Browse content similar to 10/06/2016. Check below for episodes and series from the same categories and more!
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Now on BBC News, it's time for Talking Business. | :00:00. | :00:00. | |
Making businesses more productive is crucial to a country's long-term | :00:07. | :00:16. | |
prosperity, but the UK is in its eighth year of productivity goes | :00:17. | :00:19. | |
slow. Workers here are producing significantly less per hour than | :00:20. | :00:24. | |
other industrialised nations. On this weeks programme we are looking | :00:25. | :00:28. | |
at wide Britain lags so far behind and what can be done to put it back | :00:29. | :00:30. | |
on track. Welcome to talking business from | :00:31. | :01:03. | |
London, I am Tanya Beckett. Workers are 18% more productive than our | :01:04. | :01:08. | |
average for our G7 partners, it is the widest gap since the 1990s. The | :01:09. | :01:14. | |
British government has claimed that boosting productivity is the | :01:15. | :01:19. | |
economic challenge of our age. -- 18% less productive. I have been to | :01:20. | :01:23. | |
a company that is turning things around. For this car logistics | :01:24. | :01:31. | |
company, productivity is at the heart of the business. We are trying | :01:32. | :01:37. | |
to compete in a global economy and the competition from China, India, | :01:38. | :01:41. | |
all over the world, it is getting tougher and tougher and an all of | :01:42. | :01:48. | |
lot -- an awful lot of them compete on price because of the hourly rate | :01:49. | :01:53. | |
they charge. If we can improve our processes and the products we offer | :01:54. | :01:57. | |
our customers by using the skills and talents of our people every day, | :01:58. | :02:02. | |
then we can continue to compete and grow. Unipart spent years in the | :02:03. | :02:10. | |
slow lane, it is now part of an industry that is the most productive | :02:11. | :02:17. | |
in the world. Back in 1993, we had the lowest value added per employee | :02:18. | :02:22. | |
and the lowest stock turn of any automotive company anywhere in the | :02:23. | :02:27. | |
world. We were facing an organisational life-threatening | :02:28. | :02:30. | |
crisis and we either got our act together or we would have been | :02:31. | :02:35. | |
completely obliterated. Here that journey was more about changing the | :02:36. | :02:40. | |
culture than spending cash. We often talk to people and said grey matter | :02:41. | :02:45. | |
before the greenback. Creativity before capital. There are a huge | :02:46. | :02:50. | |
number of ways to improve productivity without investing any | :02:51. | :02:53. | |
capital at all by harvesting the skills and talent of the people. | :02:54. | :02:57. | |
Provided there is unambiguous leadership from the top and there is | :02:58. | :03:00. | |
real commitment and being gauge with the whole body of knowledge, within | :03:01. | :03:05. | |
12 months we can get relativity improvements anywhere between 20 and | :03:06. | :03:10. | |
40% and then five and 10% on top of that forever. It is an approach that | :03:11. | :03:16. | |
can be applied and measured across all areas of the economy. What you | :03:17. | :03:21. | |
are measuring is the improvement in quality, the improvement in cost and | :03:22. | :03:25. | |
delivery and reduction in cycle times, the elimination of waste. We | :03:26. | :03:30. | |
have implemented the Unipart way into major banks, insurance | :03:31. | :03:35. | |
companies, into HMRC, every single time we have done it, the quality | :03:36. | :03:40. | |
has gone up, the cost has gone down and the productivity has improved. | :03:41. | :03:44. | |
Could solving the British productivity puzzle be a question of | :03:45. | :03:51. | |
mind over matter? To help me pick through the productivity puzzle in | :03:52. | :04:00. | |
more detail, I am joined by James who is part of the Institute of | :04:01. | :04:05. | |
directors, and we have a spokesperson from a mother and baby | :04:06. | :04:12. | |
chain. We also have the executive director of policy and research at | :04:13. | :04:17. | |
an independent charity which works to increase the innovation capacity | :04:18. | :04:23. | |
in the UK. Welcome to view all. James, allow me to start with you. | :04:24. | :04:28. | |
Perhaps we should define what productivity is and then get on to | :04:29. | :04:35. | |
what is important about it. It measures how much better we are at | :04:36. | :04:40. | |
doing something this year than we were in previous years. There are | :04:41. | :04:45. | |
big problems with that. You were asking productivity per hour. A lot | :04:46. | :04:50. | |
