Productivity's holistic management medicine

In the quest for greater productivity Australia has much to learn from the emphasis on employee engagement in countries that have emerged strongly from the global financial crisis.

In my travels around top companies in Sydney last week, I got the impression that the soft skills of management are getting more attention. At Stockland, Westpac and Diageo, human resources directors spoke about the importance of managers taking a much greater interest in the personal lives of their employees.

That’s a very good thing according to Professor Roy Green, dean of the Faculty of Business at the University of Technology Sydney. He’s one of the people behind a huge study into management that benchmarked Australian firms globally in terms of management’s impact on productivity.

Green told me that the cost-cutting approach many Australian firms took during the financial crisis has reduced managerial capacity. By comparison, he says, countries that have emerged strongly from the global crisis, like Germany and Sweden, had a much greater emphasis on employee engagement. Green says strong engagement of employees and instilling a talent mindset (through increased skills training, decentralising decision making and fostering self-managing work environments) can have an enormous effect on company productivity.

source: Management Matters in Australia, Nov 2009

According to research he conducted with the London School of Economics and McKinsey & Co, a one-point increase in management practice is the equivalent to a 44 per cent increase in invested capital or a 56 per cent increase in the labour force.

Green says we are falling behind best practice in this area and if Australia’s productivity problem is to be rectified, we need to address the issue quickly.

Green’s report discovered that multinational corporations with Australian subsidiaries tended to be better managed than their local counterparts. Liquor giant Diageo’s Australian office consistently rates amongst the best places to work in Australia. It has a very strong leadership program where the executive team runs management courses for line managers and division heads every quarter. According to Diageo HR director Lucinda Gemmell, it helps reinforce a culture of continual learning and sends a message to junior staff that management techniques are constantly evolving.

What Gemmell is most proud of however, is a philosophy referred to as "know me, focus me, value me”. As part of the performance review, managers also ask their staff about their personal, life goals. Where possible, they assist them in achieving these goals, even if unrelated to the business. She says that as a result, employees feel more connected to the company, and managers are better able to manage their work performance by understanding their personal needs.

Diageo’s program is an example of an expanding trend in management theory. Employers are discovering that as the population ages, talented employees are demanding that flexibility be built into work schedules. Westpac and Stockland have taken a lead on this, sponsoring a major report by the Diversity Council of Australia into how to mainstream flexible work.

Stockland points to some very real benefits from adopting flexibility – particularly as it relates to women. Five years ago, only 56 per cent of female employees returned to company from maternity leave. It created a big talent gap. HR head Michael Rosmarin discovered something quite interesting as the company started to rectify that poor performance. What Stockland realised was that many of their female employees lacked confidence that they could successfully return to the job.

Now, Stockland runs programs where workers on maternity leave are brought into the firm (along with their babies) at various intervals to get updates on the company strategy, meet with managers and re-connect with the firm. Whereas once half of these employees were lost to the firm, now 94 per cent return. Rosmarin has calculated that this has saved Stockland $3 million in recruitment and training expenses.

But there is another business case emerging from a better understanding of this demographic. At Stockland, it is informing the firm about how they might better design their communities. At Westpac, they see women over 40 as the next big growth market for financial services. This cohort is relatively unprepared for retirement and as a result will rely on financial advice as they mature. And Westpac clearly thinks that the best way to reach this cohort is through their peers and as a result sees women over 40 as an untapped labour source. Given the impending retirement of baby boomers, this is smart thinking.

So Westpac is putting in place policies to not only attract workers who may want more flexibility as they manage their families, but also to extend the working life of those workers who are nearing the end of their careers. General manager of human resources, Ross Miller says that the bank is implementing a ‘workability index’ that measures staff wellbeing, not just in the traditional physical sense but also in terms of mental, financial and social and community.

Westpac knows that if it gets this right and creates flexibility around the way we work, it can increase the working life of its staff by three to four years. For a company with over 30,000 workers, that can have a very substantial effect on the bottom line.

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