UK productivity at risk as hiring outpaces anticipated growth

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The revenue UK organisations are generating from each employee has dropped by nearly a quarter over the last three years, as organisations are rushing to recruit over and above their needs – according to PwC’s ‘A new vision for growth’ report.

The report, which is based on data from over 2,600 global organisations (150 in the UK), warns that unless businesses start managing their workforce in a more flexible and intelligent way, UK productivity levels have limited chance of making a long term improvement. This includes organisations using big data and predictive analytics to understand their future recruitment needs and how to maximise performance among their existing staff.

PwC data shows that UK organisations are now recruiting more people externally (12.8% rate of recruitment compared to 10.9% in 2011) but this is at a faster rate than revenue is growing, meaning a knock-on impact on productivity. In fact, revenue per full time employee has dropped back to levels last seen in 2008.

In the midst of the recession, UK plc’s revenue per full time employee stood at £104,000, but climbed to £139,000 by 2010 primarily due to reductions in headcount. This structural adjustment has now been superseded by a period where companies are struggling to generate new and sustainable revenue growth while at the same time recruiting people faster than before. Despite the early signs of economic recovery, this means UK revenue per full time employee has now declined back to £108,000.

Anthony Bruce, HR and workforce analytics leader at PwC, said:

“Too many organisations are simply following the pack and recruiting because everyone else is, rather than because they need to. This will ultimately stifle workforce productivity levels.

“Businesses should be making full use of the tools and information available to better manage their workforce. Whether that is managing performance, offering flexible working, encouraging internal moves and mobility or improving incentives to drive performance. Businesses also need to make better use of analytics to assess and predict what skills they actually need and where, rather than just recruiting. In this way they can encourage rather than stifle productivity.”

PwC’s report shows that a failure to recruit more strategically is costing organisations thousands of pounds worth of lost profit. The data reveals that the difference between efficient recruiting, matching people carefully to their roles, training them more quickly and having a more productive workforce can be as much as £34,000 marginal profit per employee in the banking sector and up to £67,000 per employee in the utilities sector.

Smarter workforce management also translates to a higher job acceptance rate (97% versus 93%), lower absence rates (2.2% versus 3.7%), more money invested in training (1.5% versus 0.9%), lower resignation rates (3.4% versus 6.7%) and people staying longer at the company (12 years versus 7 years).

http://www.onrec.com/news/news-archive/uk-productivity-at-risk-as-hiring-outpaces-anticipated-growth?dm_i=C5N,2XL5L,44H6K8,AL7ZB,1

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