Despite an uncertain international outlook, the UK economy is consolidating a strong recovery and creating record numbers of jobs. But we still face challenges in raising incomes and living standards. Most economists agree that this means closing the “productivity gap” with countries such as France and the United States. I am more inclined to business practice than economic theory, but as CEO of a large UK manufacturer, I know the importance of constant improvements in performance and planning for the long term.
The main lesson from my experience is that the best technology, market access and infrastructure are crucial, but only make a sustained difference if we get the best from our people at the same time. This is not just true for labour-intensive production: Nestlé’s best-performing advanced manufacturing sites in the UK show that equipping workers with skills and confidence to use new technology goes hand in hand with capital investment. The same is true for the economy as a whole, which is recognised by the government’s emphasis on increasing apprenticeships and wages alongside encouraging investment.
I would like to see this go much further. The biggest area of shared responsibility between business and government over the next decade will be to deliver a step change in investment in the skills, autonomy and modern management of the UK workforce, and this requires us to rethink how we work together.
First, we must bring in new talent to replace an ageing workforce. More than 50% of skilled workers in the food- and drink-manufacturing industry will retire over the next 15 years. At Nestlé, we are committed to creating 1,900 employment opportunities for young people across the UK and Ireland by 2016. We are committed to investing in their long-term development, but manufacturers also need new entrants, particularly apprentices, to arrive with a solid grounding in science, technology, engineering and mathematics. To achieve this will require businesses to push the government to let us play a much greater role in curriculum design and careers advice in schools.
Second, the immense power of new technology places a premium on our workers’ ability to operate autonomously, where paradoxically increased automation needs even more proactive human judgment, anticipation and problem-solving. When our work stations produce 18,000 coffee capsules in an hour, operators at all levels must have the confidence, knowledge and skills to address stoppages directly and quickly, as the cost of failing to do so directly hits the bottom line. Recent pilots at Nestlé sites have shown that this type of confidence and empowerment can be learned by everyone if supported with investment in training and matched by consistently high expectations. If the UK aspires to achieve full employment while competing in new markets and sectors, we cannot afford to leave anyone behind.
Finally, to embed these approaches consistently, we have to challenge managers to think differently about structure, hierarchy and responsibility. I am proud of Nestlé’s many great managers, but the government’s own evidence shows that, across the economy, raising all management to the level of the best could close most of the UK’s productivity gap with the US. In the food and drink sector we have made greater productivity gains in the last five years than the rest of the economy, seeing a 10% increase in output per worker. During this time Nestlé has radically reformed its hierarchies, with far greater involvement of employees at all levels in identifying and delivering improvements.
Not all of these methods are transferable, particularly for smaller businesses, where employee engagement can be more straightforward. But the experience of devolving control in a business has an important parallel for government’s role in the skills system. Most politicians recognise the importance of devolving responsibility locally and making skills provision more responsive to employers’ long-term needs, but once in office, they have too often been reluctant to risk giving up that control. This is one of the reasons why apprenticeship training is still too generic and often insufficient preparation for highly skilled roles.
If we are serious about boosting skills and productivity, then—as with employee empowerment—it is now down to companies to prove that we can deliver a fresh and better design of further and higher education that delivers excellence. The chancellor of the exchequer’s productivity plan rightly poses challenges to employers, but I hope he also recognises the reciprocal challenge for him and his colleagues to relax the grip of government and share real responsibility for preparing the workforce of tomorrow. This will mean a challenge for many businesses too, but as any factory manager will confirm, real gains in productivity require trust, confidence, sustained commitment and shared responsibility.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
