Managers determine just how productive or otherwise an enterprise is. And, by and large, the cumulative performance of every individual business determines the state of every nation’s economy and, thereby, the standard of living of its people.
Given the current state of western world economies in particular, cynic might say managers have lot to answer for. Being practical and pragmatic about it, we need better managers to get us out of the mess.
Conventional wisdom still holds that economic growth, despite the stresses and strains it puts on the world’s resources, is still the only game in town that delivers better future as we most commonly measure it. And, as Endgame author and investment guru John Mauldin wrote in his book last year, there are “two and only two ways” to grow an economy – “… either increase your working age population or increase productivity”.
Our current reality is that the pool of working age New Zealanders is not growing, according to statistics released last month. The problem will worsen as aging baby boomers exit the workforce and younger, skilled Kiwis migrate to Australia and elsewhere. So productivity flush looks like the only hand left to play.
The Government is now taking the topic more seriously. It has established Productivity Commission and assigned it to work on joint study with Australia’s similar, though somewhat larger and better resourced, body of the same name. Both governments want to find productive answers to some of the curly questions that schemes designed to increase productivity raise.
Changed forever
Globalisation and technological innovation are changing the world economy forever. Changes to the structure of the labour market are among the most significant. Consequently, managers must be schooled to understand both the implications and the applications that accompany these two dramatic workplace and work process changes.
“The pace and scale of organisational change is both quickening and expanding,” says NZIM chief executive Kevin Gaunt. “And while Government works to get the macro regulatory settings and infrastructure priorities right to encourage more productive enterprises, NZIM must help individual managers who, in the end, deliver the desired outcomes.
“We need to help managers understand what is going on in the marketplace and in their work environment and show them, by example, what can be done to make the most of emerging opportunities.
“If the world economy is, as an increasing body of evidence suggests, facing period of protracted growth, higher unemployment, volatile markets and even, heaven forbid, recurring recessions, managers must understand the implications of all that. They need to be aware of and, be able to implement, relevant people management and process strategies and to effectively lead change in their organisations,” says Gaunt.
NZIM wants to help educate managers about productivity. It wants to work with the new Productivity Commission which, by its own admission, is limited in what it can do to “spread the news” about what productivity really means and how managers can deliver it.
According to commission chair Murray Sherwin, the productivity story is economically and socially essential. But he will need the help of organisations like NZIM to get his message across, to explain productivity processes, and to reassure managers and employees alike that greater productivity is critical to them individually and the nation collectively.
“Our funding doesn’t allow for much [industry education],” he says. “The messages [from the commission] will have to be part and parcel of what we do on our enquiries and with our strategic partners. Our job is to provide the policy advice – not educate the marketplace.”
Suspicion
Sherwin acknowledges the existence of “good deal” of employer and employee suspicion and misunderstanding around the word productivity. However, he agrees that enhanced productivity is the outcome of sustained (workplace) improvements and best practice management of everyday business activities.
Gaunt agrees that New Zealand needs to lift its productive performance and says NZIM has role to play in making that happen. report by the HSBC Bank last month suggested the country is already on the right track to lifting its growth performance. By 2020 our annual productivity rate will have increased to around three percent, it said.
“New Zealand businesses will need to be more productive and grow faster if they want to sustainably deliver improvements in their profitability and in the country’s standard of living and quality of life,” says Gaunt.
“That doesn’t mean greater productivity is the only answer to overcoming some of the problems facing the economy. But productivity is significant weapon in the nation’s economic armoury. We need it to help deal with some of the other important social pressures New Zealand will face over the next 10 or 20 years.”
Productivity increases can’t, however, be delivered at any price, says Gaunt. The US is currently enjoying remarkable improvements in productivity which are, according to some reports, delivered on the back of hard-pressed employees. Some US companies are, according to workforce surveys, “starving organisations to see what they can do with lower cost structures”.
Terrified
Britain’s The Economist magazine suggests two things are keeping productivity rising in the US. Workers are reportedly terrified of losing their jobs and therefore willing to accept extra work hours or shoulder additional tasks. Secondly, “tough times are forcing firms to strain every brain cell to become more efficient” – which might not seem such bad thing to many enterprises.
The economic pressures that are collectively forcing New Zealand to refocus on productivity are both real and significant. “That’s why it’s important for organisations to also focus on developing their people,” says Gaunt. “They need to build management capability and enhance leadership skills.”
Cliché it may be, but increased productivity is about working smarter not harder or for more hours every day. Working smarter involves bringing management and everyone else on the team up to speed with what it means to run good operation in today’s world.
“It’s also about building trust and integrity within the organisation,” says Gaunt. “The myths surrounding the word productivity can only be dispelled if everyone knows what is going on and why things are being done differently, or indeed being done at all.
“Increased productivity is an outcome of team focus, consistent leadership, individual accountability, reinforcement of what’s important and all the other best practice management and leadership disciplines we promote.”
Australian economist Saul Eslake believes productivity growth will help both New Zealand and Australia deal with the demographic changes confronting both economies. It will also help reconcile potential conflicts between environmental constraints on economic growth and widely held aspirations for improved living standards.
But reversing the decline in productivity performance that both countries have experienced in recent years calls for “re-invigorated economic reform effort, improvements to education and training, improved governance of infrastructure investment and heightened innovation effort”, he says. Gaunt agrees.
Reg Birchfield FNZIM is writer on leadership, governance & management. [email protected]
