Wastage Adds Up Despite Motivated Workers

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Wastage adds up despitemotivated workers The Ernst & Young Australian Productivity PulseEdition One October

Home Printing instructionsInnovationPeopleIntroduction ExecutiveSummary

Organisation stucture,design and operating model

Technology Outlook


2/16

Wastage adds up despite motivated workers The Ernst & Young Australian Productivity Pulse 2

The slowdown in measured economic productivitygrowth has been the subject of considerablerecent debate. After at least a decade-long hiatus,productivity has found its way back in the Australianeconomic vernacular, and its now permeatinggovernments agendas as well as the boardroomsof corporate Australia.

Despite this, only a small percentage of organisationsmeasure and report on the productivity levels oftheir workers. This means the majority of Australianorganisations do not have the insights they need toimplement sustainable and effective measures toboost productivity.

The Ernst & Young Australian Productivity Pulse (the Pulse ) is the rst survey of its kind, measuring

Australian workers sentiment around the biggestbarriers hindering productivity, and the opportunitiesavailable to improve performance.

The Pulse surveys almost 2,500 workers, acrossvarious industries, regions and from all levels withinorganisations in both the private and public sector.This report focuses on four areas where organisationscan be more effective, integrated and bold in raisingtheir productivity and global competitiveness:

Organisation structure, design and operatingmodel Removing all wasteful, bureaucratic, andnon-value work and outputs

Technology Being more ambitious and effectivein process automation and technological change

People management issues Developing andutilising the full talents and capabilities ofhuman capital

Innovation - Being deliberate and audacious withan innovation agenda

Overview

$109 billionthe estimated

annual wastagein wages

18%of the day is spenton work that wastestime and effort

54%

say peoplemanagementissues havebiggest impacton productivity

Introduction



Technology Outlook


3/16


Executive summary

1Australian Bureau of Statistics, Australian Labour Market Statistics, August, 2011, www.abs.gov.au

In analysing the productivity levels of a workersaverage day, the Pulse showed only 58% is spent onwork that directly adds real value. Notwithstandingthe 24% of the day spent on networking, personaldevelopment and other organisational curricularactivities that are important to both individual and

business performance, there is still a whopping 18%or almost a fth of the day spent on work thatwastes time and effort.

Given the annual wage bill in Australia is approximately$606 billion, total organisational productivity wastagecan be valued at about $109 billion. 1

Imagine what could be achieved if you could eliminatethe 18% wastage and reinvest it into other initiativesthat boost productivity such as innovation and growth?

In rating the in uences on individual productivity acrossfour speci c areas, 54% of respondents say peoplemanagement issues have the biggest impact. Twentythree per cent state organisation structure, design andoperating model is a driving in uence, while smallerminorities cite innovation 15% and technology at 8%.

There are some very encouraging trends aroundrespondents sentiment towards their organisationswith 68% saying they were proud to work for theiremployer and 69% believing their work is valued.

However, there is de nitely room for improvementwith 39% not agreeing their organisation operateseffectively, 20% saying their organisation needs toreduce bureaucracy and redtape and a further 16%saying processes and systems needed to be simpli ed.

Despite encouraging acknowledgements of the valuetechnology can bring to productivity, it appearsAustralian businesses are yet to fully embrace the ITrevolution. Surprisingly, 39% and 42% respectivelydidnt agree they had access to the right technology orhad the right training to apply the technology they dohave effectively.

The nations productivity decline cannot be simplyblamed on Australian workers, with the Pulse showingan overwhelming 71% are motivated to do their job tothe best of their ability this statistic is also higher in

certain areas.

Results reveal the majority of respondents understandthe value of innovation on productivity levels, howevermany identify challenges and obstacles in achieving thiswithin their organisation. In our view, the onus is nowon business leaders to empower their employees togenerate ideas that help drive the organisation forward.

A workers average day

Work that added real valueto my organisation

58%18%

9%

3%

12%

Other activities that added valueto my organisation

Work that wasted time and effort

Time networking with colleaguesthat added value to me and my work

Activities that added to my personaldevelopment

People management issues

Innovation

Technology

Organisation structure, designand operating model

Impact on productivity

54%

8%

23%

15%



Technology Outlook


4/16


Out of the four areas we identi ed as having thebiggest effect on productivity, 23% of respondents citeorganisation structure, design and operating model asthe biggest in uence.

