The idea behind High Performance Working (HPW) is central to much current discussion on boosting UK economic competitiveness and growth. The UK Commission on Employment and Skills define HPW as:

‘a general approach to managing organisations that aims to stimulate more effective employee involvement and commitment in order to achieve high levels of performance… designed to enhance the discretionary effort employees put into their work, and to fully utilise the skills that they possess.’

In fact UKCES has concluded that the prevalence of HPW in the UK is both low and static and as a result it is trying to uncover the means by which broader application of HPW might be encouraged in the UK. As part of this research UKCES has recently completed a study of how competitor countries approach HPW and encourage its more widespread use. Sweden, Finland and Germany were selected as acknowledged front runners in organisational innovation activities, along with Ireland, Canada, Australia and New Zealand.

UKCES found that some countries approach this issue via legislation whereas others adopt a voluntary approach. Countries such as New Zealand, Australia and Canada have a preference for a more HR-focused HPW strategy, pursuing a more voluntarist intervention framework, similar to that operated within the UK.  According to BIS the HR practices that support HPW include:

• Annual appraisal
• Formal feedback on job performance from superiors/employers and from customers/clients
• Reviewing vacancies in relation to business strategy plus formal assessment tools for recruitment (e.g. competencies etc.) and structured induction training
• Annual review of employees’ training needs with training to perform multiple jobs
• Continuous skills development programmes linked to ‘work-(re)design’ for improved performance.

Business strategies based on quality and innovation are more likely to adopt HPW practices than those emphasising cost control and competition based primarily on price.

It takes time to build a national infrastructure of expertise to promote building awareness, understanding and stakeholder support for HPW.  In Finland a long-duration and coherent approach has been adopted explicitly linking HPW to the national innovation system with top-level political leadership. Similarly in Germany HPW initiatives in the workplace are joined increasingly to those encouraging innovation.  Germany and Finland have both developed networks of research and enterprise promotion partners. They have found that to maintain real momentum with the spread of HPW the underlying philosophy needs to be well understood both at firm level also by employer associations and unions.

The Coalition are currently developing Business Coaching for Growth, which is scheduled to be launched in January 2012, with the aim of helping up to 10,000 high growth businesses a year to address barriers to growth and grow more rapidly. The programme will target established SMEs with the potential to increase employment or turnover by 20 per cent or more each year for three years and new start-ups with the potential to achieve turnover of £1m within three years of starting trading, or to have at least 10 employees within three years. The service will include coaching of senior management teams to develop and implement growth strategies and develop leadership and management skills. It remains to be seen how far this new service will cover the HPW agenda which is clearly relevant to its goals.

As Industry Forum developed it was realised quite early on that successful process management needed to be supported by management and leadership development to sustain global competitiveness and as a result team leadership was brought into our portfolio. For some while this has been supplemented by a coaching approach which is proven to accelerate overall organisational performance improvements. We have found that developing the coaching ability of leaders increases the organisational energy that can be released to achieve business objectives and realise true organisational potential. Our coaching programme is linked to the ILM level certificate for Professional Workplace Coaches.

Other elements of talent management within IF’s offering include:

• Strategic Workforce Planning
• Organisation Development
• Succession Planning

In the recent IF article on inward investment we covered McKinsey’s research on the quality of management globally in medium sized manufacturing firms. The proven model used by McKinsey to assess managers’ capabilities covered three key aspects – shop floor operations, performance management and talent management. Comparing the UK and Sweden this work showed that the UK’s overall rating was pulled down by a long tail of underperforming firms which were mostly UK owned; the two countries’ multinationals scored equally well in management capability. This is linked to UKTI research which shows that foreign owned manufacturers in the UK have increased their output over the long term at the exceptional rate of 5-6% CAGR – much faster than the average for domestically owned firms.

In summary, the IF approach encompasses most of the McKinsey management capabilities model and many of the HR practices that are found within the High Performance Working model.  Rather than worrying about terminology, that key point emerges from the McKinsey work, the UKTI study and UKCES’s examination of High Performance Working is that not enough UK firms are using the right combination of operational and organisational development methods to be truly competitive. The UKCES study also points out that national initiatives need to be linked to related areas of expertise because of the difficulty spreading a high level of organisational performance right the way through an economy in a manner which Sweden, for example, seems to have achieved to a greater extent than the UK.

