When staff cuts aren't enough

Governments and others announcing sizeable staff cuts without changing the way they do things are simply cutting services. But addressing productivity requires a long-term, focused program.

Strip aside all the endless comment on symptoms and ask: What is really wrong with Greece? The answer is simple – they did not have sufficient productivity levels given their high currency (the euro) and they covered the gap with deficit funding and heavy borrowing. If Greece is to stay within the euro it must lift productivity.

But for the mining boom Australia would find itself in a Greek style position.

In last week’s economic talkfest just about every speaker recognised that the dramatic fall in Australian productivity at a time of high currency was the major problem facing Australia. Most mentioned the need to lift productivity but few had any idea how to do it.

I recognise that Telstra sponsor our productivity coverage, and we keep our advertising and editorial separate, but there are few people in Australia who know more about what’s needed to lift Australian productivity than the driver of the Telstra Productivity Survey, Antony de Jong.

For four years the Telstra survey has been screaming to business and government organisations that they are not measuring productivity, so will not be able to improve it. It was a warning that has never been heeded by the bulk of Australian business and government organisations.

Then the 2012 Productivity Report isolated that those businesses and government organisations that actually measure productivity and found that they were the most successful enterprises and organisations in their sectors (Waking up to productivity, March 28).

De Jong did not attend the economic talkfest but after the event I asked him why business and government organisations have been so slow to act in the productivity space.

His reply will stun the managers of many organisations who think they can lift their productivity by retrenching employees. De Jong says that it normally takes a three-year program focusing on how to improve the value drivers of an enterprise to sustainably lift productivity.

You will find many helpful hints in the video above. Too many Australian enterprises do not have the willingness to commit to three-year programs. It’s much easier to go for a head count reduction.

We have just seen the New South Wales and Victorian governments announce sizeable staff reductions. I don’t think either government has set about working out how to change the way it operates to improve value. If they don’t do that they will simply be cutting services. Productivity improvement comes by changing the way you do things.

With mining investment running high, Australia's overall economic numbers look good. But in the areas that are under pressure there is considerable pain.

At the same time, governments' tax revenues are under pressure and they need to deliver services more cheaply (Productivity Spectator: Public services in the app age, June 13).

The good news is that at last we are talking about productivity. Eventually that will lead to action.