Engaging the productivity fix

Catalysing success. 1 - Engaging the productivity fix

Are you leading a business, government agency, program or project and feeling the pressure for greater productivity despite the complex, uncertain environment? Do you have a nagging sense that working business-as-usual harder won’t get the results expected? What if you could enhance productivity in an engaging way?

Australia is not well positioned

If I challenged you to describe the current state of politics, markets, government and business in one word, what would it be? Does “turbulent” spring to mind? Do you, like me, feel that there’s a lot of effort and debate expended on important issues without much meaningful progress. With a similar sentiment, the former Secretary of the Federal Treasury, Martin Parkinson, recently said “Australia is not well positioned for either the opportunities or challenges ahead,” going on to say that “Absent productivity improvements, growth in living standards will slow dramatically.”[1]

Productivity growth has stalled

Productivity is an economic measure of how efficiently inputs (labour and capital) are used to produce outputs. For Australia, we know that over the last 40 years productivity growth has been responsible for more than 80 per cent of the improvement in measured living standards [2]. But over the last decade, investment in mining infrastructure and unprecedented terms of trade have masked an underlying deterioration in Australia’s productivity performance [3]. Indeed, since 2003-4, (multi-factor) productivity has been on average zero or negative [4].

Innovation and better work practices

To drive productivity growth we can work more, work more efficiently, or cut costs, which often translates into staff redundancies and/or reduced wages. Of course, you and I know that you can’t cost-cut your way to growth. Short term profitability isn’t a true indicator of underlying productivity. It’s why participants at the recent National Reform Summit emphasised that productivity growth and value creation has to come from innovation, investment and improved workplace practices [5].

Primary responsibility with business

Despite much of the current productivity discussion focussing on what governments must do, it’s business decisions that ultimately drive productivity growth, whether choosing to employ new technology or adjust business models, services and products to better meet customer needs. Government’s role is to provide a supportive environment by, for example, optimising regulations and investing in enabling infrastructure.

Broader notion of productivity required

The “pressure is on Australia to reposition itself as a knowledge-based, high wage, high productivity economy” [3] rather than engaging in a cost-cutting race to the bottom. To achieve this outcome, Australia needs to retain, attract and collaborate with the brightest minds. To do this I believe we need to embrace a wider notion of what it means to be productive. Not only must we produce more from our effort and investment but also different things in different ways, meeting contemporary market and social demands. The demands include creation of vibrant, efficient cities and greater social equity – places where ‘bright minds’ will want to live and work. Productivity must deliver outcomes, not just outputs.

Evidence it’s possible to do better

There’s plenty of evidence to demonstrate the sizable economic gains available from better work practices in government, business and the delivery of infrastructure (see for example [6] and [7]). Celebrated cases of public policy, corporate and project failures also demonstrate where better practices would have averted financial and reputational destruction. While it’s hardly the easiest time to undertake reform – best done when the economy was booming – there’s no rational choice other than to pursue productivity growth seriously.

Driving productivity needn’t be slow and overwhelming

Perhaps, at this point, you’re comfortable with my observations and line of argument but still feel somewhat overwhelmed by the the task of driving productivity growth; if possible, it’s something to be avoided, right? Yet this really needn’t be the case. I’m convinced it’s possible to achieve virtually immediate productivity improvements with a high return on investment (see this post for example).

To explain my point simply, just think about how many discussions you witness in your business or the public realm where the problem itself is poorly defined, there’s no clear view of what success looks like, nor clarity about the most useful levers to pull to achieve that success. That translates into a lot of unproductive effort. So then imagine the productivity gain that would occur with better-defined problems with solutions that also map out an achievable pathway to success.

Upcoming articles unlock keys to productivity

Based on this single key insight, I’ll publish four articles over the next few weeks addressing:

  • Infrastructure and productivity delivery – whose role is it?
  • The Anatomy of Opportunity – three key practices for productivity
  • Insights to the barriers to productive progress
  • Making progress – beyond why and what to how.
Risks to avoid, benefits to reap

It’s obvious we’ll all benefit from productivity improvements and new and better infrastructure. But also consider the more direct and immediate benefits of smarter solutions to better-defined problems:

  • Avoiding investment into initiatives that won’t succeed (e.g. poorly conceived projects or sales solutions)
  • Better resolution of non-technical risks that would otherwise erode your balance sheet (e.g. social licence challenges to new development)
  • Reduced likelihood of being out-performed by competitors offering smarter solutions
  • Stronger risk-weighted return on investments, making it easier to secure public and private capital
  • Less exposed to criticism and erosion of brand and political capital
  • Improved capability for innovation, valuable at a time when repetitive tasks are being taken over by technology and outsourcing.
Adaptive leaders will thrive

Progressive leaders that build off past success and embrace the evolution occurring in problem solving and collaborative work practices will be the ones that capture immediate and sustained productivity benefits. Are you one of those leaders? (Can you be sure?)

 

[1] Martin Parkinson (2015) Complacent and insular country must wake up to itself, In: Australian Financial Review, Wednesday 26 August 2015
[2] Statement of Intent (from National Reform Summit), In: Australian Financial Review, Wednesday 26 August 2015, pp. 40-41
[3] Green R., P. Toner, R. Agarwa (2012) Understanding productivity: Australia’s choice, The McKell Institute, University of Technology Sydney.
[4] Productivity Commission (2015) PC Productivity Update, July, Commonwealth of Australia, Canberra.
[5] Laura Tingle (2015) Not Fighting, Talking, In: Australian Financial Review, 29-30 August 2015, pp. 16-17
[6] Fleming N.S., K. Marr (2013) Deep Insights to Business Value Creation from Sustainability, World Engineers Summit, Sands Expo and Convention Centre, Singapore.
[7] Australian Public Service Commission (2014) State of the Service Report: State of the Service Series 2013–14, Commonwealth of Australia, Canberra.

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Comments

  1. Helpful contribution Nick. I would use ‘stagnant’ rather than ‘turbulent’ to describe the current of Australian play. While our politcians flounder, opportunities abound for entrepreneurs. It’s a state-of-mind that really matters.

    On your infrastructure points, I commend readers to David Singleton’s think piece on involving the community at the start of projects: http://www.beatoncapital.com/2015/08/we-must-involve-the-community-in-infrastructure-decision-making/

    • Thanks George. Yes I agree that early engagement of communities is valuable, and again we can be exploring more constructive ways to doing this. Co-design is entirely feasible but frightening for project owners and proponents if they’ve not experienced it.

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