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VIDEO Series: Prioritizing Productivity to Drive Growth, Competitiveness, and Profitability | CEB

How can businesses help productivity recover

Elizabeth Crofoot explains in this CEB Insight Minute.

Productivity is an important driver of profitability, but what drives productivity?

finniTo understand the determinants of productivity growth, companies must look at technology, innovation, management competencies, and regulation in highly competitive sectors, companies, and economies.

The rise in the efficiency of global production is only about a quarter of what it was 10 years ago. To maintain living standards and global economic growth, productivity growth will need to be increased by 60 percent compared to the last 10 years…a tall order.

But it’s not about working your workforce harder—working smarter is the more sustainable way to increase productivity, through technology and innovation.

Productivity growth is caught in a decline, and business cannot be complacent about what a productivity crisis could mean: adverse effects on profits, limits in the ability to grow and compete, and a threat to job creation and global economic growth, for a start. To maintain global economic growth and living standards, productivity will have to be raised by 60 percent compared to the last 10 years before the recession. It will become the primary source of competitiveness and profitability, and increasing productivity is not just about working your people harder.

Why is Britain’s productivity growth so slow?

Smaller labor supply slows economic growth. To offset this, labor productivity will be the most important tool. This productivity will mainly come from investments in innovation and new technology. But to see results, organizations will need to make the most of their human capital:

  • Using SWP on a global scale, identify where labor shortages may occur over the next ten years
  • Retain skilled employees, encourage and facilitate the transfer of knowledge through training, phased retirement for veteran employees, among other strategies
  • Move the work to where the workers are: select production and sales locations according to the geographic areas with larger workforce availability

In addition, most mature and even several emerging economies will be facing serious shortages in workers, and not just in the most skilled occupations. Tighter labor markets around the world will result, which in turn will put upward pressure on labor costs. To stay competitive, companies need to strategize to mitigate those costs.

Bart van Ark explains in this CEB Insight Minute.

 

Research shows that the decline in productivity is largely due to inefficient investments in production inputs such as machines and equipment, human capital, and organizational processes. Thus investments have to be made in innovation, technology, and intangible assets—all of which have associated requirements such as creating an innovation culture; ensuring proper integration of new technology and balancing it with workforce skills; and a keen focus on R&D, software and data, business organization, and brand capital.

The rise in the efficiency of global production is only about a quarter of what it was 10 years ago. To maintain living standards and global economic growth, productivity growth will need to be increased by 60 percent compared to the last 10 years…a tall order. But it’s not about working your workforce harder—working smarter is the more sustainable way to increase productivity, through technology and innovation. This report details the state of productivity worldwide, the implications of declining productivity over the next 10 years, and the best approaches to drive productivity as well as the key principles of those approaches.

Productivity and Competitiveness and the HR Function

With little improvement in sight to the substantial declines in productivity worldwide, in the next year we will start to see the effects of a productivity crisis—including squeezed profits and rising labor costs. The human capital function has an essential role in mitigating this crisis.

The productivity slowdown creates new challenges for CHROs and CTOs concerning wage inflation, company culture, employee engagement, and workforce skills. This report outlines these challenges and details how to tackle them.

Ataman Ozyildirim explains in this CEB Insight Minute.

Productivity and Competitiveness and the Finance Function

The global economy appears to be sliding into a productivity crisis, but increasing productivity goes beyond simply controlling costs. Research shows the decline in productivity growth is largely due to inefficiencies in investments in things like equipment, human capital, and organizational processes.

Principle areas of focus for the finance function, therefore, are ensuring productivity is a component of the conversation about profits, driving operational excellence through intangible investment, and maximizing innovation’s effect on productivity through those investments. This report details these approaches and illustrates the relationship between productivity and profits.

Ataman Ozyildirim explains in this CEB Insight Minute.

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About Dr. Ev D'aMigo; PhD

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