The Ernst & Young Australian Productivity Pulse™
Wave 4 — May 2013
Reaching our $305 billion
productivity potential
Where to from here?
Have companies reached their highest productivity peak, or will they keep on pushing towards the summit?
Despite corporate Australia, and some
government departments and agencies, seeing
incremental improvements through restructuring
and cost cutting, Australia is yet to realise $305
billion1 in productivity potential.
Australian workers say they could be 21% more
productive every day, if they could change just
one or two things at work – representing
unrealised productivity of more than $305
billion every year. This equates to an average of
$26,300 per worker2. If just 5% of this potential
was unleashed, the ASX200 could again
approach, and perhaps exceed, the magical
6000 level last seen in 2007.
Right across the workforce, four in five
Australian workers (85%) could be more
productive in their role. Workers said the main
obstacles to increase their level of productivity
were: poor staff management and a lack of
motivation, reward and recognition in the
workplace. Without deliberate intervention
from leaders across the Australian public and
private sectors, Australia will take 20 years to
achieve its full potential, assuming productivity
continues to improve at the same rate it has
over the past seven years. With intervention
this potential could be halved.
While the nation has made good progress in the
productivity stakes during the past 18 months,
with personal productivity growing steadily, it
has plateaued since August 2012 - driven by
declines in personal productivity in the financial
services and resources sectors.
Organisations have worked hard to push the
productivity levers of process efficiency and
standardised systems. However, there remains
little more to squeeze out of these initiatives.
The back to basics approach of the last year has
delivered some good gains, but now its returns
are diminishing. In the past six months, growth
has tailed off in most sectors, and even fallen,
with significant declines in the Mining, and
Financial and Insurance Services industries.
As a result, overall personal productivity has
grown year on year, but plateaued since the
last wave of The Ernst & Young Australian
Productivity Pulse™ (the Pulse) in August 2012.
Australia has already felt the net productivity
gains as a result of companies tightening the
screws to adapt to changing market conditions.
The challenge now lies in un-tapping our
productivity potential, so we ensure business is
sustainable into the medium-term.
Based on ABS Australian National Accounts: National
Income, Expenditure and Product March 2013 and Gross
Domestic Product December 2012
2
Based on ABS Australian National Accounts: National
Employment figures March 2013
1
2
The Ernst & Young Australian Productivity Pulse™ Wave 4
As Wave 4 of the Pulse reveals, companies
cannot afford to be complacent that
productivity gains will continue. There are
worrying signs that the stress of restructuring
may be starting to reverse some of the
productivity gains made during the last
12 months.
In addition, a negative shift in worker
sentiment, caused by new and growing fears
about job security, has created a growing divide
between productive and unproductive workers.
In particular, our least productive workers (the
‘Lost Souls’), who tend to be junior employees,
are disengaged and wasting far more time at
work than their productive colleagues –
creating an ever widening gap. Unproductive
workers now waste approximately 1 hr 30 mins
per day more than productive workers — up
from one hour just six months ago.
As Section 3 of this report explains, to sustain
existing productivity gains and start unleashing
the remaining potential, big organisations in
both the private and public sectors need to
review the effects of recent productivity actions
and put in place new and bold initiatives that
address all the levers of productivity
improvement. Organisations need to get clarity
around what constitutes genuinely competitive
work, declare a war on waste and engage their
workforces to motivate people to make a
discretionary effort.
These efforts will require changes by:
• Boards — should be asking the right
questions, including what has been
the impact of our productivity
improvement initiatives over the past
2 years (not just cost reduction)? What
is our productivity potential over the
next 2-5 years? What productivity
levers are we using to achieve our
potential and how much value could be
created if we invested more or less in
each one?
• C-Suite — should be putting in place
the right productivity measures and
improvement programs, and seeing
that productivity is embedded and
integrated into the overall strategy
of the organisation. Having a clear line
of sight on what the organisation’s
productivity potential is over the next
2-5 years should be well known,
agreed and owned by the C-suite.
• Managers — should be lifting their level
of engagement with their staff,
creating workplaces that inspire and
motivate their teams, linking
organisational productivity measures
to individual performance metrics,
driving waste out of processes and
policies, ensuring the right mix and
unit costs of resources are deployed
that match the outcomes demanded of
their departments, functions, or
divisions, and deploying the right
technology to automate transactional
work volumes and improve quality to
customers. Similarly, Managers should
also have a clear view of what
productivity potential exists in their
areas of responsibility and how they
will achieve it.
At the same time, government needs
to take a leadership role in promoting
national productivity. As an employer of
over 16% of the workforce, government
needs to take ambitious steps to boost
public sector productivity, including
measuring and reporting annually on the
performance of agencies at local, state
and federal levels. It also needs to
stop adding to the uncertainty that
undermines business confidence and
use policy levers to remove productivity
hurdles in the rest of the economy.
