The productivity problem

Productivity is often treated as an economic problem. A question of national output, investment levels, or technology adoption.

But in our two decades of experience, it is just as often a leadership and organisational one.

When boards and executive teams talk about growth, transformation, or resilience, the conversation frequently turns to a more practical challenge:

Do we have the leadership, capability and structure to deliver what we are trying to do?

As a talent partner, we see productivity most clearly at the point where strategy meets execution: in the roles organisations prioritise, the leadership capacity they invest in, and the operating environments they create for people to perform.

Productivity is not a mystery.

It is an organisational design question.

 

Productivity is not effort. It is design.

Most organisations are full of capable, motivated people. They are busy and committed.

But productivity is not a measure of activity. It is a measure of conversion:

How effectively time becomes output.
How clearly decisions become execution.
How consistently effort becomes value.

This is not a new insight.

The so-called “productivity paradox” of the technology era captured the same truth decades ago: tools alone do not raise performance. Organisations do.

The modern version is playing out again, this time through AI, automation, and digital investment.

In many businesses, the technology is present. The ambition is real. The pilots are running.

What determines productivity is whether the organisation is actually set up to absorb those gains: through redesigned roles, clearer decision-making, stronger capability, and operating models that allow new tools to change how work gets done.

Without that, adoption becomes activity rather than improvement. Technology can accelerate what already works. It rarely corrects what does not.

Productivity shifts when organisations make deliberate choices about how work flows, how decisions are made, and who is accountable for results. It improves when leadership teams reduce friction rather than add oversight. It strengthens when capability is built ahead of complexity, not in response to failure.

This is why productivity cannot be delegated to a programme or solved by investment alone.

It is cumulative. Structural. Leadership-led.

And it becomes visible in the everyday mechanics of the organisation: in the speed of decisions, in the quality of appointments, in the discipline of priorities, and in whether roles are designed for the outcomes required rather than the history inherited.

That is where performance either compounds or stalls.

 

What the evidence consistently shows

Decades of longitudinal research into management practices have shown that productivity differences between companies operating in the same market can be significant. The gap is not explained by sector alone, or by technology alone, but by how organisations are managed and led. High-performing firms tend to share certain characteristics.

They set fewer, yet clearer priorities.
They measure what matters and act on it.
They invest in management capability, not just technical expertise.
They adapt roles and structures as complexity increases, rather than allowing them to drift.

These are not dramatic interventions. They are disciplined habits.

Research on investment patterns tells a similar story. Capital deepening matters, but so does intangible investment: leadership capability, training, systems, organisational development. Where these are underpowered, returns on technology and capital tend to disappoint.

The implication for business leaders is practical rather than abstract.

 

The talent levers that shape productivity

If productivity is ultimately delivered through people, then the decisions around leadership and talent deserve far more attention than they often receive.

Over the years, the most meaningful productivity conversations we have had with CEOs have tended to centre on around these questions.

1. Are we being realistic about what this role needs to deliver?

One of the most common productivity constraints we see as businesses scale is not a lack of ambition, but a lack of precision.

Organisations often try to hire for every possible requirement at once: transformation, commercial growth, operational rigour, cultural leadership, deep sector knowledge.

The result is a role specification that describes a mythical creature rather than a real person.

The most effective leadership teams step back and ask a simpler question: What does this role actually need to achieve in the next 12 to 18 months?

Productivity improves when hiring is grounded in outcomes, prioritised properly, and aligned with what the organisation truly needs next, not with an impossible wish list.

2. Do we have the leadership capacity to execute?

Growth can conceal weak management. But when markets tighten or complexity increases, that buffer disappears.

Execution then rests on a smaller number of people than most organisations realise.

Appointments at senior level carry disproportionate weight. A strong leader can increase the output of an entire function. The wrong appointment can slow decision-making, dilute accountability and quietly drain performance.

This is not about individual brilliance. It is about scale.

Can this leader build capability beneath them?
Can they create focus?
Can they deliver results through others rather than around them?

3. Are we using interim and fractional talent with intent?

Periods of change often expose capability gaps. Handled well, interim or fractional leadership can protect productivity, stabilise delivery and build internal capability. Handled reactively, it can become expensive cover.

The difference lies in being deliberate.

4. Where does execution stall and are we strengthening those roles?

Productivity rarely improves evenly across an organisation.

It tends to accelerate when bottlenecks are addressed and when the roles responsible for decision-making and delivery are properly defined and supported.

5. Is our talent strategy aligned with how the business actually operates?

This is the question that often sits underneath all the others.

