You want productivity? Sack management

Australia’s falling productivity figures are starting to unleash a strange kind of panic, helped along by the shift of Michael Stutchbury from The Australian to the Australian Financial Review. The implication of much of this frenzy is that we are paying people too much, and if Australian industry is to survive then we either need to make them work harder, pay them less or employ them for shorter periods. Then productivity will rise and we will all be saved. Having made the “tough choices”.

Like most ideologically inspired cliches, it is not entirely false or misleading. Lower wage bills with same output will, QED, lead to higher labour productivity. Nothing like a circular argument to make everyone feel comfortable. But to say that it is simplistic is only to scratch the surface. If this is the best the business community can come up with, then we really are in a spot of bother. And how exactly we get to have a higher standard of living by paying the work force less is far from clear.

A few points immediately occur. One is that the lament by the business community is really about margins: that is, about reducing labour costs so profitability can be maintained. Second, productivity figures are an aggregate statistic, which tells us little about strategy, a bit like a football score only records the result, not how to improve the score next time. Third, it is a crude statistic based on an industrial era notion of output relative to costs that poorly matches  the characteristics of post-industrial capitalism (which I shall return to a little later). Fourth, I think it tells us little about national economic policy. Fifth, it is largely a management issue, not an IR issue (except to the extent that IR affects management). Crucially, management in successful high wage economies tend to pursue a complex relationship with organised labour that is far from determinedly adversarial. Fifth, anyone who thinks that non-resources Australian industry can thrive as long as we get a few percentage point gains on labour costs is living in fairy land. Globalisation is a lot more complex than that.

Still, that is where we are, for the most part. Tony Shepherd, president of the Business Council had this to say in the AFR:

The big concern of the BCA is there is a complacency in Australia about what we need to secure our future prosperity. There’s sort of a magic pudding approach that – you know, we can eat the pudding and it will be replenished and we don’t have to worry too much about the future because the resources sector will carry us through. But I think the economic problems that we are seeing in Europe now have highlighted the need for nations to have a plan – a plan that locks in the capacity of the country to be resilient and to prosper. And it’s our belief that the current settings are in fact not doing that.

We have some businesses in Australia which are struggling because of the high Australian dollar, and it’s fair to say that, on the whole, business confidence in Australia is low. So the challenge for Australian governments including the states is how do we lift our productivity and become more competitive. And to do that, we need to focus on the fundamentals. It’s not that complicated. Workplace laws are an obvious starting point. We’re becoming a high-cost, low-productivity nation. We believe in high wages and people being well paid and well looked after and well cared for and well trained and happy in their job. But we must get productivity. A stable and predictable regulation format is required.

Yep, when he says he believes in high wages and people being well paid, the meaning is clear enough. He doesn’t. And when he says it is “not that complicated” he has got it gloriously wrong. It is very complicated. A more informative and thoughtful contribution came from Keith Hancock, formerly senior Deputy President of the Australian Industrial Relations Commission:

It is conceivable that changing IR arrangements could affect productivity. Employers’ antipathy to arbitration in the early 1990s was based in part on a belief that if they had more control over workplaces they could get more out of their employees. And strong unions may inhibit management in its efforts to maximise output from given resources. Whether such possibilities are significant is a matter to be determined by evidence.

It is usual to measure productivity for the “market sector”. This is because it is difficult to measure the output of the public service, defence and education, whose products typically do not have market prices.

Between 1964-65 and 2009-10, trend growth for labour productivity in Australia corresponded to an annual rate of 2.2 per cent. For multi-factor productivity, the growth rate was 1.1 per cent. The faster growth of labour productivity reflects the continuous growth in the amount of capital deployed by the average worker.

It is obvious that the trends “explain” much of the historical record of productivity. This lends some perspective to the debate about productivity performance.

It is difficult to avoid the inference that long-term productivity growth is the fruit of long-term forces such as technological innovation, rising standards of education, better health and accumulation of capital.

Nevertheless there are variations around the trends. The claim that enterprise bargaining led to a “productivity surge” has to invoke the rise in the productivity curves, relative to trend, in the latter half of the 1990s. The claim that IR has destroyed productivity turns on the experience of the late 2000s.

Neither claim can be conclusively proved or rejected. But there are questions. Why did the earlier “surge” peter out? And how can the effects of enterprise bargaining be separated from those of other 1990s economic reforms and from those of the increased deployment of information technology?

