Be the Business has responded to a government call for evidence on how to enable less productive businesses to learn from, and catch up with, the best. The consultation was launched by the chancellor at the Spring Statement in March 2018 and closed in July 2018.
Since Be the Business formally began work six months ago, we have been raising awareness of the productivity challenge – activating our coalition of leading UK businesses, and partnering with government and other parties in the ecosystem to understand what works and areas of potential improvement.
We have a clear framework: we will test and discover what works in raising firm-level productivity in year one, propagate this in year two and to scale from year three.
Since January, we’ve been building a body of evidence about the UK productivity challenge and the ecosystem in place to tackle it. Our productivity review response sets out some of this learning, and areas which merit further consideration from the government and broader stakeholders with an interest in this agenda. A number of the key points from our response are outlined below.
- British firms are not explicitly worried about productivity in name, but business’s concerns and priorities link directly to productivity practices and capabilities
Top of mind issues for UK firms are things like rising prices, the economic climate and competition, staff recruitment and skills, and Brexit. While none of these stated concerns are explicitly “firm-level productivity”, issues like staff and rising prices are central to productivity improvement.
- The focus on leadership needs to be stronger and more effective across all firms
Some 39 per cent of SMEs invest in increasing the leadership capability of their managers. However, we suspect this is more densely concentrated in the top performing firms. Further evidence suggests as many as 2.4m bosses across the UK are untrained to lead.
- There are some common triggers to exploit that drive firms to seek advice
These include new trends in a sector that demand a fresh response, a substantive disruption (e.g. loss of a major contract) or changes in firm leadership. We also see that many managers who are fighting-fires from month to month rather than managing for the long-run, are typically very aware but are caught in a cycle they find hard to break away from.
- The economics of productivity improvement services don’t always stack up
Many of the successful SME training programmes to date have been delivered through subsidy, either through business schools finding pots of funding – mostly European – to draw on, or through private funding. Without these subsidies the market is uneconomical, primarily because the cost of service delivery outweighs what SMEs can or are willing to pay.
- There are a mix of factors underpinning weak demand for support.
Based on our extensive conversations with SMEs we believe there are six demand side issues for firms seeking advice. These are time commitment, value (though firms advocate for training after participation, few recognise the value in advance), cost, quality (a perceived, and real, lack of consistency across providers), lack of awareness (little understanding of how they compare to peers and, therefore, whether there’s an opportunity to improve) and opacity (firms being unaware of the support that’s available).
- Technology adoption is hampered by a lack of firm-level capability.
Evidence shows the link between the adoption of basic technology and productivity improvement; however, firms often don’t have the right skills to successfully deploy new technologies in their own businesses.
- The market for technology appears strong but is more supply than demand-oriented.
Many of the businesses we speak to have made mistakes in sourcing and embedding technology into their businesses in the past, leaving them reluctant to experiment and invest further. Smaller firms don’t have CTO capability and there’s limited support to help firms understand the potential impact of technology and how to introduce it. The provision that does exist is solution and sales oriented and is therefore often mistrusted.