HR’s Greatest
Opportunity
The UK
Productivity
Challenge
White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
Contents
Introduction: A Story of Hope for HR and Payroll
3
Why The UK Economy Has Everything To Do
With HR
4
The Great Productivity Challenge
6
What Productivity Should Mean In 2016
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1. The Myth of Getting "More From Less"
2. The Reality of Getting (Much) "More From
More"
3. Nailing The Evidence On Engagement
4. The Impact of Engagement on Productivity
HR's Greatest Opportunity: 3 Areas HR Can
Work On Immediately
1. Drive Personalisation
2. Embrace Technology and Analytics
3. Adopt A More Collaborative Approaches To
Working And Learning
Conclusion
Copyright 2016 NGA Human Resources
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
Introduction: A Story of
Hope for HR and Payroll
This paper, from NGA Human Resources, represents a story of hope for the HR
and payroll profession. Our passion is to help our clients understand and then
undertake great people management practices. To understand the current
business and economic environment is an important part of this and we hope that
this paper will convince you that current economic conditions in the UK represent
the greatest ever opportunity to shine among HR and payroll professionals. But
what is it that is happening in the UK to give them the opportunity to demonstrate
their value? And what can HR professionals do on an individual level to make a
difference?
Behind the headlines of stable economic growth, low inflation and rising
employment levels, there is a productivity crisis clearly evident in UK workplaces.
As this paper will show, raising the level of productivity is a priority challenge for the
Government and business leaders because it holds the key to higher levels of
economic growth and prosperity for all. Yet to get more “output” from each and
every employee, many of whom already feel at full stretch, is a difficult challenge.
HR professionals are in a unique position to make a difference to this debate, yet
too few connect the excellent people management practices they deliver at a
micro-level to the bigger economic policy challenge of productivity. Yet collectively,
the HR profession has far more influence than it appreciates in this debate and,
crucially, can be a critical influence in the way greater productivity is understood,
discussed and delivered in the workplace.
10%
30%
60%
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
Why the UK Economy Has
Everything to Do With HR
Economic growth: steady but unspectacular …
After the recession of 2008 and 2009, followed by a painfully slow and hesitant
recovery, the UK has enjoyed a 3 years of steady, if unspectacular, economic
growth.
The green parts of the graph represent quarterly positive growth - the red parts,
largely in the middle, show negative quarters. The most recent full 3 years have
seen steady growth.
The latest data suggest that the UK economy grew by 0.5% in the three months to
the end of 2015, taking the annual rate of growth for 2015 to 2.2%, down from 2.9%
in 2014. In spite of this slowing in growth, it still means the UK economy is one of the
fastest growing developed nations. Growth in the UK was more than twice the rate of
the average (1%) for Eurozone countries in 2015.
This overall picture of health is deceptive. The growth may be there, but it is highly
dependent on growth in the service sector. HR and payroll professionals working in
service sector businesses are seeing relatively good times on the whole, but those
involved in manufacturing, construction or exports know that there is little or no
growth at present. And the latest figures for manufacturing output are not flattering at
6% below the levels prior to the onset of recession in 2008.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
… while employment is at record levels.
The nature of employment growth is another strong influence on the daily working
lives of those working in HR and payroll. There are currently 31 million people in
employment in the UK at present and this is a record, with unemployment, is now
down well below 2 million. Recent figures show that the employment rate hit 74% the highest since records began in 1971. In fact over the last year, employment has
risen by 521,000. Although the common perception has been that most employment
growth has been in part-time employment, this is no longer true. While most of the
employment growth during the last recession was for part-time roles, more
employment growth has featured full-time jobs. The latest ONS figures show that
almost 23 million people are now in a full-time job, 387,000 more than a year earlier,
while over 8.4 million are working part-time, up by 134,000.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
The Great Productivity
Challenge
UK economic growth is solid if unspectacular and employment levels are at record
levels. This relatively benign environment masks a hidden problem – one which
affords a tremendous opportunity for those working HR and payroll. This opportunity
comes through the Achilles Heel of the UK economy – its poor rate of productivity
relative to other developed nations.
The UK may be growing at a favourable rate compared with other countries, but this is
almost entirely due to it simply employing more people, as any HR or payroll
professional can clearly see (particularly in the service sector) rather than the
workforce producing anything more per person than it was previously. In terms of
productivity, the UK is near the back of the pack of the major world economies.
