Dr Bob's Blog

On the 29 April 2008 the Government released a discussion document on workplace productivity. The release of this document attracted very little attention. I caught the tail end of an announcement on Radio New Zealand. I followed this up with an Internet search. The discussion document and the initiative that it heralds is one of the most important moves made in the last twelve months for the future of the New Zealand economy, for the future of our working lives and has the potential to form the basis of New Zealand’s ongoing prosperity.

The discussion document is called the New Zealand Skills Strategy 2008, and deals with the place of skills in underpinning productivity in the workplace. New Zealand’s workplace productivity lags behind Australia, who we tend to use as a benchmark, by 30%. What does this mean in practical terms?

Well it means a lot. It means that in New Zealand we produce 30% less value per hour than does Australia. I calculate that this means that if our productivity matched Australia our annual GDP in 2007 would have be $50 billion more than it was. That’s right $50 Billion. When I first did the calculation I couldn’t believe it but I tracked down the person in the Treasury Department who wrote the skills strategy document and he confirmed my figures.

It is not hard to understand why wages lag behind Australian wage rates and why many New Zealanders are heading across the Tasman to take advantage of the higher wages. If our workplace productivity equated Australia’s productivity wages here would be much higher, there would be more money available for health, education and other social services. As it is in New Zealand we can still count ourselves among the first world, but in order to remain in this league we do need to do something about our workplace productivity.

Raising productivity is a complex issue and raising productivity has no simple solution. It will take time and dedication by us all to raise our game. The private sector has a crucial role to play supported by the Government. It’s about working smarter rather than harder and, where we can, moving to produce higher value products.

What drives productivity?

Well there seem to be a series of drivers:

 

• Building management and leadership capability;
• Creating productive workplace cultures;
• Encouraging innovation and the use of new technologies;
• Investing in people skills;
• Reorganising processes and procedures;
• Networking and collaborating;
• Measuring what matters.

The discussion document’s focus is building skills. Skills are defined in a very broad way that includes “all the skills and competencies, capacities, capabilities, knowledge, attributes and experience that enables people to do their jobs”.

The discussion document points out that 8 out of 10 of the workforce of 2017 are part of the workforce today so that a good place to invest in people is directly at the workplace. We all know that things are changing rapidly and that today’s fashion becomes tomorrow’s cast off. It’s clear that skills can just as easily become irrelevant so that continuous and ongoing learning will be demanded of all of us.

During the past decade the New Zealand economy has enjoyed significant growth. This growth has come from increases in labour utilization. This involves more people working and more people working longer hours with unemployment falling to much lower levels than we have experienced in the last twenty years.

Labour utilization cannot continue to drive our economy’s growth into the future. Unemployment is likely to continue at low levels with workers in high demand.

Also our population is aging so that there will be fewer people available to work. In the words of the discussion document “we need to raise our labour productivity through making sure that each individual in the workforce produces more per hour, rather than working even longer hours”.

The discussion document points out that the key to this will be the ability of the managers and industry leaders to find and use the resources available to them – equipment, technology, better work processes and very importantly the skills of the workers.  

It seems to me that a new social contract between employers and workers will need to be worked out if this initiative is to be successful. Both sides of the equation will need to see that their interests are served both in terms of the material rewards coming from higher productivity, but also in terms of satisfactions and intangible rewards of having achieved success.

For workers it will mean continuous learning and adaptation. Lifelong employment with one firm has been under threat for sometime now and it is likely that work will move from project to project with different employers. In order to secure the workers’ loyalty in these circumstances employers will need to promise to help their workers to develop their talents and skills so that workers remain employable when it is necessary for them to move on.

The good high paying jobs will fall to those who can collaborate, explain and innovate in relation to their technical skills and capacities. Workers will need to “own” their work and take responsibility for outcomes and the achievement of excellence. They will need to accept that it will be their responsibility to take charge of their learning and ongoing development.

Employers for their part will need to provide the means for their workers to continuously learn and provide the resources for this to happen. Employers will also need to organise their processes and procedures so that workers can in fact use their new and expanded skills. For many employers this will involve letting go of command and control and taking advantage of the productive potential of the workforce. Some employers will complain that their workforce does not have the skills to be left to get on with it. This is the very thing this initiative is designed to address.

Both workers and employers will also need to recognise that technical skills will not be enough. We are entering the age (if we haven’t already reached it) where just being technically proficient is not enough.

The so called “soft skills”, what I call the awareness and communication capacities are and will continue to be the difference between average and high performance capacities. The discussion document recognises the importance of the “soft skills” but from my own experience these capacities are not well understood in the wider workplace.

In every modern industrial society there is a loud wailing about the lack of skill. Even in the United States where they are approaching a recession there is still a skill shortage. What employers are talking about usually is that there are desperate shortages of people who can collaborate, explain and/or innovate as well as being technically competent. It’s the awareness and communication capacities that make the difference and are desperately needed.

The discussion document also recognises the value of transforming workplace cultures. I have already mentioned command and control which as less and less relevant these days.

A healthy workplace culture requires three elements. It demands that there is honesty and trust by both workers and employers. There are many cases where this is simply lacking and in too many workplaces nobody trusts anybody.

High productivity will require a culture of excellence and high performance. Employers will need to demand this and provide their people with the chance to use their new skills to achieve high levels of performance. This will only be possible if it is based on trust and honesty, and the organisation’s systems, processes and procedures encourage workers to take the initiative and own their work.

Healthy workplace culture also demands that everybody is valued and respected, and committed to making the best decisions. Too often a few people dominate discussions, and do not respect or value the views of others. Many just withdraw from participation rather than buy a fight. This leads to frustration and toxic relations within an organisation.

You may ask what’s in this initiative for you as a worker or an employer.

Well, as a worker if you take responsibility for your learning and development and the achievement of high performance, then you are more likely to remain in charge of your career and future prosperity. If you are an employer and your competitor down the road has a workforce that is producing 20% more value in each hour worked than your business, then you will be in trouble. Increasing your productivity is the price of staying in business and making decent returns. You can be sure that some of your competitors will move to increase their productivity following the introduction of these skills initiatives. If you don’t you’ll be left behind.

I would encourage people concerned about workplace productivity to read the discussion document which can be downloaded from www.skillsstrategy.govt.nz./.

The discussion document is a rich source of information about what increased productivity involves. It’s not something that can be achieved over night. There is a wealth of evidence available indicating that we have a long way to go in increasing our productivity. If we can solve this problem we will go a long way to overcoming inflation and returning our exchange rate to more competitive levels, and where a high exchange rate will not be such a competitive barrier. This problem will not be solved by rhetoric, but will require dedication and hard work. I have indicated what some of the challenges involve. Read the document to see what some of the other challenges will involve and the proposed plan to address those challenges.        

The Government is organising a whole series of discussion around the country including one in Timaru on Monday 26 th May 2008 commencing at 11 am till 3.00 pm at Seven Oaks. You can register your interest in attending on the website listed above. This is an excellent opportunity to contribute to one of the most important initiatives relating to our economic future that has occurred in a long time.