Productivity performance since 2004-05 has been poor. If it were due to the extra union clout under the Rudd-Gillard regime, why did the deterioration set in several years earlier? There is a better fit with the inception of Work Choices, but talk of a causal link seems far-fetched.

The Australian Bureau of Statistics has published industry-level analyses of productivity covering the period since 1994-95. It is clear that the productivity record differs radically between industries.

In the long term, the crucial factors in productivity growth are innovation, rising quality of the labour force and growth of the capital stock. In the short term, we need to look at the special factors.

Attempts to find the causes of good and bad productivity performance in IR are misconceived.”

Much of the empty noise is due to the fact that it is economists, score keepers, doing the complaining. “The score is not going very well, therefore we must fix the score. Then the score will look much better”. True, but not especially helpful.

Government can help improve productivity with investment in infrastructure, of course, and, over the longer term, by investment in education. But as Hancock points out the claim that IR policy neatly correlates with productivity growth is “far fetched”. A typical case of ideology trumping thought.

Here are a few realities, I would suggest, about “productivity”:

1. About two thirds to three quarters of productivity enhancement comes from capital investment, technological upgrades. Not cutting wages, or reducing hours worked. The gains derived from this are slowing in most of the developed world, not just Australia.

2. If you want to radically cut wages you globalise: go looking in China or Vietnam. That has little to do with Australia’s IR laws and it requires real management skill because it is about much more than just finding cheap labour (witness the travails of Pacific Brands, the latest Australian corporate casualty of globalisation). You have to manage cross border value chains, complex logistics and currencies. Successful globalisation takes good management and Australia’s domestic cartels are about two decades behind the curve. There are many exceptions in the ASX 200, but it is something rarely discussed.

3. Productivity, as the word implies, is about producing stuff from the same or lower levels of inputs. But what happens when everyone is doing it and the low wage producers, especially China, are not creating enough demand? You get oversupply, which is the problem in many global industries, especially manufacturing (one of the worst is the car industry). So looking at productivity in isolation is to miss the point. The point is how to develop businesses for which there is demand that is not entirely dependent on cost efficient production and therefore price. We live in a post industrial era in which intangibles like brands or customer “relationships” tend to determine demand. That is not achieved by cutting workers wages and it is rarely achieved by finding cheap labour in Vietnam. If Australian industry is to go up the “value chain” — and that is what most countries are trying to do — then it requires something much more sophisticated than a bit more labour flexibility. Even being “innovative” developing clever new widgets, will not necessarily help much because the speed of copying is now so fast; diminishing returns on product innovation can hit very quickly.

4. Management, not the work force, is to blame for poor productivity. After all they take the credit and higher wages, so they must also take responsibility. To the extent that the IR laws entrench certain work place behaviours, then IR practices can be damaging. But it is management skill that is the crucial determinant, and the fact that they are blaming everyone but themselves is revealing. The crucial difference in Scandinavian countries (and Germany, as Houses and Holes pointed out), is that there is a good understanding of globalisation and how governments can work with management and the work force to develop a sustainable strategy (which has nothing to do with tariffs and subsidies).

5. The reason the business community is beating up on the IR system, and implying workers are paid too much, is that they are used to running domestic cartels, and in domestic cartels incremental gains in wage costs or market share have a telling effect on profitability. It has very little to do with developing a sound response to a high currency and a potential national problem.

So here are a few suggestions:

1. Look at the capital investment patterns and determine the effects on productivity. The massive investment in mining, for instance, may have a lagged beneficial effect.

2. Introduce Australian management and political leadership to a new concept called globalisation; better late than never.

3. Look at the domestic cartels. Maybe even break up a few if we really want want to improve productivity and get more innovation. Although I suspect many in the business community will suddenly lose enthusiasm for the whole thing.

Comments

  1. “.. exactly we get to have a higher standard of living by paying the work force less is far from clear.” Answer: We don’t. That’s the bit that we have relied on that has gotten us to where we are today. We have a standard of living that we haven’t worked for; that we don’t deserve. Automatic wage rises not linked to productivity are the cause of out ills. Like it or not, wages are about to fall; work is about to become scarce and our standard of living is about to fall to a level commensurate with our work skills. Only from there, can we then go forward.

    • Forward to where? Broad cuts to workers ability to consume will only undermine the domestic economy further.