In short, productivity in the UK has stagnated. This is the number one long-term
challenge facing the UK economy right now. It is very much in the minds of the UK
policy makers and business (see box). The Chancellor and Business Secretary have
together launched a Productivity Plan that attempts to address the issues and
recommend actions around low rates of productivity growth.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
BOX: What policy makers are saying about UK Productivity
The Bank of England Governor, Mark Carney: recently said that improving
productivity is key to the UK’s economic growth; that it “matters enormously” and must
be increased: “We have been successively disappointed with [its] performance in the
UK.”
The Chancellor of the Exchequer, George Osborne: “We have been exceptionally
successful in recent times in growing employment. We are proud of that. But now …
the UK has a long-term productivity problem, which has been made worse by the
financial crisis.”
CBI Director-General, Carolyn Fairbairn, says: “2016 needs to be the year when we
get to grips with the UK’s chronically weak productivity performance, which is 30%
lower than in the US and 28% lower than in Germany … Many of the levers for
productivity growth lie in the hands of businesses themselves.”
This is where HR can and must come in. Although politicians and business leaders
need to lead the call for debate and initiate action on how to permanently increase
levels of UK productivity, the real gains will be made through the many thousands of
individual decisions made in each and every business. Individual decisions may only
make marginal gains, but as we shall see in the next section, many marginal gains
make for large collective ones.
Therefore it is crucial that HR first of all leads a debate within every business in the UK
around what productivity really means, before going on to make permanent
incremental gains that collectively transform the nation’s productive potential.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
What Productivity Should
Mean In 2016
1. The Myth of Getting "More From Less"
“More from less” has been an easy-to-understand term, still used by some leaders,
to describe what productivity growth means to them. It’s understandable for
organisations to use it to describe how they want to get more from employees, but
the people management practices it has become associated with are less
acceptable.
When the global recession took hold in 2008-9, “more from less” became the
vocabulary commonly used within workplace cultures to describe workplaces in
which managers presided over a workforce working far longer hours and living in
fear of losing their jobs. In the very short term, usually about 6 months, this type of
culture did indeed produce transitory forced gains in productivity. But a very large
body of research, most recently brought together by the Harvard Business Review
in 2015, quite clearly shows that in the longer term productivity in these businesses
actually declined.
Instead, fearful workplaces quickly became those demonstrating employee fatigue,
repressed loathing and contempt from employees towards their employer,
alongside a sharp fall-off in discretionary effort. And when the economic recovery
began to gather pace, these businesses simply lurched from a productivity crisis to
a talent crisis, with key employees heading out of the door. There has to be a
better way – and fortunately, there is.
HR can start by influencing this debate by trying to replace the vocabulary
and culture of “More from Less” within management teams. There will always
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
be a need to keep costs firmly under control and this will necessitate difficult
decisions within some organisations. But with a UK economy recording record
levels of employment, HR has the opportunity to permanently shift the language of
the productivity debate away from “More from Less” and on to how to get “More
from More” from unprecedented levels of workforce participation.
2. The Reality of Getting (Much) "More From More"
A new type of productivity miracle, one which has positive and long-lasting effects,
has slowly been emerging from the ashes of the last recession. Unprecedented
levels of employment afford the UK the opportunity of economic growth, but this will
not be sustained without gains in productivity from the newly enlarged workforce.
HR’s opportunity, within each business, is to begin to embed the vocabulary
and route map of a “More from More” culture and introduce the incremental
people management practices that will actually achieve this.
At the core of the modern productivity miracle will be employee engagement and
the impact that this will have on productivity in the UK economy. We all know that
engaged workers get through a lot more work; and because they do, there is no
need for them to work longer hours. Similarly, engaged workers create their own
motivation and don’t or want need a fearful culture to get them going.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
3. Nailing The Evidence On Engagement
In 2013, the Employee Engagement Task Force’s produced “The Evidence” – a
compendium of statistics and research directly linking engagement with business
productivity and profitability. Perhaps the most powerful piece of evidence
discovered was that the impact of engagement levels in the workforce on
productivity: if engagement went up by 10%, the evidence suggested, then it would
add an average of £1500 per person to the bottom line of a business. So if a
business employed 1,000 workers, an increase in engagement levels of 10% would
add £1.5 million.
Even more important, the research (and common sense) tells us that the
productivity gains driven by higher levels of engagement are sustainable in a way
that the “More from Less” culture cannot achieve. This also intuitively makes sense
– those who are engaged, work smarter rather than long hours and so come back
to work each week more refreshed and more able to sustain their level of
performance.
