Claire Fox: Productivity problem down to UK firms' fear of failure

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A panel at the CIPD's Festival of Work debated the impact that investment in training and tech, management skill levels, and CEO pay have on UK productivity

The UK’s productivity problem is as much to do with cultural as it is technological factors within organisations, according to a panel at the CIPD’s Festival of Work.

The panel on day two of the event asked whether technology could potentially solve the UK’s longstanding productivity issues, highlighting the fact that while UK businesses’ reluctance to invest in new technologies and R&D is certainly an important factor, it is cultural people factors that lie behind this.

“The problems in our economy are cultural not technological,” said Claire Fox, director and founder of Academy of Ideas and regular panellist on the BBC’s Moral Maze. “So why aren’t we investing in AI? Because we’ve become hugely risk averse.”

She added: “We don’t want to fail anymore and that it seems to me is a much greater crisis… That to me is what’s holding us back from finding out what a new era of technology might offer”.

This has led to some economists and business leaders turning their attention to other measures of economic success, said Fox, which she asserted is an unhelpful distraction. “I suspect that our reluctance to invest means we are saying maybe it’s the wrong thing to measure… so we say let’s measure something like wellbeing – which I think is spurious and nonsense,” she said.

Fox agreed that wellbeing is a crucial driver of productivity, however, and a key factor holding UK output back currently. The government’s failure, in her opinion, to invest properly in manufacturing and its Industrial Strategy “matters because the only other way to make productivity increase is working people into the ground,” she said. “Not only do we not want to do that, it’s actually very short term for the economy.”

Chris Giles, economics editor at the Financial Times, agreed that the reason we’ve experienced some growth as an economy is because “we are all working harder”. He added: “That can’t go on forever; there are natural limits and at that stage we are going to be very disappointed as a country.”

Also speaking on the panel, CEO of NHS Employers Danny Mortimer agreed the importance of getting a “balance between our economic model and what we’re asking people to do”.

The challenge for the NHS is bringing people along with leadership decisions as new technology is rolled out, said Mortimer. “We need to show people that it will help them care for patients better,” he said, adding: “We need to use technology to maximise contact with the really skilled technically-proficient people we’ve got.”

Similarly to the NHS’ private sector counterparts, increased productivity (which Mortimer said most NHS staff would define as improved patient care) requires investment, however. The NHS differs here because it's reliant on political decisions, he emphasised: “There’s a massive opportunity, but like the rest of the economy our difficulty is investment to make it happen.”

Mortimer added that he was heartened by recent agreements around NHS pay, however. “We are fortunate compared to other public sector employers that the government has been wiling to invest and our unions to [co-operate with this]”, he said. “We worked people as hard as we possibly could, and now we need more of them and we need technology.”

Chairing the panel discussion, chief executive of the CIPD Peter Cheese highlighted that a large part of organisations’ risk aversion centres around not just lack of investment in tech but also in skills. It’s been seen by some as easier to take on someone low skilled and just get rid of them if needed, “rather than investing in them to build a high-skilled economy”, he said.

Fox agreed that employers had largely not fulfilled their responsibility here, relying too heavily on schools and colleges to instil the right skills for employment. Giles meanwhile highlighted the “huge information gaps [between education and employers], so people don’t know what they’re getting [when they’re] going into sectors”.

Mortimer pinpointed the current apprenticeship system as a barrier to boosting UK productivity through improving skill levels. “There’s something there that sounds good,” he said, regarding the apprenticeship levy. “But it’s so rigid and inflexible and ill-thought through that you end up investing in apprenticeships that are easy to invest in, not ones you really need.” He added that the government had been “deaf to the point of belligerence” on the levy.

The role of managers in boosting the UK’s productivity was also explored. Tina Barnard, chief executive of Watford Community Housing Trust, reported that a big focus at her organisation recently has been to get managers away from “doing the doing”.

“In the past people have probably focused on things like appraisals rather than what do we need as a leader going forwards,” she said.

Fox, however, said that she thought focusing too much on the importance of managers has been a barrier to productivity and innovation in some quarters. “Some of this can become a self-fulfilling prophecy,” she said. “I think British society has too many managers. In many areas of work process has taken over from judgement… managers can often be the barrier to risk-taking”.

The panel also explored whether ‘excessive’ executive pay was stifling productivity. They concluded that while disparities between CEO and average worker pay could lead to a sense of injustice and demoralisation among workers, distributing exec pay better to boost output and living standards wasn’t the answer.

“It’s entirely legitimate to look at whether the top people are paid too much, but we’re never going to create enough money to distribute to workers [going down that route]” said Giles.

Cheese concluded the session by reemphasising that productivity “data at a national level is pretty damn scary”, and urged his audience that: “This is something we have to all take on collectively”.

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