Report Summary

Gearing for growth: Future drivers of corporate productivity seeks to examine what approaches firms from all sectors are taking to improve productivity within their businesses, especially in the current challenging economic climate.

Key findings

• Companies are generally optimistic that they can further increase productivity. Two thirds (67%) of companies polled for this report expect to see productivity increases in the next 12 months, either in terms of greater output or more or improved products and services. Executives see two functional areas— operations (58%) and sales (33%)—as likely to see the greatest productivity increases in the next year. North American companies are more pessimistic about seeing productivity gains in terms of improved products or services in the coming year: 59% cite this as likely, compared to 72% in both Asia- Pacific and Europe.
• Managing human capital is seen as by far the most important means of improving productivity. Some 85% of companies believe this is either “crucial” or “important” to their business effectiveness. But managing human capital presents challenges. Respondents, especially those in Europe, cite a lack of engagement and motivation as the biggest obstacle to human-capital productivity, followed by poor performance management. North American companies feel more overstretched and lacking in investment in staffing, making this one of their top obstacles to improved productivity from employees.
• Functional training is seen as a key tool for improving productivity. Training ranks highly as an efficient tool for improving productivity, particularly training for particular functions. While 67% of those that have introduced management training programmes see these as effective tools, this rises to 79% when respondents are asked about functional training. Functional training also rises to the top of the list of human-capital initiatives that executives will introduce in the next 12 months that are expected to have the biggest impact on productivity.
• Companies have yet to fully capitalise on the productivity potential of technology. Using the best available technology is only the third-most important factor in productivity, after human capital and good strategic decisions, with 69% ranking this as either crucial or important. Meanwhile, nearly half (49%) of respondents believe they are not getting the most out of technology. This is especially so for European firms (58%, vs 41% in North America). Lack of investment in new technology also emerges as a concern, with 36% overall believing this is hampering productivity. Companies also appear to be missing the productivity potential of social networking technologies, especially in terms of connecting with clients. More than half (54%) of those using social media for clients say it has improved business effectiveness, but relatively few companies have yet deployed this technology.
• There is scepticism about the productivity impact of green practices. While leading companies say they find engaging employees on sustainability initiatives is a powerful motivating tool, the survey respondents appear less certain. Only 32% of those that have introduced green practices say they have had a positive effect on productivity, while half say these practices have no impact on productivity and 17% say they have a negative impact.
• Corporate strategy is seen as key to productivity gains but companies worry about making the best decisions. Making the right strategic choices ranked second (77%) behind managing humancapital more effectively in terms of the primary levers for productivity improvements. But there is concern that common strategies are not always beneficial for productivity. For instance, in the past 12 months 76% of respondents have engaged in cost cutting and labour force reduction. Yet focusing too closely on cost cutting and not making the most of existing resources is also cited most commonly among the top three strategic problems negatively affecting productivity (by 36% of respondents). Respondents’ second most commonly cited strategic problem is an over-emphasis on top-line growth, cited by 30% (rising to 43% among Asian companies).
• China might be the world’s fastest-growing economy, but it continues to lag in terms of overall productivity. In 2001-10 China was comfortably the fastest growing economy of those in this study, enjoying annual average increases in GDP per head (measured in PPP terms) of 12.5%. China also experienced the fastest level of productivity growth of all the major economies. But macroecomomic analysis shows that China still lags way behind the world’s most developed economies in terms of overall productivity levels, suggesting that productivity growth in the country will continue to outstrip that of the developed world.
• On a macroeconomic scale, spending on education and IT are among the surest ways to boost productivity. One of the best ways for a country to boost productivity levels is by spending more on education—particularly female education, which is often neglected in poorer (and less productive) countries. There is also a close correlation between IT spending and productivity growth: faster growth in IT spending in the developing world largely reflects the extra catch-up potential of these markets and the potential productivity gains that such investment can yield.