According to the whitepaper released as part of the government’s Industrial Strategy in November, poor management skills could account for a quarter of the productivity gap between US and UK companies. American companies produce a fifth more than UK companies do with the same effort, something that is logically attributed to poor business management. Apart from the natural competitiveness with our cousins across the pond there are also many other good reasons for Britain to close the gap on management skills.
More productivity means more profit
It’s not difficult to understand how a fifth more productivity would be a very positive increase for UK businesses. Particularly if it requires no extra effort other than to close the gap on management skills. To put a figure on how much this lack of management might be costing the UK economy, if the gap were to be closed over night tonight and UK companies caught up with US companies then – without any extra work at all – British companies would be an instant £300 billion richer. That’s an impressive figure for any economy.
It can be done
The example often given of an economy that completely turned itself around with the benefit of management skills is Japan. After the Second World War Japan was just one tenth as productive as America. Within years it had made huge strides with a specific programme of improvement in management skills that was designed to spread across the entire economy, from small businesses to large. Japan even subsidised management consultancies to help disseminate better business practices and set up a state inspection agency to help bring standards up.
Britain will likely fall behind if the gap is not closed
Japan is just one example of how a very conscious and specific initiative to improve management skills in all businesses has had a tangible impact on overall productivity. Singapore is another Asian economy that used a similar tactic in the 1980s when it realised that the foreign companies based there weren’t passing on their management capabilities to the smaller, local firms. So, Singapore introduced a campaign to change management mindsets and brought in consultants to upgrade knowledge and experience. South Korea has introduced similar measures, as has Finland and many other countries that have suffered from a similar management skills gap. It’s not something that can be successfully ignored and the prediction is that Britain’s productivity could fall further behind if it continues to be a problem.
There is an awareness in Britain that poor business management is causing problems for our overall economy. In the report The Innovation Paradox, the management quality of British businesses was compared to the worst 10% of firms in China. So, we are already falling well behind. The industry is trying to help itself – for example Be the Business, an initiative to spread best practice. However, most experts agree that when it comes to closing the management skills gap it’s going to require more than just private sector initiatives. As in Japan, South Korea, Singapore and Finland, the government is going to have to get (more) involved.
If you’re looking for management training, get in touch with PTP today on 01509889632.