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Employers warned over business productivity
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Too many European companies are failing to maximise the value of their people resources, a new study has suggested.
Research conducted by Big Four consultancy PricewaterhouseCoopers (PwC) indicates that employee productivity rates are at a five-year low.
The study suggests that employee productivity saw a sharp drop in 2011, following a period of relative stability between 2006 and 2010.
PwC claims this is due to an increase in staffing costs, which can be attributed to companies cutting back on their recruitment of lower-grade employees during the downturn.
This has left companies with a higher proportion of experienced workers who command greater pay, compared to younger, less experienced workers, whose pay bills will be lower.
As a consequence, Western European companies are now getting a much lower return from their investment in their workforce.
Richard Phelps, human resource services partner at PwC, said the percentage of employees with less than two years’ service has fallen sharply to 22 per cent.
"Many organisations across Europe have chosen experience over youth to see them through the recession, but cutting the recruitment of younger workers means they are paying out much more for their workforce for less return," he stated.
“The difficult job market means many experienced workers are staying longer in jobs, leaving companies struggling with top heavy structures, little staff turnover and rising wage bills.”
PwC is now urging businesses to go back to basics and improve their performance management processes to ensure that people of all levels are delivering value.
For many companies, this will mean implementing more vigorous performance management which really differentiates between higher and weaker performers and rewards them accordingly, the firm said.
It added that the better use and interpretation of people data can make "a huge difference" to employee productivity.
Companies need to really understand what their employees want, what matters to them and what motivates them, PwC added.
“The current low growth environment means companies must get the most value from their investment in people," Mr Phelps urged.
"This means flexing their human resources policies for different parts of the workforce."
He said companies could find new ways of motivating people who are staying longer in their roles and offering greater options to people nearing retirement.
"Companies need to ensure they get the best out of their younger workers by setting out clear development paths and offering flexible compensation packages," he added.
Posted by John Lynes
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