The productivity gap

Despite working some of the longest hours in Europe, UK business is not as productive as many of our competitors on the continent. There are numerous reasons for this, but there does seem to be one reason that analysts are not focusing too hard upon.

Sure, you can invest in faster computers and printers. You can train staff to be better at shuffling paper around. You can even work longer hours to plough through the heavy workload. But none of that is ever going to address the underlying issue for many workplaces: UK business is ossified.

Companies that have been around for decades will have formed working processes and procedures over the years, most of which may well have been cutting edge at the time they were conceived. However, time marches on, and companies have a tendency to become locked into A Certain Way Of Doing Things.

Legacy systems, procedures and thought processes build up within any business. Long established and large organisations – such as those we see in banking and insurance – tend to disproportionately be victims of the gradual drag on productivity that comes from relying upon the same old process decade after decade.Changing the direction of one of these behemoths is akin to turning the Titanic.

But just because a thing is difficult, that does not mean it should not be done. A good example of this might be the financial services sector.

Financial services in the UK have grown over the past 50 years, however, the back-end IT systems have been slow to change and adapt. There are indications that investment in back-end IT has not been sufficient across the sector. Some banks may still be relying on systems that still contain elements dating back to the 1960s.

Banks have been investing, just not enough. And not in the right areas. One of the best – and most difficult – investments any business can make is to take a view on how best to work, and then to build systems and train staff to deliver that best practice. But it’s difficult to start projects that creatively re-imagine business processes in large organisations where stability is valued.

With a new breed of ‘challenger’ banks snapping at the heels of the incumbents, now is actually the time for the old school financial institutions to take a good look at how they work. Between 2010 and 2013 the challenger banks grew from 4% of the market, to 7%. A phenomenal growth when placed in the context of the traditional reluctance to change banks.

Instead of trying to keep decades old systems going, the challenger banks can start with a blank sheet of paper to deliver the best ways to do business. Offering better service based upon modern purpose-built systems is partly what is enabling their growth,

The brute force approach to delivering productivity (working longer hours with systems that are not fit for purpose) is not a sustainable strategy. It’s time for big business in the UK to drive productivity by embracing change, using modern tools and techniques, and pro-actively searching out improvements rather than waiting for disaster to act as a cue that change is overdue.

This post was first published by me on LinkedIn.

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