Backed by proactive government support,
companies that start pushing towards
their productivity potential heights now,
stand to gain significant advantage over
those whose inertia keeps them stuck at
their current level, or even sliding
backwards. Without the new approaches
outlined in this report, Australia is in
danger of getting stuck far from the
summit of our productivity potential.
About The Pulse
The Pulse measures Australian workers’
sentiments about their and their
organisation’s productivity and the value
of the work they do. It gauges the voices
of more than 2,000 workers across key
industries and from all levels in both the
private and public sector.
Eighteen months ago, Wave 1 found
Australian workers wasting 18% of their
day on work that didn’t add value —
costing the economy an estimated
$109 billion. A year ago, Wave 2, profiled
four groups of workers, from “highly
productive” to “unproductive”, with each
group identifiable through a number of
characteristics. Six months ago, Wave 3
revealed how the more productive groups
were driving an upturn in productivity.
In Wave 4 we examine Australia’s
productivity potential — its
context, causes and
characteristics — and how
to unleash it.
Reaching our $305 billion productivity potential
3
4
The Ernst & Young Australian Productivity Pulse™ Wave 4
Section 1: state of play
• Economic
context — Australian job security,
restructuring and underemployment.
• Productivity
potential — Where are the significant levels
of untapped productivity within the workforce?
• Productivity
level update — Overall and by sector
and geography
• Productivity
profiles — Rise of the “Solid Contributors”;
disengagement of “Lost Souls”; the growing divide
between productive and unproductive workers.
• What’s
going on in your workplace? — How long are we
working? Where are we wasting time?
Reaching our $305 billion productivity potential
5
State of play
Economic context
Perception of job security by industry
Worker confidence in job security
plummets
Despite positive employment figures, for
the first time since the Pulse started 18
months ago, we’ve seen a significant fall in
worker sentiment over job security (-5
percentage points) and confidence in the
job market (-3) in the past six months. In
Wave 4, only one in four (24%) workers
said they felt secure in their current role.
This is important, as job security goes
hand in hand with productivity. Only 17%
of Lost Souls felt secure, compared with
38% of Super Achievers.
Cost cutting and redundancies by State
and Territory
25
24%
Percentage of Australian workers
Productivity may have lifted in the past
12 months, but several factors in the
underlying economy could reverse this
trend. While cost-cutting and corporate
restructuring have resulted in a net
productivity gain for the nation, there are
worrying signs that stress from these
programs may be starting to reverse
some of the productivity gains made
during the past 12 months.
24%
20
20%
20%
19%
16%
15
10
5
0
Health
and social
assistance
Professional, Manufacturing Retail and
scientific
wholesale
and technical
trade
Finance
and
insurance
Mining
Cost cutting and redundancies continue
The shift in worker sentiment has been at least partly caused by renewed cost cutting
activities and/or redundancies in the past six months. Of those who had experienced
declines in productivity, more than a quarter (27%) reported restructuring was
responsible for the decline.
This effect was particularly apparent in the public sector, where 57% of workers said
they had seen cost cutting or redundancies, versus 37% in the private sector. In terms
of industry and geography, the Mining, Professional, Scientific & Technical and Trade
sectors were more likely to have seen restructuring activity, along with companies
on the Eastern Seaboard.
Cost cutting or redundancies in the last six months by industry
45%
34%
37%
44%
38%
43%
Percentage of Australian workers
80
70
60
50
40
16
30
20
6
Finance and
insurance
The Ernst & Young Australian Productivity Pulse™ Wave 4
Mining
Professional, Manufacturing Health
scientific
and social
and technical
assistance
Retail and
wholesale
trade
Wave 2 (Feb 2012)
Wave 3 (Aug 2012)
Wave 4 (Feb 2013)
National average 42
National average 35
National average 41
Other
ABS figures show part-time employment
climbing by 53,700 in the last six
months. Yet, this masks the Pulse
findings that 37% of part-time employees
aren’t working enough hours. This
hidden underemployment was worse in
NSW and VIC, where it affected 40% of
part-time workers; whereas, in WA’s
stronger job market, this figure fell
to 21%.
We believe there is capacity in the
Australian workforce, particularly among
part-time Patchy Participants, with 54%
wanting to work more hours.
Productivity potential
The Pulse identified $305 billion in untapped potential across all productivity
segments, with four in five (85%) workers believing they could be more productive
in their role to some degree. On average, employees from all levels, and across all
sectors, said they could be 21% more productive in their role.
Clearly, there is a vast gap between what productivity levels could look like and what
is actually happening in Australian workplaces. We believe business leaders have an
unconscious awareness that this productivity potential exists — but must now act to
proactively tap into it.
Who has a >50% productivity potential?
Workers with a greater than 50% productivity potential are more likely to be
junior employees, aged 20-34 who have been with their company for fewer than
three years.
Looking across the productivity profiles, Lost Souls possessed the greatest
productivity potential, with 38% claiming they could be more than 40% more
productive if they could change one or two things in their job.
