National Productivity Week 27th January 2025 | Visit Website

A diverse community of
leading experts, policymakers
and practitioners

The Institute’s key research themes
are led by ten academic partners
spread across the UK.

We’re a UK-wide research
organisation exploring what
productivity means for business

Businesses are crucial to solving
the UK’s productivity problems.

How do business leaders think about productivity?

Why should firms care about productivity? How does it add to the bottom line? What exactly drives productivity? And how can you get better at it?  In Season 3 of The Productivity Institute’s podcast Productivity Puzzles, host Bart van Ark has been exploring business productivity from the perspectives of academic research and policymakers and now, in episode three, business leaders themselves.

Productivity is a critical component of a firm’s success, yet it is often not at the forefront of the minds of business leaders. Every business leader seems to know in the back of their mind that productivity matters, but few firms bother much to define it precisely. The podcast episode serves as a primer for those seeking to understand and improve productivity, offering practical wisdom from the front lines of industry.

Understanding Productivity

At its heart, productivity is about turning resources into better outcomes. However, while businesses often measure productivity, they frequently struggle to integrate it into their strategic planning. While businesses in different industries might focus on different productivity metrics, it is important that these productivity metrics are aligned with business goals and that the workforce understands and embraces these objectives.

Five Key Drivers of Productivity

The Productivity Institute has undertaken extensive work on strategic productivity and the aspects that businesses really care about. Five drivers of productivity have been identified as core to business operations:

  • Innovation and Digital can revolutionise how businesses operate and deliver value – this incorporates research and development, as well as AI.
  • Worker Skills and Well-Being are equally important, as a skilled and motivated workforce is the engine of productivity – health and diversity are significant components of this driver.
  • Leadership and Management play a critical role in setting the direction and fostering a culture that values productivity – management competencies and an agile workforce are crucial.
  • Access to Finance is another crucial aspect, as businesses need capital to invest in productivity-enhancing initiatives – this encompasses access to start-up capital and venture capital, alongside how are investment decisions taken.
  • Marketing and Communication are vital for ensuring that the value proposition of the business is clear and compelling to both customers and employees – brand and internal and external communication are critical factors for most businesses.

Barriers to Productivity

External factors such as competition, government policies, and access to talent can create significant challenges for productivity. Internally, issues such as workforce engagement, the ability to adapt to change, and the alignment of different business functions can also hinder productivity. To be productive, particularly during turbulent periods, businesses need to be agile and responsive to both internal and external pressures.

The Role of Business Support Programmes

Opinions among business leaders on business support programmes are mixed. While some have found them to be valuable sources of guidance and resources, others have found them to be time-consuming and not always aligned with the specific needs of their business. Overall, businesses should approach these programmes with clear objectives and an understanding of what they hope to gain.

Future focus

There is no one-size-fits-all solution, and each business must find its unique path to productivity improvement. However, there are some takeaways that can be applied across all firms: the importance of strategic thinking, the role of leadership in driving change, and the need for continuous adaptation to stay ahead in a rapidly evolving business landscape.

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