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UKTI promote UK exports and inward investment. They have funded research into the comparative performance of UK domestic owned and foreign owned manufacturing firms by Richard Harris from Glasgow University which has thrown up some remarkable trends. The study which was published in 2009 finds that between 1984 and 2005 the number of employees in foreign owned manufacturing firms in the UK had remained broadly constant at around 750,000. The substantial decline in manufacturing employment in the UK over that period has been concentrated in UK owned firms. Over the same period foreign owned manufacturing firms in the UK increased their gross output by 200% whereas the UK owned manufacturing firms increased output by only 15%. Harris concluded that  “foreign” owned plants have assumed much greater importance and look set to dominate British manufacturing in the near future.” Harris finds that the manufacturing sector, where foreign ownership was most developed, is automotive manufacturing.

Successive Governments have been committed to an open UK economy and the level outward investment from the UK has usually been more than the level of inward investment to the UK. The trend in UK manufacturing employment and output is a reflection of the more general process of globalisation. Harris’s research is available here

Part of the explanation for the difference in performance between foreign owned and domestic manufacturing in the UK can be found in the 2007 study McKinsey carried out – a quantitative study of 4000 medium sized manufacturing firms in the US, Asia and Europe (including the UK). Managers in these firms were interviewed about 18 topics in three broad areas – shop floor operations, performance management and talent management. Each of the 18 topics was scored from 1 to 5. Analysis revealed that high scores overall for a particular firm correlated with good performance on profitability, productivity and growth. The research is summarised here

If a manager scored well on a particular performance dimension they were more likely to score well overall. McKinsey concluded that the average score across the 18 topics is a reliable indicator of the overall quality of management.

Looking at the management score results by country, McKinsey found that management varied widely within individual countries – to a much greater extent than the variation between countries. McKinsey concluded that the biggest difference between countries with a high overall management score and a low overall management score is in the size of the tail of under performing firms.

Looking at the ownership patterns between high and low management performance, McKinsey found that multinational firms had the best overall scores while organizations owned and run by their founders or members of the founder’s family performed poorly in comparison. McKinsey concluded that the propensity to employ professional managers and promote them on the basis of merit, which typifies multi-nationals, delivers better managed better performing firms.

In the UK the average management score for domestic firms was 2.85 while the score for foreign owned firms was 3.17. Sweden was one of the few countries where domestic management scored almost the same as the management of foreign owned firms – 3.13 against 3.17. In fact the Swedish domestic managers achieved the second highest score for indigenous firms – just behind the US where the domestic management score was 3.16. The gap between the management and performance of UK manufacturing compared to Swedish manufacturing as evidenced by McKinsey is the quality of management in UK domestically owned firms. McKinsey finds that the UK sits in a second tier of companies, with a lower score than the US, Sweden, Japan and Germany, but a (slightly) better one than France, Italy and Poland.

The UK’s scores for operations  management were low suggesting that UK manufacturers  have been slow to adopt many of the modern production techniques that have been applied with great success elsewhere. The details of the operations management metrics are of particular interest to Industry Forum given our service offerings in this area. There are three specific dimensions amongst the 18 – the introduction and rationale for modern manufacturing and process problem documentation. To get the top score on the last dimension a manager/firm should agree that  ‘exposing (process) problems in a structured way is integral to individuals’ responsibilities and resolution occurs as a part of normal business processes rather than by extraordinary effort/teams’. Industry Forum has always sought to help firms achieve this level of capability.

What are the implications of the research for the Coalition’s goal of rebalancing the economy towards manufacturing?  The first point has to be the importance of continuing and indeed upscaling effort to promote manufacturing inward investment. This should involve both attracting new investors and a focus on existing inward investors to expand their operations. The automotive sector is currently a great example of how foreign owned firms with a long relationship with the UK  are increasing their level of investment and employment and taking a larger share of world markets.

The easiest path to boosting UK manufacturing output is to support and reinforce the existing long term trend for foreign owned manufacturers here to increase their output by an average of 5-6% per annum.

Also we need to continue and reinforce the process whereby foreign-owned manufacturing primes encourage the development of the better capabilities in the UK owned firms in their supply chain. The expectations of major customers provide a powerful incentive for supply chain firms to improve their performance. There is a long history of automotive majors developing the UK supply chain and indeed this was the initial rationale for setting up Industry Forum.

The process of supply chain development is a particularly high priority for clean and renewable energy sectors where large scale inward investment is likely to take place. Much of this will involve foreign-owned majors setting up new R&D and manufacturing plants in the UK. It is vital that the UK owned firms who might become suppliers to these new investments are helped and encouraged to raise their management standards so that they can support the major inward investors in a globally competitive manner. Operational excellence is a good area to start with in raising the game of UK firms who could be able to enter inward investors’ supply chains.