        • Yep. I already have! My income has more than halved since the GFC hit. I am reliant upon passive income for my daily bread. Our OCR (in NZ) has gone from 8.25% to 2.5% ! And forward to…the future. There is not future for either of our countries in the policies of the present. We have to ‘join in’ and control our destinies through currency control; wages control and asset price (property market) control. Until we do, we are heading towards oblivion.

          • You’re reliant on a passive income?

            So you don’t even add to productive output and are demanding changes from those that do?

            Hmm.

          • That’s just plain petty and nasty RP and Lefty and really you should both apologise for it!
            Janet didn’t say she’d never worked. Maybe she is one of those who actually saved to provide the money for investment to employ people…as opposed to those who just spent it all on consumer goods! Who the heck are you to judge?

  2. Poor prodcutivity also comes down to staff education, and the avergage percentage of revenue that Australian businesses spend on training their staff is approximately zero. When they recruit people, they expect them to arrive with the exact skill set required for the job; obviously somebody else has paid for that training and experience.

    We’d also have less of a “labour shortage” if companies were willing to train people themselves, but the idea that they’d actually invest money in their staff (rather than try to screw as much unpaid out-of-hours work out of them as possible) is simply not a thing we do in this country.

    • This touches on my personal bugbear, which is that preliminary education expenses (i.e. education costs incurred before a person starts to generate the associated income) are not tax-deductible.

      This type of expenditure is akin to CAPEX by a business and individuals should be able to claim some sort of “amortisation” deduction for it, once they start generating income.

      This would go some way towards offsetting business’ reluctance to spend on training.

    • This is very true.

      Having worked in the UK and around Europe ( including Germany ) the cultural differences are huge.

      In Germany, which has some of the strictest regulations, the productivity comes from the idea that your human resources are you primary asset. Protected by laws that ensure that you can’t work more than your contracted hours, by companies who invest in training and making sure that you have all the skills needed for your job. Workers then spend their time … working! Working hard.
      Whereas here, it seems people spend a lot of time at work, but do bugger all work and getting training is nigh on impossible.

      • Whereas here, it seems people spend a lot of time at work, but do bugger all work…’

        I blame MB for that :o)

        Seriously though, you only need to spend a little time in an Australian workplace to see that spending long hours at work is the way to get ahead, regardless of output.

      • darklydrawlMEMBER

        Top response. I have never understood why in so many places working until 6 or 7 pm at night (often because you are inefficent or lazy or stuggling or slow etc) is seen as better than someone who does twice the work in half the time and goes home at 4pm. Madness!! Being at work long hours and doing not much at all doesn’t make you useful – just expensive – a fact seemingly lost on many businesses.

        • Well not necessarily expensive, some of those hours don’t cost extra.

          I believe the long hours now are to validate the decision of those prior who also worked long hours.

          • darklydrawlMEMBER

            I mean ‘expensive’ as in they are sitting around drinking coffee, flushing toilets, running power, consuming produce from the tea room et al.

            I wasn’t thinking wages as such, as they are often a fixed or sunk cost per day. But an extra 100 folks flushing toilets and opening the fridge doors etc is more along the lines of what I am talking about.

          • RP these extra hours can be expensive. The perceived effects of “over work” due to long hours further decreases an employee’s productivity, even if they are dismally unproductive already.

            I am in the process of writing my thesis on productivity in the Australian workforce. I am looking specifically at the points that were brought up above. It came out of the frustration at having half my IT project team and stakeholders within the business off on ‘breaks” constantly. I have found for instance a 10 min cigarette break will see approximately 45mins of lost work time. A 15 minute coffee break loses upwards of an hour of work time.

            However before business start to clamp down on such practices, I’m testing the hypothesis that greater investment in on the job training and practical group management skill development will see greater commitment to more productive work.

            I feel that lower to middle management are not efficient as they don’t know how to manage their staff properly and feel that in the end the company sees them as dispensable. This disconnect sees them lose commitment and hence productivity. The longer work hours is so that they can appear to working hard, hence protecting their position. Techniques that identify unproductive employees will do just that, however will not solve the underlying problem.

          • Don’t get me wrong, I am not protecting management here.

            I am of the belief that Australians makes appalling managers. We abound in great technicians, but harnessing them in large scale organisations takes talent, talent we don’t really have.

            I think its due to bullying being a trait that is rather pronounced in anglo-Australian culture.

