Rosemary Howard

There is a widespread misconception among many Australian managers that operational excellence equates to saving dollars. However, focusing just on the bottom-line is not the way to transform organisations.

If a business is doing what it did yesterday, but just doing it a bit more cheaply, that isn’t going to deliver any long-term competitive advantage and it won’t make that business more successful.

Real productivity gains are needed but Australia, weighed down by its own good fortune, could struggle to make them.

The mining boom, the very thing that has kept Australia going while other economies in the world have struggled under the weight of the global financial crisis, is taking the focus off productivity levels, and undermining Australia’s ability to perform well in the long term.

A report from independent public policy think-tank the Grattan Institute has pointed out that according to the broadest measures Australia’s productivity performance has turned negative over the last five years. The authors of Australia’s Productivity Challenge, economist Saul Eslake and research fellow Marcus Walsh, issued a stern warning that the country’s economic performance could decline substantially once the commodity boom runs its course.

Australia is not doing the hard yards on a globally competitive basis.

Last year, only 42% of Australian organisations even measured productivity, down from 49% in 2009, according to The Telstra Productivity Indicator 2010.

If organisations are not measuring productivity, how are they managing it?

Leadership remains a key issue, and this is tied to levels of education. However, Australia has a dangerous disdain for business management methodologies such as Six Sigma. Used strategically, these tools can make a valuable contribution to operational excellence.

The education level of Australia’s workforce generally does not compare well with other advanced economies.

We have half the number of people with Masters degrees or PhDs versus the US or the UK and one-third the level of Germany.

Australia ranks 25th out of 33 Organisation for Economic Co-operation and Development (OECD) nations for public expenditure on education as a percentage of GDP.

And when it comes to collaboration between tertiary institutions and business, Australia is a lowly last among the European Union’s 27 nations.

Australia may take pride in being very ‘school of hard knocks’ competent, but if we don’t know what we don’t know, we won’t learn from leading frameworks and best practice.

Australian managers have plenty of positive points that are widely admired and deliver results. We say what we think and don’t hold back. We listen to each other and engage in reasonably open conversations. We form teams naturally, and global academics comment on the phenomenon of boards operating as real teams in Australia, which is comparatively unusual.

Despite this, we are still complacent about addressing productivity.

When the mining boom ends – and it will – we will rely on strong leadership and management skills, as well as technological innovation, to drive the real productivity performance required to sustain our quality of life.

Rosemary Howard is Executive Director and Conjoint Professor of AGSM Executive Programs at the Australian School of Business, UNSW.