Declining productivity as the most urgent issue the federal government must address

by Marco Tapia

in management-it-consulting,

September 6, 2011

CEO PULSE: Productivity should be Gillard’s top priority

Australia’s top chief executives have named declining productivity as the most urgent issue the federal government must address in order to ensure sustainable prosperity, as their optimism about the prospects for the Australian economy plummeted 25 per cent over the past quarter.

The latest Business Spectator Accenture CEO Pulse surveyshows 147 surveyed chief executives – who run companies with an Australian turnover of $100 million or more – nominated declining productivity as the most urgent issue for government to address – 46 per cent – and the most urgent issue for business to address – 63 per cent – in order to ensure sustainable prosperity.

The sentiments on productivity were broadly in line with those echoed from former BHP Billiton Ltd chair Don Argus in a speech on Monday, in which he described productivity growth as woeful and in need of urgent attention, saying it “certainly needed more careful consideration than throwing billions of dollars at projects which have not been risk assessed”, and whose benefits hadn’t been analysed by the Productivity Commission.

On economic performance, CEOs gave the federal government its worst scorecard since the inception of the survey, rating them a 2.6 out of 10, a significant decrease compared to the 3.3 score reported in Q2. Pessimism in its prospects increased significantly since Q2, up 24 per cent to 50 per cent.

The plummet in optimism about the Australian economy was in line with CEO’s feelings about the prospects for their own organisation in the next 12 months, which fell to 55 per cent from 72 per cent in Q2.

CEO sentiment on productivity and prosperity

Also echoing sentiments of current BHP chair Jac Nasser, Mr Argus and Reserve Bank Governor Glenn Stevens, who called for the government to improve their focus on increasing productivity, the chief executives surveyed agreed the decline must be addressed in order to ensure sustainable prosperity.

CEOs surveyed were most likely to nominate increased productivity (93 per cent) and investment in innovation by the business community (86 per cent) as extremely important over the next 15 years.

They nominated the manufacturing industry as the sector requiring the greatest investment in innovation – 37 per cent – and the greatest productivity increase – 47 per cent – over the next 15 years.

In terms of measuring the prosperity of Australia as a country, surveyed CEOs said economic growth (e.g. productivity) was extremely important (79 per cent), followed by social well-being (e.g. education, safety), at 77 per cent and political stability (e.g. security, freedom), also at 77 per cent.

Advice to the chairman of the Productivity Commission, Gary Banks

When asked what advice they would give to the chairman of the Productivity Commission, Gary Banks, surveyed CEOs offered a diverse range of advice and feedback. Many expressed a desire to see more significant headway being made on productivity levels in Australia as well as a more pro-active and independent (of the government) approach to improving productivity levels.

There was also sentiment from surveyed CEOs that the Productivity Commission should strengthen its relationship with industry and private enterprise in order to better understand their needs.

One CEO surveyed wrote: “Realistically compare Australian productivity with other developed and developing countries aiming to find alternative actions to improve our productivity. He should listen to a variety of sectors and come up with a plan for the long term future of Australia.”

While another noted: “Find a way to push through red tape or other market blockers and achieve one or two ‘wins’ in our most important areas. For instance, if innovation is important, focus on it and achieve an outcome. If it’s investment or capital, focus on that.”

“Gary Banks should have a good look at the manufacturing sector. It’s in the news now, but the horse has bolted. It has been left to its own devices for too long. How about some form of support for local manufacturers rather than funding auto manufacturers to source offshore,” one CEO wrote.

Matching a desire for more awareness from another: “Publicise that real productivity is falling and invite industry to provide the top 5 barriers that need to be reduced to support its increase in both innovation and cost reduction.”

Research design and analysis for the CEO Pulse was conducted by GA Research and fieldwork by AFS. The sample comprised 147 CEOs of organisations with an Australian turnover of $100 million or more who opted to participate in a five minute survey conducted over the phone or online between Monday 22 August and Sunday 4 September 2011.