            Being a manager ignites the sociopath in us, instead of the facilitator.

            And I do agree that a rethinking of uor productive output could see us do wonders, all I am saying is that currently, marginal costs such as coffeee and electricity don’t compare when ‘the troops are docile and willing to put in the hard yards to 7pm just like did 5 years ago’

          • > I feel that lower to middle
            > management are not efficient

            They spent too much time playing politics especially in large corporations were the main problem is too much focus on “managing up” rather then leading employees and facilitating their activities. I was part of the senior regional management team at a global company where I could see it first hand. I got so sick of it that decided to move on and work for a smaller company where I don’t have to put up with all the BS when I make decisions.

        • That was my experience when I worked at the silver doughnut, I was able to do 3 times the work working from 9-5 than one of my colleagues working 9-7, most of the management just attended meetings about meeting and passed on e-mails. I think that one of the worse things too is the “creation of process”, the argument that the more hoops that you have to jump through and the longer that it takes to get things done the less the risk. What it does is make the person on the ground so busy jumping hoops and creating paperwork that they have little time for the actual change and end up rushing it through and making mistakes.

      • I have been pointing out for years that productivity is reduced by inflated urban land prices and restrictive planning systems. Refer “Productivity and Growth in the UK Economy”, McKinsey Institute, 1998.

        Also “Economics and Land Use Planning” by Alan W. Evans (2004); “Building Jerusalem in the Green and Pleasant Land” by Alan W. Evans (2007).

        And “What we Know (And Don’t Know) About the Links between Planning and Economic Performance” by Max Nathan and Henry Overman (LSE, 2012).

    • The response to this is (once again) pure game theory.

      If an organisation outlays a lot of money training staff, and for the sake of IRR, with an estimated pay back period of say 3-5 years.

      All it takes is a competing organisation that willfully neglects to training and focuses only on poaching. The increment in remuneration only has to be below that 3-5 year IRR to be worthwhile.

      In an increasingly complex world, that is becoming a large sum of money.

      Now following game theory, the rational response is for the former company to cease training and become a poacher.

      Now we have ‘skill shortages’, and a lot of successful applicants tend to be gained through nepotism, or are able to “fake it ’til you make it”.

      One only has to look at the real reason why we have certain forms of regulation. Glass-Steagal was to seperate types of risk we don’t want from the retail banking sector. Post WWII legislated 1 apprentice for every 4 or 5 tradesmen, to ensure skills always came on line, and apprentice wages were not criminally low.

      Business, by its very nature, by its very definition, is sociopathic*. legislation protects it from itself and its sociopathic tendencies.

      * Now before this fire ideological outrage, I understand the risk vehicle of the corporation has provided immense benefit, but these tendencies need to be curbed to prevents races to the bottom

      • Very well put. Training the staff and maintaining loyalty is increasingly difficult. People are trained up and then look for more money. I suspect it is partly due to high debt loads and a need to pay it off as quick as possible.

        • Or people realize that there is no moral worth to the word of said company so treat the company with the appropriate loyalty it deserves.

          Companies have given away their good will – this is the price.

  3. On the Labour cost side it is not wages that we should be considering.

    It is wages net of housing.

    This is the problem we see in the mining industry. The wages of miners are high. The housing costs of miners [rents, prices, transport to work] are also high.

    If a community produces 100 widgets with 30 of them used to house themselves, then that is more productive than a community that produces 130 widgets and used 70 of them to house themselves.

    At the moment that does not get factored in.

    • Exactly.

      This is why the low housing cost, high income cities in Southern USA “own” the economic future today.

      This is because they do not allow utopian eco-taleban planners to run rackets in the supply of land for housing development.

      • I bet Holdens could be built in Southern USA for HALF the cost over the next 20 years, that it is going to cost to keep making them in Australia. There is no reason Australia couldn’t be equally competitive at least with its land prices and planning processes and their flow on effects on productivity.

        Not to mention southern USA’s “Right to Work” laws. Everyone is happy because living costs are low. A combination of squeezed housing and living costs and militant labour spells death to an economy.

  4. +100 . SoN, you should get the Nobel prize for this one (though not the peace prize, as you probably caused a few wingnut heads to spontaneously explode)
    .
    BCA can wail all it wants about productivity, but they can’t get the political parties to listen to them. It is Mr Abbott’s krytonite.

