Management quality among British firms has shown signs of improving over the past few years, according to official data, which could provide the economy with a sorely needed productivity boost.
The Office for National Statistics’ (ONS) third management survey showed average management scores had improved in the last three years, largely driven by improvements among under-performing firms.
The mean management score was 0.61 in 2023, up from 0.53 in 2020.
Overall management practices have improved since 2016
Management practices include the use of targets, key performance indicators and how businesses respond to problems faced by employees
Firms are scored in a range from zero to one with the score depending on the extent to which firms introduce measures to promote effective management.
Source: ONS
“To score 1, firms need to continuously review their processes with the aim to minimise future challenges, carry out regular performance reviews, train employees, and base hiring and promotion decisions on merit,” the ONS said.
Introducing these practices is associated with higher productivity and stronger resilience for firms, the ONS noted.
The survey found that larger firms had higher management practice scores than smaller firms, while firms in the services industries generally scored higher than those in production.
A number of analysts have argued that poor management is a major problem for the UK economy, contributing to sluggish productivity growth and poor investment decisions.
“Bad managers are an area in which Britain stands out,” the Resolution Foundation said in its Ending Stagnation report.
According to the World Management Survey, just 11 per cent of UK firms are better managed than the top quintile of US firms.
Source: ONS
The survey also found that firms with higher management scores were more likely to test and adopt artificial intelligence (AI) than poorly managed firms.
Only three per cent of firms in the bottom decile had tested or used the technology compared with 36 per cent at the top.
Poorly managed firms were also far more likely to say that AI was not relevant. Nearly three-quarters of firms in the bottom decile said AI was not applicable compared to just under a third of the top.