Inefficient use of labour is believed to be costing the UK economy as a whole billions. Using average wages in manufacturing, Proudfoot Consulting conservatively estimates the cost of poor labour productivity to the UK economy in 2005 at around 70bn, or 6% of GDP. Commenting on the report, Simon Glynn, chief operating officer of Proudfoot Consulting said:
“It would be easy to view the global productivity increase as cause for celebration in company boardrooms around the world. But our report shows there is clear and considerable scope for further productivity improvement. It also shows that executives tend to overestimate efficiency improvement in their companies.
“Many are failing to deliver increased shareholder value by losing the equivalent, on average, of 38 working days per employee each year through operating inefficiencies. But, amazingly, a considerable percentage of executives say they have no plan to address this: almost a quarter of those we surveyed, a third in the UK, have no current action plan. And those in the UK that do set targets are less ambitious than those in competitor economies.”
“No company can achieve 100% labour efficiency all of the time but experience shows that 85% is a realistic upper threshold. To achieve this, a business needs firm chief executive support and a mix of clear, consistent strategy, management ability, work systems, technology use, people supervision, motivation and commitment. The challenge for the many now is to mirror the few that have so far managed to achieve this level of performance.”
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