Some Thoughts on Productivity

I often venture off into my blog essays pursuing some ideal or espousing arguments that I often feel I am poorly qualified to make. But this week I am going to propound on something I based my career on, and probably egotistically believe I have at least a few insights into. I spent at least twenty years of my career as an executive in trying to find ways of improving the productivity of the workforce. My career was in power stations and I am pleased to say that in latter years the power stations I managed had by far the best labour productivity in the country.

Many years ago I started using a model that suggested that there were four major drivers to workforce productivity – viz. work design, employee competence, the best use of technology and employee motivation. That this model was effective can be attested by the fact that in the end we were able to produce outstanding outcomes using only half the number of employees of our competitors in similar circumstances.

There has been considerable comment to the fact that productivity in the Australian economy is diminishing. The impacts of this however have been ameliorated by high commodity prices and the burgeoning growth of our mining and energy sectors. But we have vulnerability here. Commodity prices will inevitably fall and the Australian economy will then be exposed to the inefficiencies of its workplaces.

We learned this lesson once, but now seem to have forgotten it. In the early eighties under the auspices of a Labor Government we embarked on a micro-economic reform agenda. It started with an initiative of the Federal Government. They sent a mission off to Western Europe to determine why the Europeans were better placed in manufacturing than Australia was. The mission comprised officials from the Trade and Development Commission and union officials. On their return they authored a document that was called “Australia Reconstructed.”

Their principal findings were, that compared with the Europeans:
1. The Australian workforce was not as skilled as the Europeans,
2. Productivity was hampered by the rigidities of the award system, and
3. Australian Management also did not have the skills of their European Counterparts.

What followed was a very productive period in Australian industrial relations when we were at last able to connect wage increases with potential productivity gains. Many industrial agreements were also able to link pay increases with skills enhancement which allowed a degree of progression even for the lesser skilled. This period of microeconomic reform also ushered in the notion of enterprise bargaining. And whilst this was still underpinned by the award system the new enterprise agreements allowed a lot more flexibility and moved away from the strait jacket of award classifications and senseless demarcations that had stifled productivity.

As a result of this, the structural impediments to productivity improvement were considerably reduced. Finally, under the Howard government employers were even able to negotiate individual agreements with employees and the ability of unions to impose themselves on the workplace was greatly constrained.

But of course some unscrupulous employers were unable to help themselves and exploited some of the more vulnerable in the workplace. This enabled unions to mount a case that the reforms had gone too far. The backlash to this exploitive behaviour resulted in the downfall of the Howard government. The Rudd/Gillard government, beholden to the unions for waging such an effective campaign against Howard promptly threw out Workchoices and put in place legislation that has effectively taken industrial relations back to the seventies. This has not helped us to improve productivity and if not addressed will lead to an inevitable decline in business performance.

However, let me say that whilst this is a potentially significant impediment to productivity improvement, it is not the only, or perhaps even not the most serious issue.

In my experience, the greatest contributor to workplace productivity is the alignment of the workforce with the purpose of the business. We often call this motivation. In the model I described above, I called it commitment. Now I have written about this many times in the past and suggested ways that employee commitment might be won. I won’t go over that again.

But let me state this. If employee commitment is to be gained, that is entirely at the feet of management. Many poorly performing organisations will complain about union interference, undue costs of labour, government red-tape, unhelpful taxation laws and so on. Whilst each of these might have an impact and is not to be discounted, the big ticket item, employee commitment, is entirely their responsibility.

I am always concerned when I visit a workplace and the management tells me that they are proud of the fact that they have good relationships with their unions. To me the relationship you have with unions is of secondary concern. It is the relationship you have with your workforce that is paramount. And unfortunately the better the relationship you have with your workforce the more likely it is that your relationship with unions will be poor. Unions are always seeking to put themselves between management and workforce in order to justify their role to their members.

At the recent Jobs Forum a significant research study was unveiled. The research was carried out by a team of academics from the University of NSW, the Australian National University, Macquarie University and the Copenhagen Business School. The study examined 77 businesses in the services sector and tried to distinguish the features of high performing workplaces (HPWs) that rendered their performance better than the low performing workplaces (LPWs). Much of what differentiated the two classes of organisation related to leadership. [Bear in mind here that the HPWs were 12% more productive and 3 times more profitable than the LPWs]

Some of the more significant findings of the study were that Supervisors and managers in the HPWs:
• Spend more time and effort in managing their people than leaders in LPWs
• Have clear values and practice what they preach
• Give employees opportunities to lead work assignments and activities
• Encourage employee development and learning
• Welcome criticism and feedback as learning opportunities
• Give increased acknowledgement to employees
• Foster involvement and cooperation among employees
• Have a clear vision and goals for the future
• Are innovative and encourage employees to think about problems in new ways.

Consequently in the HPWs employees had:
• Lower levels of turnover
• Higher levels of job satisfaction
• Lower levels of anxiety
• Higher levels of positive emotions.

Now I would contend those outcomes result from good leadership and are available to any organisation that has quality people and effective leadership practices in place. So whilst our productivity might suffer unduly from external constraints like IR laws, government regulations, inappropriate taxes and so on, management must face up to the fact that perhaps the major driver of employee commitment and hence productivity is entirely in their own hands.

4 Replies to “Some Thoughts on Productivity”

  1. Morgan vs Mitsubishi?

    Soul added at no additional cost.

    We are all brothers and sisters even if a bit mussed up. The System needs fixing.

  2. Thanks Ted. It’s so simple, and it works. The hardest thing is the paradigm shift. Personally I feel it is a great way to leave a positive legacy for the next generation.

  3. Again – a well thought thorugh piece Ted, and I totally agree. I also concur with Ian Boardman’s comment re the challenge of mindset.

    I still have hope that there are good leaders around (level 5, Jim Collins) who are working to establish such cultures.

    It will be interesting to watch the ultimate outcomes of the QF squabble!!

    Thank you,


  4. Thank you Father Robin, Ian and Barbara for your comments.

    Good to see a submission from you, Ian. You possess good leadership qualities – it’s a shame your career doesn’t allow you to exercise them as much now.

    Barbara, it has been one of my disappointments as a management consultant in recent years that I see so few examples of good leadership. No doubt you have had a similar experience. I know many competent managers (according to Warren Bennis, “people who do things right”) but few competent leaders (“people who do the right things”). Maybe I am just getting old and jaundiced!

    Next week’s blog will deal with some contingent issues. I look forward to hearing from you again then!

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