12/04/2013 - 06:54

Productivity top worry for WA business

12/04/2013 - 06:54


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Productivity top worry for WA business
Deloitte's Michael McNulty.

Western Australia’s business leaders are concerned about productivity but less anxious about growth than their eastern-states counterparts, a directors survey has revealed.

Deloitte’s biannual Board Effectiveness survey combines responses from 100 chairs and chief executives of ASX200 companies to identify the issues most important to the nation’s business chiefs.

This year’s survey found that for the first time productivity had overtaken growth as the leading cause for concern at both a state and national level, with 42 per cent of all respondents indicating it was at the top of their agenda for the next two years.

While growth was the second most important issue overall, WA respondents considered it less important than capital management, regulation and talent management. It ranked eighth on the list of the most important issues for WA business leaders.

Deloitte WA managing partner Michael McNulty said WA respondents’ de-emphasis of growth reflected the dominance of the state’s resources industry and the demands of major capital projects.

“I think in many ways it’s probably driven by the fact that for the majors, a lot of those growth projects are in train and committed prior to the commencement of this year,” he told reporters at a media briefing.

“The real focus on those is actually getting them done and getting them done within a reasonable cost and reasonable time basis.

“A lot of the organisations here in mining services and oil and gas services have been set up around the capital projects. When they roll over in lots over the next three years it’s a pretty substantial shift in their business models to actually adapt.”

Deloitte New South Wales managing partner John Meacock, who led the research, said chairs and chief executives were concerned about national productivity as well as company productivity.

Disquiet around industrial relations and the high Australian dollar had exacerbated a general lack of confidence in the business community, he said.

“A lot of (respondents) say ‘from a corporate view, we can’t cut our way to success’ but in essence, because they’re struggling to find growth, the market’s dictating that they actually really pull down and find these efficiencies,” Mr Meacock told reporters.

“Australian business is not as confident as we would expect or would hope, given effectively we haven’t had a bad economy throughout this whole period.”

At a state level, productivity was considered twice as important as the second-most important issue: strategy and execution.

Mr McNulty said he was not surprised to see productivity top the list of concerns of WA business leaders, pointing to the difficulties of attracting investment into the state given its high costs.

“When you look at what it’s like to do business over here and the costs of doing business here over the last five years, the escalation is quite incredible,” Mr McNulty said.

“When you actually think about international competitiveness and getting major capital projects up, there is absolutely no doubt that we’ve lost a significant amount of competitiveness in that field. To attract projects here and to attract new companies and investment into WA, it’s really tough.”

However innovation did not rank as a key issue, which Mr Meacock suggested was a reflection of a ‘cultural cringe’ around innovation in Australia.

“As a culture we almost say that we’re good adapters or adopters but not particularly innovative,” he said.

“People will talk about innovation as being important but perhaps haven’t done enough around implementing programs and building the culture around innovation.”


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