Inadequate capacity building, technology bane of organisations’ growth
ORGANISATIONS are not investing enough in their workers or technology needed to boost productivity, a new report has declared.
The report, put together by Human Resources (HR) personnel discovered that there is a clear link between an organisation’s mindset and its approach to investment.
According to the United Kingdom based Chartered Institute of Personnel Development (CIPD), the development may be responsible for poor productivity performance in recent years.
The report explained that despite two years of solid economic growth in the UK, a fifth (21 per cent) of organisations are still stuck in ‘survival mode’ and aren’t making the necessary investments in equipment or people to boost their productivity. It added that 29 per cent of employers are failing to get the right balance between investment in their workforce and investment in technology and equipment.
The CIPD’s chief economist, Mark Beatson warns that too many businesses are being held back by an ‘ambition ceiling’ which is preventing them from making the productivity gains needed to achieve business growth.
The CIPD’s report, titled “Investing In Productivity”, found a clear link between an organisation’s mindset and its relative productivity.
It breaks down the nearly 1,000 organisations surveyed into five distinct mindsets based on respondents’ experience over the last two years:
‘Balanced investors’ – A quarter (25 per cent) explained that they have ‘continued to invest in equipment, technology and people and have increased their productivity significantly’ over the last two years.
According to the report, this group is most likely to have increased investment on the previous two years, adding that over half (53 per cent) have increased expenditure on capital equipment, 43 per cent increased expenditure on learning and development (L&D) and 72 per cent had increased their output in the previous 12 months.
‘Survivors’ – 21 per cent of organisations felt that their business had been ‘in survival mode for a long time and had not been able to invest in major improvements to the business’. This group, CIPD explains is most likely to have reduced investment in the previous two years – 22 per cent reduced expenditure on capital equipment and 30 per cent reduced expenditure on L&D.
Cost-cutters’ – 19 per cent said that they are ‘a leaner business now because they took cost out during the recession and the productivity of their workers has improved as a result’, noting that this group is most likely to have maintained a stable level of investment.
‘People-focused investors’ – 16 per cent said that their business ‘has continued to invest in its people, but they need to invest more in equipment and technology to see real productivity improvements’.
‘Capital-focused investors’ – 13 per cent explained that their business has’ continued to invest in equipment and technology, adding that they haven’t invested enough in staff to maximise the value of this investment’.
Chief economist at the CIPD, and author of the report, Mark Beatson, was quoted as saying: “The recession has cast a long shadow over many British businesses and residual fears about a future downturn have left many organisations with a ‘glass half empty’ mindset which has held them back from investing, despite improved economic conditions. We need these businesses to recognise the current opportunities for growth, innovation and investment, to raise their sights and break through their ‘ambition ceiling’. Unless they can do this, it’s questionable how many companies will be able to absorb the planned National Living Wage without an adverse impact on employment levels.”
CIPD Chief Executive, Peter Cheese, said: “This is the latest in a series of reports the CIPD has produced over the last 18 months arguing that we need a stronger focus on improving workplace productivity if we are to sustain real wage increases for all. The National Living Wage could ‘pay its way’ if employers increase the productivity of their workers. However, if businesses fail to provide better training and redesign jobs and adopt better systems and equipment, so they add more value per hour, it’s likely that the UK’s productivity problems will persist and companies will struggle to deliver improved wages without making some job cuts.”
According to the report, when asked about their future plans and productivity potential, 55 per cent of organisations expect to produce more goods and services in the coming year, 32 per cent expect to produce the same and eight per cent expect to produce less.
34 per cent of organisations consider themselves high performers that don’t see the need for major change and lots of investment.
A further third (33 per cent) fall into the category of intending to make up lost ground, with 17 per cent saying that they will now be able to make the investments in equipment and technology they haven’t been able to do in the last few years’ and 16 per cent saying that they will now be able to make the investments in people that they haven’t been able to in recent years.
However, a fifth (20 per cent) thought they wouldn’t be in a position to improve existing poor performance because they lacked the finance to invest (reported by 16 per cent) or the skills and ambition to improve (reported by 4%).
Beatson said: “This report shows the characteristics that differentiate high productivity businesses from low productivity ones. Businesses that focus on quality, have an internal culture that fits their intended direction of travel and take a balanced approach to investment in both capital and equipment and in their people are likely to have higher productivity now as well as being more optimistic about the future.”
