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LUMS Professor discusses the Government's Industrial Strategy

12 April 2017

Professor Martin Spring explores the role productivity plays in the success of the Government's Industrial Strategy.

In one firm I worked for as a graduate-level engineer, I was fairly unusual. I was the first graduate they had ever employed. To be honest, they didn’t know what to do with me. One graduate wasn’t going to change how the organisation worked.

There’s a lesson in this for the Government’s Industrial Strategy green paper currently out for consultation. Because while the proposed Strategy includes many of the right components for building economic growth, there are some things missing.

It talks a great deal about STEM (science, technology, engineering and maths) skills and making sure we have fresh streams of world-class scientists, technicians, software coders and the like - but there’s a disconnect with the bigger and more pressing issue of how we turn individual skills into organisations capable of generating value. And particularly, how we make those organisations as productive as possible.

There is no simple magic that makes groups of capable people work effectively together. It takes concerted effort in terms of management skills, organisational development, and creating the most effective kind of organisational culture. In other words, what’s missing from the proposed Industrial Strategy, as it stands, is better management. And there is plenty of evidence that good management and leadership make for more productive firms.

In the business world of today, it’s not just an issue of how organisations manage their own staff. A particular problem for a number of industry sectors is the relationship between the large, powerful organisations and their supply chains. For example, if the small firms in a supply chain are only given small and short-term contracts, there isn’t the basis of security and confidence to invest in skills and to innovate. The risks are too large. It doesn’t matter how smart and energetic the small innovators are, they are dependent on how they are managed by their more powerful partners, and in turn, how they manage them.

That means we need to be thinking about management skills and approaches much more widely than direct line reports, to the management of the wider world of stakeholders. 

Paradoxically, although management is important, we have fewer managers in the traditional sense. Organisations are leaner and flatter, but, if anything, there is more to be managed in terms of networks of associates and partners across supply chains. The question that has to be asked is whether people with high levels of STEM skills are necessarily in a position to fill all of these gaps. Components of management skills on STEM courses may not be enough - we need more staff across businesses with organisational nous. As has been argued by the Chartered Association of Business Schools, it’s time for STEM to be given an extra ‘M’ for management.

Like many of the ‘pillars’ of the Strategy, getting organisational management right isn’t a small or discrete issue. A fundamental first step will be to prioritise funding - and that means analysis and consideration of where the greatest impact and the greatest returns will be seen: is that in high-value manufacturing, in aerospace, in energy? This needs to be based on an understanding of which parts of these complex supply chains add most value and create the best jobs on UK soil. For each area of focus there needs to be inclusion of both large and small players and their distinctive management and organisational development needs. To do this requires government and other institutions such as universities to both bring together the large and small, and to ensure they are working together in a fair and effective way, starting to speak the same language and aligning their needs.

Hanging over any attempts to plan for the future of UK industry is the issue of productivity. Reportedly, UK workers have reached the stage where they ‘produce’ around 30% less than peers in the USA, France and Germany. Productivity, in theory at least, is where there should be easy wins, where the UK can make ground without the need for new breakthroughs in sectors or via new technologies. At LUMS, a Centre for Productivity & Efficiency is in the making, which will combine the economists’ understanding of what’s happening, to what extent, and why, with a focus on management, and identifying the practical actions required for improvement. So the Centre will be multi-disciplinary and include input from thinkers and doers in operations management, human resource management, strategy, management accounting, and innovation, as well as rigorous economic analysis.

In other words, we believe that we need to get down to organisational level. For instance, there’s even a significant mismatch between what economists think of as productivity and what it means to managers, and that’s not going to help with identifying the real issues and reversing the headline figures. There’s the crux of it all - we need to make sure that policy relating to industrial strategy and productivity is linked more systematically with the actual management practices in place: only in this way will the economy reach its potential.

 

Professor Martin Spring, Lancaster University Management School.