Productivity gains stall - Australia has $305 billion in unrealised productivity

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  • Workers’ productivity levels plateau in past 6 months
  • Cost reductions and corporate restructurings start to take their toll on workplace culture and sentiment
  • Growing divide between productive and unproductive workers, led by disengaged younger workers

Monday, 6 May 2013 — Australian workers say they could be 21% more productive at work every day if they could change just one or two things at work – representing more than $305 billion in productivity1or $26,300 per worker2.

The fourth six-monthly EY Australian Productivity Pulse™ found four in five Australian workers (85%) could be more productive in their role. Workers said the main obstacles to productivity improvement related to staff engagement, wellbeing, motivation, reward and recognition in the workplace.

EY Oceania Advisory Leader Neil Plumridge said assuming productivity continued to improve at the same rate it had over the past seven years, it would take Australia 20 years to achieve its potential.

“The world is changing, our competitors are getting more aggressive and productive, and we’re facing some huge challenges in terms of our demographics and production costs so there’s an imperative for faster and higher levels of productivity. We must get our acts together and bring forward our potential by five or 10 years,” Mr Plumridge said.

Mr Plumridge said while the nation had made good progress in the productivity stakes during the past 18 months with personal productivity growing steadily, it had plateaued since the last wave of the Productivity Pulse™ in August 2012. This was particularly driven by declines in personal productivity in the financial services and resources sectors.

“Arguably, Australia has already felt the net productivity gains as a result of companies tightening the screws to adapt to changed market conditions. The challenge lies in tapping into our productivity potential so we ensure business is sustainable into the medium term.

“Australian companies cannot afford to sit on their hands. While cost-cutting and corporate restructuring has resulted in a net productivity gain for the nation, there are worrying signs that stress from these programs may be starting to reverse some of the productivity gains made over the past 12 months,” Mr Plumridge said.

The EY Australian Productivity Pulse™ measures Australian workers’ views about their organisation’s and their own productivity. Based on a survey of approximately 2,100 employees spanning seven industries and from all levels within organisations, it includes workers from both the private and public sectors.

Mr Plumridge said throughout corporate Australia there was an ‘unconscious awareness’ of the productivity potential that existed.

“There is anticipation that we’re entering a period of productivity growth, but without the tools to tap into and realise its potential, our complacency will place us squarely where we found ourselves in more prosperous times,” he added. “Employees from all levels in organisations, and across all sectors, are saying that they could be working 20% smarter - not to be confused with 20% harder.

“If just 5% of this potential was unleashed, the ASX200 could again approach and perhaps exceed the magical 6000 level last seen in 2007,” Mr Plumridge said.

The top areas that would benefit productivity most are:

  • Having a culture that values staff and wellbeing (30%)
  • Ensuring people’s skills are matched to their job and are paid appropriately (28%)
  • Standard and simple systems that ensure an efficient workplace (26%)
  • Ensuring the best people for the job are attracted to the organisation and kept (26%)
  • Improving process efficiency (25%) “In other words, the answer lies in having the right culture, the right people in the right jobs, and the right systems.
  • “We need to drive higher employee engagement and participation, greater efficiencies around technology deployment and innovation, and we need to understand the demand for quality jobs in the Asian century,” Mr Plumridge said. “Furthermore, companies that relied only on cost cutting to improve financial results were missing the point on productivity and would not achieve their potential.”

The Pulse found the ‘national productivity average’ has increased from 7.25 to 7.50 (based on a ten point scale) over the year, plateauing from a high of 7.58 in August 2012. The Australian Productivity Scale™ places Australian workers into four groups from ‘highly productive’ Super Achievers and Solid Contributors through to ‘unproductive’ Patchy Participants and Lost Souls with two categories of workers above the current national average of 7.50 on a 10-point scale and two below.

The proportion of the working day that was wasted fell significantly in the past six months from 14% of the work day to 11%. This was driven by reductions in waste in the more productive segments.

Mr Plumridge said the growing divide between unproductive and productive workers was increasing significantly with 38% of the ‘Lost Souls’ reporting further declines in productivity and claiming they could be more than 40% more productive than they currently are. This is almost double the national average of 21%.

Lost Souls were also wasting more than a quarter (28%) of their working day which equals two hours and five minutes every day. This is in comparison to Super Achievers at the other end of the scale who only waste 30 minutes a day.

“Unproductive workers now waste 1.5 hours more than productive workers every day – up from one hour just six months ago,” Mr Plumridge said. “While it’s easy to dismiss workers at the bottom end of the scale, we need to remind ourselves that these Lost Souls are usually younger and more junior employees who are feeling disenfranchised and disengaged. Without leveraging this part of our workforce we are missing a great chunk of an organisation’s as well as the nation’s productivity.”

Mr Plumridge said that during the past six months, on average, only one in four (24%) workers said they felt secure in their current role, and of those who had experienced productivity declines 27% believed restructuring of the organisation had created declines in productivity.

“A negative shift in worker sentiment caused by growing fears around job security has created a growing divide between productive and unproductive workers. Currently, our least productive workers, who tend to be younger, are even more disengaged and wasting more time at work.”

Mr Plumridge said the survey also revealed some interesting views on the government’s role in driving productivity, with the majority of workers (73%) saying they don’t believe government impacts productivity within organisations. For those that do believe government impacts productivity, 21% believe it is holding back the productivity of organisations.

The Pulse indicates that improving quality of work, or job design, and achieving better financial performance are not mutually exclusive.

Mr Plumridge said the higher quality of work, the higher the productivity, with super achievers measuring highest on all work quality indicators. Additionally, where there were higher scores in quality of work, workplace relations and work motivation and training were also higher.

Other key findings of Wave 4 of the EY Australian Productivity Pulse™ include:

Most productive industries

There has been no significant change to the ranking of the most productive industries in the past six months, but financial services and mining have experienced the greatest decline. Based on their workers’ average ranking on the EY Productivity Scale™, Healthcare and Social Assistance has again led the charge:

  1. Healthcare and Social Assistance 7.67 (1)
  2. Manufacturing 7.54 (2)
  3. All other industries (including Transportation) 7.50 (3)
  4. Professional, Scientific and Technical Services 7.47 (4)
  5. Trade (Retail & Wholesale) 7.46 (5)
  6. Mining (Resources) 7.27 (6)
  7. Financial and Insurance Services 7.27 (7)
  • In terms of their productivity potential, workers in the Retail and Wholesale Trade sector believe they could be 25% more productive at work, whereas workers in the Mining sector say they could only be 17% more productive.

Differences by geography

Across the states and territories:

  • The most productive state continues to be Tasmania which has led the charge for the past year with a productivity average of 7.84. This is followed by SA (7.82), QLD (7.69) WA (7.54), ACT (7.45), VIC (7.40) and NSW (7.35).
  • Victoria was the only state this wave to have experienced a significant fall in personal productivity, falling from fourth place to second last. NSW is again the least productive state.
  • Workers in the ACT believe they could be 23% more productive at work and at the other end of the scale Tasmanians say they could only be 14% more productive.

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1EY analysis based on ABS Australian National Accounts: National Income, Expenditure and Product March 2013 and Gross Domestic Product December 2012
2EY analysis based on ABS Australian National Accounts: National Employment figures March 2013

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Katherine Meier
EY Australia
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