This document summarizes research on productivity in the UK. It discusses: 1) Interviews with leading businesses that found productivity is a complex issue influenced by both internal factors like technology and management as well as external factors like regulation and commodity prices. 2) While large, "frontier" firms often lead in productivity growth, some small and medium enterprises also see rapid productivity increases through a focus on customer-focused innovation, investment, valuing staff, and being responsive to market conditions. 3) There are opportunities for government to influence external factors and encourage sharing of best practices, but productivity challenges remain complex with no single solution. Productivity metrics also differ from business priorities on efficiency and short-term goals.

1. Productivity: meaning, measurement and
management beyond the frontier
Carol Stanfield

2. Contents: two ERC Research Reports
• Understanding value added per employee in six UK sectors: The
insiders’ view
• What drives productivity growth behind the frontier?
• Conclusions and implications

3. Explaining the productivity puzzle
• OECD – Frontier firms leading the way/low tech diffusion
• Haldane – long tails
• Factors which have helped explain productivity in the past are becoming less
relevant
• UK research: Rigidities in between-sector resource allocations; within sector
competitiveness; intra-firm factors
• Riley (2018): productivity slowdown in sectors which experienced strongest
growth pre-recession; more than half labour productivity gap is accounted for in
small number of sectors
• Why?
• Interviews with leading businesses/industry bodies in oil and gas, beverages,
pharma, transport manufacture, finance, insurance.

4. Structural explanations of productivity

5. Language and metrics
• Businesses don’t use the language or the metrics of productivity
Productivity metric is longer term: business focussed on short term
Productivity is outside their control: efficiency (resource, asset, labour) is in
their control
Other metrics matter – e.g. delivery schedules

6. Drivers of ‘productivity’/efficiency
Internal Factors
Technology
Management and leadership
Innovation
External factors
Competition
Regulation
Commodity prices
Tax regimes
Patents
All subject to
sector nuances

7. Learning from the best SMEs
• Productivity growth is significantly more rapid among ‘frontier’ firms
in the top decile of the productivity distribution.
• Usually large firms
• What about smaller firms ‘behind the frontier’?

8. Are most productive SMEs also fastest
growing? E.g. Manufacturing

9. Again, the usual suspects don’t apply…

10. Complex interplay of factors in SMEs
Leader
Product
and Market
Customer
focussed
innovation
Investment
Operational
management
Valuing staff
Government
activity
Reactive, responsive
Strategic, tactical
Data driven, routinised
Performance
culture
Market
conditions
Autonomy, agility
All subject to
sector nuances

11. Conclusions and Implications for Government
• Increasingly complex productivity puzzle
• Good practice can happen in small firms too – esp. where learning from big
firms
• Bridge the language and priority divide – is it always possible?
• Awareness and acknowledgement of Government influence on the
external sphere
• Government procurement influences firm behaviour and practice
• Importance of management and leadership ‘getting through’ but acted
upon? Why not?
• But insufficient on its own

12. Thank you
For further details please visit :
www.enterpriseresearch.ac.uk
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