How much more productive could you be?
Average
productivity
potential
100
Percentage of Australian workers
Underemployment hidden in rosy
job figures
80
21%
25%
30%
16
15
60
19
38
17
20%
20%
13
14
15
13
60
47
15
54
40
52
28
20
16
0
Total
Greater than 40%
26
20
Lost soul
12
12
Patchy particpant Solid contributor Super achiever
21% - 40%
1% - 20%
0% - no more productive
Reaching our $305 billion productivity potential
7
Productivity level update
Where are the pockets of
productivity potential?
The Pulse found the national productivity average has increased from 7.25 to 7.50
(based on a ten point scale) over the year, plateauing from a high of 7.58 in August
2012. Although the overall uplift is encouraging, we are concerned that many states
and sectors have started to show declines in the last six months.
Although untapped potential exists
across the workforce, there are key
differences by state and industry.
How much more productive could
you be?
By industry
Retail and wholesale trade
Finance and insurance
22%
Manufacturing
22%
25%
Professional scientific
21%
and technical
Health and
social assistance
Mining
Least
productivity
potential
Greatest
productivity
potential
21%
23%
ACT
Least
productivity
potential
NSW
22%
WA
22%
VIC
22%
QLD
22%
8
TAS
Average overall productivity rating by state
10
17%
By state
SA
Productivity changes by state and sector
The annual increase in perceived personal productivity was driven by workers in all
states. The greatest increases came from Tasmania and South Australia, which were
both below the national average a year ago. However, most states have declined in
the past six months — Victoria significantly, after a mid-year spike — with only
Queensland and Western Australia remaining on an upward trajectory.
Productivity rating
Greatest
productivity
potential
Also, workers attributed most productivity improvements in the past six months to
their own efforts, making tactical, incremental improvements to the way they work. In
contrast, productivity declines were attributed to poor people management creating
a lack of motivation, reward and recognition in the workplace.
8
7
6
16%
14%
The Ernst & Young Australian Productivity Pulse™ Wave 4
VIC
NSW
QLD
WA
TAS
SA
ACT
Wave 2 (Feb 2012)
Wave 3 (Aug 2012)
Wave 4 (Feb 2013)
National average 7.25
National average 7.58
National average 7.5
Growing divide between productive
and unproductive workers
Average overall productivity rating by sector
Productivity rating
8
In the past six months, Lost Souls have
become even more unproductive,
disengaged and wasteful, while Solid
Contributors and Super Achievers
reduced their wasted activities – creating
a widening gap between the two ends of
the productivity spectrum. We are
concerned that 38% of already
unproductive Lost Soul workers reported
further declines in productivity in the
latest wave (up from 20% in wave 3).
7
6 Health care Manufacturing All other Professional, Retail and Financial and
and social
industries scientific and wholesale insurance
assistance
technical services trade
services
Mining
Wave 2 (Feb 2012)
Wave 3 (Aug 2012)
Wave 4 (Feb 2013)
National average 7.25
National average 7.58
National average 7.5
Every industry sector increased productivity on an annual basis, with mining and
manufacturing delivering gains well above average. That said, with the exception of
Health Care and Social Assistance, which has plateaued since August 2012, every
other sector has started declining from a mid-year high. The biggest falls since
August 2012 were from Mining and Financial and Insurance Services, where costcutting programs and redundancies may have begun taking their toll on perceived
personal productivity.
Productivity profiles
The Pulse profiles Australian workers in four groups, with two categories of workers
above the national average of 7.50 on a 10-point scale, and two below.
In the past six months, the proportion of Solid Contributors continued to grow,
coupled with a decline in the proportion of the highest Super Achievers (those rating
ten) at the very top of the productivity scale.
Wave 3 — November 2012
Wave 4 — May 2013
National productivity average 7.58
National productivity average 7.50
The growing divide between productive
and unproductive workers can also be
seen in the disagreement between Lost
Souls and Super Achievers in response
to statements about workplace
motivation and management. The
following statements prompted the
biggest polarisation in responses:
“I am motivated to do my job to the
best of my ability”
“My skills are strongly utilised by
my employer”
“I have a high level of control to get
my work done in the way I want to”
“I am supported by my manager to
effectively undertake my role”
“I am proud to work for my employer”
“I feel I get the right training to do my
job as productively as possible”
53%
49%
32%
26%
14%
5%
Lost soul Patchy participant Solid contributor Super achiever
16%
4%
Lost soul Patchy participant Solid contributor Super achiever
Reaching our $305 billion productivity potential
9
Who are Lost Souls?
Disengagement of Lost Souls
Lost Souls are more likely than Super Achievers to:
Australia is struggling to influence the
least productive people in our workforce.
While their more productive colleagues
continue to lift their performance, Lost
Souls are wasting more than two hours of
their working day. Their disengagement
is demonstrated by their willingness to
blame productivity declines on poor
management and fail to take personal
responsibility. They spend more time on
wasteful activities than Super Achievers:
2.1 hours vs. 0.5 hours.
