Productivity problems? Don't blame the workers

Contrary to recent headlines suggesting Australian workers are holding back productivity growth, industry groups agree it's greater labour market flexibility that's required to keep Australian businesses competitive.

The Conversation

"A third of workers waste quarter of their day” – Herald Sun. "Wasted work time costs billions a year” – The Age.

Judging from these headlines, you would think Australian workers are chronic time wasters causing the loss of revenue to business and the Australian economy as well as holding back productivity growth.

Yet you would be misled. These headlines actually relate to an Ernst & Young Productivity Pulse report which attempts to come to grips with problems of productivity in Australian workplaces.

Its own headline is "Wastage adds up despite motivated workers" – so even if we don’t go further than these headlines and titles, we can see there is something of a problem here with our mass circulation media.

The Ernst & Young report is based on a survey of 2,500 workers (as stated on page two of the report, although both The Age and Herald Sun say that 11,500 workers were surveyed). In keeping with the tenor of the title of the report, the key finding is that large barriers to worker productivity stem from weaknesses in business practice across organisational structure, design and operational model; the use of technology; people management; and innovation.

Productivity conundrum – where lies the blame?

The Ernst & Young report presents a very different view of the problems of Australian productivity from that of one of Australia’s principal business interest groups – the Australian Industry Group – which squarely blames a large part of the blockages on the extent of labour market "over-regulation” imposed by the Fair Work Act and workers’ failure, through unions, to embrace greater flexibility.

The AIG view is set out by former AIG chief executive, Heather Ridout in a speech given last September.

According to Ridout, productivity growth is hindered through the Fair Work Act by "Provisions which restrict the engagement of contractors and on-hire workers” and "the lack of a workable form of agreement which provides flexibility to employers and individual employees”.

She also claims that unions are in various ways obstructive in terms of employers’ drive to be competitive in a globalised economy with a high Australian dollar.

In essence, the cure for Australia’s poor productivity across a range of industry sectors in relation to overseas competitors, according to the AIG is greater labour market flexibility.

The current AIG head Innes Wilcox, in responding to the ACTU report on insecure employment and its recommendations to reduce casualisation, says that "the unions' attempts to impose new restrictions on casual employment flexibility are not in the interests of employers, employees or the community… Employers need flexibility to maintain productivity and competitiveness.”

The Ernst & Young survey suggests Australia’s productivity malaise has rather different sources than the intransigence of workers and their representatives in rejecting flexibility. Where the AIG points to labour rigidity in blocking productivity, the Ernest and Young survey suggests that organisational rigidity is a major blockage.

It says (page 4) that: "bureaucracy and regulation exist in organisations to manage risk, assign accountability and ensure quality. However, they can and do have the unintended consequence of reducing organisations’ flexibility, as well as adding a cost burden to operations — and as shown in our Pulse, shrinking productivity”.

Ernst & Young also make the point (page 9), congruent with what anyone who has been through a MBA type course is taught, that "when you look more closely at what has made some organisations’ perform extraordinarily well compared to their competitors or peers, there is often a common denominator; a realisation of the value of people and understanding of their motivation drivers.”

Another of the MBA truisms that Ernst & Young put forward is that "innovation is a key driver of productivity growth and competitiveness of organisations around the globe” – as Tim Mazzarol’s recent article in The Conversation on the importance of research and development in terms of Germany’s success compellingly proposes.

Finally, "The Pulse shows the nation’s productivity decline cannot be blamed on Australian workers”. In fact, the vast majority are highly motivated and dedicated with special mention of older workers in this domain. The report also suggests that employment insecurity takes its toll on productivity.

Where the debate on Australian productivity is heavily couched in terms of the role of labour obstruction to flexibility, the Ernst & Young report makes for a refreshing read. Let’s go back to those old MBA textbooks on what makes for business success – and a globally competitive economy.

Veronica Sheen is Research Associate, PSI at Monash University.

This story first appeared on The Conversation. Reproduced with permission.