Articles

What are the Directors doing

In The board, UK productivity on March 10, 2010 by Tim Aikens

Company directors have reached the top of their career. For them this is often the result of many years of hard work and not a little talent. Yet when they get to the top what is their interest in raising productivity?  In manufacturing it would seem that it is quite significant, yet in other areas – service, supplies, public sector (yes they do have a lot of ‘Directors’) it would seem that their interest is small or at least ineffective (see earlier posts). I often wonder why this is so. To me, if we do not continually raise productivity, businesses will fail – and have been doing so for many years – only the fittest – i.e. the most productive survive. So why is productivity ignored?

One reason why I think directors’ minds are off the scent is that they are beset by short-term problems.  Not least of which is the need to demonstrate that performance has improved since the last quarter.  If  the stock market is watching their performance, and profits fall, the share price falls and they become a takeover target. If it sounds simple – it is.  Many directors lose a lot of sleep – and hair over whether the next quarter’s results will be good enough.  How can they plan for a long-term, more efficient future if they have to sacrifice everything at the altar of short-term results?

But this is not the case in the public sector, or is it?  the last government has introduced so much measurement so many performance measures that senior mangers live or die by them. Their objective is to ‘hit targets’ and not to be more effective.  The phrase ‘rewarding people for the wrong behaviours’ springs to mind (and I will write ore about that in a later blog).

So – how do we get senior management to think more about productivity and really do something? What do you think?

In the public sector I believe we need a complete overhaul of the target mentality that currently exists and to bring back some common sense – as well as letting managers take a long-term view.  In the private sector directors need to stand up to the stock market and show that long-term performance is more important than a one time improvement (as many companies such as Exxon Mobil do year on year). Institutional investors need to take a longer term view themselves and press to get productivity on the boardroom agenda as one of the top issues, rather than press for incremental improvements in quarterly results.

Let’s have your comments and get this topic onto the political and boardroom agendas!!

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