Not simply whether the organisation has strong individuals, but whether capability is placed where it creates the most impact.

These are not dramatic interventions. But over time, they shape whether effort compounds or dissipates. And in our experience, productivity follows the quality of those decisions.

 

Talk to Denholm

Productivity is not an abstract economic debate. It shows up in how effectively strategy turns into delivery. In whether roles are defined with precision. In whether the right capability is in place at the right time.

For more than two decades, we have worked alongside organisations making those decisions. Strengthening leadership teams, supporting moments of transition, and helping businesses align talent with ambition.

If productivity is becoming a more pressing question in your organisation, we would welcome the conversation.

Not to offer a template. But to think with you about the leadership and talent choices that will determine what happens next...

 

More questions worth exploring...

Why has productivity become a board-level priority?

For much of the last decade, organisations could often grow despite inefficiencies. Cheap capital, buoyant markets and expanding demand masked structural weaknesses.

Today's environment is different. Persistent cost pressures, labour shortages, geopolitical uncertainty and accelerating technological change mean leadership teams have less room for inefficiency. Productivity is no longer simply about doing more with less. It has become a measure of organisational resilience.

The organisations outperforming their peers are not necessarily working harder. They are allocating leadership attention, capability and capital more effectively than their competitors.

 

What is the biggest misconception about organisational productivity?

The assumption that productivity is primarily a workforce issue.

In reality, sustained productivity is rarely constrained by effort. Most organisations are full of intelligent, committed people.

The constraint is usually organisational.

Unclear priorities. Slow decision-making. Layers of governance that create friction rather than accountability. Leadership teams trying to solve tomorrow's problems with yesterday's operating model.

When productivity improves, it is often because leaders redesign the organisation rather than ask people to work harder.

 

How does leadership influence productivity?

Leadership determines the conditions in which productivity becomes possible.

The quality of decisions, the clarity of strategic priorities and the confidence to simplify complexity all begin at the top of the organisation.

Exceptional leaders understand that their role is not to create dependency. It is to build capability throughout the business.

When leadership creates clarity, organisations move faster. When leaders remove unnecessary complexity, people spend more time creating value and less time navigating process.

That is where productivity compounds.

 

Why is talent strategy becoming a competitive advantage?

Many organisations still think about talent as an HR issue.

The most successful businesses increasingly see it as a strategic capability.

Every major business objective, whether entering new markets, adopting AI, improving customer experience or increasing operational efficiency, ultimately depends on having leadership capable of delivering it.

Talent strategy is no longer simply about filling vacancies.

It is about building organisational capability ahead of demand.

The businesses that consistently outperform competitors are often those making leadership investments long before capability becomes a constraint.

 

Does technology improve productivity on its own?

Technology amplifies capability. It rarely creates it.

History shows that productivity gains follow organisational adaptation rather than technological adoption.

AI provides perhaps the clearest example.

Most organisations now have access to broadly similar technologies. Competitive advantage will not come from owning the tools. It will come from redesigning work, developing new leadership capabilities and creating organisations able to absorb change faster than their competitors.

Technology changes potential.

Leadership determines whether that potential becomes performance.

 

How should organisations think about executive hiring during periods of growth?

Growth changes the nature of leadership.

The executive who successfully built a £20 million business may require a very different set of capabilities to lead a £200 million organisation.

One of the most common mistakes leadership teams make is recruiting against today's operating model rather than tomorrow's.

The most effective appointments are rarely about replacing capability.

They are about anticipating complexity before it arrives.

That requires a different conversation from simply finding someone who has "done the job before."

 

Why are interim and fractional leaders becoming more important?

Increasingly, organisations need access to capability without necessarily adding permanent leadership capacity.

The most effective boards now view interim and fractional executives as strategic instruments rather than temporary solutions.

Used well, they accelerate transformation, transfer knowledge, strengthen leadership teams and reduce execution risk.

The value lies not simply in filling a gap, but in increasing organisational capability at moments where speed matters.

 

What role does organisational design play in long-term growth?

Strategy determines where an organisation wants to go.

Organisational design determines whether it can get there.

Businesses often invest heavily in commercial strategy while allowing structures, reporting lines and decision-making processes to evolve organically over time.

Eventually complexity becomes friction.

High-performing organisations revisit organisational design continuously, ensuring that accountability remains clear, leadership spans remain manageable and capability evolves alongside strategic ambition.

In our experience, productivity is rarely transformed by a single initiative.

It improves because organisations make hundreds of deliberate design decisions that reduce friction and enable better execution.