Why productivity needn’t be such a puzzle

Pamela Dow
Research Centre Manager

09 October 2018

Pamela Dow, Chief Reform Officer at Catch 22 is a member of our Voluntary and community sector panel and shares her views on evidence and her vision for the Centre.

Weak productivity is a concern in all OECD countries, but the ‘productivity puzzle’ is not just something that interests Finance Ministers and Central Bankers. Productivity is output from input: how much we achieve in relation to how much work we do. If productivity is stagnant or in decline it means we are working harder and longer for less impact.

Britain has a very chronic case. Our productivity is 18% below the OECD average and a full 35% below Germany.

One explanation is along these lines: the UK has some of the most brilliant companies, working in tandem with the best universities, leading the world in life sciences, engineering, AI. But the breakthroughs are taking decades to trickle down and become the norm. We have a long tail of inefficient companies, slow to adopt improved practices. The phrase ‘R&D’- Research and Development – is always conjoined, but the UK’s problem seems to be that we are great at ‘R’ but not at ‘D’. We are brilliant at inventing new processes, practices and products. We’re a bit rubbish at understanding what needs to be done to adopt them, quickly, and then methodically training or retraining our workforces accordingly.

In the UK we have some of the most astounding schools and fantastic family interventions which change lives. We have a well-funded advocacy sector with influence and insight and established academic disciplines. But we also have massive policy failure, expensive white elephants, and places that Ofsted have deemed inadequate for years and years.

Whatever we’re doing to ‘share best practice’ isn’t working as well as it could. Online repositories of evidence aren’t being used, and a constant plea for innovation is making people anxious not empowered.

When policy fails or falls short it’s usually because evidence has been treated as a ‘what’ not a ‘how’. Evidence has been interpreted as a vaccine to be administered to cure a complex social problem, rather than a guide to help leaders and managers make better decisions.

A quick example. A few years ago, some very senior clinical psychologists designed and delivered a successful programme for sex offenders, incorporating intensive group therapy and built on empathy and acknowledgement. It was evaluated as successful in improving control over impulses and therefore the likelihood of offending. It was then quickly rolled out across the prison estate. Only not with such senior clinical psychologists, or enough training or time. A few years later the programme was re-evaluated as not working. It was worse than doing nothing. Did we take the wrong lessons from the positive evidence, and the wrong conclusion from the negative evidence? The result is that no intensive group therapeutic programme for sex offenders will now be commissioned for a generation, and I refuse to believe that this approach, done well, doesn’t help some people. It’s not the ‘what’ we should be focusing on, it’s the ‘how’.

My recommendation to the What Works team is to study a slightly obscure 2011 paper* on the correlation between R&D and productivity, by academics from across the EU:

  1. Focus on process innovation not product innovation. Help people do their current jobs better, and work better with others. Don’t keep changing their jobs, or restructuring.

  2. Participating in R&D improves productivity. If leaders place a value on learning from the best, looking outwards, and rewarding those who do, they set a culture of ambition and high expectations.

  3. R&D investments and productivity are cumulative and mutually dependent. It takes time to embed such a culture and it improves with time.

  4. Fixed R&D costs are smaller than sunk costs. Once you have set up your outward-facing, self-improving, and innovating team, maintaining it is cheaper than constantly establishing new projects.

  5. Bigger and more complex organisations get more productivity return from R&D than small ones. This is a clear call to action to our largest Local Authorities, and regional partnerships, to lead the way.

*Hall, Bronwyn H. 2011. “Innovation and Productivity”. Nordic Economic Policy 2:167-204.