The CIPD’s report highlights the need for Government to work with businesses to help them to break through their ambition ceiling, as some firms may not understand how to change, or lack the capability to innovate and improve.
The report said: “This means that measures intended to help business such as lower business taxes or greater employer ownership of Apprenticeship funding are unlikely to benefit them.
In response, the CIPD is calling for a joined-up approach to business support centred on networks, noting that the new Business Growth Hubs, and collaborations that help businesses learn from each other and create virtuous circles of investment and improvement.
The report also raises alarm bells for the Government about the ability of public sector organisations to deliver the improvements in productivity needed if the intended cuts in funding of public services are to be met without damaging service quality.
Meanwhile, a recent report explained that to raise the bar for strike action divert attention from building better, more engaged workforces.
According to the report, the Government’s proposed changes to existing laws on industrial action centre on: raising the bar on thresholds for strike ballots, including a minimum turnout of 50 per cent of union members entitled to vote and a further threshold for ‘important public services’ where 40 per cent of those entitled to vote would need to vote in favour of industrial action.
In its submission to the Government, CIPD explained that proposals are an outdated response to the challenges of the modern workplace.
It explained that the number of working days lost through industrial action stands at less than a tenth of what it was in the 1980s, dropping from seven million days per year in the 1980s to an average of 670,000 per year between 1990 and 2014.
CIPD surveys of employers and consultation with members indicate that relationships with their trade unions are generally good.
According to the report, CIPD is urging the Government and organisations to build a better dialogue with their workforce improve employee engagement and consider alternative methods of protecting the public from the impact of strike, such as ‘no-strike agreements’.
Cheese said: “Government proposals seem to be targeting yesterday’s problem instead of addressing the reality of modern workplaces. The number of days lost to strike action has dropped by over 90 per cent in the last twenty years and industrial action today increasingly takes the form of protest action rather than all-out strikes making the legislation even less warranted.
It’s time to start talking about prevention rather than cure when it comes to strike action and the public sector’s workforce challenges in particular. Taxpayers’ interests are best served by an efficient, engaged and productive public sector workforce. We need to see more consultation and ongoing dialogue, and engagement with, the workforce, rather than the introduction of mechanisms that reflect the industrial relations challenges of the 1980s. To jump straight to legislating strike activity without considering this seems to be a significant step back.
These proposals could also have unintended consequences, for example, by creating more division and encouraging trade unions to plan for more localised industrial action to maximise support and make it more likely that the proposed statutory threshold for membership turnout will be met. They may also lead to an increase in unofficial action, which can be hard for employers, trade unions to resolve.
Employee relations adviser at the CIPD, Mike Emmott, said: “The new proposals won’t make it impossible for trade unions to call lawful strikes. They will, however, harden attitudes and encourage trade unions to plan smaller, more localised protests to maximise support and make it more likely that the proposed statutory threshold for membership turnout will be met.”
Commenting on the proposals to tackle intimidation of non-striking workers, Emmott said: “Intimidation in the course of industrial disputes, including on the picket lines or as part of a wider protest action, is completely unacceptable. Workers and their families should never be subjected to the kind of harassment that we saw at Grangemouth in 2013.
However, we don’t believe that a new criminal offence needs to be created for this purpose. As the limits on lawful strike action become tighter, we can expect intimidation to become a more frequent occurrence in relation to industrial disputes. We believe that problems in relation to intimidation in the context of protest action should not, in general, be a matter for trade union law. The law on protest action should apply equally to trade unions and to other organisations undertaking protest action.
There are a number of existing public order offences, including assault, harassment and trespass, which may be relevant in these situations. The key issue is enforcement, and this is a matter for the police. The CIPD does, however, support the proposal to strengthen the Picketing Code so that a number of key aspects, including the appointment of a picketing supervisor, should be legally enforceable.
On the proposal to repeal the ban on using agency workers to cover for striking workers, Emmott said: “There is nothing in existing legislation to stop employers from recruiting replacement staff, providing they hire them directly and not through an employment agency, but we have little evidence that employers take this option. Some employers might be interested in recruiting temporary agency workers to maintain operations during industrial action. However, in most cases they would find it difficult to recruit suitably qualified workers, and few employment agencies will want to get involved in industrial disputes.”