Good management practice drives performance – but practice lags in UK
1 min read
Management practices at medium sized UK manufacturing firms are lagging behind those of key international competitors, according to a new survey of more than 4,000 such organisations globally. The latest phase of a major research project by McKinsey & Company and The Centre for Economic Performance gives the deepest insight yet into the use and effectiveness of good management practices worldwide.
The survey demonstrates a robust link between companies’ management practices and a range of performance measures including labour productivity, sales growth and return on capital employed. Overall, management practices at UK manufacturers place the country fifth among the twelve surveyed, behind the US, Sweden, Japan and Germany.
In some areas of management UK firms perform particularly well, however. The country’s people management practices were bettered only by those of the US, a finding that the research team say is associated with the UK’s flexible, competitive labour market.
It is in shop floor operations management – the “lean manufacturing” techniques that have been applied so successfully by leading US and Japanese firms – that UK companies lag behind their major international competitors. They are also poor at using targets and performance measurement to get the best out of employees.
“Structurally, the UK is in a good position to maintain a significant, high value manufacturing sector,” says John Dowdy, director at McKinsey & Company. “But our research indicates that UK manufacturers, while they are working hard to attract and retain talented people, may be letting themselves down by not equipping their workforce with either the tools or the motivation to deliver excellent performance.”
The spread of management performance between firms in the same country far exceeds inter-country differences. And it is a large ‘tail’ of poor-performers that brings the UK’s overall score down. When the researchers asked managers to assess the quality of management at their own firms, they found that few had any idea of how well they performed by international standards.
“The basis of good management practice is widely known, and well understood,” says Dowdy. “And our research demonstrates that skilled management is one of the single most effective ways to improve performance, so it is frustrating that so few firms seem to either recognise or be trying to address their own limitations in this area.”
The research contains some worrying findings for policymakers too. It reveals a strong link between better education levels in a company’s workforce and improved management performance, yet UK companies are near the bottom of the table in terms of the education of both their management and their wider workforce.
