Duncan Brown: Good economic growth via staff management

A range of recent economic statistics and indices, following the publication of the UK’s second-quarter GDP (gross domestic product) growth figure of 0.6%, ranging from purchasing and employment intentions to consumer and business confidence, all point, at last, to some sort of genuine economic recovery being under way. For that, we should all be grateful.

But in a thought-provoking article published on 25 July, City AM’s editor, Allister Heath, questions the nature and sustainability of this recovery and says: “We must urgently improve the quality of our economic growth.”

After the last four years, any growth might seem ‘good’.

But Heath perceptively distinguishes between ‘good’, sustainable, long-term output expansion, driven by capital investment, innovation and exports (as in the UK’s car industry, for example); and ‘bad growth’, short-term sales increases financed by artificially cheap credit, low interest rates and ‘government handouts’ which will crash once again when the cost of money increases to properly reflect the balance of supply and demand.

My own reading and work points to a similar distinction in the quality of people management that is driving the recovery. On the one hand, we have further evidence of the benefits of high-performance working (HPW). A major study for the UK Commission on Employment and Skills (UKCES), High-performance skills in the employer skill study, published in July 2013, found powerful relationships with firm performance and that “establishments that lead the way in developing new products and services, that compete in markets with premium-quality products, are more likely to adopt HPW practices” and are much less likely to experience recruitment and retention difficulties. Skills development, employee involvement and reward and motivational practices all appear to play a contributory role.

Looking at research institutions themselves, a June 2013 University of Bristol paper, Herding cats: Management and university performance (McCormack, Propper and Smith) reports similar close relationships between institutional research and teaching performance and the use of such management practices, including effective training, talent management, and managing and rewarding high performance.

Yet worrying, the UKCES finds that while some practices, such as flexible benefits, have spread over the past four years, this ‘good’ people management practice has generally declined in incidence, particularly among smaller, private sector employers.

In an excellent essay for the Engaging for Success website, Linda Holbeche, co-director of the Holbeche Partnership, contrasts employers that are genuinely committed to building sustained high performance through employee engagement and those that have taken advantage of the recession to “cut costs and produce greater (short-term) output from what is arguably an insecure, overworked and over-managed, alienated workforce”.

The announcement of a Department for Business Innovation and Skills (BIS) investigation into the use of zero-hours contracts highlights that the official figure of 200,000 in the UK employed on such arrangements is almost certainly a huge under-estimate.

Holbeche asks pointedly: “Should more employers be taking a lead in developing a more sustainable approach to employing and managing people…can a new form of capitalism and related employment practice emerge that has a longer-term perspective?”

She is guardedly optimistic that “a more genuinely mutual employment relationship can emerge, phoenix-like, from the ashes of economic crisis”.

The UKCES and Bristol University research would suggest that it has to if we are to avoid the situation Allister Heath fears, of a repeat of the 2008 crash in the not-too-distant future, if we don’t adopt a more sustainable growth and management model.

Follow Duncan on Twitter: @duncanbhr