Bank of England chief economist Andy Haldane startled the business community on 20 March with his view that the UK’s productivity crisis “is the result of management failings”.
In a headline-making speech, Haldane sketched out a picture of a business landscape in which “non-frontier”, or “laggard”, firms are falling short of more innovative companies and creating a drag on UK Plc. In his assessment, for example, “weaknesses in management processes and practices go a long way towards explaining the long tail of low-productivity manufacturing companies.
“These poor practices are most pronounced in sectors where competition is weak, and in family-owned firms where management control rests with the eldest son.”
He added: “A one-standard deviation improvement in the quality of management raises productivity by, on average, around 10%.” What are bosses to make of this advice – wrapped as it is in some rather pronounced barbs towards their community?
The Institute of Leadership & Management's head of research, policy and standards Kate Cooper says: “I’m always a bit suspicious of claims that an ‘x’ percentage change in a certain direction will lead to ‘y’ percentage improvements in particular parts of the system. Undoubtedly, if you improve processes, you will yield greater efficiencies. But to me, this sounds very much like the project-management arena, and frameworks such as Prince2, where everything becomes about process and numbers. That poses a risk that managers could lose sight of the quality of the outcome that those processes are meant to produce.
“Yes, by all means get your systems right – but be sure that you also have empowered staff in your organisation who are able to work with the systems, critique them and make recommendations for their improvement. Crucially, those staff must be assured that their thoughts will be listened to and acted upon.
“This whole debate really reminds me of the Quality Circles that became a popular Japanese management method in the early 1960s. Essentially, they were based on the notion that the best people to make systems better and more effective are the people who work with them every day. I, too, believe that leaders should hear out knowledgeable employees, and not assume – as Haldane seems to imply – that having some sort of project-management supremo overseeing the process will always deliver optimal benefits. It’s the people who are in closest contact with the systems who will have the most valuable insights.”
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