Band aids won't soothe productivity pain

Australia is in the midst of a productivity crisis that promises to inflict heavy casualties. In the fight for survival, businesses must put productivity at the top of the agenda, before it's too late.

Australian businesses waste tens of billions of dollars each year due to poor productivity. This is money that few can afford in the current climate. But there is no quick fix to the problem. Australia's productivity growth has dropped to such an extent that it will take years to get back on track.

The end of the resources boom means that there is now a heightened sense of urgency surrounding the country's productivity. If there is no meaningful progress, the effects from the lagging productivity that has cursed the nation for more than a decade will be severe.

For many workers, the result of businesses striving to improve productivity has been that they are now doing the same amount of work with fewer resources. This is not a solution to the problem. This is a quick fix that doesn't solve the underlying issue. Cutting costs will only lift the nation's productivity in the short-term.

A recent survey shows the effect that this quick fix is having on the workforce.

The latest Ernst & Young Australian Productivity Pulse, released last week, found that workers are wasting 4 per cent less time at work now than this time last year. The average amount of time wasted in work has fallen from 18 per cent to 14 per cent in the past year.

In monetary terms, that 14 per cent costs Australian businesses $87 billion in wages every year. For now, workers are costing businesses less in wasted wages. But this won't last because cutting costs is not a sustainable business model.

Part of the reason for the rise in productivity is workers' attitudes. The recent push to educate the nation on improving productivity has led to workers becoming more aware of how to make the best use of their time.

Ernst & Young's Oceania Advisory Leader, Neil Plumridge, says that workers are now keen to be part of the solution. "Two out of three workers are now saying that they have within their own control the ability to influence and drive productivity,” he said.

But, a major driver for the lift in productivity growth is that workers are finding themselves with a larger workload due to fewer resources, such as capital or staff.

The work still needs to get done, but with less staff – either due to natural attrition or redundancies, or less capital or both, workers are effectively forced to become more efficient and manage their time better so that they can focus on core, essential activities.

One of the risks this poses is that this kind of forced productivity growth can often be to the detriment of the individual. Working under increased pressure for long periods will inevitably lead to burn out and an increased dissatisfaction in the workplace, which in turn can lead to reduced productivity as the worker becomes more and more disillusioned over time.

The challenge remains on employers and the government – at both state and federal level – to continue the war on waste, to find solutions to this growing problem.

Instead of relying on workers to increase productivity due to fewer resources, which is a short-term solution at best, organisations and the government should be looking for long-term solutions that solve the underlying issue rather than mask it.

One such solution should be putting a greater emphasis on innovation, especially technological innovation. Another would be to introduce more flexible working arrangements, such as teleworking. Government agencies also need to look at cutting down on the excessive reporting and approvals policy that is entrenched in the public service yet provides no added value.

The latest findings by Ernst & Young at least show that the nation is taking productivity seriously. But the problem won't be solved quickly or easily, which is why the focus needs to stay with productivity for at least the medium-term.

Plumridge echoed this sentiment following the release of last week's survey. "My suggestion to all workers and organisations is that productivity must stay high on the agenda. It's got to be either one, two or three on the boardroom's agenda and the country's agenda for the next five years at least,” he said.

By continuing to prioritise productivity, Australia has the chance to rival its peers on the global stage. As seen in the graph below, Australia is not the only country to experience poor productivity growth in recent years. Of the 25 countries listed, 19 have suffered a slowdown since the 1990s.

Still, Australia has fared worst than most. Moreover, it's evident here that the US – the benchmark with which Australia compares itself to on productivity – has not seen a slowdown anywhere near the proportions experienced by Australia.

The challenge now is for Australia to get back to a level of productivity growth that rivals the US.

As Australia struggles to come to terms with a resources slowdown, organisations, government and workers need to take action now. It's the only way to find solutions that will increase the nation's productivity before it's too late.