Productivity - Management or Government

The Australian Financial Review today ran a front page article headlined “Managers blamed over productivity”.

The article is an example of the pointless either/or nature of the argument over the causes of low productivity in Australia and who should show leadership in addressing this problem.

Mediocre management

McKinsey (and others) conducted the survey cited in the article and they found that mediocre management leads to mediocre results – and Australia's score of 3 for management performance on a 1 to 5 scale is mediocre!

The US and Germany are only a little less mediocre.  It would appear that mediocrity is the global standard for management performance.

Attribution error

Managers, like everyone else, seek to blame external factors (government, unions, foreign companies) for poor company performance but attribute good performance to their own capability.  This known to social psychologists as “attribution error”.

On this, McKinsey found that government regulations restrict management action but management capability was the primary driver of company performance and that protection from competition allows poorly managed companies to survive.

McKinsey also stated that a 6% gain in productivity follows from moving the management performance score from 3 to 4.  The Total Quality Management (TQM) movement of the 80s and 90s proved that the level of waste in companies could be the equivalent of 30%-50% of revenue.

Boosting productivity through Leadership

It is clear that if business groups (and economists) want Australia’s productivity to improve they must show leadership and promote modern techniques such as Lean Enterprise.

The government must also show leadership and address restrictive labour practices and boost competition between businesses.

For further information on boosting productivity, please check the Library on my company's website