Banks, Lenders & Investors Cash Flow & Forecasting General

Productivity, working hours and health – time for a new approach?

happiness and workers' productivityProductivity, and how to improve it, is a perennial concern for the UK’s SME managers.
The country’s woeful productivity when compared with other countries has long been an issue for businesses, albeit it improved in the first six months of this year according to ONS (Office for National Statistics) figures.
Productivity is traditionally measured by the amount of work produced per worker, per working hour, but new thinking suggests that we are measuring it all wrongly.
In an article in entitled Are we measuring productivity all wrong the economics and productivity expert at UWE, Professor Don Webber is quoted as arguing that productivity is measured by dividing gross value added (GVA) by the number of hours of work but that until the financial crash of 2008 GVA had been disproportionately boosted by the financial services sector.
There are three components to increasing productivity, he says. They are the ability to push down costs, push up prices and sell more units.
But he says the calculation is far more complex in a consumer economy like the UK, where austerity has had an impact on the ability to buy goods and services, and not enough attention is paid to such elements as investment in more efficient systems, tools and working conditions.
Indeed, I would argue that national productivity measurement based on macro data masks the huge productivity gains made by many firms and especially those who have invested in automation, robotics, AI and new machinery. Consider the comparison of two measures of productivity and how they might show significant improvement; the first is sales by square feet in a Lidl or Aldi, both shops that stock the shop floor with pallets of goods; and the second is car manufacturers who might measure sales per worker where their factories are automated. It can be seen how the gig economy masks these productivity gain figures.
The Businessleader article also mentions some HSBC research, which found that workplace culture is a key factor to increasing productivity.
It found that businesses that offer employees the opportunity to work flexibly are more productive and that workers place flexibility ahead of financial incentives when asked about what motivates them the most.

Innovative solutions to improving productivity

In November, Shadow Chancellor John McDonnell suggested that businesses that operated a four-day week without cutting pay could see improvements in staff morale, health and revenue. It may seem counter-intuitive but there is evidence from a number of bosses whose businesses have tried it that they are reaping rewards. The economist, Lord Skidelsky, has been asked to investigate the issue further.
The Health and Safety Executive (HSE) recently announced that, for the first time, work-related stress, anxiety and depression account for over half of all working days lost due to ill health in Great Britain. In total, 15.4m working days were lost in 2017-18 as a result, up from 12.5m the previous year.
The issue of businesses paying attention to their employees’ mental wellbeing as well as their physical health has consequently attained a higher profile. A growing number of major employers, including the bosses of Royal Mail, WH Smith, Thames Water and Ford of Britain have called on the Government to give mental health the same status as physical health in HSE legislation.
Clearly, it makes sense for businesses to review their policies and practices on working hours, mental and physical health support and training, where there are now so many options for using AI and smart technology to improve working practices and where it is becoming clearer that a happy, healthy and motivated workforce is a key to improved productivity.

Business Development & Marketing General

The skills shortage and Brexit – can AI fill the gaps?

the skills shortage and AIAlmost two thirds of businesses in the Engineering and Technical sector say that recruiting staff with the right skills will be a barrier to achieving their business objectives over the next three years, according to a survey published by the Institution of Engineering and Technology (IET) in December.
From medical staff, particularly nurses, to engineers, IT specialists and construction workers the UK has had a skills gap for a number of years and has depended on EU migrant workers, such as engineers and construction workers from Poland to fill the gap.
The latest British Chambers of Commerce (BCC) Quarterly Trends also revealed that almost three quarters of service sector firms (71%) struggled to hire the right workers throughout Q4 2017 – the highest figure on record.

The Brexit effect on the skills shortage

With unemployment at a 42-year low, arguably, the skills shortage situation has been made more difficult by the UK’s decision to leave the EU.
Since the Brexit decision, reportedly, fewer workers are willing to move to the UK and more EU workers have been leaving because of the continued uncertainty about their employment and personal security. Net migration to Britain fell to its lowest level in three years in the 12 months to the end of March 2017 and earlier this month it was reported that the UK had dropped down the league tables of desirable countries to move to.
In an effort to address the skills shortage and improve training, the Government imposed a skills levy, that came into force last year, when larger firms were required to pay an Apprenticeship Levy.
Yet this week the CBI criticised the levy, saying that the strategy aimed at improving the skills base was not working and that the levy had alienated businesses. CBI managing director argued: “We need a skills approach that lasts for 50 years, not five,”.
Whatever the pros and cons of various Government initiatives, any attempt to improve the UK skills base is likely to take a number of years before people are sufficiently well-trained and experienced to either join the workforce or progress up the career ladder.