There are some very encouraging trends around

respondents sentiment towards their organisation.Sixtyeight per cent are proud to work for theiremployer, 69% believe their work is valued and 78%have a clear vision of what is expected of themin their role.

Despite this rosy outlook, there is de nitely roomfor improvement. Thirtysix percent did notagree processes and systems in place assistedrole execution, 41% did not agree organisationeffectiveness and ef ciency had the right level offocus and attention and 39% did not agree their

organisation operates effectively.The number one recommendation for improvinggeneral organisational productivity is to reducebureaucracy and redtape. Bureaucracy andregulation exist in organisations to manage risk,

assign accountability and ensure quality. However,they can and do have the unintended consequence ofreducing organisations exibility, as well as addinga cost burden to operations and as shown in ourPulse , shrinking productivity.

In reducing bureaucracy and redtape it is importantfor organisations to take a holistic approach, identifyingregulatory inef ciencies across the business as awhole, while also ensuring quality and high standardsare not compromised. Two of the biggest in uences on organisationalproductivity are having a clear vision of theorganisations future and having con dence inleadership. Respondents from the professional,scienti c and technical; and the nance and insurancesectors rank highly in both these categories. This is

not surprising given organisations from these sectorsgenerally place internal communication higher up onthe business agenda and often have better resourcesand bigger budgets to ensure effective, timelycommunications to their employees.

Organisation structuredesign and operation model

say their organisationneeds to reducebureaucracy and redtape

39%did not agreetheir organisationoperates effectively

cite organisationstructure, design andoperating model asthe biggest in uenceon productivity

23%

20%



Technology Outlook


5/16


Another signi cant in uence on organisationalproductivity is fostering a competitive workforce, whereboth the health care and social assistance and publicsectors rank the lowest.

Recently there has been widespread media

commentary on public sector productivity. Given thatthe survey shows this sector has a less competitiveworkplace environment, there is indeed opportunityto leverage and embrace a wider set of values thatare more commonplace within corporates, includingworkplace culture, organisation dynamics and cuttingback redtape.

I am clear onwhat is expectedof me in my role

My work isvalued by my

employer

I am proud towork for my

employer

I dont agree thatmy organisationgives the right

level of focus andattention to improving

organisational effectivness

I dont agree thatmy organisation

operates efciently

I dont agree thatthe processes andsystems in placeassist me to domy job properly

Organisation structure, design and operating model: key ndings

0102030405060

708090

69

78

68

41 39 36 P e r c e n t ( % )

Reducingbureaucracyand red-tape

Simplifyingprocesses

and systems

Eliminatingwasteful output

Producing higherquality work

Standardisingprocesses and

systems

Organisation structure, design and operating model: key improvement areas

0

5

10

15

20

25

16

20

10 9 9

P e r c e n t ( % )

01020304050607080

My workplace environment is competitive

Organisation structure, design and operating model: industry perspectives

5854 54

41474543

6762

59 6167

5762

65 67 62 6269

5750

I understand my organisations plans for the future I have condence in my organisations leadership

Financial and insurance services Construction and resources Public sector

Healthcare and social assistance Professional, scientic and technical services

Trade (retail and wholesale) Manufacturing

P e r c e n t ( % )



Technology Outlook


6/16


TechnologyThe connection between technology and productivityis obvious. Technology is an enabler of productivity.

Interestingly, out of the four areas we identi ed ashaving the biggest effect on productivity, only 8% ofrespondents cited technology as a key in uence.

Arguably there has always been a performance gapbetween organisations that embrace technology andthose who resist it. While the gap has been fairly steadyfor decades, it is now starting to widen dramatically.

Leading organisations are capitalising on technologyadvances to pioneer a whole new innovation paradigmbased on the ways they measure, experiment with,share and replicate information.

The Pulse shows 62% of respondents feel technology

is important to their role, 40% say technology hasincreased productivity levels and 65% recogniseadditional, new or improved technology would maketheir organisation more productive over the long term.

Despite these positive trends, it appears Australianbusinesses have still not fully embraced the value IT canadd. Thirtynine per cent dont agree they have accessto the right technology and 42% dont agree they havethe right training to apply technology effectively.

