Pressing all the levers

Treasury Secretary Gabriel Makhlouf. Photo / Greg Bowker

New Zealand's economy has delivered reasonable economic growth in recent years, but an all-too-familiar caveat to successes has been the country's poor productivity performance, writes James Penn.

In a September speech, Gabriel Makhlouf, Secretary to the Treasury, said "recent research indicates that if New Zealand's productivity caught up with the better-performing countries in the OECD, our incomes would be 50-60 per cent higher.

"There is no single productivity accelerator that we can just press harder on," said Makhlouf.

"There are many gears, levers, buttons and switches. We need to work on all of them."

In the Mood of the Boardroom survey, New Zealand's top chief executives were asked exactly what gears and levers they were pulling to move towards a high-performance culture that delivers workplace productivity improvements.

For many respondents, the answer was that labour productivity would be maximised in tandem with technological change.

"Continual training in emerging technologies," answered Michael Snowden, CEO of OneNet.

"Promotion and financial rewards for adoption. Experiments in proof-of-concept, followed by trials and full implementation of productivity-enhancing technologies."

And creating a space for this to occur is also key, with OneNet establishing a "virtual lab" for motivated employees to participate in the development of these technologies "without leaving their 'day job'."

"We are implementing a digital transformation that will automate standardised procedures and compliance and require our people to analyse the trends and outputs and advise our clients," outlined Ross Buckley, chairman of KPMG.

"Training and development of our people, along with the use of technology," said a healthcare company leader. "We are already investing in bot development and are looking at AI to enhance clinical delivery. This will be better for our clinicians as well as deliver a better clinical outcome."

Culture of upskilling
The other common thread throughout these responses is continual upskilling.

Company director Alison Paterson said the focus was on "key performance indicators, arming employees with enhanced tools for delivery and continual emphasis on upskilling employees."

An executive said investment in progressive automation of repetitive activity had to be coupled with "ongoing skills development of staff to ensure they maintain relevance to future work needs".

In his September speech, Makhlouf said it was important that New Zealanders had skills that were adaptable and transferable.

"People need to be able to move from industries that may be affected by technology and competition to those that are growing, taking up new opportunities that technology and greater international connectedness actually creates," he said.

"In the Treasury's view, to help achieve this there should be an emphasis on attainment of cognitive and non-cognitive foundational skills and social skills that are transferable and support life-long learning, as well as greater rates of progression to higher tertiary qualifications. Indeed a key question is how our education system — and particularly our tertiary system — will help with ongoing learning."

High performance on the farm
If New Zealand is to unlock productivity growth, the country's largest industry, agriculture, will surely play a significant role. Encouragingly, agribusiness respondents were among the most illustrative in their responses to the Mood of the Boardroom on this question.

"We will have fewer, much more highly skilled, much more highly paid workers through using appropriate technology," explained Skellerup Holdings boss David Mair.

Steven Carden said his strategy for fostering productivity growth at Pāmu Farms, formerly known as Landcorp, included "upskilling, investment in data analytics, investment in broadband upgrades, investment in mobile tech, and exploration of robotics."

"Visible low tolerance for poor performance and behaviours as a baseline," said Brendhan Greaney, CEO of Tatua dairy co-operative.

"We are setting clear expectations within the context of our strategic framework that has been very widely communicated through small group interactions."

"We're genuinely listening to our people from leadership forums through to shop floor for connectedness.

"We fundamentally believe that our people want to do a great job and just need good context and clarity of organisation direction and priorities."

"Take great care in employing people who have values aligned with those of the organisation," added Greaney.

Another agribusiness executive said the focus was on simplifying processes and investing in artificial intelligence and automation.

On the agenda for another: "Significant investment in people skills and capability.

Significant investment in technology. Move to cloud-based platforms."

Flexibility to drive productivity
Many executives placed emphasis on flexibility and agility in the workplace.

One insurance sector executive said their company was focused on "creating a more agile and flexible work environment, and breaking down and removing the traditional requirements for staff to be office-based."

Anna Stove, General Manager of GlaxoSmithKline, said the pharmaceutical player was "focused on being a modern employer allowing all staff to work flexibly."

The widespread move to flexible workplaces is relatively recent, meaning a link with productivity is difficult to establish. However, a HSBC study found 89 per cent of UK workers believe flexible working hours would motivate them to be more productive at work.

This is reflected in the response of a banking executive, who said, "We've found that, by having a flexible workplace so staff can have a balanced work life, productivity has increased."

A leading entrepreneur said their agenda for a high performance culture included:

● Regular 90-day "sprints" for all business areas
● Agile technology development
● Values-based behaviour
● Empowerment of individual decision making and action
●Focus on adding value to clients, peers and shareholders and self at all times

Simon Moutter, a vocal advocate of Agile ways of working, highlighted this as a key to developing and maintaining a high performance culture at Spark. However, an energy company boss was sceptical about the value of such trends.

"We develop a high-performance culture by not adopting corporate 'flavour of the moment' themes like Agile, but rather looking at what mix of workplace design, technology enablement and cultural/resource planning is required," he explained.

Union concerns
Few impediments were cited on the productivity question, however two respondents highlighted union activity as a barrier to establishing a high-performance environment.

Doug Ducker, managing director of Pan Pac Forest Products, said movement towards a high-performance culture was progressing slowly, "given varying support from individuals and, under this Government, the unions.

Staff involvement in discussion and education is being used to assist."

An executive in the travel and tourism sector said progress was, overall, going well.

"However, unions are now split, wanting collaboration with business at the top, while lower levels in the union have been emboldened and returned to old-style 1973 negotiating tactics."

These concerns are perhaps driven by recent employment law changes, including a Bill that plans to end the 90-day trial period for businesses with 20 staff or more, and remove the right of employers to opt out of multi-employer collective agreements.

"Business cannot support this Bill and will be making our position clear as it progresses through Parliament," said BusinessNZ chief executive Kirk Hope in September, citing the legislation's "ability to harm employment relations, jobs and commercial value in New Zealand enterprises".

Keeping up with the OECD
OECD statistics suggest New Zealand's labour productivity was 2.1 per cent lower in 2017 than it was five years prior.

By contrast, the same period has seen a 5.8 per cent increase in productivity in Australia.

That measure, GDP per hour worked, was an estimated US$37.10 for New Zealand in 2017, more than 20 per cent below the latest available OECD average (2016, US$47).

If the productivity plateau is not addressed, New Zealand firms may begin feeling the pinch as overseas productivity outperformance threatens the market share of domestic firms.

"We have a relentless need to increase productivity to neuter wage growth and inflation and deal with highly competitive imports," explained a senior figure in the building and construction sector. "This backdrop means achieving these improvements are tracked and a key part of performance measurements in the business."

Ultimately, these gains (or lack thereof) will flow on to living standards too.

"Productivity matters," said Treasury Secretary Makhlouf in the September speech. "It is how we grow more prosperous. It underpins improvements in our living standards. It means we are using our resources more efficiently.

"Improved productivity provides more choice, for citizens, businesses, and government."