When the latest set of productivity figures came out in October, they painted a depressingly familiar picture. The UK continues to seeing falling productivity, and with every drop the pressure grows on the Government to take meaningful action in order to try and solve the problem, which is key to addressing falling real wages and improving the public finances.

One of the difficulties in tackling the problem of the UK’s poor productivity growth is that it is so complex with many contributing factors put forward to explain it. Many people cite the low investment in capital equipment and processes, while others will point to cheap labour, or poor levels of literacy and numeracy. The questions ‘What causes poor productivity?’ is a question with a myriad of answers!

Another key piece of the productivity puzzle which is increasingly coming under the spotlight is the quality of management. The Bank of England’s chief economist Andy Haldane argued in March this year that a lack of management quality is a plausible explanation for the UK’s long tail of low productivity companies. He went on to suggest that if we were to make progress in solving this issue, then we could see significant economic returns.

It is against this context that the CIPD supported by JP Morgan developed and piloted its People Skills initiative, which provided HR support to more than 400 small firms through local partners such as a chamber of commerce, Local Enterprise Partnership, Growth Hub and councils in Hackney, east London, Stoke and Glasgow, from July 2015 to October 2016.

The evaluation report People Skills; Building ambition and HR capability in small firms was published in September and provided some fascinating insights into the type HR support SMEs need, how much it is valued and its impact.

One of the most significant findings from the evaluation of the research project was that the first step to business improvement for many small businesses is getting the very basics of people management in place. This could be something as simple as establishing workers’ terms and conditions and job descriptions. The research suggests that until these people management ‘foundations’ are in place, owner-managers don’t have the capability, interest or time to invest in value-added activity such as training staff. However, while the typical type of support delivered to SMEs through the People Skills service was fairly transactional, the evaluation found evidence that the initiative added significant value to participant organisations, including indications of improvements to their productivity.

Face-to-face advice was crucial in delivering the sort of bespoke support that the businesses needed. The model itself used local-based HR consultants, which meant that it provided not only flexibility for businesses but also ensured that the consultants were well-versed in the local challenges that SMEs faced.

What was also striking was that the vast majority of owner-managers that used the People Skills service had previously never received support before. This was primarily down to a lack of awareness of how valuable this support could be to their business. It leads us to question why, when people are first setting up their businesses, a HR consultation isn’t offered alongside the collection of meetings with finance professionals that most people will sit down with.

The overwhelming message from the pilot was that these services made a difference, were valuable to the organisations who used them and were filling a vital gap in the market. To that end, we have now recommended a national rollout of the People Skills initiative across the Local Enterprise Partnership network in England as part of a renewed focus in the Government’s industrial strategy on enhancing workplace productivity by boosting managerial quality, increasing investment in skills and strengthening the quality of business support through local-level institutions. Our provisional estimate is that if the CIPD-JP Morgan delivery model were adopted by all LEPs, it would require initial funding of about £13 million per year for at least three years. This could be funded by allocating £40 million from the £23 billion National Productivity Investment Fund.

While of course boosting the HR and people management capability of small firms does not represent in any way a solution to the productivity puzzle in itself, it certainly has a role to play.

There are nearly 1.3 million small firms in the UK employing between 1 and 50 people and in total about 36% of the UK’s workforce, so efforts to boost productivity growth will be undermined unless more is done to provide them with the support they need to become more efficient and grow.

Ben Wilmott, Head of Public Policy at CIPD