Are UK organisations getting better at managing their people?

>40% of employees identify themselves as a ‘manager’. Somewhere between 30%-40% of employees appear to have some formal responsibility for supervising other people.

UK labour productivity - the amount produced per hour worked - has been lagging behind our major international competitors for decades.  According to the London School of Economics, the gap between the UK and the USA, France and Germany narrowed between 1979 and 2007, but the recession has caused the gap to widen again (see the chart below).  This is why CIPD has said that 2014 needs to be the 'year of productivity' as we are unlikely to see sustained growth in real earnings without productivity growth.

Studies aiming these differences in productivity have often highlighted the UK's 'long tail' of under-performing firms.  In other words, if you look at all the firms in a given industry, there are some with high productivity (the leaders), quite a lot in the middle, and more than you would expect with relatively low productivity (the laggards, or long tail if you plot them on a histogram). Furthermore, these distributions tend to persist.  Why don't the low productivity firms either go out of business or catch up with the leaders?

Historically, the finger of blame has often - though not exclusively - been pointed at management.  The 'British disease' was as much about inept and complacent managers as it was about bloody-minded trade union leaders.  This was beautifully satirised in 1971 in Carry On at Your Convenience. All the ingredients of the UK's productivity problem are laid bare in WC Boggs and Son: the inept owner and MD, the streetwise supervisor who really runs the business (Sid James complete with pipe and cardigan) and the out-at-the-drop-of-a-hat shop steward.  Enter the owner's son who makes the revolutionary suggestion of manufacturing a bidet to win a big foreign order.  Chaos ensues.  Happily, all ends well.  Arguably the screenwriters are ahead of their time in seeing the defeat of the unions and reassertion of the 'right to manage' almost a decade before the power struggle between management and unions at British Leyland.

Unions are now much less likely to be cited as a constraint on management's ability to implement workplace change - but productivity weaknesses persist.  In 2003, the Department of Trade and Industry and ESRC commissioned a report from Michael Porter and Christian Ketels on the UK's competitiveness and productivity performance with a specific remit to consider the role of management.  The report did suggest that UK businesses sometimes lagged behind countries such as the USA, Japan, France and Germany in their adoption of modern management practices.  However, it cast doubt on the 'long tail hypothesis', suggesting that the distribution of productivity across firms was much the same as other countries (with the exception of the USA).  Furthermore, it stated that management practice was inextricably linked to factors such as competitive positioning and investment.  If (too many) UK firms adopt a low cost, low value, low investment business model, UK managers act accordingly.

Ten years on, as part of our Megatrends project, we are looking again at management in the UK - in particular, whether or not UK organisations have got any better at managing their people.  There are grounds for cautious optimism.  Competition and Old Father Time may mean that some of the worst managed organisations and the worst managers are no longer there.  WC Boggs would have thought MBA stood for 'My Big A**e'.  Today's managers - like the workforce in general - are better qualified than their predecessors.  HR managers are more likely to be spending their time working out how to improve employee engagement than negotiating with unions on how to avoid another strike.  However, as argued in our report earlier this year on industrial policy and skills, there is little evidence of an across the board transformation in ambition or business models.  Many workplaces have seen job cuts, pay freezes or cuts or restructuring because of the recession or cuts in funding.  Our latest Employee Outlook survey found that employees' trust in senior managers was at a two year low.

The last decade has also seen progress in understanding how management practices affect productivity.  A group of economists led by Professor Nick Bloom (now at Stanford University, but originally from the LSE) have developed surveys that allow comparisons of management quality to be made between organisations and across countries, and which show clear associations between management quality (as scored in the survey) and organisational performance (a summary of this work can be found at here).  When compared to a range of developed and developing countries, the average management score for UK manufacturing firms is just above average, on a par with France and Australia but well below the USA.  However, when it comes to schools, the UK is top of the pile ahead of the USA, Japan, Germany and Sweden.

According to the spring 2014 Employee Outlook survey, 40% of employees identify themselves as a 'manager'.  Somewhere between 30% and 40% of employees appear to have some formal responsibility for supervising other people.  The problem - as well as the solution - appears widespread.

So are we getting better at managing people? There will soon be opportunities for you to have your say and share your experience on CIPD's Communities and LinkedIn pages.

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