The UK’s Industrial Strategy identifies the manufacturing sector and small and medium sized enterprises (SMEs) as key targets for investment in productivity improvement. Leeds in West Yorkshire is mid-table in city ranked productivity and has over 7,300 manufacturing businesses employing over 1.3 million, the majority of which are SMEs. Addressing low productivity in the region is critical for economic sustainability. However, improving it requires the understanding of the multifaceted concept of productivity and how this can be measured and improved in particular businesses.
Research has shown that a firm’s performance management (PM) capability is hindering productivity growth. PM capability means understanding productivity from a systematic perspective, identifying the key business processes that impact overall productivity and how these can be measured. Without this, SMEs cannot adequately identify which areas of their business to improve to impact productivity and thereby derive a robust improvement strategy to sustain the business.
Some manufacturing SMEs have adopted Enterprise Resource Planning and Materials Resource Planning systems. Many of the implementations achieve operational success, in the sense that orders are fulfilled transactions automated. However the systems are often underutilised and are not used to drive performance improvement.
Some of our previous research shows that SME leaders are often most influenced by local agents. These agents such as commercial client bank managers or firm accountants usually have a transactional relationship with SMEs but significantly they have a stake in improving the sustainability and growth of these firms. Other parties with a ‘stake’ in the business may include business improvement consultants who need to maintain a reputation within the network as to the efficacy of their services, particularly in relation to productivity. The agents and the business leaders are often located within their own overlapping social networks which form local economic eco-systems which are increasingly recognised as being a key to economic success.
The Business School is keen to leverage the networks and improve productivity in the region through a project creating a collaborative expert ‘quartet’ of local agents including - accountants, a commercial bank manager, management consultants and academics. The quartet has developed an innovative intervention by integrating both theory and commercial practice, to encourage manufacturing SME’s to boost their productivity through the adoption of performance management methods, with the overall aim of improving long term productivity. The project uses an ‘intervention gradient’ which moves from being expert led, to joint development, and finally expert review of the improvement plans constructed by the SMEs.
Key elements of the project include helping SMEs assess and benchmark their current total productivity, identify which of their key business process affect overall productivity, and ensuring they can access and analyse data from their current systems to assess performance. The outcomes of the project are that each SME will be assisted to develop their own strategic performance improvement plan which will be assessed on its impact on productivity.
You can follow our progress on our twitter feed @ProductivityLBS.