Unsurprisingly, results show the professional, scienti cand technical sectors fare the best on the technologyfront, with 55% acknowledging technology hasincreased productivity levels over the past 12 months.

This is a contrast to the 36% gure in the publicsector, and reinforces that the recent Federal budgetannouncement of an additional $1.03 billion ofIT spending in the public sector is highly needed 2.However, despite the governments ambition to drivepublicsector productivity through the provision oftopnotch IT, the key will be in its implementation.

Only 48% of respondents from the public sectoracknowledge their organisation has a successfulhistory of implementing new technology and isprogressive in its application.

of respondents saytechnology has the biggestin uence on productivity

8%

recognise additional, new orimproved technology wouldimprove performance

65%

do not have the right trainingto apply the technology they dohave effectively

42%

2The Australian, $1bn budget boost for public sector projects, May 2011



Technology Outlook


7/16


When it comes to technology wastage, the constructionand resources; and retail and wholesale trade sectorsrank the highest, showing approximately 10% downtimeper week. This level of wastage may be tolerable for the booming

resource sector, however given the challenging outlookfor retail as the sector continues to grapple with issuessuch as online, competition and declining consumerspending, 10% wastage associated with technologyequivalent to two hours per person per week,could be detrimental.

The Pulse shows signi cant technology changesare needed in computer software and applications,integration of systems and the way in whichbusinesses collect and use information.

This is particularly true in the retail sector. Businesses

should be harnessing technological tools and strategiesto more effectively collect and use consumer data totackle online competitors head on. Smart retailers willlook to enhance the instore experience by leveragingtechnology to employ targeted marketing campaigns toboost sales, provide an enhanced customer experienceand realise operational cost savings.

Financial andinsuranceservices

Constructionand resources

Public sector Trade(retail andwholesale)

Manufacturing Health care andsocial assistance

Professional,scientic and

technical services

Total

Technology: usage vs wastage

31.5

2.5

26.52.4

22.02.1 25.5

2.0

192.0

18.01.7 22.5

2.3

20.52.1

8% 9% 9% 7%10% 9% 9%10%

Technology usage (hours per week) Technology wastage (hours per week) Wastage percentage

Technology: areas identied for signicant change

0

5

10

15

20

25

3035

40

45

50

4643 43 42 42

41 40 38 37 3632 32

26

C o m p u t e r s o f t w a r e a n d a p p l i c a t i o n s

I n t e g r a t i o n o f s y s t e m s a n d a p p l i c a t i o n s

I n f o r m a t i o n c o l l e c t i o n

C o m p u t e r h a r d w a r e

I n f o r m a t i o n u s a g e a n d a p p l i c a t i o n

O p e r a t i n g s y s t e m s

C o m p u t e r n e t w o r k s

W i r e l e s s c o n n e c t i v i t y

D a t a s t o r a g e

M o b i l e d e v i c e s

I n f o r m a t i o n s e c u r i t y

V o i c e a n d t e l e p h o n y

V i d e o c o n f e r e n c i n g

P e r c e n t ( % )



Technology Outlook


8/16


Technology isimportant in

my role

Over the last 12months technologyhas increased my

organisationsproductivity

Additional, new orimproved technology

would make myorganisation more

productive

I dont agree that Ihave access to theright technology

to do my jobeffectively

I dont agree that Ihave the right

training to effectivelyapply technology todo my job properly

I dont agree thatmy organisation is

progressive inapplying newtechnology inthe workplace

Technology: key ndings

0

1020

30

40

50

60

70

40

65 62

39 42

49

P e r c e n t ( % )

01020

304050607080

My organisation has a history of successfullyimplementing new technology

Technology: industry perspectives

53 5144 44

66

4248

5651 48 47

69

4448 47

42 4135

55

3436

My organisation is progressive in applyingnew technology to the workplace

Over the past 12 months technology hasincreased my productivity

Financial and insurance services Construct ion and resources Public sector


Trade (retai l and wholesale) Manufacturing

P e r c e n t ( % )



Technology Outlook


9/16


PeopleWhen you look more closely at what has made someorganisations perform extraordinarily well comparedto their competitors or peers, there is often a commondenominator; a realisation of the value of people andunderstanding of their motivation drivers.