HR clearly has a role to play in talking to leadership and management teams in
organisations all over the UK about the culture of “More from More” rather than
“More from Less”. Both at a macro and micro-level, workforce productivity is a
challenge that everyone wants to meet and HR professionals can start by outlining
other key facts that link engagement to productivity.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
4. The Impact of Engagement on Productivity
Here are some more examples of the impact that engagement can have on
productivity.
Absence: The number of sick days per year is clearly a measurable indicator of
an engaged/disengaged workforce. Research from Gallup shows that engaged
workers average only 2.7 days absence per year, versus 6.2 days for a disengaged
workers.
Given that this is a gap of 3.5 days per person, a business with 1000 employees
would gain an extra 3500 working days per year. Given that most people work
about 260 days a year, this is the equivalent of being able to hire 15 extra people.
The gap of 3.5 days per person – this of course equates to 3500 working days per
years’ worth of difference (or the equivalent of an extra 13-14 people in a thousand
strong workforce).
Customer needs: Understanding customer needs allows employees to exercise
discretion in ways that strengthen business relationships. PwC research shows that
there is a strong correlation between highly engaged staff, an improved
understanding of customer needs. Over 70% of engaged workers, PwC found,
understand their customers’ needs, compared to only 17% for non-engaged
workers. A differential of 50+ percentage points clearly presents an enormous
potential sales dividend for a business with engaged high up on its priority list.
Referrals: Business is so often won through referrals. Research from Gallup
suggests that there’s a bigger gap between engaged workers (78%) and nonengaged workers (13%) in terms of whether they would recommend the company’s
products and services. Again a differential of +65 percentage points represents a
huge difference to the power of “word of mouth” recommendation for any
organization.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
HR's Greatest Opportunity:
3 Areas HR Can Work On
Immediately
No single HR or payroll professional can transform the productivity of an
organisation on their own, just as that organisation is just one of thousands making
in the UK business community. Collectively, however, many small actions can make
a big difference and even as individuals, HR and payroll professionals can make
more of a difference than they perhaps realise by changing the way business talks
about productivity and by making the business case for the impact of engagement
on productivity, as already outlined.
Sir David Brailsford, the visionary coach of the London 2012’s brilliantly successful
cycling team, achieved significant “productivity” gains via several incremental
innovations. On their own, they each yielded maybe a 1% or 2% improvement in
performance, but put together they yielded multiple world records and gold medals.
HR should now take the same approach to using engagement to drive productivity.
Engagement won’t come through one strategic change but through lots of little
actions.
There are many ways to increase engagement in any organisation, so we have
outlined three broad areas for action below. There are many others but these three
core principles, even when achieving marginal gains can, when combined, produce
significant improvements in productivity.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
1. Drive Personalisation
To adopt an agenda of “personalisation” of the workforce is a major factor in
understanding and driving motivation and engagement in the workplace. The
graphic above is from “Managing the Expectations and Keeping Motivation
amongst the Diverse Workforce” from NGA Human Resources. It shows the main
drivers of motivation in the workplace. All of these you might expect of an average
employee. The truth is that that there is no longer any such thing as an “average
employee” - and treating them in this way could have disastrous consequences.
Employees are increasingly comparing their workplace experiences of
personalisation with those they receive as consumers - and are finding the former
wanting by comparison. There’s no such thing as an average customer - so why
should there be any such thing as an average employee?
The factors that motivate employees will vary massively and HR can make
marginal gains by recognising and accepting this trend. The outcome is that
businesses are already finding it difficult if not impossible to successfully execute a
“one size fits all” benefits packages. The motivations are influenced by the stage
that the employees are at in their career, their personal circumstances and where
they’re located in the UK.
Managing an increasingly diverse workforce brings with it multiple challenges.
However, companies can keep their employees more engaged and motivated by
personalising their package of career development and benefits. This individual
approach will help to drive engagement and discretionary effort in the organisation.
Fortunately, the era of personalisation has been helped by a dramatic increase in
the role of technology in best practice HR and Payroll.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
2. Embrace Technology and Analytics
The graphic shows research from the CIPD and highlighted in “The Changing
World of Work” from NGA Human Resources. Workplace technology used to be
one area that employees went into work to learn more about. Today, they learn
more about technology as consumers through their smart devices.
Research shows us that:• 82% turn to their mobile device to influence a purchase decision whilst shopping
• 62% are more likely to take action right away toward solving an unexpected
problem or new task
• 91% turn to their mobile device for ideas while doing a given task.
More and more employees now operate from a range of workplaces, whether that
means hot desking within one building, working in different locations or working
from home. Mobile technology allows people to do their job from just about
anywhere and businesses need to adapt their technology and working practices to
allow for this.
