Path to the summit: unleashing productivity potential

The EY New Zealand Productivity Pulse™

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Productivity focus areas

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Measuring and communicating about productivity

To unleash their productivity potential, organisations must measure and communicate about productivity. In organisations that measure productivity, the Pulse found 94% of workers strive to increase productivity, 9% more than in organisations that don't.

Also, measuring productivity creates a positive feedback loop, which gains its own momentum.

The Pulse also revealed that workers who are dialled in to the topic of productivity, through organisational measurement or communication, have a greater productivity potential than those who are not (25% vs.20%).

This is an area where New Zealand has room for significant improvement. The Pulse revealed only 39% workers are aware their organisation measures productivity, with 31% of workers unsure.
In addition, 84% of workers said they didn’t receive clear communication about the elements that drive performance.

Also of concern, the Pulse found only 22% of companies actively trying to improve productivity had set organisational goals, and only 13% had aligned productivity goals to individual workers.

Across industry, 60% of finance and insurance workers were aware their employer measured productivity; all other industries were below 50% with only 34% of healthcare and social assistance workers stating that productivity is being measured in the workplace.

More work needed around productivity definition and metrics

In terms of how organisations measure productivity, workers reported more than 30 different types of metrics, including: KPIs, financial information and output analysis. Although productivity measures will clearly differ from sector to sector, companies and industries seem to lack consistent definitions of what is meant by productivity.

As a country, we need greater clarity about what productivity is and isn’t, for example: it isn’t a panacea; and it isn’t just cost cutting. At an industry level, common productivity definitions and measures would enable cross-industry benchmarking. At an individual level, organisations also need to establish a common understanding of productivity, so the Board doesn’t view it differently from the shop floor.

Levers of productivity

The Pulse revealed those New Zealand organisations trying to improve productivity have spent the past year going back to basics, putting most of their efforts into improving process efficiency and standardising and simplifying systems.

Together with cost cutting and redundancies, this is what has delivered most of New Zealand’s productivity gains, with organisations creating incremental improvements by cutting costs, removing process duplication and redundancy and increasing automation. Many have even revisited functions or processes they thought were working well to find more value.

However, you can only squeeze so much additional productivity from such initiatives. In future, these tried and true programmes will only produce diminishing returns. To unleash New Zealand’s remaining productivity potential, big corporations and government agencies need new thinking and game changing interventions around more radical uses of technology and automation – and around the shape of work itself.

Only perform competitive work

It’s time for New Zealand organisations to get better clarity around the work that genuinely needs to be done by full-time employees (i.e. work that confers competitive advantage), and the work that can be done better, cheaper or faster by technology or by other people, through contracting, outsourcing or offshoring.

To this point, some companies in the manufacturing sector, for example, have hung onto uncompetitive practices that are simply not sustainable. In a flat world, New Zealand organisations need to be realistic about where they can, and cannot compete, and adjust their resourcing models, and even their core business, accordingly.

Declare a war on waste

Waste is the one remaining traditional target area where organisations still have a lot of work to do. By tackling waste strategically – taking a serious look at processes and functions through a waste lens – organisations often find another 10% of value sitting waiting to be harvested. Take a look at the minutiae of the work that gets done in your organisation. What value does it deliver? Do you really need that report, regular meeting or even project?

Engage your workforce

The Pulse found that workers overwhelmingly attributed productivity declines to poor staff management and a lack of motivation, reward and recognition in the workplace. This issue needs a serious response, with a sharp edge. If your workers believe they could be 21% more productive, you need to understand how this relates to your organisation and where this potential resides.

You need to make sure employees know: how productivity is measured, what they can do as individuals to improve productivity, and how they are tracking against key measures. You also need to listen to your workforce and improve the work environment so it motivates people to make a discretionary effort that adds value.

Worker's top five reasons for productivity decline

1. Poor management
2. Lack of motivation
3. Lack of incentives/rewards
4. Staff treated poorly
5. Poor communication


Productivity focus areas

When it came to productivity focus areas, workers believed people management and organisational model, design and operation had the greatest potential to impact productivity – rating much higher than technology or innovation. In fact, workers ranked organisation and people levers as nine of the top ten attributes driving productivity.

