Public sector productivity lagging the private sector by $2.4 billion

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Tuesday, 29 October 2013 — The national productivity average has continued its upward trend but Australian public sector productivity is lagging the private sector costing Australian taxpayers $2.4 billion1 with only 20% of public sector workers believing they are operating at their lifetime best.

The fifth six-monthly EY Australian Productivity Pulse™ (the Pulse)  found this contrasted with 29% of private sector workers, despite the workers sharing comparable skills, capabilities and remuneration.

EY Oceania Advisory Leader Neil Plumridge said although personal productivity continues to increase across the country, public sector business models, practices and policies need to change to bridge the gap between public sector and private.

“Governments are committed to doing more with less but there is huge scope for a more strategic approach to policy to ensure the public sector is adequately prepared for the future.

“Governments need to think in the long term to ensure we are creating the skilled and productive workforce Australia needs,” Mr Plumridge said. Mr Plumridge said the public sector environment is not yielding workers who consider themselves highly productive.

“This is not about the skills and capability of the public sector workforce, which is comparable with the private sector. Nor is it about remuneration, which can be higher in the public sector. We can only conclude that the productivity of public sector workers is being held back by government organisations themselves.”

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. This particular Pulse included a larger sample of public sector workers.

Job security

EY’s Productivity Pulse reports have consistently found a strong link between job security and personal productivity, with workers who feel less secure more likely to be less productive.

Australia’s workers believe improving productivity in the public sector is more important than in the private sector. This is felt most strongly in Queensland, which has experienced Australia’s most extensive public sector cuts in recent years.

Mr Plumridge said 53% of government workers have experienced cost cutting or redundancies in the past six months versus 37% of private sector workers.

“Unless managed carefully and strategically, the very process of reducing jobs will exacerbate poor public sector productivity.

“Agencies and departments need to consider more effective targeting to ensure redundancies do not take the sector’s most productive workers, worsening their productivity profile.

“Voluntary redundancies in the public sector are releasing significant productivity enabling talent into the market. A reason for this could be that those that choose to leave are high performing candidates who feel confident they will easily get another job,” Mr Plumridge said.

The impact of outsourcing

Mr Plumridge said the Pulse found that public sector workers strongly doubted the effectiveness of outsourcing.

“Outsourcing is extremely common in the public sector, with nearly a quarter of workers experiencing this change in their workplace. Among those who’ve seen outsourcing in action, only a third said it delivered higher quality outcomes – as opposed to 54% in the private sector.”

Mr Plumridge said of even greater concern are reports that over a third of public sector outsourcing actively reduced productivity, leading to lower quality and higher costs. This was more than double the number of such experiences in the private sector, strongly bringing into question the efficacy of traditional outsourcing for government services.

“Policy makers assume that government service delivery would be inherently more efficient in the hands of private operators, because of superior management practices and profit incentives.

“But there is no one size fits all approach and outsourcing often fails to take into consideration the complexities of many government services which can ultimately lead to higher costs,” Mr Plumridge said.

Thirty nine per cent of public sector workers feel they need more staff to deliver current workloads, in contrast with 24% of their private sector peers.

The Pulse found a strong correlation between more productive individuals and ‘right-sized’ organisations.

Mr Plumridge said resourcing management and communication is critical to developing and maintaining a productive workforce, especially where agencies and departments are making significant cuts to staffing levels. “People may be cynical about workers’ self assessment of their organisation’s resourcing but there is a clear relationship between the two.

“Like most organisations, public sector agencies grow over time, often failing to remove headcount even when roles are out-dated. However, across the board redundancies are not the answer,” Mr Plumridge said.

Driving productive teams

Across the public and private sector workforce, managers are ill equipped to drive a team’s productivity. Fewer than one in four workers say their manager encourages them to go above and beyond in their role. However these findings get worse in the public sector, where significantly lower percentages of workers are satisfied with their managers.

Mr Plumridge said responsibility for driving productivity had to sit with managers and ultimately the organisations that support them to ensure the workforce practices motivate workers to perform at their personal best.

“Of course, the public sector and the private sector have different priorities, with the public sector needing to fulfill their community service and transparency obligations as well as being subject to high levels of scrutiny.

“However, the public sector must ensure they have the management capabilities and employment practices required to support a productive work force.

“The next big wave of productivity change in the public sector will come, not through redundancies, but through improvements to the way workers are managed and motivated,” Mr Plumridge said.

Public sector workers were more concerned about keeping their managers happy than delivering business outcomes.

“In fact, 13% of public sector workers said their primary focus was ensuring their manager is satisfied, as opposed to focusing on the quality or quantity of their work, or on-time delivery. This only applied to 3% of workers in the private sector,” Mr Plumridge said.

Workplace flexibility

The findings around workplace flexibility were concerning with a significantly higher number of public sector workers disagreeing with the statement: “I am able to achieve a good work/life balance,” than their private sector peers.

Mr Plumridge said of the 24% of public sector workers who believe government is holding back productivity, 43% suggest agencies and departments adopt more flexible working practices.

“As a traditionally family-friendly employer, with a large proportion of female workers, flexibility is one area where the public sector has always been ahead of the private sector.

“Agencies must consider what’s driving this finding. Do their employees think flexible work practices are at risk? Or do workers believe they will be disadvantaged – perhaps become more at risk of redundancy – if they take up flexible work options? If either of these scenarios are in play, the public sector risks losing workers, particularly female workers,” Mr Plumridge said.

Other key findings of Wave 5 of the EY Australian Productivity Pulse™ include:

National productivity rises

  • Based on a ten point scale, Australia’s productivity increased from 7.5 to 7.7 in the last six months, up from 7.3 in February 2012.
  • Wastage has not improved. On average, workers continue to waste 11% of their day (50 minutes). But there is a growing gap between those at the far ends of the productivity spectrum. Our most productive workers waste approximately 1.5 hours per day less than our most unproductive workers – up from one hour a year ago.
  • Improved productivity has again been driven by the individual efforts of workers – not organisational change.

Productivity changes by state

  • The national increase in personal productivity was driven by NSW workers, with a strong, consistent increase right across the year.
  • VIC and the ACT were the next highest contributors, while TAS and WA had smaller, but positive growth.
  • SA continued the downward trend that began in August 2012.
  • There was no change in personal productivity in QLD over the last twelve months.

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Contact details:

Katherine Meier
Ernst & Young Australia
Tel: +61 3 9655 2620 or 0417 859 323