Six-point plan to boost Welsh business productivity unveiled at Productivity Summit

Professor Brian Morgan

Cardiff Metropolitan University academic Professor Brian Morgan pinpointed key strategies to help boost business productivity in Wales at a Welsh productivity summit on Thursday, 12th March.

Hosted at the Radisson Blu Hotel, Cardiff and supported by The Hodge Foundation, the productivity summit looked to understand why productivity remains so low in Wales, and unveiled key findings from the ‘Managing Productivity in Welsh Firms’ report.

The event also included a number of keynote speakers, including Stephen Phipson CBE, Chief Executive of Make UK; Mike Moran, CEO of Proton PLC; and Maireadh Pedersen, CEO of Quay Pharma. The presentations by each of the speakers were very well received by the audience. They each produced significant insights into the determinants of productivity growth at the level of the firm.

During the event, audience members also had the chance to take part in a real-time survey tool that obtains audience members’ opinions instantaneously, with one of the results being that almost half of audience members agreed that the need for improved and more structured management in firms was the most important point in the listed recommendations.

Professor Morgan said: “The Hodge-funded research project shows a positive correlation between employee engagement and productivity (and therefore profitability.) Increasing employee engagement is one of the best ways to improve productivity. To help implement the report’s recommendations, Welsh businesses and the Government should create a new era of partnership to support the economy and create opportunities for business growth.”

Developed by Cardiff Met academic Professor Morgan, visiting Hodge Foundation Professor Gerry Holtham, and other members of the Hodge Research Project, the study sought to provide a better understanding of how firms’ management practises affect productivity. Evidence for the report was gathered following interviews conducted with 74 companies across Wales.

As a result of the findings, the academics have produced a series of recommendations which they suggest could become part of an action plan for improving productivity among Welsh business:

  1. Managerial Capacity: How can management standards be improved in firms?
    The research demonstrated a close link between more structured management practices and improved productivity. For example, a broad ‘Balanced Scorecard’ approach to measuring performance would help to identify a comprehensive set of KPIs that would assist in raising productivity. In addition, the lack of a strong strategic orientation in Welsh businesses highlights the need for more effective leadership of the business.
  2. Skills Training
    When asked: what was the main restraint on growth, the most common answer was finding people with the right skills. Smaller firms which trained their workers via apprenticeships, often complained that, once trained, they were being poached. To overcome this problem, the training levy was introduced in the UK to incentivize firms to do their own training. However, in terms of higher apprenticeships, the Welsh system excludes vocational qualifications at level 7. This is counter-productive given the importance of improving professional management in Welsh companies.
  3. Encouraging Industry Solutions for Effective Networking
    There are a number of trade associations and business clubs offering various services to their members such as providing business guidance and export assistance. However, there is an under-utilisation of these associations by Welsh firms and there is a lack of appreciation of the significant benefits of effective networking – such as joint working and the exchange of information. Business support services should explicitly facilitate more effective networking and collaborative activities to address productivity and performance issues.
  4. Consistency of Government Policy
    There needs to be greater consistency in the Government’s approach to industrial support. Too many programmes are ended abruptly with no replacement being put in place. Evaluation and consistency are often absent. Policy inconsistency of this sort increases the uncertainty faced by businesses. It reduces investment and limits improvements in future productivity.
  5. Regional Delivery Structures
    The Government needs to create a new arms-length regional structure and integrate it with the City Deals with the objective of raising GVA and productivity in Welsh firms. A database should be developed in each region of all firms above a certain threshold in terms of performance in order to identify potential growth firms with the capacity to raise their productivity. These agencies could also encourage inter-firm collaboration – and also business-university collaboration.
  6. The Digital Deficit and Artificial Intelligence (AI)
    There seems to be a lack of recognition by many firms that investing in ICT, especially superfast broadband enabled services, is likely to improve their productivity. The public sector should continue to prioritise investments in broadband to reduce the Digital Deficit and encourage more investment by firms in digital technology and other forms of intangible capital. A future challenge for firms will be integrating AI into production processes in ways that can improve efficiency.