of us have a contract saying we worked 95, but we do a lot of stuff | :04:51. | :04:56. | |
that is not 95, you may order Amazon books while at work. -- 925. -- 9am | :04:57. | :05:12. | |
to 5pm. Is a society generally speaking, if it has good high | :05:13. | :05:21. | |
productivity, is it better off? If a country can produce a lot, do a lot | :05:22. | :05:29. | |
either per hour or per worker in the country, there will be more goods | :05:30. | :05:32. | |
and services and it will be a wealthier country. One of the things | :05:33. | :05:36. | |
we have seen in the UK is not only is the productivity lower than other | :05:37. | :05:41. | |
rich countries and other G-7 countries, but we see something | :05:42. | :05:45. | |
really worrying happened since the 2009 recession, the productivity gap | :05:46. | :05:49. | |
between us and Germany and the US has got bigger since 2009. That is | :05:50. | :05:54. | |
something that economists and business people are worried about. | :05:55. | :05:59. | |
Tesco back to why that may be the case in a second, Laura you are | :06:00. | :06:03. | |
running an actual business. Is productivity something you talk | :06:04. | :06:08. | |
about in your business? In retail we tend to look at like-for-like sales, | :06:09. | :06:16. | |
we do look at productivity in areas like warehouse distribution. But | :06:17. | :06:19. | |
when you are talking about a business that relies hugely on | :06:20. | :06:23. | |
well-trained staff, knowledgeable sales assistants, we are not going | :06:24. | :06:27. | |
to look at the amount of parcels we get out of our stores per hour, | :06:28. | :06:32. | |
because we want our sales assistants to spend time with the customer. It | :06:33. | :06:38. | |
is not about a pile it high, sell it cheap attitude, it is an informed | :06:39. | :06:43. | |
purchase that the consumer will make. They need to have the time put | :06:44. | :06:48. | |
into it. We cannot always look at productivity. We need to look at | :06:49. | :07:00. | |
EBITDA. Maybe productivity is not always an appropriate measure of | :07:01. | :07:03. | |
success and what Laura is saying in some cases, parts of our business, | :07:04. | :07:11. | |
it is not appropriate measure. I think that is the case. I go around | :07:12. | :07:16. | |
the country and talk to companies about this. They say we do short run | :07:17. | :07:21. | |
production of various goods and services. I was in Scotland and they | :07:22. | :07:30. | |
produce short runs of things. That is what the customer wants. They | :07:31. | :07:35. | |
want and agility, to respond to changes. If you want cheap, go to | :07:36. | :07:41. | |
Turkey, but if you want high value added things with agile, flexible | :07:42. | :07:46. | |
stuff, you come to the UK. Many small businesses may make that point | :07:47. | :07:52. | |
as well. Let's come to the issue of why it is... And it stings for some | :07:53. | :07:55. | |
British people, the French have a short -- shorter working week, but | :07:56. | :08:03. | |
they are more productive than the Brits, why may that be the case? | :08:04. | :08:09. | |
Some of it is how we measure it and some of it is the reality. If you | :08:10. | :08:13. | |
compare Britain with France, in France people work fewer hours per | :08:14. | :08:17. | |
week, but in total they produce about the same amount. Although | :08:18. | :08:22. | |
British productivity per hour worked looks lower, once you look at how | :08:23. | :08:26. | |
much work we put in, once you consider the unemployment rate of | :08:27. | :08:32. | |
France which is a lot higher than in the UK, the productivity is not all | :08:33. | :08:34. | |
that different. When you are measuring your business, what | :08:35. | :08:39. | |
measures do you use? Do use productivity in a broader way or | :08:40. | :08:44. | |
over a longer period of time? In a company like mine, a mid-market | :08:45. | :08:48. | |
retailer relying on high street stores across the country, we do | :08:49. | :08:53. | |
look at a lot of key performance indicators which analyse how well we | :08:54. | :08:57. | |
are performing within the individual store. We also look at the warehouse | :08:58. | :09:02. | |
key productivity indicators and we assess whether we are being | :09:03. | :09:06. | |
efficient, that efficiency drive is what makes as a profitable business. | :09:07. | :09:11. | |
In our warehouse environment, we cross train people. In the morning, | :09:12. | :09:15. | |
particular ticketing on a Monday morning, we may have a lot of retail | :09:16. | :09:19. | |
orders to get out of the door quickly. By Monday evening we may | :09:20. | :09:23. | |
have a lot of mail orders coming through. People can work in one | :09:24. | :09:33. | |
