Australian business wastes $109 billion in wages per year in unproductive work

Monday, 17 October 2011 — A new productivity survey released today reveals that while the majority of Australian workers are highly motivated, almost a fifth of their time (18%) at work is wasted, costing organisations an estimated $109 billion in wages alone¹.

The EY Australian Productivity Pulse™ found that only 58% of an average work day is spent on work that directly adds ‘real value’ versus time perceived to be wasted as a result of factors such as wrong job fit, inefficient systems and processes, and red tape. A further 24% is spent on core activities such as networking and professional development.

The Productivity Pulse is the first survey of its kind in Australia and was developed to directly measure Australian workers’ sentiments around productivity and what they perceive as the biggest barriers and opportunities.

The findings are based on a survey of 2,500 employees in organisations across Australia, spanning seven sectors and from all levels within organisations in both the private and public sectors.

Key findings of the Productivity Pulse include:

• 62% of people believe their organisation is operating efficiently
• People management issues have the biggest impact on productivity (54%), followed by organisational processes (23%), innovation (15%) and technology (8%)
• Workers aged 45 and above have the highest motivation with 74% motivated to do their job to the best of their ability, versus 66% of younger workers (under 45).
• Workers in Western Australia wasted the least amount of time on an average day followed by South Australia, Australian Capital Territory (ACT) and Tasmania, then New South Wales, Victoria, and Queensland, and the Northern Territory (NT).
• Workers in Western Australia and South Australia rated their organisations as the most efficient followed by Queensland, New South Wales and Victoria, NT and ACT, and Tasmania.
• Regional Australia workers feel their organisations operate slightly more efficiently (63%) than their city counterparts (61%)
• The most efficient industry as rated by its workers is financial and insurance services and the least ‘wasteful’ industries are professional, scientific and technical services (17%) and health care and social assistance (17%).

EY Advisory Leader Neil Plumridge says the cost of this wasted time within organisations is significant to employers in both the private and public sectors as well as to the broader Australian economy, and reflects in part the past decade’s neglect towards the productivity decline.

“This means that every single day $320 million is lost in valueless work. If we improve that by just 10% the impact to Australia’s productivity would be tremendous,” Plumridge says.

“This doesn’t mean we are a nation of ‘slackers’. Quite the opposite is true.

“Australia is one of the hardest working countries in the world and given an overwhelming 71% of workers are motivated to do their job to the best of their ability, we simply can’t put the productivity issue down to personal motivation,” Plumridge says.

People management is critical

Mr Plumridge says it’s not surprising that people management issues have the highest influence on how effective people thought they were at work. The main factors include: skills not matching jobs, people’s capabilities being underutilised, a lack of clear vision from leadership and no direction for career progression.

“Mature workers are the most enthusiastic performers and are more likely to be motivated by the actual work they do rather than salary, work/life balance or employment security.

“In fact, salary, incentives and bonuses fall short across the board with only 13% of respondents saying it is a driving factor. This reinforces the notion that monetary rewards are not the silver bullet when it comes to lifting productivity,” Plumridge says.

Public vs Private

Plumridge says 56% of workers in the public sector believe their organisation is operating efficiently versus the average of 62% for all industries, while manufacturing ranked even lower at 55%.

“For workers in the public sector, this was mostly the result of people issues such as a lack of confidence in leadership, ineffective workplace culture as well as bureaucratic structures and processes,” Plumridge says.

“Given the growth and importance of the public sector, it’s time that it looked to incorporate many of the disciplines of productivity and performance management of the private sector.”

Not as simple as cost reduction

“It is easy to jump to the conclusion that productivity can be fixed by downsizing or cutting costs. However, this is a short-sighted view of productivity – to get a full picture you need a panoramic lens.

“Organisations need to think in terms of making bolder, more revolutionary changes that move them into a higher zone of productivity, well above the long-term average of 1-2% a year.

“And rather than cut jobs, organisations should be looking to eliminate wasteful work and redeploy those resources to growth and investment areas,” Plumridge says.

Plumridge says there is obviously a huge dividend available to organisations if they re-focus on upping productivity. This can be achieved by removing non-value, bureaucratic work, embracing technologies that drive efficiency, encouraging a culture of innovation, putting in place effective structures and importantly, developing and utilising the full talents and capabilities of people.

“It’s easy to consider productivity as a problem for the government of the day to deal with. While they indeed have a vital role to play, business leaders have an equal responsibility to invest in initiatives that drive productivity within their organisations,” Plumridge adds.

Plumridge said EY would release follow-up research that surveyed CEOs, Board Directors and Executives about their organisation’s productivity next month.

Attached: Australian Productivity Pulse Key Findings

Please click here for a copy the Australian Productivity Pulse report. 

¹ Based on the annual wage bill in Australia of approximately $606bn (ABS Labour Employment and ABS Average Weekly Earnings May 2011), total organisational productivity wastage can be valued at $109 billion per annum.

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EY Australia
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