Future jobs, innovation, and productivity

The tax forum last week managed to garner a lot of media attention, but I suspect the only outcome anyone will remember was yet another political promise – a higher tax free threshold for personal income tax.

In the media confusion of the inevitable political point scoring, missing invitations, and rent seeking – it was easy to miss the Future Jobs Forum – a rather more interesting Canberra talkfest that was held the following day.

While the Prime Minister’s closing speech at the Future Jobs Forum was rather predictably focused on propping up jobs for the manufacturing sector, the conference also saw the publication of a major new piece of Australian research into the links between productivity and leadership. The report “Leadership, Culture and Management Practices of High Performing Workplaces in Australia: The High Performing Workplaces Index” was commissioned by the Department of Education Employment and Workplace Relations, and carried out by the Australian National University and the Australian School of Business.

In a nutshell, the report measured 18 different performance indicators across the Australian firms in the study (all services industry firms), and used them to categorise “High Performance Workplaces” (HPW) and “Low Performance Workplaces” (LPW).

Profits, productivity and innovation were found to be significantly higher in the HPW workplaces. Leaders working at companies in the high performance group were found to:

  • Spend more time and effort managing their people than leaders in LPWs (29.3% higher).
  • Have clear values and “practice what they preach” (25.7% higher).
  • Give employees opportunities to lead work assignments and activities (22.9% higher).
  • Encourage employee development and learning (21.1% higher).
  • Welcome criticism and feedback as learning opportunities (20.4% higher).
  • Give increased recognition and acknowledgement to employees (19% higher).

When business conditions are tough, the most common area of focus for executive teams is productivity – or more accurately, labour productivity.  Command and control style efficiency programs are common, and typically sound the deathknell of innovation and employee job satisfaction.

The last decade in Australia has seen long waves of corporate and government downsizing, so for many large organisations the easy labour productivity gains happened many years ago.

ABS - Productivity Figures from National Accounts 2010
ABS - Productivity Figures from National Accounts 2010

The Australian National Accounts figures from the Australian Bureau of Statistics show an interesting story, clearly indicating that labour productivity measures continue to improve slowly. The ABS provides a useful glossary explaining the various forms of productivity, but in simple terms capital productivity indicates changes to output relating to increases in capital or equipment, and multifactor productivity is seeen as a proxy for improvements due to innovation.

In other words, Australian businesses have been achieving consistent improvements due to labour productivity – but gains from innovation have been weak to non-existant in recent years. Return on Investment is also clearly tough to achieve, as shown by the steep decline in capital productivity.

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