Nearly 3,000 UK firms of all sizes and from all sectors were surveyed and ranked in a Company Performance Index (CPI). The results show that in terms of added value the top third of firms out-perform the bottom two-thirds by £1,600 per worker per annum.
This means that if just 10 per cent of the UK’s lower performing firms moved to the performance levels of the top third of UK firms by acting on the recommendations in this report, the UK’s productivity growth rate would increase by 0.25 per cent per annum.
The Company Performance Index (CPI) measures strategic effectiveness in the following areas:
• Customers and markets
• Shareholders and governance systems
• Stakeholder relationships
• Human resource practices
• Creativity and innovation management
The five core clusters of the CPI have a powerful impact both on firm-level performance and on total factor productivity (TFP1). Acting on basic factor inputs they explain 76 per cent of the difference in productivity across firms.
The five core areas of strategic inter-dependency captured by the CPI are translated into productive action through five ‘intangible’ factors of production.
The ‘intangible’ factors of production are:
• Culture and Employee Relations.
What Firms Should do
High performing firms have unique organisational structures resulting from geography, size and history, that enables continued success. They have a higher degree of informality and continued dialogue supported by simple – though not simplistic – processes that allow faster decision-making. They openly share information between peers and networks of managers that need timely and accurate information in order to get the best job done. They have visible and accessible leadership and management, combined with high expectations from those in decision-making roles. They distrust the status quo, valuing quality rather than quantity, and have a focus on the long-term and on outcomes. The culture and employee relations are characterised – not codified – by pride, innovation and strong interpersonal relations.
What Government Should do
The Government is urged to focus on improving policy in ways that will sustain the 21st Century high success company. In total there are four broad areas for policy development that the findings suggest:
1. Entrenching the conditions for more sustainable high success companies
2. Encouraging investment in innovation, R&D and knowledge
3. Encouraging investment in people
4. Encouraging the development of high trust relationships between businesses and between employers and employees.