Policy makers often like to look for new solutions for policy goals. This research shows that there are existing solutions which have worked well so far – inward investment and supply chain development – which should be maintained and reinforced to achieve the Coalition’s goals for rebalancing the economy.

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In November 2010 the UK Commission for Employment and Skills started research on rebalancing the UK economy, sectorally and spatially to identify the possible role of, and implications for, skills and employment policy. The project also covered the rationale for government intervention to build a strong and sustainable economy, balanced geographically and sectorally. The results were published in August 2011 in two volumes available here

‘Rebalancing’ has become a key word in the political and economic goals of the Coalition. It covers a number of different issues – the economy has become unbalanced because there has been too much borrowing for consumption and not enough saving for investment. The balance of trade is out of kilter because the deficit in trade in manufactured goods may not be reliably covered in future by a surplus in services especially if the excessive reliance on financial services is rectified. The balance in growth rates and levels between regions of the UK has not been ameliorated sufficiently by Regional Development Agencies given that the OECD found that the UK had in 2005 the highest level of regional GDP variation in the countries considered. The energy sector must be rebalanced towards low carbon and renewable generation.

The UKCES reviewed a number of international case studies of rebalancing and settled on five in particular –  Korea, Finland, Sweden, Germany and the Netherlands – which they presented in detail in the evidence volume.

For example since the 1990s, Finland has recovered from the global economic downturn with a more ‘balanced’ fiscal position and competitive, high technology economy. In Germany close collaboration between employers and the state (at national and sub-national scales) helps match the supply and demand for skills thanks partly to a vocational training system which integrates theoretical learning in vocational schools and practical workplace training . The Korean government has sustained a strong commitment to regional innovation centres. The Northern Dutch provinces have shown potential for bottom up mobilisation finding partners in other parts of Europe to take advantage of EU programmes. In Sweden sectoral and regional rebalancing led to demand for new occupations and skills and the local education system had a major role to play in increasing the supply of relevant skills through new courses.

The study reviewed the familiar economic objections to state intervention but concluded that recent thinking about economic or functional geographies where spatial differences persist long-term because of agglomeration economies made the case for action. Economic development policy now focuses on the adaptive capacity, productivity and utilisation of resources in specific places. The evidence review found that the rationale for specific government intervention in support of ‘rebalancing’ activity is now based on the need to address the underutilisation of resources and improve the competitiveness of places.

According to this project, success in rebalancing is most likely with:

• ‘Packages’ of interventions that span policy areas have better chances of success than single silo actions.
• Interventions that go with the sectoral and cultural grain.
• Certainty and predictability going forward.
• Autonomy at the ‘right’ spatial level.
• Capable and competent governance and oversight.
• Dialogue between employers, unions, workers and other organisations.

In terms of the role of employment and skills policy in ‘rebalancing’ the key messages emerging from the study are:

• Interventions supporting the development of the educational infrastructure and hybrid people and skills interventions have provided some of the highest returns of any human capital and skills interventions  in the UK and abroad.
• The expansion of higher education, including specific targeting of applied sciences in some regions, has provided skills of value for sector ‘rebalancing’.
• Intermediary organisations can play useful roles in working with employers and education and training providers to ensure employers’ demand for skills are met, particularly as an economy rebalances sectorally.
• Skills development and investment in training to aid the ‘rebalancing’ process needs to be shared between employers, individuals, and government.
• Emphasising lifelong learning and the skills for sustaining and progressing in work, can yield positive outcomes for individuals and can assist in the ‘rebalancing’ process between sectors. Anticipating skills change is crucial.

Industry Forum has embraced the skills dimension of building process improvement capability for at least ten years and this year has opened a Learning Centre at its headquarters on the Birmingham Business Park. Its Learning and Development offering is extensive and includes global management systems, study tours, leadership and management, operational excellence and apprenticeships. IF have delivered learning and development programmes in Automotive, Aerospace, Food manufacturing and FMCG.

 

 

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The UK Government is committed to increasing the proportion of UK energy from renewable sources since it regards climate change as one of the gravest threats facing us. The drive to increase the proportion of energy obtained from renewable sources will  increase the security of energy supplies in the UK and will also provide opportunities for investment in new industries and new technologies. The Government is committed to helping business develop in this area to put the UK at the forefront of new renewable technologies and skills.

