Kiwi firms get poor grades in report

By FIONA ROTHERHAM

Human resource management and benchmarking outside New Zealand are two areas many Kiwi manufacturers pay scant attention to, says a Government study.

Around 1 to 2 per cent of 1400 manufacturing firms were judged to be world class by the Commerce Ministry study entitled Gearing Up: a study of best manufacturing practice in New Zealand.

This small number was expected as overseas research indicated it takes 8 to 12 years from deregulation for a lagging firm to evolve into one with best practices.

Most firms lacked a strategic approach to organisational development and needed to improve employee practices and benchmarking to gain a competitive edge, the study said.

This was not a problem unique to manufacturing, said ministry spokesman Stephen Knuckey.

"It is a New Zealand-wide business problem. A lot of firms view it not as an investment, as an investment in capital would be, but as an unnecessary expense."

Only 35 per cent of firms align their employee practices with their strategic direction through a human resource development policy. Most do not use productivity-based incentive schemes, formal training or performance review systems throughout the organisation.

Concerns raised about skilled staff shortages meant more interaction was needed between industry and the education and training system, the study said.

Only half of manufacturers systematically compared their performance against other companies'. Even those that did were more likely to compare themselves with domestic firms and companies in the same industry rather than overseas firms or different sectors. The study reinforced earlier research directly linking best practice to profitability.

Overall, manufacturers were being forced into adopting best practice in the face of increasing international competition. Sectors such as timber and paper, food/beverage, tobacco and non-metallic mineral products proved to have been quickest to adapt from the inward-looking culture predominant in the early 1990s. Meat products, textile and clothing manufacturers had relatively poor practices.

The larger the firm, whether it exported and how much industry protection it had were all factors.

Customer focus was the most highly developed practice throughout the industry, closely followed by close supplier relationships reflecting the uptake of e-commerce.

Quality was top priority for best practice firms although others failed to entrust responsibility for quality to the shop floor.

The key driver of best practice appeared to be leadership. As previous studies had shown, many managers were good at the day-to-day running of the company. But few provided vision, direction or excitement to their organisations.