Badly performing businesses cost UK £2.5b a year

Jul 19 2005 by Nic Paton Print This Article

Britain's economy is losing £2.5 billion a year, the equivalent of £1,600 per worker, through poor productivity, a new study has suggested.

A report by the Work Foundation has suggested that Britain's productivity growth rate could be raised by a quarter of a percentage point per year per worker.

The Cracking The Performance Code study looked at the performance of 3,000 UK firms using a "company performance index" that examined the way firms blended strategy across five core areas: customers and markets; shareholders and governance systems; stakeholder relationships; HR practices and creativity, innovation and management.

Its findings suggested that if only 10 per cent of companies stuck at the bottom of the performance league table upped their game and moved into the top third, the Treasury's target of increasing productivity growth by a quarter of a percentage point per worker per annum would be met.

It also looked closely at five "intangible factors" of production Ė structure, culture and employee relations, communications, leadership and process.

The way top scoring firms worked was radically different to the way bottom scorers worked

It found the way top scoring firms worked was radically different to the way bottom scorers worked.

The structure of top firms was found to enable rather than drive performance.

Processes were simple - though not simplistic - and designed to expedite decision-making, argued the Work Foundation.

Risk-taking was encouraged and if things went wrong, with procedures allowing changes of direction quickly and easily.

Similarly, on communications, in top scoring firms communication systems went up, down and across the organisation.

Conferring with unions and works councils was seen as an organisational objective because it helped to share knowledge with those on the factory floor or out in the field.

Critically, leaders of the highest performing firms were seen and heard, said the Work Foundation.

Their organisations were not necessarily easy places to work, but there was little hierarchy and people at the top strove to deliver resources and technology to let their teams get the job done.

Although the buzz around leadership currently focuses around the "transactional" and "transformational", leaders of top scoring firms were stewards of their organisations rather than visionaries, it added.

The culture of top performing organisations was characterised by a sense of pride and vigorous determination not to get left behind.

Managers had a positive self-image, worked on their own self-development and encouraged others to do the same.

Quality not quantity and a focus on the external were exemplified by the way structure and process was subordinated to delivering to the client.

This was facilitated by employees having control over how, where and when to get things done, it added.

Finally, there was a challenging and open working environment that determined relations between employees.

Though the working environment was supportive, top performing firms were dynamic and maintained employee engagement through a sense of organisational pride, the report argued.

Work Foundation chief executive Will Hutton said: "The economic future of the UK depends on more of its companies becoming successful, sustainable and highly productive.

"This report is a huge step forward in helping us understand how companies succeed, we should absorb these lessons and act," he added.