58%
Spend more
time travelling to
and from work
1.3 hours
Be employed in
their current role for
less than 3 years
Super achievers
Super achievers
Super achievers
Be aged
25w34 years...
...and have
no children
Super achievers
44%
31%
15%
42%
39%
Super achievers
23%
Super achievers
8%
17%
Feel that
their organisation’s
productivity has
declined compared to
6 months ago
Agree that
they are planning to
leave their organisation
in the next 12 months
30%
34%
Super achievers
Super achievers
14%
10%
List career
development
and progression
opportunities in their
top 3 motivating areas
in the workplace
Believe decline in
productivity is due to
poor management
Say they
don’t know who
is responsible for
improving the
productivity of their
organisation
Super achievers
Super achievers
Super achievers
18%
6%
71%
23%
Less likely to
believe it is the
responsibility of all
individual employees
41%
Super achievers
66%
10
Think there are no
benefits to being more
productive
Super achievers
13%
28%
.9 hours
Agree that their
organisation is not as
productive as it could be
Be a junior
employee
55%
The Ernst & Young Australian Productivity Pulse™ Wave 4
15%
4%
Worryingly, Lost Souls are more likely to
be found in the new generations of
workers. These people are more likely to
be junior employees, aged between 25
and 34. On average, they believe they
could be 30% more productive, but
almost a quarter can’t see any benefit to
lifting their output.
Without leveraging this part of our
workforce we are missing a great chunk
of an organisation’s as well as the
nation’s productivity. This will require
better communication about the benefits
of and practical measures for individuals
to improve productivity. It may also
include showing this segment career
development and progression
opportunities and reconsidering their
employment benefits. For example, Lost
Souls are currently less likely to receive
benefits, such as gym memberships or
health checks, than any other group.
What’s going on in your workplace?
Productive workers reduce wastage
In the last six months, the breakdown of a typical full-time working day remained
unchanged, with a few differences across sectors and productivity profiles. Those
working in Mining were still putting in the longest hours (41% of their day), with those
in Professional, Scientific and Technical industries working the shortest day (34%).
Despite productivity remaining relatively
static, the total time spent on wasteful
activities in the workplace has declined
significantly, with a growing split between
productive and unproductive workers.
Time spent on key activities during a typical working day
The proportion of the working day
attributable to waste fell from 14% to
11% in the past six months. This was
driven by reductions in waste in the two
most productive segments, while Patchy
Participants held steady. However,
wastage by Lost Souls increased
significantly. On average, this segment
now wastes 28% (more than two hours)
of their working day, up 7% percentage
points from Wave 3.
5%
Travel time
(to/from work)
31%
Sleeping
35%
At work
(including breaks)
11%
Eating/housework
personal care
15%
Leisure/
recreation
Productive workers are now wasting
approximately 1 hr 30 mins per day less
than unproductive workers – up from
one hour, six months ago.
4%
Breaks during
working hours
Waiting for other people continued to be
the largest contributor to wasted time
within each productivity segment.
Where are we wasting our time?
80
Total wastage = 1hr, 10 mins
Number of minutes wasted on activity
70
60
3.7%
6.3%
6.2%
50
40
6.3%
8.8%
8.5%
30
20
10
0
4.0%
7.1%
Total wastage = 52 mins
3.2%
5.0%
4.6%
4.8%
3.7%
4.9%
3.3%
5.5%
12.5%
12.2%
5.6%
4.5%
Wave 3
Other
Time wasted taking care
of personal matters
Time wasted in meetings
Time spent on doing things
manually that can be automated
Travel between sites/offices
Wasted time spent on sending/
replying to emails
Time wasted on social media
Technology waiting time (IT issues)
Time wasted wasted waiting
for other people
Work I produce which is not used
Wave 4
Reaching our $305 billion productivity potential
11
12
The Ernst & Young Australian Productivity Pulse™ Wave 4
Section 2:
Section 2: key takeouts for
Boards, C-suites and Managers
Reaching our $305 billion productivity potential
13
Boards
Unleashing an organisation’s
productivity potential will
require focus from the board
down. Most organisations have
gone as far as they can with
their current cost cutting
programs. There’s precious
little more fat to trim or cut
without a fundamental re-think
of business operating models.
The next wave of productivity
improvement will come via
different initiatives — driven
from the top.
As the chart on the following page
reveals, the vast majority of workers
believe they can be more productive —
with the right organisational support.
However, this support will not be
forthcoming unless boards make
productivity improvement a top priority.
For some boards, productivity is way
down the agenda. Few have productivity
committees; few ask for reports that tell
directors whether their organisation is
more or less productive than it was a
year ago. Until boards start focusing on
productivity metrics — rather than
straight cost cutting — the remaining
productivity potential will go untapped.
Directors could be more proactive about
productivity and start asking different
questions:
• Does every director of the board have
the same detailed understanding of
what productivity is and isn’t for their
organisation?