Quality of work

Around the world, improving quality of work is considered to be increasingly important at a national level, not just to support employee well-being, but also to boost productivity. Using a quality of work framework developed by the United Nations Economic Commission for Europe, the Pulse ranked the dimensions of quality of work most likely to increase productivity in New Zealand.

1. Workplace relations and work motivation

Workers who have strong relationships with their co‚Äźworkers and supervisors and do not feel discriminated against or harassed, have higher morale and lower turnover and absenteeism. Equally, those given clear and achievable goals, autonomy, and sufficient feedback feel they are able to apply their own ideas in work, feel they do useful work and are satisfied with their work. The overall result is improved performance and productivity.

2. Skills development and training

Employees who receive the right training for their role and whose skills are closely aligned with their role and well utilised by their employers are more productive.

3. Working hours and balancing work
and non-working life

Well-developed work-life balance policies improve satisfaction and productivity. They make it easier for companies to attract and retain the right people. In addition, employees tend to devote high work effort to the company in return for the flexibility shown in support of their needs.

4. Safety and ethics of employment

Employees who feel safe in their working environment and believe their employer focuses on safety are more likely to be productive. Productivity is also higher when people feel they received a fair wage and were not subject to unfair criticism.

5. Security of employment

People who feel secure in their roles are more likely to be productive.

How can employers boost both quality of work and productivity?

The Pulse indicates that improving quality of work and achieving better financial performance are two sides of the same coin – not conflicting goals. It shows the higher quality of work, the higher the productivity, with super achievers measuring highest on all work quality indicators. According to the Pulse, the quality of work dimensions most likely to boost productivity (indicated by a more than 3 point gap on a 1-10 scale between Lost Souls and Super Achievers) are:

  • Job satisfaction
  • Motivation
  • Management supports workplace effectiveness
  • Skills utilisation
  • Training to support productivity
  • Individual control over how they achieve outcomes

Interestingly, part-time workers scored highest for quality of work than full-time or casual workers.

Government responsibilities to support national productivity

Government at all levels has two roles in supporting productivity:

Improve productivity performance in the public sector

The public sector needs to put its own house in order and improve the productivity of its 43,345 full-time equivalent employees3. To date, such efforts have largely revolved around incremental improvements. In future, government agencies need to be far more ambitious, targeting:

Demand

Remove any programs, reports, committees or regulations that don’t add value to the country.

Supply

Make more radical use of technology and automation and take another look at privatisation, or at least at outsourcing functions to the commercial sector. If government processes and functions were subject to market testing, many would fall behind best practice. While policy should remain in the hands of government, the vast majority of service delivery could be performed more efficiently by the private or not-for-profit sectors.

Transparency

Measure and report annually on the productivity performance of individual agencies at local and national levels. If government believes productivity is important, it has an obligation to publicise its own performance and compare it to previous years. This is not about cutting costs, but about tax payers getting ‘more bang for their buck’.

2. Use policy levers to remove productivity hurdles

The top priority on the government’s productivity agenda should be, wherever possible, to remove uncertainty from the economic environment. With multiple offshore factors in constant flux, continual local policy changes seriously undermine productivity. Business needs to have confidence that the tax, industrial relations or foreign investment rules it planned for will remain consistent.

Beyond this, government has the following range of levers to support businesses in unleashing their productivity potential.

Set a productivity target for country

New Zealand needs to put a light on the hill to guide our productivity ambitions towards 2025 or 2030, and then put policies in place to guide the way. We already have a good start in the programmes under the Growth Agenda and the ultra-fast broadband initiative. Now we need to tie these initiatives directly into creating the type of jobs that will underpin New Zealand’s economic future. As a nation, we need a much higher level approach to developing quality work, including recognising that some existing jobs are holding the country back, and transitioning out of them by using technology or moving them offshore.

Declare war on wasteful regulation

Organisations are wasting a vast amount of resources to comply with unnecessary regulation. The Government is focussing on the Resource Management Act, Local Government and some other functions - these and other complex challenges are yet to realise the intended gains.

Unblock infrastructure bottlenecks

Inefficiencies in our ports, railways and roads are holding back the country, despite the efforts of the Council for Infrastructure Development to spearhead improvement. We need stronger government leadership to accelerate our nation-building programme, gain private sector funding and, quite literally, get the country moving.

3 Human Resource Capability Survey June 2012, http://www.ssc.govt.nz/sites/all/files/hrc-survey-2012-findings-summary.pdf