department or the other. We have times when the telephones are busy. | :09:34. | :09:36. | |
Those members of staff may be able to go to customer service and some | :09:37. | :09:38. | |
of them are trained between warehouse and telephone work. You | :09:39. | :09:41. | |
run your business with intelligence, use agility and use your workforce | :09:42. | :09:48. | |
as a valuable commodity, then we can keep the business Lane and make sure | :09:49. | :09:53. | |
that actually our productivity levels are kept high. -- lean. | :09:54. | :10:04. | |
Should be criticised the UK for this? Be lazy, are we still | :10:05. | :10:07. | |
recovering from the financial crisis, maybe we have been so | :10:08. | :10:11. | |
focused on that that we have taken our eye off the ball? We should | :10:12. | :10:16. | |
certainly strive to be better, but one of the great things that has | :10:17. | :10:20. | |
happened through the last recession is the way in which employers and | :10:21. | :10:24. | |
employees really change their behaviour. If you saw the recession | :10:25. | :10:29. | |
as deep and as big as Britain had, you would have thought unemployment | :10:30. | :10:37. | |
would have gone to 18%, but it didn't. And employers said don't | :10:38. | :10:45. | |
come to meet with wage rises, but I won't let anyone off. At times you | :10:46. | :10:50. | |
have low productivity, people are working to full capacity, but the | :10:51. | :10:54. | |
talent and skills are being retained within the company. People know how | :10:55. | :11:01. | |
important those people can be. -- at times you have high productivity. I | :11:02. | :11:07. | |
expect unemployment to drift up a bit, we have had some fantastically | :11:08. | :11:13. | |
record years, it is a bit cyclical. In general we should strive for | :11:14. | :11:17. | |
better, but let's not throw the baby out with the bath water. The | :11:18. | :11:21. | |
relationship between unemployment and innovation, every time we get | :11:22. | :11:26. | |
innovation, we can argue jobs get lost. What is the relationship | :11:27. | :11:30. | |
between productivity and innovation? If you look at the gap between the | :11:31. | :11:36. | |
UK and say the US and Germany, a third of that is to do with | :11:37. | :11:39. | |
industries that the UK was traditionally very dependent on | :11:40. | :11:44. | |
going downhill, oil and gas, financial services, they account for | :11:45. | :11:50. | |
about a third, but the other two thirds seem to be the rest. The | :11:51. | :11:53. | |
ability to innovate and the ability for the good, small businesses, the | :11:54. | :11:59. | |
start-ups that bring innovation growth. That is a problem that the | :12:00. | :12:05. | |
UK needs to address. Later in the programme we will be hearing more | :12:06. | :12:08. | |
from our guests about what they think needs to be done to improve | :12:09. | :12:13. | |
productivity, but first some thoughts from our comedy consultant | :12:14. | :12:17. | |
who is getting to grips with the productivity puzzle by drawing on a | :12:18. | :12:21. | |
sweet source of inspiration in this weeks talking point. It is these | :12:22. | :12:28. | |
little fellows, we will use them to make a broad point about | :12:29. | :12:31. | |
productivity and address the productivity decline in the UK. | :12:32. | :12:35. | |
Maybe we well maybe I will just eat some jellybeans. My name is Richard | :12:36. | :12:45. | |
Cullen. I am the managing director of the jellybean factory. We make | :12:46. | :12:54. | |
gourmet jellybeans. It takes two weeks to make one jellybean. We make | :12:55. | :13:03. | |
approximately 14 million jellybeans a day, 90% of those are exported | :13:04. | :13:08. | |
around the world. You have to have a efficiency is and keep measuring | :13:09. | :13:12. | |
everything at each stage in the process. Of course it will not be | :13:13. | :13:17. | |
all about eating jellybeans. We will be talking to some experts in the | :13:18. | :13:22. | |
area, let's hear from the London School of economic. The productivity | :13:23. | :13:26. | |
puzzle is the name that has been given to the phenomenon we have seen | :13:27. | :13:31. | |
since the financial crisis in the UK whereby productivity which had been | :13:32. | :13:36. | |
growing consistently up to 2008 fell sharply and has flat lined ever | :13:37. | :13:41. | |
since. The productivity puzzle. I wonder what flavour this is. Some of | :13:42. | :13:47. | |
the issues we have around productivity in the UK are | :13:48. | :13:50. | |
long-standing. We have chronic and investment in some areas that are | :13:51. | :13:54. | |
very important for productivity growth. For example in research and | :13:55. | :13:59. | |