• Have our cost cutting programs
actually improved productivity —
or just cut costs?
• How do we know that?
• What is our productivity potential over
the next 2-5 years?
• What levers are we going to use to
unlock it?
• How much value could be created if
we invested more or less in each one?
• What are our targets over time?
• How will we measure our success?
• How will that be reported to
the board?
Productivity improvement requires as
much governance attention as capital
investment or strategic direction. If we
don’t put it higher on the board agenda,
it will not get the executive or
management focus it deserves.
14
The Ernst & Young Australian Productivity Pulse™ Wave 4
How much more productive could you be?
Percentage of Australian workers
100
80
21%
25%
30%
16
15
60
19
38
17
20%
20%
13
14
15
13
60
47
15
54
40
52
28
20
16
0
Total
Greater than 40%
26
20
Lost soul
12
12
Patchy particpant Solid contributor Super achiever
21% - 40%
1% - 20%
0% - no more productive
Boards
Average
productivity
potential
Reaching our $305 billion productivity potential
15
C-suite
The C-suite’s responsibilities start
with gaining a clear line of sight on
what the organisation’s productivity
potential is over the next 2-5 years.
This should be well understood,
agreed to and owned by the
executive leadership team.
Then, the team can identify and put
in place the right productivity
measures and improvement
programs to unlock that potential.
As a starting place, the scorecard
on the following page will help
leadership teams to assess likely
areas for improvement.
Executive responsibilities to help
unlock productivity potential
• CEO
• Make productivity an organisational
priority through regular internal
communication and updates
• CFO
• Identify metrics
• Support measurement and reporting
up and down the organisation
• Strategy Director
• Integrate productivity targets and
initiatives with the overall strategy of
the organisation
• COO
• Embed productivity-improving
interventions into day-to-day
operations
• Improve process efficiency
• Standardise and simplify systems
• CIO
• Investigate automation options to
unlock productivity potential
16
The Ernst & Young Australian Productivity Pulse™ Wave 4
• HRD
• Support managers in setting
productivity goals for
individual workers
• Tie productivity metrics to
performance reviews
• Drive people manager behaviours
to motivate workers
• Communications Director
• Educate the workforce about the
importance of improving productivity
• Publicise best practice and call out
‘productivity heroes’
Cascade the CEO’s productivity
communications to all levels
How does your organisation rate; Productivity Scorecard
Productivity focus areas
Description of good productivity practice
Level of adoption in our organisation
Not at
all
Organisation
architecture
(Effective organisational
model, structure and
processes)
Low
Moderate
High
Very
high
• Productivity goals that are aligned to individual workers
• Productivity goals throughout the organisation
• Optimal organisational structure with clear definition of
employee roles
• Improving process efficiency
• The presence of policies and guidelines that are relevant to my role
and match the aims of the organisation
• Clear communication of the elements that drive performance so that I
know exactly what to do
People management
• A culture of valuing staff wellbeing and engagement
(Developing and utilising the
full talents and capabilities of
the workforce)
• Provide effective constructive feedback on my performance
and development
• Ensure peoples’ skills are matched to their job and that they are
paid appropriately
• The workplace reflects a mixture of skills, backgrounds
and competencies
• Ensuring the best people for the job are attracted to and retained
within the organisation
Technology
and capital
• Making sure systems are standard and simple to ensure an
efficient workplace
(Being more ambitious and
effective in process
automation and technology
change)
• Making particular activities automated
Innovation
• A culture of continuous improvement and collaboration
(Being deliberate and
audacious with an innovation
agenda and enablement)
• Constant generation and review of new ideas to improve
the organisation
• Availability of good data and information to help make decisions
• Effective training to allow staff to get the most from new technology
and tools
• The organisation striving to be the ‘best in industry or class’
C-suite
• Innovation in all areas of the organisation
Reaching our $305 billion productivity potential
17
Managers
Managers should have a clear
view of what productivity potential
exists in their areas of
responsibility and how they will
achieve it. This is likely to include:
Motivating teams and boosting
employee engagement
Managers should focus on creating
workplaces that inspire and engage their
teams. Engaged employees are more likely
to take ownership of business outcomes,
‘go the extra mile’, work towards continual
improvement and use their initiative — all
of which makes them more productive.
Importantly, employees are most engaged
when they can see and measure the outcomes
of their performance. Managers should link
individual performance metrics to
organisational productivity goals, so they can
measure meaningful employee performance,
hold them accountable and reward productive
achievement. Managers also need to actively
support any employee development required
for them to succeed in their role.
Ensuring the right mix resources
Managers need to deploy the right mix of
resources to match the outcomes demanded
of their departments, functions, or divisions.
This will require them to understand the unit
costs of those resources: not just the cost of
inputs, but the value of the outputs they are
contributing to. Only then, can they make
informed resourcing decisions to unlock
productivity potential.
