Productivity has been a hot topic on the Australian macro and micro economic scene for the last several years and not just because of the GFC.
Productivity growth has been in decline since 2000 (still growing but at declining rate of 1% compared to 3.5% in the previous decade) after the acceleration of productivity growth in the 1990s.
According to the Grattan’s Institute report “Productivity growth is the most important determinant of long run improvements in any country’s sustainable standard of living. After decades of decline relative to other countries, Australia substantially improved its productivity performance in the 1990s. However productivity growth has slowed substantially during the current decade.”
The Australian Labour Productivity as a percentage of the US level fell almost 10% in the last decade (1998 to 2008).
So what has contributed to this drop in productivity?
Paul Eslake and Marcus Walsh have discussed the key factors at lengths in their report a summary of the key findings were covered in my first article on this topic.
The more recent business news will add some fresh perspective to the story.
Just take a look at Holden, Toyota, Qantas, BHP Billiton and Heinz. What do they all have in common?
If you ask Toyota’s Australia president Max Yasuda he will point blank tell you: “Australia’s inflexible Industrial Relations System and Lazy Workplace Culture”.
He explained the axing of the 350 jobs at the Altona plant in Melbourne with declining international competitiveness, influenced by lack of flexibility to respond to changing business conditions, increased union influence, bogus sick leave and absenteeism rate of 30%.
We all know what happened with Qantas, fresh information from Alan Joyce suggesting that Jetstar will be pulled from Darwin and Cairns if he’s not allowed to employ foreign labour.
Heinz has relocated its tomato sauce manufacturing plant from Victoria to New Zealand.
So what are the solutions?
From a macro-economic point of view the Government has undertaken a review of the Fair Work Act, which is expected to conclude next month.
And whilst regulatory restrictions have a significant influence on business results the answer to productivity will not be resolved with changes in the regulations or even Government alone.
Let’s get back to the Australian “lazy workplace culture”.
For an outsider, such as Max Yasuda, it may appear this way, especially if we look superficially at sick leave and absenteeism numbers, or at “face time” (the number of hours spent in the office, a major KPI in Japan, also an indicator of dedication to the company).
But, as always, we need to investigate the causes behind the numbers.
However, from our experience, working with both manufacturers and service providers, we know that managers do not always look beyond the first layer when problem-solving.
It reminds me of the Operational Manager of a car component manufacturing client who complained that his team could not deliver the product on time.
His reason – “I’ve trained them numerous times and they still can’t do it”, Why? –“Because they are thick”, was his answer.
As it turned out, after some more in-depth analysis of the potential contributing factors behind the “thick-ness”, it was the company culture and management style to blame, which always allowed time extensions if delivery targets could not be met, and without any sanctions.
So the reasons for subdued productivity are almost never found in your staff – lazy, incompetent, thick, etc.
You, as a manager, as a CEO, need to get back to the drawing board and start exploring.
And no, it doesn’t take too much time and resources, if you have the right mental models in place.
Some mental models, such as the fish-bone diagram, strategy maps, decision-making trees, cause-benefit analysis, the peak performer model, to name just a few, are covered in engineering degrees.
But all, without exception, are taught in a good management development programme.
Going back to Max, we can assume, that like the majority of organisations pursuing productivity improvement, his approach was/is to drive people harder.
This is a very simplistic approach and on its own will only result in short-term improvements (a band-aid solution). It’s like starting a strict diet to lose weight fast and expecting to achieve long term, sustainable results. And yet people do and that feeds an enormous, multi-billion dollar “health” industry.
A more long-term, sustainable approach to productivity boost involves a multi-level plan/strategy including:
Interestingly enough a recent report, Managing in a Multi-Speed Economy 2011-2012, found that only 37% of managers could define productivity, though 50% considered productivity a business priority for the next 12 months.
Productivity is briefly defined by “units of output (product or service) per unit of input (resources)” – or achieving more with less.
Sometimes, however, productivity is only interpreted as efficiency focusing on quantity, rather than quality, even though the quality parameters are being met.
This paradox stems from the fact that quality and productivity may be driven and defined internally, using “maker” rather than “user” definitions.
Take for example the very common situation where IT system designers meet their own very high quality standards but fail to meet the functionality, user-friendly standards of the user. They may have come with the solution quickly but if it wasn’t the right solution they failed the quality or effectiveness productivity test.
This problem is easily avoided with well defined value streams and value drivers and the right education – in strategic customer service, in strategic management, in continuous improvement, in decision-making, etc.
2. The Right Strategic Plan and Performance Measurement System
The 2011 Telstra Productivity Indicator found that while 76% of Australian organisations ranked productivity as a top priority, only 24% measured it, which left a “productivity gap deficit” of 52%.
Just saying you want to improve productivity is not good enough – it needs to become a strategic goal;
You need to track its value stream and use the right measures.
