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Meeting The Workplace Productivity Challenge - WPWG Findings And Recommendations

At a firm or industry level, productivity growth is important because it means businesses can meet their obligations to workers, shareholders, and governments (taxes and regulation), and still remain competitive or even improve their competitiveness in the market place.[17]

New Zealand's challenge for the future is to build on its high performing workplaces, while also achieving improvements that move the country to a sustainable, high value, high skill and high wage economy.

There is no single answer to this challenge. Instead, this report articulates how all firms are capable of raising workplace productivity and how doing even a few things right, such as training or investing in new technology, can contribute to greater gains for everyone.

We recognise that there are many different ways to define what is important for improving workplace productivity. The way people think about these issues depends on their perspectives and the types of business, industry or union that they are involved with. This report seeks to distil the wide range of points of view that were articulated over the course of our considerations.

In this section, we identify some steps for how New Zealanders can raise workplace productivity in order to improve economic performance and therefore ensure we have the very best quality of life possible.

Our findings and recommendations set out an agenda for responding to the workplace productivity challenge and emphasise the need to build a shared responsibility for action among industry, firms, unions, employees and government.

SHARING RESPONSIBILITY

We view this report as a means of beginning a discussion about the importance of lifting workplace productivity. In order for this discussion to lead to sustained change, we have sought to approach the concept of workplace productivity in a broad way that adds value to existing systems and processes and sets goals for continuous improvements.

Industry, business, unions and employees are all important in lifting productivity at the firm level. Representatives of these key stakeholders have conveyed a strong sense of commitment to workplace productivity but have also acknowledged that sharing responsibility with government in an appropriate manner is also required as a part of the Workplace Productivity Agenda.

We believe that industry, business, unions and employees and their existing networks can be a very effective avenue to move the ongoing Workplace Productivity Agenda forward, and wherever possible, these networks and structures should be utilised.

In order for this to be successful in building productivity improvements, there must be a commitment to the concept of joint responsibility among industry, business, unions, employees and government. A joint commitment to action the Workplace Productivity Agenda will be sought with stakeholders.

The proposed Workplace Productivity Agenda (which is detailed later in this section) includes a number of actions aimed at providing support to firms in lifting their productivity. Support may be provided through a variety of mechanisms, such as regional workshop meetings and online information, and by any of the parties involved in delivering the agenda.

It is envisaged that the government's role in the agenda would focus on facilitation and support. As there is already a wealth of information and support available to firms, a key focus going forward will be to help them access these resources and to add additional assistance, should that be required.

RELEVANCE TO ALL FIRMS AND SECTORS

Our recommendations (outlined later in this report) are founded on the principle that the Workplace Productivity Agenda must be relevant to all firms.

New Zealand's economy includes a wide variety of firms in terms of size, geography and business operation, each of which faces specific challenges in increasing productivity levels. Of all New Zealand enterprises, 97% employ 19 or fewer employees. This is not exceptional when making comparisons with other countries.

Using value added as a measure of output, SMEs accounted for 38% of the economy's output in 2003.[18] In terms of total employment, around 30% of employees work in a workplace with fewer than 20 employees, although this needs to be balanced against the roughly 50% who are employed by businesses with more than 100 employees.[19]

Productivity is an important issue for all businesses, so communications and support tools need to be customised across sectors as much as possible to be relevant to a range of needs. For example, SMEs face specific challenges in increasing productivity levels across all of the drivers identified, including how to encourage both national and international expansion as a means of increasing productivity. We were cognisant of the challenges faced by firms of different sizes in drafting the Workplace Productivity Agenda.

