Breaking finance and business news, tax information, jobs and more for finance directors and senior finance professionals.

New research released in Grant Thornton's UK Workplace Productivity Report also found that almost all medium and large-sized businesses will be using some measure to gauge workplace productivity by the end of 2008, including a sizeable proportion introducing measures this year for the first time.

Despite the potential for such a significant economic impact, however, most are still failing to capture meaningful information or use it to drive improvements.

Lack of sophistication 

The research canvassed the decision makers behind 200 medium and large-sized UK businesses, and found two thirds (66 per cent) of companies reported using workplace productivity measurement to improve performance, with another quarter (26 per cent) intending to introduce these measures for the first time in the coming year.

Alysoun Stewart, Partner and Head of Entrepreneurial Advisory at Grant Thornton, said that although the research indicated businesses are striving to find appropriate means to measure productivity, most suffer from a lack of sophistication in the tools used, particularly a lack of clarity about the key performance indicators (KPIs) that will drive growth.

"Current economic conditions have become a major catalyst for productivity improvement, both in terms of strategic capital investment and in improving staff efficiency. We need to see businesses embracing practical, organisation-wide measurement and reward mechanisms that will create real productivity improvements, which in turn will offer a genuine boost to the UK economy,” Stewart said.

Combination of measures 

The majority of those companies measuring employee productivity within their businesses (65 per cent) were now measuring all staff, although a fifth (21 per cent) still avoided measuring the efficiency of their management team.

A combination of measures were very often in place, including 51 per cent monitoring output per employee, while 53 per cent examined team output, 37 per cent used management reviews and 27 per cent used peer reviews.

The use of performance related pay is also a missed opportunity.

While 96 per cent of businesses had some form of performance pay initiative, just 10 per cent offered it with each pay check, with the largest group (31 per cent) still offering only an annual bonus, leaving many workers feeling a disconnect between their performance and their reward.

Just 7 per cent of businesses were currently aligning their business to a specific set of targets.

Fundamental principle 

There are also very few companies willing to base more than a fraction of total pay on performance, with more than three quarters (76 per cent) of businesses offering 15 per cent of pay or less based on performance.

"It is a fundamental principle that reward must be clearly linked with productivity - every employee needs to understand what is expected of them and how they will be rewarded for achievement," Stewart continued.

Grant Thornton called the proper use of performance measurement linked to reward structures that drives behaviour towards improved productivity the most powerful tool available to any management team, delivering growth and enhancing enterprise value.

The research also looked at the factors inhibiting productivity and found meeting overload to be number one on the list.

In fact unproductive meetings even figured larger than a lack of technology and poor research and development as the issue currently having the greatest impact on productivity improvement.

"The importance of workplace productivity cannot be overstated. When taking into account the improvements in average household  income that can be derived through growing productivity, the quest for workplace efficiency should be the number one goal for UK businesses in 2008," Stewart concluded.

Related articles

• Employee engagement drives shareholder value
• US firms reluctant to disclose performance pay goals
• Boards fail to measure their own effectiveness

Related links

• Grant Thornton