Productivity and people management

The situation

Productivity growth is critical if the UK is to benefit from sustainable increases in living standards and pay. However, since the financial crash the UK economy has experienced lower productivity growth leading to an increase in the gap with France, Germany and the US. This has been attributed to a range of factors, including measurement error, a slowdown in select industries, problems diffusing new technologies, and a lack of management capability. Productivity growth may have deteriorated further since the pandemic, although there are uncertainties around the official data.

Evidence suggests there is a positive link between the use of structured management practices and labour productivity, a link supported by the CIPD's own research.

The latest forecast by the Office for Budget Responsibility shows that the future rate of productivity growth will be critical in influencing future fiscal policy. Weak productivity growth increases pressure to increase taxes or cut spending.

CIPD viewpoint

The CIPD’s view is that there is an untapped potential to boost productivity by raising the quality of people management across all sectors, and that the workplace should play a more central role in the government’s industrial strategy and policy priorities. The government’s policies have focused more on macro-policy levers, such as infrastructure projects and research, and have paid far less attention to micro- or firm-level drivers of productivity.

The CIPD has a key role to play by helping to professionalise HR, equipping HR practitioners with the knowledge and skills they need to help organisations build their people management and development capabilities. 

In addition, more needs to be done to support small firms with limited or no HR support to help owner-managers of small businesses improve their people management capability.

We believe the insights gained from a number of HR support pilots we’ve run in different parts of the country (aimed at exploring the best ways to boost small firms’ people management capability) demonstrate how this can be done at scale.

Actions for the UK Government

• Increase the prominence of firm-level drivers of productivity, such as leadership, people management capability and workplace practices in government policy.
• Boost the quality of business support services for small firms, including HR and people management support. This could be delivered at local level throughout the country.

Recommendations for employers

• Ensure that there is clear alignment between your organisation’s business strategy and objectives, and your people strategy.
• Regularly engage in strategic workforce planning to understand the risks and opportunities facing the business and what this means for organisational and people development, recruitment, and management policies and practices.
• Develop high-quality human capital information data analytics and reporting capability to drive insight. Highlight the value of investing in people, and inform management decision-making.
• Use workforce data to improve diversity and inclusion. This is good business practice, boosts innovation, and enhances the organisation’s ability to serve a diverse customer base.
• Develop the people management capability of all line managers. They play a vital part in boosting employee engagement and wellbeing.
• Develop key policies and practices central to motivating staff. These include both direct and indirect employee voice, conflict management, work-life balance, and training and career development.