On that note, it is not surprising that out of the fourareas we identi ed as having the biggest effect onproductivity, 54% of respondents say that peoplemanagement issues are the number one in uence.The Pulse shows the nations productivity declinecannot be blamed on Australian workers. Anoverwhelming 71% state they are motivated to do their

job to the best of their ability yet only 62% say theirskills are strongly utilised by their employer, leavinga staggering 38% of workers with skills that couldpotentially be used more productively in other areas.

The professional, scienti c and technical; and healthcare and social assistance sectors have the highestmotivation levels, skills alignment with jobrequirement and skills utilisation.

Conversely, the manufacturing; and retail andwholesale trade sectors did not fare so well, suggestingthat signi cant improvements could be made aroundmanaging human capital more effectively. The Pulse also uncovers a key relationship between

age and motivation levels. Respondents from the65+ age bracket are the most enthused, with 85%saying they are motivated to perform to their highestcapacity, which is a stark contrast to 53% from the1519 age bracket.65%

54%

32%

say people managementissues has the biggestimpact on productivity

are planning to leavetheir organisation inthe next 12 months

are motivated to dotheir job to the bestof their ability

71%



Technology Outlook


10/16


Adding to the business case for the mature worker,the Pulse reveals older workers are more likely to bemotivated by the actual work they do, rather thanincentives, salary, work/life balance or employmentsecurity. In fact, salary, incentives and bonusescame up short across the board with only 13%

of respondents saying it was a driving factor substantiating the notion monetary rewards arenot the silver bullet in raising productivity.

Alarmingly, the Pulse shows 32% are planning to leavetheir organisation in the next 12 months with a further35% already pursuing external opportunities. Failureto support career progression may be a contributingfactor, with approximately half of all respondents notagreeing that there is a clear direction for their career.

05

10

15

20

25

30

The work that I do

P e r c e n t ( % )

Top 5 motivators across age groups

5

15 16

19

262828

16

8

14161616 15

26

16

19

14

11

7

10 11

6

8

1113 12

6 5

15

97 7 7

6

Work/ li fe balance Salary, incentives and bonuses Employment securi ty The people I work with

1519 years 2024 years 2534 years 3544 years 4554 years 5564 years 65 years or more

15- 19 years 20 -24 years 25- 34 years 35- 44 years 45 -54 years 55- 64 years 65 years or more

I am motivated to do my job to the best of my ability

010

2030

405060708090

5361 65

69 69

80 85

P e r c e n t ( % )



Technology Outlook


11/16


I am motivatedto do my job to thebest of my ability

My skills arestrongly utilisedby my employer

I have access to theright learning and

developmentopportunities to

continue developingmy skills

I am planningto leave my

organisation in thenext 12 months

I am actively pursuingopportunities

outside myorganisation

I do not agreethat there is a

clear direction formy career withinmy organisation

People management issues: key ndings

01020

304050607080

6271

52

32 35

50 P e r c e n t ( % )

01020

30405060708090

Managers Professionals Technical andtrade workers

Community andpersonal service

workers

Clerical andadministrative

workers

Sales workers Machineryoperators and

drivers

Labourers

People management issues: satisfaction vs utilisation

7267 66 70 66 64 65 62

76 74 74 79 73 74 76 71

Satisfaction levels Skill utilisation

P e r c e n t ( % )



Technology Outlook


12/16


01020

30405060708090

I am motivated to do my job to the bestof my ability

People management issues: industry perspectives

69 68 68

76 77

6466 69 69

64

78 76

6669

60 63 5967 68

5957

My skills align with the requirements of my role My skills are strongly utilised by my employer




P e r c e n t ( % )

0102030405060708090

The work that I do

P e r c e n t ( % )

People management issues: industry perspectives

80 7975 76 77

84 86 8173

79 82 7782 79

57 59

67

52

6369

64

7278

87

73 71

7973

8379 77 78

82 83 87

Work/ li fe ba lance Salary, incent ives and bonuses Employment secur ity The people I work with






Technology Outlook


13/16


InnovationIt is hard to argue against the fact that innovation is akey driver of productivity growth and competitivenessof organisations around the globe. However the Pulseshows that out of the four areas identi ed in having thebiggest effect on productivity, only 15% of respondentscite innovation as a key in uence.

Results illustrate the majority of respondentsunderstand the value of innovation on productivitylevels, however many identify challenges and obstaclesto driving innovation within their organisation.