We also note two other important considerations for ensuring our recommendations are relevant for all firms:

  • While we have not analysed or considered the performance of the public sector, the Working Group recognises that improving workplace productivity in this sector is also important, and we believe many of our recommendations are also relevant to the public sector. The government will need to consider further how workplace productivity improvements can be achieved in the public sector.
  • We are aware there is variability in the performance of firms across different industry sectors. While we did not analyse the aggregate performance of the New Zealand economy on an industry basis, different sectors will be in different positions in terms of the potential for them to achieve workplace productivity improvements, the types of assistance that could help them and industry willingness, readiness and motivation to engage with the Workplace Productivity Agenda.

In implementing the Workplace Productivity Agenda, initiatives will need to be developed that meet the needs of SMEs, and different sectors or industries. The development of these initiatives will also need to take into account sequencing issues about the prioritisation of assistance and targeting to achieve the greatest effectiveness, for example, in terms of identifying what the criteria are for providing direct assistance to firms for a particular initiative.

IMPROVED ACCESSIBILITY AND REACH

One of the key issues raised at the Workplace Productivity Workshop was the accessibility and reach of government programmes. To inform our recommendations, a stocktake was undertaken of existing government programmes available to industry, firms and unions that could assist in productivity-improving business practices.

This exercise confirmed that there is a wide range of programmes currently available to these groups, all of which are aimed at assisting them to succeed with their business strategies.

A proportion of firms was not fully informed about what existing support was available or how different government programmes functioned.

Representatives from firms also indicated that they did not always use the government information or programmes available to them, as they found the current systems and processes too onerous and complicated. Overall, they wanted more information about what supports are currently available to them and to be able to access in a simple and easy manner.

STRUCTURE OF OUR RECOMMENDATIONS

In Section 2 of this report, we identified seven main drivers that are important in lifting workplace productivity:

  1. Building leadership and management capability
  2. Creating productive workplace cultures
  3. Encouraging innovation and the use of technology
  4. Investing in people and skills
  5. Organising work
  6. Networking and collaborating
  7. Measuring what matters.

The Working Group has made recommendations for each of these drivers under four broad "actions" identified in Figure 10.

Figure 10: Framework of recommendations. Figure 10 is provided in the PDF version

The actions shown in Figure 10 support the Workplace Productivity Agenda and represent a broad framework for the ways that industry, firms, unions, employees and the government can implement productivity improvements. The actions identify what we think matters for improving workplace productivity and the order in which we think support should be provided.

The intention is to create an ongoing process that generates continuous improvements in the processes and systems available to all stakeholders. It is proposed that support for firms will continue to be the shared responsibility of all partners identified in the framework.

Awareness raising

This is an extremely important component of meeting the productivity challenge. It is proposed that a first step in the process of improving productivity gains for all New Zealand firms is promoting greater awareness of what workplace productivity means and the potential opportunities and benefits that can be created for all, in a way that is meaningful for all New Zealand workplaces.

Lifting the profile of workplace productivity is a responsibility for industry, firms, employees, unions and government.

Diagnostic tools

Diagnostic tools assist firms in identifying how effectively they are performing, and identify where they may need to improve. Diagnostic tools can measure performance individually against any of the seven drivers of workplace productivity, although the diagnostic process will be more effective where it examines performance against a combination of these drivers (reflecting the complementarities between different business practices).

An effective diagnostic tool will enable a firm to undertake a gap analysis of current performance and the firm's objectives. The tool may also allow for ongoing evaluation of the firm's progress in achieving changes to its business practices and measurement of the improvements that result.

To assist in this process, and to ensure that firms can easily access and navigate the wide range of government support that is available to them, we are recommending the development of a range of diagnostic tools to help firms in this next stage. There are many existing diagnostic tools, and it will be necessary to look at what tools already exist to identify how these could be complemented or supplemented by the development of new tools.

There is a range of different types of diagnostic tools, for example, they can be online questionnaires linked to productivity tips, summaries of best practice findings, skills needs analysis and analytical frameworks. There is also a range of ways in which diagnostic tools can be applied, for example, they can be self-administered tools or online programmes, or they can involve interactions with experts in a particular field.

