Australia’s missing productivity link: Gottliebsen

How does a shareholder or government minister determine whether they have a switched on chief executive likely to deliver rewards?

Ask the chief executive whether their organisation measures productivity and whether improvement in that productivity is a key part of his or her remuneration package.

According to the third annual Telstra survey – the Telstra Productivity Indicator 2011 – 76% of organisations regard productivity as important, but only 24% actually measure it and unless you measure it you can’t improve it.

In the government sector only 14% of top public servants measure productivity so it is clear that their productivity improvement aim is purely lip service to Julia Gillard. Public servants are about increasing the size of their empire rather than doing more with the same resources or the same with less resources.

In the private sector there is an increasing number of leaders who measure productivity. They have been helped by Orica whose outstanding performances over the last five years have been partly helped by increased demand for explosives but also its measurement of productivity and the improvements in the business that followed.

The Telstra survey shows that among those who measure and improve productivity there is incredible business improvement – underlying the Orica example.

Once you start measuring productivity then you are usually better able to make good investment decisions. Accordingly the productivity leaders are usually able to relate to customers and are able to reach them much more effectively.

And because they can focus their IT investment towards lifting productivity they find that they are able to attract a bigger proportion of younger customers than those that don’t measure productivity.

Better still, they are better at retaining existing talents, and their IT investment enables them to offer more flexible working hours including working from home. They are so much better at using staff feedback to improve revenue streams and they are much more confident about future growth than those that are not measuring productivity.

The average institutions only asks CEOs about what is going to happen to profit in the next six to 12 months instead of focusing on what will drive profits in the longer term. Orica tells me they rarely get asked about their productivity yet it is a key driver of their profits and investment strategies.

We are starting to see big changes in strategies from banks and retailers as they invest more in service. Unless they are measuring productivity it is likely they will get into trouble.

Of course the company that needs to change the most is Telstra. It will need to invest in productivity improvement if it is to compete against more nimble competitors. A good sign is that recently top executives were asked to operate the call centre so they could see the shambles that is created by the Telstra silos.

Telstra is the sponsor of the survey and is also, potentially, a key beneficiary.

This article first appeared on Business Spectator.