18
The Ernst & Young Australian Productivity Pulse™ Wave 4
Deploying the right technology
Many organisations have repetitive, routine
processes that are still handled manually,
consuming significant labour resources.
These activities are both expensive for the
organisation and soul destroying for the
individual worker. They result in low employee
satisfaction and poor motivation, which in
turn leads to lack of care and frequent
human error.
Managers should look for more opportunities
to deploy business process automation to
dramatically reduce both the cost of
performing these processes and the error rate.
Instead of having an administrator perform the
task multiple times every day or week, a
process simply needs to be created once and
set to repeat — freeing employees to engage in
more rewarding and value-adding work.
Top five reasons for a decline
in productivity:
Managers
1. Poor management
2. Lack of motivation
3. Lack of incentives/rewards
4. Staff treated poorly
5. Lack of communication
Reaching our $305 billion productivity potential
19
20
The Ernst & Young Australian Productivity Pulse™ Wave 4
Section 3: path to the summit
• Measuring
• Levers
productivity — The positive feedback loop
of productivity — What levers should you be pressing?
• Quality
of work — How to boost both quality of work and productivity
• Government
— Policy changes to drive forward productivity
Reaching our $305 billion productivity potential
21
Measuring and
communicating
about productivity
Organisation
measures
productivity
To unleash their productivity potential,
organisations must measure and
communicate about productivity. In
organisations that measure productivity,
the Pulse found 88% of workers strive to
increase productivity, 14% more than in
organisations that don’t. Also, as
described in the diagram below,
measuring productivity creates
a positive feedback loop, which
gains its own momentum.
This is an area where Australia has room
for significant improvement. The Pulse
revealed only 39% workers are aware
their organisation measures productivity,
with 31% of workers unsure. Awareness
also varied significantly by industry
sector and state.
In addition, 78% of workers said they
didn’t receive clear communication about
the elements that drive performance.
Also of concern, the Pulse found only
a quarter of companies actively trying
to improve productivity had set
organisational goals, and only 17%
had aligned productivity goals to
individual workers.
Worker strives
to increase
productivity
In terms of how organisations measure productivity, workers reported more than 30
different types of metrics, including: KPIs, financial information and output analysis.
Although productivity measures will clearly differ from sector to sector, companies
and industries seem to lack consistent definitions of what is meant by productivity.
As a country, we need greater clarity about what productivity is and isn’t, for
example: it isn’t a panacea; and it isn’t just cost cutting. At an industry level, common
productivity definitions and measures would enable cross-industry benchmarking.
At an individual level, organisations also need to establish a common understanding
of productivity, so the Board doesn’t view it differently from the shop floor.
Percentage of workers that know their organisation measures productivity
By industry
60
50
54%
53%
52%
41%
40
38%
38%
35%
30
20
10
0
22
Worker
becomes
concious of the
productivity
potential
More work needed around productivity definition and metrics
Percentage of Australian workers
The Pulse also revealed that workers
who are dialled in to the topic of
productivity, through organisational
measurement or communication, have a
greater productivity potential than those
who are not (23% vs.19%).
Worker feels
the organisation
is striving to
become more
productive
Productivity
increases
The Ernst & Young Australian Productivity Pulse™ Wave 4
Finance
and insurance
Mining
Manufacturing Professional, Health and
scientific
social
and technical assistance
Retail and
wholesale
trade
Other
Declare a war on waste
By state
50
Percentage of Australian workers
45%
40
44%
43%
42%
38%
36%
30
33%
20
10
0
Waste is the one remaining traditional
target area where organisations still
have a lot of work to do. By tackling
waste strategically — taking a serious
look at processes and functions through
a waste lens — organisations often find
another 10% of value sitting waiting to
be harvested. Take a look at the minutiae
of the work that gets done in your
organisation. What value does it deliver?
Do you really need that report, regular
meeting or even project?
Engage your workforce
WA
ACT
VIC
QLD
TAS
SA
NSW
Levers of productivity
The Pulse revealed those Australian organisations trying to improve productivity have
spent the past year going back to basics, putting most of their efforts into improving
process efficiency and standardising and simplifying systems. Together with cost
cutting and redundancies, this is what has delivered most of Australia’s productivity
gains, with organisations creating incremental improvements by cutting costs,
removing process duplication and redundancy and increasing automation. Many
have even revisited functions or processes they thought were working well to find
more value.
However, you can only squeeze so much additional productivity from such initiatives.
In future, these tried and true programs will only produce diminishing returns.
To unleash Australia’s remaining productivity potential, big corporations and
government agencies need new thinking and game changing interventions around
more radical uses of technology and automation — and around the shape of work itself.