I’ve reviewed strategic plans where productivity and efficiency are mentioned in numerous contexts but never explicitly as a goal and a measure.
You almost get to think that they are there because it sounds and looks good. When asked, the strategy implementers (i.e. staff) could not really define what was meant by productivity in all those different contexts.
A few more words on the value streams – there is nothing more powerful for any organisation’s success then indentifying the value creation map, in other words how is value delivered to the stakeholders.
Yet very few organisations have identified their value maps and designed their business strategy and plans around them.
A lot of discussion about productivity happens between business and government but not always within the business itself.
When you decide to focus on productivity as either a key continuous improvement goal (incremental improvement) or as a “our back is against the wall” measure (quantum leap improvement) your intentions and actions should be transparent and explicitly communicated throughout the entire organisation.
Let’s look at two examples.
One of our client companies had implemented a 5S system, which is essentially a waste reduction initiative with the main purpose of streamlining operations. It does take time and resources to implement, which the company had successfully done. However a few of the areas had problems maintaining the initiative especially in the “Shining” (Cleaning) component of initiative.
I asked the guys on the management programme we were running with them at the time if they knew what the purpose of this initiative was and why they thought the “Shining” wasn’t happening.
The answer was they didn’t quite know what the purpose was and that the workers, the majority of them males, did not like cleaning after themselves as they didn’t see this as part of their job.
We see this lack of understanding of the meaning/purpose of initiatives (even single jobs) quite often and had these guys known that it wasn’t about aesthetics but about waste and efficiency they would have had a different mind-set and respectively different behaviour.
They just didn’t know/were not explicitly told.
The other example is much more painful, as the organisation in question is no longer trading.
I remember the frustration of the GM, when they were going through restructuring and having to roster people in fortnightly shifts of work/off-work.
Most of his concerns were caused by what he labelled as “reckless” behaviour – people leaving work for their 2 weeks of enforced leave and leaving the powerful machines and work equipment on, wasting resources and time while at work and not empathising with the company situation.
And yet, even at this stage there was nothing visual to encourage people to save resources. Instead all visuals were related to procedures and work safety with signs plastered above staircases telling people not to fail to notice the staircases!!!!
Visual communication is very powerful as it focuses the attention and has a direct line of “communication” to the brain – hence the proliferation of visual poka-yokes in recent years, not just in the high risk industries (health-care and heavy manufacturing) but also in the service industry
4. Reward and Recognition
This one is a huge topic on its own.
For now it’s worth considering the fact that the Asian businesses, known for their huge innovation, technology and efficiency progress in recent years, are known for their good reward and recognition programmes.
One example of such initiative, which works really well is “gain-sharing” where the company gives back a percentage of the realised benefit (saving or profit) back to the contributor/s and as such encourages people to innovate.
5. Lead by example
As the famous management thinker Peter Drucker once said “The Productivity of Work is not the responsibility of the Worker, but of the Manager”.
There are a lot of managers who are way too operational or hands-on and even pride themselves on that.
I think it’s a case of a misinterpreted “lead-by-example” principle.
The main purpose of any manager and leader is two-fold: remove the obstacles and develop the person so that they can achieve their goals and enjoy the process.
So leading by example is about the demonstration of the right values and behaviour, not doing the job yourself.
6. Culture and Employee Engagement
Speaking of values and their role in sustainable productivity gains, make sure that productivity and its interpretation in your organisational context is embedded in your organisational value set.
Because being a Low-cost provider – one of the key top level corporate strategies according to Strategy Guru Michael Porter – is no longer a strategy of choice, no longer a differentiator and source of competitive advantage.
It is a necessity, a responsibility of every single organisation to continuously employ fewer (optimal) resources and maximise value to the customer.
How to create a culture of continuous productivity improvement?
Engage people – link values to your reward and recognition system.
A few years ago, (yes, it is not a new “thing”), I saw a software developer from Sydney showcasing how their Reward and Recognition software was used solely to reward and recognise staff based on adherence to preferred values, demonstration of the right attitude, behaviour and workplace communication.
7. Technology alignment and Innovation
When it comes to productivity improvement there is nothing that can give you and your organisation a bigger, more tangible boost than the right technology.
It’s only a matter of what to use and how to get your people on board as quickly as possible, applying the change management principles from the early stages of the decision making process.
We, as a company, and as part of our new Work Smart – Have Fun programme, have made it a priority to research and assess the best examples of technology enablers and embed them into our own and our clients’ practices.
If you’re still unsure about new technology, just ask your pre-schooler to show you a mind-map – my daughter’s school note books (and she’s only 4) are loaded with mind-mapping and decision making software, something that we teach in our management development programmes for grown-ups.
So jump on board, don’t let your kids embarrass you by showing you how!