The 2009 Renewable Energy Directive sets a target for the UK to achieve 15% of its energy consumption from renewable sources by 2020 compared to 3% in 2009. A Renewable Energy Roadmap for the UK has been published which sets out a comprehensive programme of actions to tackle the barriers to renewables deployment, enabling the level of renewable energy consumed in the UK to grow in line with the goals for 2020 and beyond.
See http://www.decc.gov.uk/en/content/cms/meeting_energy/renewable_ener/re_roadmap/re_roadmap.aspx

The Renewables Roadmap sets its sights on delivering as much as 18GW of energy capacity from wind farms off the UK coast by 2020. The other technologies covered in the roadmap are onshore wind, marine energy, biomass electricity, biomass heat, ground source heat pumps, air source heat pumps and renewable transport.

In terms of tackling carbon emissions and climate change it is important not to forget the potential contribution of nuclear energy. Nuclear power is low-carbon, affordable, dependable, and capable of increasing diversity of energy supply. It has been part of the UK’s energy mix for the past five decades; as a result most of the existing fleet of nuclear power stations will have reached the end of their lives by 2023. The 2008 Nuclear White Paper stated that new nuclear power stations should have a role to play in this country’s future energy mix, alongside other low-carbon sources. The likely level of investment in nuclear energy in the next two decades is in excess of the total probable investment in offshore wind. The replacement of the UK’s existing nuclear capacity alone could represent some £20 billion worth of business for UK companies.

In early October, Dr Mike Weightman, the UK’s chief nuclear inspector, found no fundamental weaknesses in the current licensing regime or safety principles. The Fukushima disaster provides no reason to restrict UK nuclear reactors or stop building new ones, he concluded.  But “continuous improvement” should be sought, he said in his report. The government commissioned the report after the March tsunami damaged Japan’s Fukushima Daiichi plant.

The Coalition Government published a programme in June 2010, which set out its vision that energy companies can build new nuclear power stations provided they are subject to the normal planning process for major projects and receive no public subsidy. The Government has confirmed nuclear would play an important role, alongside renewable energy and Carbon Capture and Storage in the future energy mix.

DECC is taking a number of actions to reduce regulatory and planning risks for investors and ensure owners and operators have robust funding plans for waste management and decommissioning such as assessment of potential new build sites that are suitable on a strategic level.  The aim is to have the first new nuclear power stations generating electricity from around 2018.

The anticipated level of investment in offshore wind has already attracted several major global firms to set up facilities in this country. The Spanish wind turbine manufacturer, Gamesa has said it will invest £133 million in the UK over three years. Siemens have re-affirmed their commitment to invest just under £200 million and General Electric is to build a £99m offshore wind turbine factory in the UK, creating up to 1,900 new jobs by 2020. Hull has been selected as a turbine assembly location by Siemens and Gamesa has selected Dundee. Mitsubishi Power Systems Europe has announced that it will invest up to £100 million in a Scottish offshore wind research and development centre with the goal of commercialising efficient renewable technology.

Concerns have been expressed that  UK firms who might potentially join the wind energy supply chain are not fully equipped to get maximum benefit from this inward investment. A survey of the industry commissioned by The Technology Strategy Board in 2010 revealed a number of concerns:

• The challenges in identifying potential customers and establishing a supply relationship with Tier 1/2/3 companies. There is a sense of supply chain disconnection from the top tier offshore wind companies and developers.
• Uncertainties over the scale, timing and commitment of the offshore market segment addressable by UK companies. In particular, UK businesses are seeking enough long-term market assurance that would warrant their capital and skilled training investments.
• Tough market entry and strong competition faced by the predominantly inexperienced small/medium size UK businesses from more established and bigger overseas companies.
• The difficulty in accessing the specification and requirements of the top tier suppliers in order to promote or evaluate the existing competencies, or to identify the scale of new manufacturing capabilities needed.
• Lack of access to any pre-qualification process, procurement opportunities and limited understanding contract placement routes.
• Difficulty in identifying potential UK or overseas business counterparts to form strategic partnerships or joint ventures.
• Limited coordinated supply chain development and business diversification support programmes to help UK businesses into the emerging offshore wind industry.

The recently published DECC Renewable Energy Roadmap makes a commitment to establish an industry task force to set out a path for reducing the costs of offshore wind involving industry, the Government and the Crown Estate. The Crown Estate is to play a key role in facilitating the work of the task force through its analysis on cost-reduction pathways. The group will produce an action plan by Spring 2012 as part of efforts to bring the costs of offshore wind down by 33 per cent within a decade to £100/MWh. The government recently said the UK could increase its target for offshore wind capacity from 13GW to 18GW by 2020, but only if costs fall by around a third.