    • dumb_non_economist

      Mav,
      I agree, and SoN, I nominate you as Labour & Industry Minister! Trouble is you haven’t put it in a simplistic one sentence paragraph with a really simple solution, so no one in the media or on the street will read it, takes more than 30seconds!

  5. Good article and the sooner the many lazy cartels get some competition the better.

    However, there will be lots of resistance and not just from the business owners. Many of the remaining bastions of union memership are in the cartels and they may not like change any more than the business owners

    • Large companies that control their oligopoly markets are much more interesting to union leadership. Easier to organise easier to deals easier to resist change.

      Nothing complicates an enterprise bargain like structural change.

  6. “Lower wage bills with same output will, QED, lead to higher labour productivity”.

    This is correct if the lower wage bills are due to a fall in hours worked. It isn’t true if the lower wage bills are due to a fall in the avg. hourly wage.

    A cut in the avg. hourly wage with ouput fixed will increase profits and the profit share of national income, but won’t change productivity. Some have argued that this may even lower productivty – because the cost of labour falls relative to the cost of capital. Not sure about that one.

    Basically I reckon IR changes do impact productivity, but only over the short term. Long-term, businesses need to be competing against each other to lift capacity and infrastructure needs to exist to handle more capacity. As you point out, neither of these things have really been happening.

  7. Saul Eslake’s examination of productivity, when he was at Grattan Insitute, described the paradox of IT investments in Australia leading to higher productivity as being caught between exchange rates i.e. it was opaque at best but not certainty. A beneficial exchange rate may yield IT productivity but other factors may weigh more heavily than a single cost factor in aggregate terms.

  8. How would a bus driver, for example, increase his or her productivity – produce more from the same input ? This is surely an example where productivity gains will be dependent on capital investment and technological innovation. Should a bus driver have their real income eroded over time because of their inability to effect improvements in productivity by working harder or smarter ?

    In the decade or so I have spent working in asset management, it had largely been completely routine for front office staff to receive annual increases in base salary in the order of 10-20%, regardless of improvements in their ‘productivity’. Each year, as the wages of front office staff rose, so too did those in back office functions, such that every unit pricing administrator, performance analyst and miscellaneous data monkey could also rely on clocking up the same 10% annual increases. There was no shortage of candidates for these jobs, but we were just ‘keeping pace with remuneration levels in the global asset management industry’ we were told.

    Management (and the staff themselves) would further justify these kind of increases on the basis that assets under management had been increasing (hard not to in bull market conditions and with guaranteed super pumping fresh cash in every month), and with investment performance above (easily jumped) hurdle rates, but the reality was staff weren’t really working any smarter or harder. That much become clear sometime around October 2008, when a decade of easy returns was obliterated and it became clear just how ephemeral the increased ‘productivity’ was.

    I have yet to see wages in this particular niche of the finance sector decline to more realistic levels, where wages growth is properly aligned to match improvements in ‘productivity’. And yet it is many of the cosseted doyens of this industry that are agitating behind the scenes to call for improvements in productivity growth in the industries and companies in which they invest. By which they really unambiguously mean, increased profitability. And given the laughably short-term timeframe in which these geniuses operate, for that particular objective you can read – you are being paid too much to drive that bus.

    • That is one industry where deployment of capital could only be worse if they started buying Lotto tickets, and in the long-term is likely running counter to efforts to increase this country’s productive capacity.

  9. The title of the article couldn’t be more exact. In professional service industries the causes for the low productivity is something very obvious. Months per year of “working from home”, political correctness about people who are lazy and work less than 5 hours a day, but arrogant and that is why excel quickly to higher position, the negligence of the managers, who worry more about not getting in a work place conflict by naming the free riders. All that can be summarized in the very fruitless and useless weekly work load meetings with the same rumination around the same problems, without anyone to blame or shame, but someone who is not anyone specifically.

    • darklydrawlMEMBER

      Yep! Most large corporates I have worked at over the years have had plenty of freeloaders.

      There are those who actually do the work, and there are those who generally just show up. Guesstimate ratio would be around 30% freeloaders.

      As you say, many people can point out who is who, but due to the PC driven ideology of the HR department there is bugger all you can do about the slacker squad.

      Sadly, the most common solution used is to move them to ‘anywhere’ else in the organisation, frequently as a promotion as an added incentive to move them on!

      Bloody madness if you ask me, but I have seen this time and time again.