develop them. What are you doing here? It is about measuring | :14:00. | :14:04. | |
everything in the facility. Everything is up on the boards all | :14:05. | :14:09. | |
around this room. What is the gross conundrum when you make millions of | :14:10. | :14:14. | |
jellybeans per day? You cannot stop, we will go to 16, 18, within two | :14:15. | :14:20. | |
years we will be at 28 million a day by the end of 2019. You must | :14:21. | :14:26. | |
continually grow and you must continually improve. That is a | :14:27. | :14:36. | |
bubble gum flavour, they add on the coating to this centre. I think this | :14:37. | :14:42. | |
is Pina Colorado. I can take that back to the hour it was produced. | :14:43. | :14:48. | |
There are orders carried out on every single line. This is the team | :14:49. | :14:52. | |
that did every single line, the results of the orders, the actions | :14:53. | :14:56. | |
that need to be taken and you can see the continuous improvement. | :14:57. | :15:00. | |
Productivity is really important. I hate to see any interruption to of | :15:01. | :15:09. | |
jellybeans! The final boxes coming off the line. -- interruption to any | :15:10. | :15:19. | |
supply of jellybeans! So there you have it, I found no solution to the | :15:20. | :15:24. | |
UK productivity decline, I was distracted by jellybeans being made. | :15:25. | :15:30. | |
This productivity puzzle has widened the gap between us and other | :15:31. | :15:35. | |
countries. In the UK they have a 15 point plan to fix the productivity | :15:36. | :15:38. | |
decline, but all I am concerned about in terms of numbers is which | :15:39. | :15:42. | |
one of the 36 flavours I would like to choose to eat next. Let's give it | :15:43. | :15:57. | |
a go. Pink grapefruit it is. Our correspondent enjoying more powerful | :15:58. | :16:01. | |
levels of productivity. Remember you can see more of his films on our | :16:02. | :16:09. | |
website. When you look at your business, Laura, do you think here | :16:10. | :16:13. | |
is a problem that needs to be solved or is it an ongoing issue for you to | :16:14. | :16:16. | |
look at how much you are producing per hour? It is an ongoing issue | :16:17. | :16:22. | |
obviously. It is particularly difficult in British retail at the | :16:23. | :16:27. | |
moment. The introduction of the living wage has of course put | :16:28. | :16:31. | |
pressure on all retailers, by 2020 the minimum wage will be at ?9 an | :16:32. | :16:37. | |
hour. We have always paid at least 20% above the minimum wage. We are | :16:38. | :16:42. | |
talking about quite highly skilled wages, they will be the minimum wage | :16:43. | :16:47. | |
in the next few years. Which means that warehouse and retail operatives | :16:48. | :16:52. | |
which will be the vast majority of our workforce will be quite well | :16:53. | :16:57. | |
paid. We will actually bring upon ourselves in this country the same | :16:58. | :17:01. | |
productivity problems that some European countries already have. At | :17:02. | :17:05. | |
the moment we want to create good quality jobs, but we have to do that | :17:06. | :17:10. | |
by being a financially viable business. We do not raise pay in the | :17:11. | :17:19. | |
warehouses at the moment because we could get redundancies. That is | :17:20. | :17:23. | |
probably the office at the country in Germany which finds it difficult | :17:24. | :17:28. | |
to recruit the relatively low paid workers and so will invest in | :17:29. | :17:32. | |
automation because of the fact they do not have the readily available | :17:33. | :17:39. | |
labour force that we have. On the minimum wage, if any country | :17:40. | :17:44. | |
introduces what is perceived to be a relatively high minimum wage, does | :17:45. | :17:46. | |
that force companies to say I have to get a bang for my buck. These | :17:47. | :17:52. | |
workers need to add more, focus them on the issue? Yes, is the short | :17:53. | :18:03. | |
answer. Do companies simply respond by saying we will have fewer | :18:04. | :18:07. | |
workers? One of the things we have had in the UK is we have had higher | :18:08. | :18:12. | |
levels of employment. Other European countries have much higher | :18:13. | :18:16. | |
unemployment rates. Is that the trade-off? It may be the trade-off | :18:17. | :18:20. | |
for some companies. That would be unfortunate, but it may be an | :18:21. | :18:26. | |
inevitability if some of these low paid workers cannot justify | :18:27. | :18:28. | |
themselves given what I had to pay them. Is there attempt nation to | :18:29. | :18:34. | |
think that by throwing money at a problem that that solves the problem | :18:35. | :18:39. | |
when it does not automatically? That is a really good point. We know is | :18:40. | :18:44. | |
