From Employment Law to Productivity

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By Sarah Prasad

Last week I hosted an HR Leadership Forum in Leeds, facilitated by Mary Wilson (Human Resources Director, dnata). The topic for our discussion was: the challenges to be productive and competitive in light of changing employment legislation. Not only was it a great opportunity to meet talented HR leaders from a variety of business sizes and sectors, but the commercial focus of our subject lead to some fruitful discussions. One thing was clear, the drive to enhance performance and increase productivity and profitability remains, as ever, top of the agenda for HR leaders.

However, do we find that our efficiency and growth is slowed or stunted by the ever evolving legal landscape?  Indeed UK productivity is sitting at nearly 20% below the average for G7 countries (Office for National Statistics) and near the bottom of the G20. Whilst there are clearly a host of other factors at play here, regardless of its size or sector, for most organisations, there will be cost implications, in time and money, to legal compliance.

So far this year we’ve seen the introduction of the national living wage, gender pay gap reporting as well as the need to pay attention to the Trade Union Bill and new rules on exit payments for public-sector workers. Next year may well bring new legislation around Counter Extremism, childcare and extended rules on termination payments. Arguably compliance with these changes is more easily absorbed by larger organisations, with dedicated compliance, quality and/or HR teams. Many SME’s however, don’t have this specific resource and key personnel can find themselves pulled away from value added activities to figure out what compliance looks like for them in practice.

The Employment regulation and the labour market report (CIPD, Jan 2015) highlights the well documented view, that:“regulation is thought to deter productivity growth by reducing the ability of the economy to reallocate resources effectively, meaning they are used less efficiently than would otherwise be the case.”  However, rather surprisingly, the report concludes that “the UK’s traditionally liberal approach has done nothing to enhance productivity performance”. Rather it is ‘workplace practice’ that has more of a positive impact.

Perhaps then, as we discussed in our Forum last week, enhancing productivity and efficiency, especially against the demanding backdrop of changing legislation, requires our managers and leaders to develop teams who are engaged, self- managing and self-motivated?  We can manage our costs effectively and demand greater value for money from our suppliers, but if our teams are not able to take accountability and demonstrate proactivity, we run the risk of hitting a brick wall.

Interestingly, the US is the only clear example of a low employment protection – high productivity economy. Last year Anna Valero, research economist on productivity and innovation at the London School of Economics (LSE) stated that “you can explain about a quarter of US productivity superiority by management practices…”

It is this strength of management practice within businesses that Duncan Brown from the UK Commission for Employment and Skills thinks this should be given the most attention. While he admits it is hard to measure, Brown emphasises that ‘it’s about what goes on within businesses; it’s everything they do to turn equipment and workers into products and services people want to buy’ (HR Magazine, July 2015)

The key question is, what, if anything, should the government do to better support behavioural change in management practices across the UK? What do you think?

 

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