      Of course the folk who actually do the ‘stuff’ are rarely offered these sort of deals as their managers know they need them. Reward for non-performance. I have seen it a lot.

      Ironically much of the just ‘show up’ crowd also seem to spend large amounts of time vocally complaining about their work – heh, usually how hopelessly busy and stressed they are as they finish off their 3rd smoko break for the morning 😉

      • Hey, those people are always first on my list to get managed out. I’ve worked in a lot of places full of them though, they are poison.
        The BCA loudspeaker couldn’t possibly Make any more broad, sweeping generalizations if he tried.
        I’ve often wondered whether part of the issue is our bloated middle class. The majority of Australians sit in it, there aren’t a lot of ways to get up and out.
        For the record, my expat husband is appalled at the lack of academic rigor in this country..don’t start him on people without degrees

      • -1. Nothing more tragic than a middle manager in a corporate that thinks they are hard working and valuable. Long days, family comes second etc. The ‘freeloader’ is actually just a person with life and a bit of perspective.

  10. why are we even discussing IR reforms when the tax system incentives rent seeking and punishes productive behaviour..

    the rule of tax is that whatever you tax you get less of it, I fail to see how we keep land taxes low and punish the bejesus out of labour and capital and we expect to get more labour and capital…

  11. “1. About two thirds to three quarters of productivity enhancement comes from capital investment, technological upgrades. ”

    This is why the high value of the AUD is as much an opportunity as a threat,
    It is allowing Aussie companies to re-tool and upgrade to newer capital equipment from international capital equipment markets.
    At 60cents US to the dollar, that just wouldnt happen.

    This is the point that the “AUD Chicken Littles” don’t seem able to grasp.

    • +1.

      We have a once in a century, if not millenium, windfall from our mining boom.

      We should be buying the entire planet for future generations to reap, not pissing it up the wall paying double the price for our existing housing stock.

      • +1

        the problem is that if we were to take advantage of the strong dollar to buy overseas assets wouldn’t we just generate more cases of the NAB buying Homeside?

        seriously, when it comes to buying offshore our managers would go to a market with the family cow and come home with a handful of beans* thinking they have done a smart deal.

        * these would not be magic beans.

    • George, interesting point but are they actually doing that? Can you provide any further information?

      SoN, very nice post.

  12. dumb_non_economist

    SoN,
    Re point 4. We have unfortunately adopted the the British culture regards labour/management, just as we have with their culture towards alcohol consumption.
    It will take decades to change that.

  13. 2. Introduce Australian management and political leadership to a new concept called globalisation; better late than never.

    Very timely in light of other conversations here at MB being strongly supportive of various regulations, controls, subsidies and protections…

    • 3d1k.

      Is there really a path available to us that is free of any ideological inconsistency or paradox, given the largely pragmatic and self-serving framework under which most countries operate ?

    • Have to be on the side of the mine bot here.

      First hand, our resources personnel are carving up abroad with their management style and technical expertise.

      To see them at work in Thailand and more recently, Mongolia shows where some of our brightest are.

      • +1000

        We are soooo gooooood! Seriously, despite the plethora of mining critics, this is a field where we excel.

        (Hence my view that if the boom is decades long (yes HnH I know it’s over) there is real opportunity to develop Australian resources technology, engineering and practices as the primo global player and destination for services.)(a little snippet in the weekend papers showed a small WA engineering outfit (off the back of the boom) designing trainlift systems for Taiwan, order books full, there is so much opportunity, if we are going to provide industry support perhaps we can also include those that are the future). rant over.

        • darklydrawlMEMBER

          Aussie mining companies (and mining services et al) are also getting a lot of work in Africa too. Plenty of Aussie on the ground over there right now.

          • Definitely, a lot basing over in South Africa at the moment. Many engineering companies see Africa as the next Australia, as governments have been too unstable to make any efficient use of their resources.

      • Mining is the only sector you would (should) trust to invest your money overseas. Compare to the record of the banks when they venture offshore (shudder).

        • darklydrawlMEMBER

          And insurance companies too. Actually many Aussie companies have a less than stellar record with OS purchases.

          Although Mike Smith at ANZ seems to be holding their “Go Asian” strategy together ok so far. Might be luck, might be sneaky reporting or maybe they are gettting it right.

          IAG’s little UK adventure has cost shareholders millions of dollars, as has NAB’s. Ooops!

