Australian CEOs don't measure up

The failure of Australian corporate and government leaders to measure their organisation's productivity is hurting growth and revenue.

The 2012 Telstra Productivity Survey will leave many of our boards and their chief executives hanging their heads in shame.

It shows that improving productivity in Australia starts with lifting the standard of Australian management, which has fallen badly behind the US and many other countries.

Part of the blame must rest with Australian boards who have made mistakes in their chief executive and top management selections.

The survey covers 387 private enterprises employing over 200 people and 139 government organisations. This is the fourth in the series. The previous three years showed that while most CEOs were saying that productivity was a vital objective, only about a quarter of CEOs were measuring it, so most were really only paying lip service to the objective.

Its very hard to achieve productivity gains if you don’t measure productivity. The fact that so many CEOs turned their back on productivity has played a big role in the fall in Australian productivity.

This year, for the first time, the survey studied what was happening to those that were measuring productivity and discovered a majority were towelling their opponents. Moreover, those that were not measuring productivity were most likely to be poor performers.

And to rub salt into Australian management wounds Dun and Bradstreet announced that Australia had fallen behind in internet commerce, although retailers were mainly to blame.

Directors and managers all around Australia are bemoaning the fact that Australia is not improving productivity. The Reserve Bank has joined in the chorus. Most corporate chiefs are blaming the government and there is no doubt that the Howard, Rudd and Gillard governments have each taken action that contributed to the reduction in Australian productivity. In addition, the Telstra survey also shows that federal, state and local government officials must also must take a big chunk of the blame.

But our CEOs cannot escape being damned by blaming others.

While the detail is disturbing it also shows there is real hope to turn this around. Some 80 per cent of our companies believe productivity is important, but only 20 per cent measure it. And the percentage of those who measure productivity is down from 24 per cent in the previous year. When we look at government organisations we find that 68 per cent believe productivity is important, but only 11 per cent measure it.

Amongst government organisations those that understand productivity are achieving far better results – they are twice as likely to achieve their organisational objectives and improve their customer experience and satisfaction.

There is no doubt that a lot can be done in the government sector to improve the productivity environment of the nation but even more can be done in the private sector. In both the the corporate sector and government the small minority of organisations that actually monitor their productivity are achieving remarkable outcomes.

Of those 20 per cent of Australian corporations that measure productivity, some 52 per cent – more than half – are achieving growth and increasing revenue. Whereas of those that are the followers and do not measure productivity, only 34 per cent are achieving growth and only 27 per cent are increasing revenue.

Amazingly, more than half of those who monitor productivity are lifting market share whereas, among those who don’t monitor productivity, only 25 per cent achieve increases in market share.

These figures are clearly shown in the graph below.


That graph should be on the back of every boardroom door where the company is not achieving growth or lifting market share.

I have no doubt that the sluggishness in the Australian stockmarket is in part due to the failure of our CEOs to achieve the potential of their companies because they are not monitoring productivity. I also believe that too many CEOs have been trapped into short-term thinking by our institutional analysts and, as a result, long-term superannuation investors are paying a big price.


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