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UK productivity at risk as hiring outstrips revenue growth

That is the message in a new report from business advisers PwC. 

The report, which is based on data from over 2,600 organisations worldwide, including 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 in the A New Vision For Growth report 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.

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This structural adjustment has now been superseded by a period where companies are struggling to generate new and sustainable revenue growth while at the same time recruiting people faster than before, the report says.

Despite the early signs of economic recovery, this means UK revenue per full time employee has now declined back to £108,000.

David Wignall (pictured), partner and leader of the human resource services team for PwC in Milton Keynes and the South Midlands, 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.”

Employers should look at managing performance, offering flexible working, encouraging internal moves and mobility or improving incentives to drive performance, he added.

“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, lower absence rates, more money invested in training, lower resignation rates and people staying longer at the company.