Can AI fill the skills gap?

Any number of “experts” have predicted the demise of various jobs as technological advances make their skills redundant. McKinsey, for example, calculated in November last year that as many as 700 million people worldwide could be displaced from their jobs by 2030 due to technology.
However, it argues that there will be no shortage of demand for workers, only that the types of jobs available will change and people will find they need to retrain, adapt and become more skilled.
Hubspot recently speculated in a blog that the top 10 jobs at highest risk of being displaced by AI were telemarketers, bookkeeping clerks, compensation and benefits managers, couriers, proof readers, receptionists, computer support specialists, market research analysts, advertising salespeople and retail sales staff. Read the full blog here for the reasons why.
Those least at risk, according to the blog, are those who have people or creative skills and the top 10 of these were HR managers, sales managers, marketing managers, PR managers, event planners, writers, software developers, editors, graphic designers and CEOs.
The ability for AI to act as a substitute for basic skill level jobs in such areas as manufacturing production lines or for delivery services is plainly obvious, but as for the rest it will depend on the sophistication, safety and reliability of the technology.
For example, with driverless cars, there have been a number of collisions reported although it is early days yet, and robots will have to be a good deal more sophisticated and “human” before we use them to provide care for elderly relatives.
As for CEOs, they are safe for now at least but could even their days eventually be numbered?

Banks, Lenders & Investors Cash Flow & Forecasting Finance General

Is another tech bubble looming?

tech bubble about to be burstRecently, I heard Sam Altman, president of the start-up incubator Y Combinator, who had come over to the UK from Silicon Valley to preach to the tech faithful about the sunny uplands of the world of tech.
According to an article in The New Yorker in October 2016, “Like everyone in Silicon Valley, Altman professes to want to save the world; unlike almost everyone there, he has a plan to do it”.
He is also the co-founder with Elon Musk of OpenAI, a non-profit that the same article describes as “a hedged bet on the end of human predominance—a kind of strategic-defence initiative to protect us from our own creations”
In London, Altman’s followers converged on Shoreditch Town Hall, all of them having pre-registered for tickets to hear him. Many of them could not get into the hall, even though they had tickets. The queue was hundreds of yards long. It was a sell-out that had been over-sold

The message and why I see another tech bubble

Altman’s message was all about how Silicon Valley is the only place to be because they have the vision to change the world and have the solutions to the world’s problems. He predicted that within 10 years, 70% of the world’s jobs will be done by AI. But he also argued that the cleaver people in Silicon Valley were going to ensure that everyone in the world would have food, income and fulfilling jobs to sustain them so no one should worry.
The audience loved it, but all I could see was a bubble close to bursting. It is like the later stage of a cult at the point when it isolates itself from the world.
There is a precedent in the dot-com bubble that collapsed in the late 1990s, when the valuations of companies in the tech sector increased very rapidly thanks to a cult-like belief in its infallibility. The focus was on user numbers instead of profit. Over the period 1999-2001 many companies failed completely while the value of others, such as Cisco, plunged by more than 80%. Some, such as Amazon, Microsoft, Apple, Cisco and Google survived and eventually became some of the largest US corporations.
The bubble involves two elements, the belief that all entrepreneurs can participate, and the investors to sustain them. Like in the late 1990s it is obvious that only a very few entrepreneurial companies will survive. And picking the winners is difficult, only hindsight makes it easy.
In March this year the Guardian was the latest in a number of news media, including and Bloomberg, in October 2016, asking whether there was another tech bubble looming. The evidence cited included that the rental housing market in San Francisco had plateaued and there were signs that Venture Capitalists were making fewer investments, start-up valuations were falling, and recruitment was slowing.
However, with the examples of Google and Amazon there will be no shortage of believers. And while investors are willing to fund entrepreneurs then the tech bubble will continue.
Plainly there is no shortage of believers but eventually reality will kick in and the bubble will deflate if not burst. Investors will seek safer places for their money and entrepreneurs will find jobs or at least pursue more immediate profits. Very few companies will become the next Google or Amazon.