The Workplace Productivity Challenge - Summary - Department of ...

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16 summary of the report of the workplace productivity working group Figure 5: Contributions to New Zealand’s Labour Productivity Growth Source: Black, M, Melody, G and McLellan, N (2003), “Productivity in New Zealand 1988 to 2002”, New Zealand Economic Papers 37(1): 119-150, Statistics New Zealand. 2.00% 6- year average annual growth rate 1.50% 1.00% 0.50% 0.00% -0.50% -1.00% LABOUR PRODUCTIVITY MULTIFACTOR PRODUCTIVITY CAPITAL-TO-LABOUR RATIO -1.50% 1987-1992 1988-1993 1989-1994 1990-1995 1991-1996 1992-1997 1993-1998 1994-1999 1995-2000 1996-2001 1997-2002 Improvements in workplace productivity can contribute to labour productivity, notably MFP, and therefore to economic growth and New Zealand’s living standards. OECD research suggests that productivity gains within existing firms account for 50%-80% of labour productivity growth in most OECD countries. The entry and exit of firms account for most of the rest of labour productivity growth, although the contribution of the expansion and contraction of existing firms should not be overlooked. New Zealand faces a continuing challenge in improving living standards for all. For New Zealand to move back up the OECD rankings, per capita GDP growth would need to exceed the growth rate of richer economies in the OECD by a significant margin. For example, it would need to exceed the UK’s per capita GDP growth by 1.9% per year over the next 10 years to rise above the UK’s per capita GDP. 4.2 Workplace Productivity Drivers Firms face strong incentives to invest in productivity-enhancing activities that will increase their returns. The productivity of the firm reflects how it brings together people, skills, technology, capital and other inputs to increase its profitability and market share. Continuous innovation and improvement in all aspects of the firm’s management and operations are key components of lifting productivity. The main ways that firms can increase their productivity are through investing in capital, achieving economies of scale, investing in innovation and technology, and adopting better business practices. Capital investment in physical resources such as machinery and technology complements labour, enabling workers to be more productive. Investment in new technology that embodies the latest innovations can boost productivity further, as can complementary investments, such as training workers and improving the organisation of work. Economies of scale improve productivity as the firm engages in mass production. As the firm produces more and more goods, average cost begins to fall because of economies in production, such as using expensive machinery more intensively. Adopting better practices across the range of business procedures can also lift productivity directly through improvements in efficiency, for example in production processes, but also through
summary of the report of the workplace productivity working group 17 improvements in the management and implementation of productivity-enhancing strategies such as worker training or R&D. New or improved products and processes, whether developed in the firm, adopted and adapted from elsewhere or purchased off the shelf, allow the firm to make things better, improve efficiency and quality, and develop new products. In reaching our findings, we identified seven complementary and reinforcing drivers that can be used by firms to improve productivity (outlined later in this section). Implicit within each of the drivers is the understanding that the way people are treated and managed is of fundamental importance to workplace productivity. People tend to be more motivated in the workplace if they feel appreciated and respected. Creating a positive work environment not only boosts morale but also productivity levels. Productivity improvements can be made using any of these drivers, depending on the priorities facing a particular firm. We note that it is not an “all or nothing” approach and implementation of all seven drivers is not necessarily imperative to achieving workplace productivity gains. For example, a firm that implements one of the drivers well is likely to see greater productivity gains than if it did nothing. However, the drivers tend to be complementary, so that changes in one area reinforce changes in another. The case study on page 23 illustrates how a firm has identified which strategies when combined will have the greatest impact and has implemented them with the engagement of management and employees to improve workplace productivity. A more detailed analysis of each of these drivers and their inter-relationships is available in the Working Group’s full report. Building Leadership and Management “Leadership is an influence relationship between leaders and followers that seeks to elicit voluntary commitment and action to effect real change and outcomes that reflect their shared purpose.” – Lester Levy, NZ Leadership Institute, WPWG Workshop, May 2004 Leadership and management capabilities are key drivers of firm capability and performance and cut across all of the other workplace productivity drivers. If there is a lack of strong leadership and/or management in a firm, it will be difficult to successfully develop and implement initiatives around the other main productivity drivers. We identified a strong role for leadership, and in particular leadership by example, in creating a positive and productive workplace culture. Leadership capability relates to an individual or team’s ability to identify new opportunities and inspire others to pursue those opportunities. Leaders are found at every level of an organisation and a productive workplace will have leadership depth. Managerial capability includes the strategic ability to adapt to a changing environment that creates internal and external threats and opportunities; organisational and management skills; people and communication skills; and information acquisition and learning processes – all critical factors in workplace productivity. High performing organisations have both effective management and effective leadership and, as a result, excellence in execution.
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