So if HR is to be at the heart of any productivity agenda for its organisation,
employees now have to be seen as their internal customers of technology – the
ease with which they are able to work with it will make a difference to how engaged
they feel.
The flipside of more technology is data. Data analytics will be of growing
importance to the HR profession because it will impact on the engagement and
performance of every organisation. HR has been very slow to embrace people
analytics. Research from Diginomica/IBM suggests that only 13% of business and
HR leaders surveyed felt confident that they understand analytics deeply enough
for it to drive business performance, while more than half said they struggled to
produce business insights for their organisations.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
Where this is a challenge for HR, it is also an opportunity. If HR and payroll
professionals could find way to use technology and data insight a little more across
their organisations it could create new opportunities to drive engagement and
productivity. Here are some examples:Automation: Technology can automate processes, freeing up time for more
strategic HR tasks.
Efficiency: Self-service within HR and payroll systems provide opportunities for
increased efficiency and engagement.
Increased feedback: With annual appraisals are becoming less popular,
employees increasingly want the same sort of instant feedback they would get as
consumers.
Gains through a more joined up approach: Disparate systems can mean
inefficiency, a lack of joined up reporting and disengagement.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
3. Adopt A More Collaborative Approaches To Working
And Learning
Linked to productivity gains made through the personalisation and technology
agenda comes a seismic change taking place in the way employees want to work
together. New joint research among nearly 100 HRDs and L&D Directors by the
engagement specialists 10Eighty and collaborative learning experts Merriborn
Consulting reveal the following three key findings:-
• Organisations using collaborative learning register significantly higher engagement
levels – over 10 percentage points more
• The vast majority of those surveyed believe that collaborative learning will increase
productivity by at least 5% in their organisation
• Organisations using collaborative learning register a significantly higher take up in
all other elements of their learning spend.
Clearly there are gains to be made through a more collaborative approach to
working and learning in terms of engagement, productivity and the use of valuable
learning resources. Here are some other examples of how collaborative working
drives engagement:Social: Social networking technologies enable interactions among people, business,
partners and customers. A growing body of research suggests that it is possible to
drive up engagement scores significantly just by changing working practices in this
way.
Mobile: Employees are all over the place – quite literally. Businesses currently
adopting collaborative working practices do so through mobiles and iPad as well as
desktops or laptops. Mobile devices make it quicker and easier to connect with
anyone at any time.
Project mentality – businesses using collaborative technologies use it as a means of
coalescing knowledge, collective intelligence and creativity around particular projects
or tasks and usually work best in organisations where functional silos otherwise
inhibit their engagement with one another.
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White Paper | HR’s Greatest Opportunity - The UK Productivity Challenge
Conclusion
This paper represents a story of hope for the HR profession.
The UK has experienced 3 years of steady, if unspectacular economic growth and
levels of employment are at record levels. Productivity, however, is the Achilles heel
of the UK and has been identified by Government and business as a major priority
for the economy to continue to prosper.
For this to happen, there needs to be a transformation in attitudes towards what
productivity means today – and this is where HR can play a crucial role. Much of the
language and behaviours around productivity still focus on a “More from Less”
narrative, inherited in the period up until the last recession and its association with
long working hours and job insecurity. Research clearly shows productivity gains
achieved through this route were nothing of the sort, being transitory and indeed
negative in their longer term impact.
Instead, with more workers employed than ever before against a favourable
economic backcloth, HR and payroll have a unique opportunity to move the debate
over productivity on to a (much) “More from More” agenda. At the heart of this move
is a clear body of evidence emerging which shows that higher levels of workforce
engagement impact significantly – and permanently – on productivity in
organisations of all shapes and sizes.
This paper has outlined 3 broad areas (amongst many others available) –
personalisation, technology and collaborative working - in which HR professionals
individually and collectively can make the greatest difference to the rhetoric and see
the realisation of genuine productivity gains in the UK economy.
This is HR’s greatest opportunity to shine - and there is no time to waste.
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NGA Human Resources is a global leader in helping organisations transform their business-critical HR
operations to deliver more effective and efficient people-critical services.
We help our clients become better employers through smarter, more streamlined business processes - to
save money, manage employee life cycles and support globally connected agile organisations. This is how
NGA makes HR work.
What sets us apart is The NGA Advantage. It’s a combination of deep HR expertise and insight, advanced
technology platforms and applications and a global portfolio of flexible service delivery options.
www.ngahr.co.uk
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