Fiftyone per cent say that further innovation wouldincrease productivity, 49% acknowledge a clear andcompelling case for innovation and 51% acknowledgethey have the opportunity to suggest new ideas. Incontrast, 44% did not agree their organisation givesinnovation the right focus and attention, 59% didnot agree innovation was adequately recognised andrewarded and 48% did not agree good ideaswere implemented.

A recent study by the ABS analysed the economictheory behind market competition and innovation.The results show that organisations within marketswith high competition levels had a higher propensityto innovate 3.

The Pulse also found this to be true, with organisationsfrom competitive markets such as the nancial andinsurance; and professional, scienti c and technicalsectors being more willing to take risks and try newthings, while less competitive markets such as thepublic; and health care and social assistance sectorsare dramatically less inclined to embrace innovation.In saying that, respondents across the board areunanimous in recognising further innovation wouldincrease productivity so regardless of the sector, inour view, the onus is on business leaders to empowertheir employees to generate ideas that help drive theorganisation forward.

3Australian Bureau of Statistics, Competitive markets and Innovation levels, August 2011, www.abs.gov.au

recognise furtherinnovation wouldincrease productivity

51%

say innovationhas the biggestinfuence on

productivity

acknowledge theirorganisation doesnot give innovationthe right focus andattention

44%

15%



Technology Outlook


14/16


0

10

20

30

40

50

60

70

My organisation is willing to take risksand try new things

Innovation: industry perspectives

49

41 40

33

49

37

30

50

38 39 37

52

3337

51 49 47 49

57

4751

Innovation is appropriately recognisedand rewarded

Further innovation in my organisation would enableme to be more productive in the next 12 months

Financial and insurance services Construct ion and resources Public sector



P e r c e n t ( % )

Further innovation inmy organisation wouldenable me to be more

productive in thenext 12 months

I am given theopportunity to suggestnew ideas to improve

my organisation

There is a clear andcompelling case

for innovation

I dont agree thatmy organisationgives innovation

the right levelof focus and

attention

I dont agree thatinnovation isappropriately

recognised andrewarded

I dont agree thatgood ideas getimplemented

in my organisation

Innovation: key ndings

0

10

20

30

40

50

60

70

515147

44

59

48

P e r c e n t ( % )



Technology Outlook


15/16


OutlookAlthough most organisations are at any one timetackling a number of the elements of productivity, it isnot until they are faced with a crisis that they see thevalue in addressing the whole picture or implementingsigni cant change. This is because people are moreaccepting of the need for change in the midst of a crisisand more comfortable being taken along for the ride.

Organisations that dont dare take their foot off theproductivity pedal, even in good times, will always bebetter positioned in the race for growth than those whoonly see it as tool to use in a crisis.

The time to act is now.

Given that people management issues are shownto have the biggest in uence on productivity, it willbe important for organisations to focus a signi cantamount of their attention in this space. As thePulse shows, the motivation is already instilled inAustralian workers, however business leaders can takeproductivity to new heights by fostering an effectiveworking environment where skills are fully utilised,learning and development opportunities are availableand career progression is taken seriously.

Notwithstanding, technology, innovation andorganisation structure, design and operating model areall important elements and must not be neglected.

Leading organisations will invest in new and leadingtechnology to boost productivity levels simultaneouslypaying substantial attention to how software isdeployed, rolled out and implemented.

Australian workers take satisfaction in working for theiremployers and are motivated when they feel their workis valued. However, ineffective processes and systemsand a lack of visibility and clarity from leadership canhave an adverse effect. Organisations that look tostreamline and standardise processes and policies whilealso providing transparency around direction will bebest placed to improve performance.

Productivity brought about by innovative thinking isall about value creation through the application of newideas. Innovation can take many forms: from nding acheaper way to make widgets, to nding a way to makethose widgets work better, faster, and more ef ciently.

However, the perceived risks and costs that areassociated with being innovative can be a barrier formany organisations, and in many cases productivitygrowth through innovation is sti ed across manysectors, industries and countries.

Innovation is a state of mind and is important for allmanagers to foster an environment that supportschange and enhancement as part ofbusinessasusual.

The time toact is now



Technology Outlook


16/16


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Wastage Adds Up Despite Motivated Workers