Research reveals the obstacles to productivity in SME

New research from the University of Gloucestershire provides insight into the critical issue of productivity among small and medium sized businesses (SME) employing between 10 and 250 people.

The study, published this month by the university’s newly formed Centre for Innovation and Productivity, examines the drivers and barriers for SMEs in the race to increase productivity within their own firms.

Professor Malcolm Prowle, who led the research, explains its significance: “SMEs are the backbone of the UK economy, employing around 59% of the workforce and contributing half the nation’s GDP. It’s critical for our economy that we support businesses to overcome the obstacles that they identify in this study. Also, SMEs are seen as key to achieving a balanced UK economy and to meeting the challenges of Brexit.”

In November’s Budget the Chancellor launched a £23bn National Productivity Investment Fund to tackle poor productivity, largely through increased investment in infrastructure. But with the UK lagging 30% behind the US, Germany and France, and Gloucestershire falling 8% behind the rest of the UK, how are business leaders themselves tackling the issue on the ground?

This wide-ranging study exposes the complexity of defining and measuring productivity within an individual organisation. Despite a universal acknowledgement among leaders of its importance, many businesses are unsure as to whether their productivity has increased or decreased. Understanding the relationship between productivity, growth and profitability can also be unclear.

Companies see a number of barriers facing them in the pursuit of improved productivity, but these are rarely concerns about macro-issues such as infrastructure, funding and regulation.

Barriers among SME are more commonly considered to be:

• Lack of skills exacerbated by difficulties in recruiting skilled staff
• Lack of management time and capacity to effect the necessary changes
• Lack of information on which to base decisions

A company culture that values strategy and innovation is considered important by most, as is effective leadership.

“Most companies recognise that the barriers to improving productivity need to be resolved internally,” comments Professor Prowle.

“While government has some key roles to play in terms of developing infrastructure and simplifying regulation, our research suggests that the main thrust to improve productivity must come from within businesses themselves.

“We suggest that there is a need for SMEs to grapple with two agendas. The first concerns technical issues such as the collection of information on productivity or the improvement of operational processes and workspace management.

“The second agenda is ‘softer’ and concerns the development of the SME as an organisation. Of particular importance is the need to develop a strategic focus on productivity improvement and a culture of innovation, which will initiate such improvements.”

Stewart Barnes, Managing Director of QuoLux, who was involved in the research in his role as Visiting Fellow at the University of Gloucestershire, adds: “There is a compelling rationale for sharing knowledge within the business and academic communities in order to support leaders. This has great relevance for the role of public and private sector leadership development support for SME, in particular.

“This was evident not only in this research study, but through years of experience supporting owner-managers of SME to grow their firms through equipping them with the skills – and self-belief – to lead, engage and innovate.”

A team based at the University of Gloucestershire Business School conducted the research:

• Professor Malcolm Prowle – Professor of Performance Management
• Dr Mike Lucas – formerly senior lecturer at the Open University Business School
• Mr Stewart Barnes – Visiting Fellow, University of Gloucestershire
• Mr Glynn Lowth – Visiting Fellow, University of Gloucestershire

Download a free copy of the report which was produced with support from QuoLux.