Mark Threlfall and Mike Bernon call for greater cooperation between large organisations and their suppliers.
Business is a story of winners and losers. But the growing divide between the top and bottom of British companies, the haves and have-nots, is now a problem for the economy as a whole when it comes to the national productivity ‘puzzle’.
Data from the CBI has shown that the most productive areas of the UK are three times more productive than the least. Two-thirds of employees work for firms that are below average in terms of the productivity levels expected for their size or sector. Competitor countries fare much better.
The productivity issue is centre stage. Unlike other G7 nations, UK businesses have been unable to return to the levels of productivity achieved before 2008. In the first quarter of 2017, levels dipped further by 0.5%.
This year the business leaders pulled together by government as the Productivity Leadership Group launched Be the Business, arguing that just small improvements in productivity across the ‘long tail’ of smaller firms would add £130bn to the value of the UK economy.
Closing the productivity gap will be important for economic growth, but also for unblocking the development of businesses both large and small.
The campaign is to focus on providing easy-to-action tools to improve operational processes via benchmarking, collaboration, better leadership and talent management.
Closing the productivity gap will be important for economic growth, but also for unblocking the development of businesses both large and small. And that’s why more organisations are looking at ways to invest in the training and development of partners in their supply chains.
The evolution of the apprenticeship levy in 2018 – when large employers will be able to re-allocate a proportion of the levy payment to fund apprenticeships for their suppliers – is a signal of the importance of this kind of support.
The long tail
The push for more apprenticeships and the introduction of the levy from April 2017 has been intended to ensure larger employers spend more on education, for new entrants and experienced staff up to master’s degree level. In reality, it’s the large businesses which have naturally invested more than others in training and development.
Levels of qualification in the UK workforce generally are the highest they have ever been, and again there is an issue of inequality with the real problems being among the long tail of smaller firms, people working at the lower end of the career ladder, in the lack of upskilling and lifelong learning among experienced staff.
Particular challenges include the number of people who become trapped in low-skill jobs without the prospect of more mid-level careers to progress into; and also older employees struggling with the demands of new ways of working and without opportunities to learn.
Work by the Federation of Small Businesses has highlighted how important external support is to small firms. In its study, 60% of SMEs reported increased sales and profitability as a result of input on knowledge and skills; following best practice on HR systems was found to lead to a significant impact on long-term performance.
Supply chain contests
More organisations are coming torealise that it’s not individual companies that compete, but whole supply chains. No matter what their internal strengths and capabilities are, it’s only as part of the chain that they succeed.
Traditional relationships have been transactional: orders are made; products and services delivered; suppliers kept at arm’s length. There is now a spectrum, with many supply chains still operating at the transactional level at one end, but others shifting to partnership at the other.
The automotive sector is a good example of partnerships, where first tier suppliers are integrated into every stage of design and development of vehicles, allowing for strong strategic planning and just-in-time delivery.
Large employers have a great deal to offer as models of good practice when it comes to Human Resources, performance management and people development.
But collaboration can be equally effective at simpler levels. For example in retail, where better information sharing with farmers and manufacturers allows for improved planning and control over supplies and quality.
Marks & Spencer works with Cranfield School of Management on an executive programme it has funded to share good leadership and management practices among its supply chain partners.
Members of supply chains, from top to bottom, have knowledge and insights that are critical for development, for providing a more holistic perspective on a business sector, for problem-solving, innovation and access to different technologies and approaches. Collaborating across a supply chain unlocks value.
The focus of the Be the Business initiative is less operational and more around creating a high-performance culture in smaller firms. Large employers have a great deal to offer as models of good practice when it comes to Human Resources, performance management and people development.
It’s here that the Productivity Leadership Group has predicted seeing the most straightforward gains in productivity, simply by sharing systems and processes for engaging and motivating staff to deliver more, to be more committed to personal development.
But this is where the greatest challenges lie in encouraging more supply chain collaboration. There are culture differences within organisations in terms of behaviours and expectations, say between the sales and marketing teams looking for flexibility, and operations wanting reliability.
The differences are obviously more stark between organisations with different roles within a supply chain, working at a different scale, with a different heritage, goals and types of expertise.
There is also the history of supply chain relationships to consider, where large players can have a reputation for having been adversarial over many years, of taking full advantage of their financial and market muscle. Collaboration requires trust, and trust is only built through experience over time.
About the authors
Mark Threlfall is the director of Cranfield School of Management’s Centre for Customised Executive Development. Mike Bernon is senior lecturer in supply chain management at Cranfield School of Management.