Only perform competitive work
The Pulse found that workers
overwhelmingly attributed productivity
declines to poor staff management and
a lack of motivation, reward and
recognition in the workplace. This issue
needs a serious response, with a sharp
edge. If your workers believe they could
be 21% more productive, you need to
understand how this relates to your
organisation and where this potential
resides. You need to make sure
employees know: how productivity is
measured, what they can do as
individuals to improve productivity, and
how they are tracking against key
measures. You also need to listen to
your workforce and improve the work
environment so it motivates people to
make a discretionary effort that
adds value.
It’s time for Australian organisations to get better clarity around the work that
genuinely needs to be done by full-time employees (i.e. work that confers competitive
advantage), and the work that can be done better, cheaper or faster by technology or
by other people, through contracting, outsourcing or offshoring.
To this point, the automotive industry offers a cautionary tale for every other sector,
demonstrating that hanging onto uncompetitive practices is simply not sustainable.
In a flat world, Australian organisations need to be realistic about where they can,
and cannot compete, and adjust their resourcing models, and even their core
business, accordingly.
Reaching our $305 billion productivity potential
23
Workers’ top five reasons for
productivity decline
1. Poor management
2. Lack of motivation
Productivity focus areas
When it came to productivity focus areas, workers believed people management
and organisational model, design and operation had the greatest potential to impact
productivity — rating much higher than technology or innovation. In fact, workers
ranked organisation and people levers as nine of the top ten attributes
driving productivity.
3. Lack of incentives/rewards
4. Staff treated poorly
5. Poor communication
Organisation
architecture
(35%)
People
Management
(32%)
Effective organisational
model, structure
and processes
Developing and utlising
the full capabilities of
the workforce
Technology
and capital
(18%)
Innovation
(14%)
Being more ambitious
and effective in process
automation and
technological change
Being deliberate and
audacious with an
innovation agenda
and enablement
What productivity levers are organisations using?
Percentage of Australian workers in
organisations that try to increase
their productivity
Improving process efficiency
Making sure systems are standard and simple to ensure an efficient workplace
A culture of valuing staff wellbeing and engagement
The organisation striving to be the 'best in industry or class'
Productivity goals throughout the organisation
A culture of continuous improvement and collaboration
Effective training to allow me to get the most from new technology and tools
The workplace reflects a mixture of skills, backgrounds and competencies
Constant generation and review of new ideas to improve the organisation
Clear communication of the elements that drive performance
Ensure peoples' skills are matched to their job and that they are paid appropriately
Availability of good data and information to help make decisions
Provide effective constructive feedback on my performance and development
Policies and guidelines that are relevant and match the aims of the organisation
Optimal organisational structure with clear definition of employee roles
Ensuring the best people for the job are attracted to and retained within the organisation
Productivity goals that are aligned to individual workers
Making particular activities automated
Innovation in all areas of the organisation
24
The Ernst & Young Australian Productivity Pulse™ Wave 4
Quality of work
Around the world, improving quality of
work is considered to be increasingly
important at a national level, not just to
support employee well-being, but also to
boost productivity. Using a quality of
work framework developed by the United
Nations Economic Commission for
Europe, the Pulse ranked the dimensions
of quality of work most likely to increase
productivity in Australia.
1. Workplace relations and work
motivation — workers who have
strong relationships with their co‐
workers and supervisors and do not
feel discriminated against or
harassed, have higher morale and
lower turnover and absenteeism.
Equally, those given clear and
achievable goals, autonomy, and
sufficient feedback feel they are able
to apply their own ideas in work, feel
they do useful work and are satisfied
with their work. The overall result is
improved performance and
productivity.
2. Skills development and training
— employees who receive the right
training for their role and whose skills
are closely aligned with their role and
well utilised by their employers are
more productive.
3. Working hours and balancing work
and non-working life —
well-developed work-life balance
policies improve satisfaction and
productivity. They make it easier for
companies to attract and retain the
right people. In addition, employees
tend to devote high work effort to the
company in return for the flexibility
shown in support of their needs.
4. Safety and ethics of employment
— employees who feel safe in their
working environment and believe
their employer focuses on safety
are more likely to be productive.
Productivity is also higher when
people feel they received a fair wage
and were not subject to unfair
criticism.
5. Security of employment — people
who feel secure in their roles are
more likely to be productive.
Interestingly, part-time workers scored
highest for quality of work than full-time
or casual workers. Across industry
sectors, the differences were marginal.
Mining had the lowest quality of work
average, falling down on all dimensions
except Safety and ethics of employment.
Health & Social Assistance had the
highest rating, with particular strengths
in workplace relations and work
motivation and also skills development
and training.
How can employers boost both
quality of work and productivity?
The Pulse indicates that improving
quality of work and achieving better
financial performance are two sides of
the same coin — not conflicting goals. It
shows the higher quality of work, the
higher the productivity, with super
achievers measuring highest on all work
quality indicators.
