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The Productivity Goalposts Just Moved

Tuesday, August 18th, 2020

I was speaking to a business owner last week. He had had 50% of his staff on furlough but has managed to run at about 90% of revenue.  He was wondering what to do now that furlough is winding down.

His explanation for the higher productivity was that he “kept the A team at work”.

Now obviously each organisation is different, and the impact of Covid varies with industry.  But here are a couple of numbers:

  • Output per hour worked in the UK was roughly 15% below the average for the rest of the G7 advanced economies in 2016 (Source:  International comparisons of UK productivity (ICP), first estimates: 2016 – ONS, October 2017)
  • There were roughly 33m people in employment in April 2019 (Source: Employment in the UK: April 2019, ONS, April 2019)
  • About 9.5m people were put on furlough in the UK (Source: Statista, Aug 2020)

So, passing lightly over the fact that some of this data isn’t very well date-matched, and that today’s working hours and patterns are complicated, we seemed to have about 5m too many employees for the GDP we produced going into covid.  This excludes any market-specific covid impact such as in retail, airlines or hospitality.

Now some inefficient or poorly-managed businesses will have been well positioned to take advantage of the pandemic and so will have thrived despite themselves.  Another group of businesses will learn nothing and, if they survive, will struggle on accepting low returns.  Some will have been productive and efficient already and will stay lean as they emerge.

But some, like the business owner above who asked me that (rhetorical) question will see this opportunity to shed “the B team” and continue to use automation and better organisation to sustain productivity.  It is much easier to get rid of staff when a) everyone else is doing it b) you can blame a virus c) you have suddenly been forced to be more productive with fewer staff in order to survive.

What is this job loss number going to be?  I don’t know but perhaps between 2m and 9m?  An enormous amount of individual grief that should worry us all as taxpayers and humans.

As a business advisor, however, I am more concerneed about those business owners who do not take this opportunity to achieve a step-change in productivity; who think that things will return to normal.  They won’t.  The productivity goalposts just moved.  As UK productivity starts to return to international levels, and more productive businesses start to hire again, you will be gobbled up by fitter competition.

If you’d like to learn how to increase the productivity of your business then perhaps you should investigate some of these training events.

 

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