07/12/2011 - 11:11

Improved productivity can drive growth

07/12/2011 - 11:11

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The third part on Deloitte’s series on labour market challenges outlines the case for making those currently in the workforce more productive.

The third part on Deloitte’s series on labour market challenges outlines the case for making those currently in the workforce more productive.

THINGS have changed in our state, and they have changed rapidly. In its recently updated ‘State Growth Outlook’, for example, the Chamber of Minerals and Energy of Western Australia (CME) predicted that the current growth plans of the minerals and energy sector are expected to need 119,500 people in 2012, up from 75,600 in 2009. 

On the back of this, and through to 2020, an additional 30,000 to 50,000 people every year will also be employed in other industry sectors as a result of increased minerals and energy activity. 

The growth story is an exciting one, and it clearly presents huge opportunities for WA. Yet on a more sobering note, the CME also foresees a significant deficit in our workforce requirements based on Australian Bureau of Statistics population forecasts and current workforce participation rates.

As a result, the question ‘where is my next job coming from?’, has now been replaced with the more immediate organisational question for the WA and national economies – ‘where are the next workers coming from?’. 

Competition will be for workers rather than jobs, and much of the debate concerning our labour challenge has centred on how we can increase access to potential workers and then improve participation levels. 

But while often overlooked, the productivity of our existing workforce is a supply side contributor, and challenge. Productivity is the measure of how much each available worker contributes to the economy while they are at work. As a guide to just how much value there is in improved productivity, Deloitte Access Economics estimates that just 1 percentage point gain in efficiency would add $14 billion to the productive power of Australia.

Following labour reforms in the 1980s and early ’90s, Australia’s productivity relative to the US peaked in the late ’90s, but it has been in decline since and is currently at its lowest levels since the early 1970s. This drop in productivity, combined with the challenges of finding new workers, means business, supported by government, needs to take innovative approaches if it is to make the most of this growth opportunity.   

This challenge is particularly important for WA, where increasing productivity can help reduce the pressure to find additional workers in what is an extremely competitive and limited market. 

Deloitte recently released a discussion paper, ‘Where is your next worker?’, outlining 12 ‘levers’ that can be used by business and government to address the looming skill shortage – and four of these relate directly to the productivity challenge, focusing on: employee engagement; learning and development;  career management; and innovation and technology.

The performance of any organisation is strongly aligned to having an engaged workforce. So a key question for today’s leaders is how to get all of their people aligned and fully engaged in the execution of their strategy. 

Engaged employees are prepared to put discretionary effort into achieving organisational goals – an additional one hour’s discretionary effort per day represents on average a 13 per cent increase in productivity.  

On the flip side, management consulting firm Gallup estimates the cost of disengagement for Australian businesses is more than $39 billion a year in lost productivity.

So the ability, and commitment, to shift employees from cruise control into top gear can allow companies to extract valuable productivity gains.

In the rush to recruit external talent, recognising and using the power of harnessing a company’s existing talented workforce through learning and development programs is often overlooked. 

Research by the Australian National University and the ABS shows very high returns on investing in people. Interestingly, these returns have actually risen over time, so supporting the personal growth and internal mobility of individual employees through clear learning and development strategies and programs that target the specific skills and qualifications required for the new and evolving roles makes business sense. 

Governments also have a key role to play in this area.  A number of countries have transformed their approach to reskilling through strong education programs focused on areas such as languages and technology.

However, current Australian investment in education is insufficient to compete with the numbers of qualified graduates from technology and business schools in emerging economies. At the urging of business, our education investment strategy requires some serious rethinking from our policymakers.

Improved partnerships across government, industry and academic institutions are required to engage on capability gaps and drive skills development relevant for both now and the future. 

The WA resources sector, for example, would benefit from a strongly integrated approach focusing on engineering, sciences and maths among other disciplines.  

More effective career management for a company’s existing workforce can also deliver real dividends. In searching for the next worker, there is a risk that the core asset of current people is overlooked. A careful balancing act is required here.

Australia’s next generation of senior leadership may, for example, be blocked from progression by policies aimed at delaying retirement of senior, and older management (a move that for many businesses can also address the ‘next worker’ question).  

The modern high performer is often impatient and expects rapid promotion. It will take innovative leadership, succession planning and career strategies to keep highly talented younger employees with true leadership capability from leaving their current employers in frustration and disappointment.    

Finally there is innovation, which, if developed and implemented effectively, can actually minimise the need for a physical human resource and reduce the need for additional workers.  

WA faces enormous challenges if it is to deliver on the resources boom opportunity, and our ability to support a large regional workforce with sufficient accommodation, health, education and associated infrastructure continues to receive a great emphasis.  

When combined with the skill shortage, the response of many resources-based companies has been to look at challenging their existing business models and embrace technology solutions as an innovative means to meet customer demand. 

The ‘digital oil/gas field’ and ‘mine of the future’, where core elements of remote and complex operations can be managed from a centralised hub, show how our leading organisations are investing in a strong productivity vision. 

Investment decisions, both recent and pending, in floating LNG capability that can make previously stranded gas fields bankable from a commercial perspective is another example.  

Our global resources companies and service organisations are increasingly making WA a hub for regional and global centres of excellence focused on technology innovation. We have an opportunity to be world leaders in adopting and embracing innovative solutions to the challenges we face around skills and remote operations. 

Beyond the resources sector, information and communications technology reform and adoption will also be key to advancing productivity improvements.  

In a broad study for the World Bank on the growth effects of ICT, it was found that each progressive stage of ICT innovation through fixed, mobile, internet and broadband technology had a larger economic impact than the one proceeding it. Our national broadband initiative is directly aimed at attempting to deliver productivity gains.

As we ride a wave of global uncertainty, the next decade is going to be an exciting one for WA. The world is screaming out in demand for our resources, and industry and government getting productivity right will allow us to leverage our most important human capital like never before.  

• Michael Lynn is a partner and national consulting oil and gas leader with professional services firm Deloitte. He also heads the strategy and operations practice in Deloitte’s Perth office.


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