According to the Pulse, the quality of
work dimensions most likely to boost
productivity (indicated by a more than 3
point gap on a 1-10 scale between Lost
Souls and Super Achievers) are:
• Job satisfaction
• Motivation
• Management supports workplace
effectiveness
• Skills utilisation
• Training to support productivity
• Individual control over how they
achieve outcomes
Reaching our $305 billion productivity potential
25
Government responsibilities
to support national
productivity
Government at all levels has two roles in
supporting productivity:
1.Improve productivity
performance in the public sector
The public sector needs to put its own
house in order and improve the
productivity of its 1.9 million3 employees
— or more than 16% of the Australian
workforce. To date, such efforts have
largely revolved around incremental
improvements. In future, government
agencies need to be far more
ambitious, targeting:
• Demand — Remove any programs,
reports, committees or regulations
that don’t add value to the country.
• Supply — Make more radical use of
technology and automation and take
another look at privatisation, or at
least at outsourcing functions to the
commercial sector. If government
processes and functions were subject
to market testing, many would fall
behind best practice. While policy
should remain in the hands of
government, the vast majority of
service delivery could be performed
more efficiently by the private or
not-for-profit sectors.
• Transparency — Measure and report
annually on the productivity
performance of individual agencies
at local, state and federal levels. If
government believes productivity is
important, it has an obligation to
publicise its own performance and
compare it to previous years. This is
not about cutting costs, but about
tax payers getting ‘more bang for
their buck’.
2.Use policy levers to remove
productivity hurdles
The top priority on the government’s
productivity agenda should be, wherever
possible, to remove uncertainty from the
economic environment. With multiple
offshore factors in constant flux,
continual local policy changes seriously
undermine productivity. Business needs
to have confidence that the tax, industrial
relations or foreign investment rules it
planned for will remain consistent.
Beyond this, government has the
following range of levers to support
businesses in unleashing their
productivity potential.
Employment and Earnings, Public Sector,
Australia, 2011-12,
Australian Bureau of Statistics
3
26
The Ernst & Young Australian Productivity Pulse™ Wave 4
• Set a productivity target for country
— Australia needs to put a light on the
hill to guide our productivity ambitions
towards 2025 or 2030, and then put
policies in place to guide the way. We
already have a good start in terms of
education, skills and the NBN. Now
now we need to tie these initiatives
directly into creating the type of jobs
that will underpin Australia’s economic
future. As a nation, we need a much
higher level approach to developing
quality work, including recognising
that some existing jobs are holding the
country back, and transitioning out of
them by using technology or moving
them offshore.
• Declare war on wasteful regulation
— Organisations are wasting a vast
amount of resources to comply with
unnecessary regulation. For example,
universities estimate government red
tape costs them $7 million each year.
The Federal Government has recently
removed 1,000 items of redundant
regulation, but this is just the tip of the
iceberg. The Opposition estimates
regulatory costs can be reduced by
$1 billion.
• Unblock infrastructure bottlenecks —
Inefficiencies in our ports, railways and
roads are holding back the country,
despite the efforts of Infrastructure
Australia. We need stronger
government leadership to accelerate
our nation-building program, gain
private sector funding and, quite
literally, get the country moving.
Workers uncertain of government’s role
The Pulse uncovered uncertainty about the government’s role in driving national
productivity, with 73% of workers either unsure of the government’s impact or believing
it had no impact on productivity at all. One in five workers felt the government was
actually holding back the productivity of their business. This sentiment was especially
strong in the mining industry, where 29% believed the Government was a hurdle
to productivity.
By contrast, in the ACT, 18% of workers felt the Government was helping to improve
the productivity of their business. However, this compared with just 6% across all
other states.
Percentage of workers who felt the government was holding their productivity back
More flexible
working practices
(37%)
Invest
in innovation
(18%)
Act to reduce
the rising cost of
goods/services
(56%)
Encourage
workforce
participation
(23%)
Act to reduce
unsustainable
wages/labour
cost growth
(23%)
Improve
skills and
education
of workers
(26%)
Employee
relations
(29%)
investment
infrastructure
(29%)
Reaching our $305 billion productivity potential
27
Ernst & Young
Assurance | Tax | Transactions | Advisory
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide,
our 167,000 people are united by our shared values and an unwavering commitment to quality.
We make a difference by helping our people, our clients and our wider communities achieve
their potential.
Ernst & Young refers to the global organisation of member firms of Ernst & Young Global Limited,
each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by
guarantee, does not provide services to clients. For more information about our organisation,
please visit www.ey.com.
© 2013 Ernst & Young, Australia.
All Rights Reserved.
SCORE No. AU00001635
This communication provides general information which is current as at the time of production. The
information contained in this communication does not constitute advice and should not be relied on
as such. Professional advice should be sought prior to any action being taken in reliance on any of the
information. Ernst & Young disclaims all responsibility and liability (including, without limitation, for any
direct or indirect or consequential costs, loss or damage or loss of profits) arising from anything done
or omitted to be done by any party in reliance, whether wholly or partially, on any of the information.
Any party that relies on the information does so at its own risk.
Liability limited by a scheme approved under Professional Standards Legislation.
M1325217
ED None