          • Mike Smith is one I do admire.. the anti-Gail kelly so to speak.

            It makes sense he isn’t Australian.

            To be honest, it makes sense, other than mining, we do not compete very well, we quite simply do not have the environment that is condusive to developing business competition.

            EVERYTHING is a cartel, the skillset required is marketing and lobbying, not innovation.

            How is a ‘good’ competitor ever going to rise above the ranks, demonstrate their advantage in an Australian business environment.

            Miners can, because they are trade focused, and they will get promoted.

  14. “It’s all the fault of incompetent management” is just as simplistic as “it’s all the fault of lazy workers”, I’m afraid.

    Epic fail. Particularly disappointing when you started out pointing out that this is a complex issue.

    The reality is that workers, management and the government all share part of the blame for this situation. The relative proportions of blame vary enormously from industry to industry and from company to company. There is no single answer.

      • Tongue in cheek, or are you for real?

        Workers and management can only play on the pitch they are given. The government is responsible for IR legislation.

        As Bryan K points out below, there are plenty of taxes that hamper productivity.

        Finally, government is the largest employer in the country and employs the least productive workforce. Parkinson’s Law has not been repealed since 1955. (or was it 1954? I forget.)

        • Absolutely Alex
          Further as SON stated early in the piece productivity doesn’t take account of the economic structure. We can have highly productive industries but if most of the economy is regulatory then you have a very low productivity economy.

          Another issue for employers is this. There is no point in going to some industrial court of Fair Work Australia to seek redress or fairness. The whole industrial legal system is made up of former union organisers and officials. They cannot take an independent view. It’s simply impossible. So employers do not trust the industrial courts.
          Further small employers simply do not have the resources to fight anything before any court.
          That’s why IR laws that clearly give the employer some say in his own business are of paramount importance.

  15. Proper investment in IT is a huge problem in Australia. Most companies (and govt.) dont’ know how to use IT effectively to increase productivity.

    When they do go on a mission to upgrade IT, they normally stuff it up and waste millions of dollars… that is bad management.

    • A good example of that is a certain Super management company with two buildings at circular quay, that spent 120 Mil on a project that had been implemented at a competitor for 35 Mil. Same system and same client / connectivity to markets.

  16. If productivity is the criterion “Sell on News” why not canvass ALL the options? Ken Henry recommended we abolish more than one hundred inefficient taxes–together with the shocking deadweight attending them–and institute an all-in federal land tax which cannot be passed on in costs. IR and productivity aint simply a fight between labour and capital; both need to join forces to make the rent-seeking 1% contribute their fair share.

    • Land taxes that can’t be passed on in costs…..now there’s a solution! The Govt can rip industry to shreds without it effecting the great voting majority. Wow another Ken Henry brainstorm!!!!
      Ken Henry is a public servant who never had to run a business or whose family home and family welfare were on the line all the time. That’s why we get such drivel.

      • “Ken Henry is a public servant who never had to run a business or whose family home and family welfare were on the line all the time. That’s why we get such drivel.”

        Correct flawse (but, you knew that already) We are not taxed efficiently.

  17. Surely the state governments have to take some responsibility. The amount of hours wasted in inefficient commuting must impact heavily on productivity.

    • Adz…I’ve been around a lot of doctors lately. These are top men, surgeons whose time is very valuable to the community. About a third of the time they are talking to you is spent covering their a….s against insurance claims etc
      In my business, goods that are apporved for safe use in Europe, teh US, UK. Canada etc are not suitable for sale here without another $10-$12K worth of testing and approval. This is for small items used outdoors from time to time. Why? Just to keep some seat warmers in the manner to which they have become accustomed.

      Every day in business you deal with Govt stupidity.

  18. If the key performance metric for board and senior management is shareholder value, much of the senior management would be enduring substantial pay cuts or be out of a job. (In fairness some are.) Others would be riding on the back of things over which they have no control, like commodity prices.

    The directors club and its aspiring members refuse to be rewarded based largely on the metric that measure what they constant say is their goal, creation of shareholder value.

  19. God forbid if the Australian Public Service isn’t stifled by an explosion in the SES ranks all trying to put runs on the board with their new found empires we have a bunch of EL 1’s and 2’s near retirement who won’t make a decision that could upset their pension plan. Problem is, when the broom comes through for the clean out, all the wrong people will leave.