The circumstances which favour offshore wind in the UK energy mix also favour marine energy. The Coalition has established a new UK Marine Energy Programme, that is focusing on enhancing the UK marine energy sector’s ability to develop and deploy wave and tidal energy devices at a commercial scale. The programme involves:

• Putting in place a coherent programme of policies across Government, led by DECC, to enable the UK Marine Energy sector to move from prototype testing to commercial deployment over the coming 5 years.
• Providing a direct link between Ministers and sector stakeholders.

This programme is overseen by the Marine Energy Programme Board, which draws together key stakeholders from across the marine energy sector, and will play a central role in advising the Government what actions the Programme should address to advance the industry. The Board has set up Working Groups to take the work of the Programme forward which cover:

• Support needed for small scale arrays and early commercial deployment. This group will be asked to provide recommendations back to the Board on what level of capital and revenue support is necessary to realise the development and deployment of small scale pre-commercial arrays in the medium term.
• Planning and consenting issues.
• Knowledge sharing though a Marine Intelligence Network. Facilitating knowledge sharing that is beneficial to the market as a whole has been cited as one way to reduce risk and encourage investment. The Crown Estate and DECC will lead this group in partnership to explore this idea further and discuss the possible creation of a Marine Intelligence Network.

Industry Forum has a great deal of experience in organising and improving the performance of supply chains – not just in automotive and aerospace but also in the fresh food supply chain. The challenge of getting maximum benefit for firms with the potential to join the offshore wind supply chain have attracted a lot of attention because of the impressive wave of inward investment from global wind turbine manufacturers. There are similar challenges in establishing the supply chains for nuclear replacement and the expansion of the marine sector. Industry Forum is keen to make its expertise available to these various energy sectors and is actively developing its links with the appropriate energy networks. We believe that our knowledge and experience can make a significant contribution to the achievement of the UK’s energy goals in the medium term.

 

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Within the European Community, the food and drink industry (excluding primary agriculture) is the largest manufacturing sector with some 300,000 enterprises employing around 4.7m people. Germany has the largest share in terms of total value added with just under 18% of the European Community (EC) total but the UK is not far behind with a 16.5% share. France has the third largest share at just over 15% . None of the other EC Member States have a share in excess of 10%. Within the industry, bread and confectionery is the largest sub-sector contributing a third of the total value added in the EC. It is also the most labour-intensive food sub-sector.

While the majority of enterprises in the sector are SMEs, the sector is dominated by large multi-nationals with Nestle as the largest European firm. Unilever is second in the rankings while Diageo PLC is third. Associated British Foods is the next largest UK firm ranking eighth across Europe. Other important European firms include Danone and Heineken.

In the UK, the food and drink sector has proved remarkably resilient in the recent recession and has maintained its leading position in UK manufacturing in terms of overall employment, turnover and value added. The industry is particularly important in the East of the country, especially the Lincolnshire area. Competition in the industry is increasingly strong both nationally and internationally. Mergers and divestments are quite frequent and private equity firms have been active in the sector – United Biscuits, one of the largest UK food firms was in the FTSE 100 until December 2006 when it was acquired by a consortium of Blackstone Group and PAI Partners.

Productivity in the UK food and drink sector has been below the UK manufacturing average but the challenge posed by the purchasing power of the industry’s main customers provides a powerful incentive to reduce costs and boost added value. Innovation is an increasingly important factor in driving up value added, especially technical innovation. Since its formation in 1996, Industry Forum has undertaken a number of projects in the UK food sector and there is plenty of evidence that our approach yields benefit within the sector. This experience provides a good foundation to expand our customer base in the sector and we have recently begun to work for a global confectionery major with a significant UK footprint. We are also working in the supply chain for two of the UK’s leading and most competitive supermarkets.

The Food and Drink Federation is the industry’s trade association and it recently engaged the Institute for Manufacturing at Cambridge University to explore future scenarios for the industry. Emerging from this work is a major agenda starting with the formation of a clear future vision by stakeholders including the Government and a richer dialogue between industry, Government and society at large.

Increased skills will be important for the industry so that it can produce in more innovative ways in particular innovation linked to sustainability. The Sector Performance Standards in Food Manufacturing Excellence have been developed by the Food and Drink Sector Skills Council, Improve, and were launched in 2009 after consultation with the sector. These standards have been used to develop proficiency qualifications which recognise improvement skills in the context  of the food and drink sector.  Industry Forum  is working with Improve, through the National Skills Academy Food and Drink Manufacturing Lean Manufacturing Network.

 

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