just spending money on new computers or new technology can add no value | :18:45. | :18:48. | |
at all if you do not do it in the right way. What really makes new | :18:49. | :18:53. | |
investment is useful, whether new computers machines, it is the | :18:54. | :18:57. | |
ability to integrate your workforce around it. Make investments in | :18:58. | :19:01. | |
training, workforce backs ability and in new ways of working so you | :19:02. | :19:12. | |
make the most of those things. That is something that the UK has | :19:13. | :19:14. | |
historically been pretty good at, the US has always been pretty good | :19:15. | :19:17. | |
at it. If you look at Germany and France, they have been historically | :19:18. | :19:21. | |
less good at it. The issue of tax incentives to introduce automation, | :19:22. | :19:25. | |
sometimes companies in some countries may get huge tax | :19:26. | :19:28. | |
incentives were doing exactly that. Laura has brought at Germany, is | :19:29. | :19:33. | |
that a positive role for the German government to play? The Germans have | :19:34. | :19:38. | |
what we do not have and I am not encouraging us to have it, they have | :19:39. | :19:43. | |
had high corporation taxes and you can write off the machinery quickly. | :19:44. | :19:48. | |
That means companies have tended to invest in a huge amount of equipment | :19:49. | :19:52. | |
displacing workers and replacing that equipment very quickly. It is | :19:53. | :19:57. | |
not about the age of the equipment, it is the tax shield they are | :19:58. | :20:02. | |
focused on. Something has to give and what gives is the return in | :20:03. | :20:06. | |
investment which tends to be poor. What is the role of the government | :20:07. | :20:11. | |
as far as you are concerned? It has put out a detailed plan, should it | :20:12. | :20:16. | |
be as prescriptive as that? Ultimately a lot of these new ideas | :20:17. | :20:21. | |
and ways of doing things will arise from individual businesses. | :20:22. | :20:26. | |
Particularly they will arise from potentially disruptive businesses, | :20:27. | :20:30. | |
possibly start-ups, possibly the smaller, more high-growth | :20:31. | :20:33. | |
businesses. The one thing the government can do is to create the | :20:34. | :20:37. | |
conditions where those kinds of businesses can get ahead, making it | :20:38. | :20:42. | |
easier for businesses to get access to finance or they can grow, making | :20:43. | :20:46. | |
sure the regulatory system does not make it difficult to introduce new | :20:47. | :20:50. | |
technologies, to do things in different ways and to make sure that | :20:51. | :20:54. | |
those start-ups, the innovative companies and growing companies, | :20:55. | :20:57. | |
they can make the most of what they do, but it is not about spending | :20:58. | :21:01. | |
money, it is about creating the right conditions. Would you agree it | :21:02. | :21:08. | |
is about the environment, Laura? Yes, we always talk about | :21:09. | :21:11. | |
immigration, at the moment we are talking about it in a negative | :21:12. | :21:15. | |
fashion, but actually we find it extremely hard to recruit and employ | :21:16. | :21:20. | |
highly skilled individuals who come from IT backgrounds, who would help | :21:21. | :21:24. | |
us with the automation of our company. We are desperately trying | :21:25. | :21:28. | |
to invest in our IT infrastructure, but we do not have the staff to do | :21:29. | :21:35. | |
that. We do have a lot of retail and sales assistants, warehouse | :21:36. | :21:38. | |
operative is available to us. We need both sides of the coin. -- | :21:39. | :21:45. | |
operatives. I would be interested to know your thoughts? The most | :21:46. | :21:51. | |
important infrastructure point that we have made is about broadband. | :21:52. | :21:55. | |
What has happened with broadband is people's demand for it has | :21:56. | :21:59. | |
completely leapfrogged and they need to get ahead of the curve on that. I | :22:00. | :22:06. | |
agree with the case on immigration. People are not bringing in | :22:07. | :22:08. | |
immigrants because they want to pay them less, they need the skills. It | :22:09. | :22:13. | |
is critical, the UK has always been a melting pot of people. I am an | :22:14. | :22:18. | |
immigrant, I have lived to the 30 years, it makes the UK vibrant and | :22:19. | :22:22. | |
successful in the long term. Thank you very much to you all. That is it | :22:23. | :22:28. | |
from Talking Business in London, do join us next week when we will be in | :22:29. | :22:34. | |
China talking to a new breed of companies who are finding their feet | :22:35. | :22:36. | |
in the international marketplace. Goodbye. | :22:37. | :22:41. |