Employee involvement in the assessment process is also a vital component to its success because workers will ultimately be responsible for implementing any workplace productivity strategies, and those strategies will need to reflect workers' experiences to be truly effective.

These diagnostic tools may also help in ensuring that an individual firm's productivity improvement strategy is aligned with its business practices, including incentives. For example, if a firm's approach to the use of technology does not support its organisational goals, the firm may not realise the potential benefits of introducing new technologies.

Implementation

In implementing strategies to improve productivity, a firm is likely to want more information and support to decide what specific actions it wants to take and the best way to put these in place. This could include access to professional support, quality assurance and best practice, and information about what sort of support is most effective and is directly linked to productivity gains.

Based on feedback from the workshop, firms have indicated they want to be able to access information in a simple, user-friendly streamlined manner. For example, a firm may simply need to know where to find good consultants to assist in implementing parts of its strategy, it may need information about training and/or education programmes available to meet its specific needs or it may need small business growth assistance.

Research and evaluation

As firms engage in workplace productivity strategies, valuable information, such as lessons learned, best practices, collection of benchmarking data and other information, will be collated and developed to become additional tools to assist businesses towards continuous improvement in the future.

Research will continue in various government and non-government agencies that will also build on the workplace productivity knowledge base. Collaboration among all the key stakeholders (industry, firms, unions and employees) will be required to ensure that this information is organised and made easily available.

Support for networking activities to facilitate information/knowledge dissemination and sharing may be needed to encourage firms to participate and realise the benefits of this exchange.

5.1 A Workplace Productivity Agenda

During the 90s, productivity meant reducing staff numbers and making people work harder to make the profit share more compelling. But this made it harder for employees. It seems to have changed over the last couple of years. Employers are meeting employees part way.

WPWG Focus Group Participant, Auckland, 16 July 2004

Improving workplace productivity needs to be a high profile issue for industry, firms, unions, employees and government.

We have made a range of recommendations for how workplace productivity can be improved - we recommend that a Workplace Productivity Agenda be adopted to provide a co-ordinated response to our recommendations, to oversee this response and to generate joint commitment from industry, firms, unions, employees and government to improving workplace productivity. For the remainder of this report, this co-ordinated response is what we mean when we refer to a Workplace Productivity Agenda.

The process we undertook in reaching our findings has generated a heightened level of attention to workplace productivity issues, a significant level of commitment from key stakeholders and goodwill for initiatives to lift New Zealand's overall workplace productivity performance.

We consider that it is essential this commitment and goodwill be harnessed to achieve sustained emphasis on continuous improvements in workplace productivity.

It will also be important that the Workplace Productivity Agenda is connected to or aligned with other activities, such as research commissioned by the GIAB on how workplace culture is integral to innovation and productivity improvements.

In communicating messages about the Workplace Productivity Agenda, there needs to be a greater emphasis on learning how to do what we do better, increasing the value of what we do now and identifying the new opportunities that will lead to the higher value, higher skill, higher wage economy. Productivity messages also need to be presented in line with New Zealanders' values and emphasising the potential for the associated benefits and opportunities from productivity to be shared.

When businesses excel, the benefits of that extend to customers, for example, through improved service delivery, and employees, where increased profits lead to increases in compensation and/or employee benefits. In the past, debate about how to improve productivity in New Zealand has been affected by some negative interpretations, including concerns that it equates to cost-cutting.

THE AGENDA NEEDS TO BE OVERSEEN BY A SUCCESSOR BODY TO THE WPWG

It would be valuable to have a successor body to this Working Group that is accountable for the proposed ongoing Workplace Productivity Agenda and charged with maintaining the profile of workplace productivity issues and the commitment of the key stakeholders.

While there is a range of institutional forms that a successor body could take, on balance, we support the form of an advisory board or committee.

We recognise that there are already a number of advisory boards and committees in place and that the government may wish to allocate responsibility to an existing body for the functions we outline for a successor body.

We consider that a separate successor body should be established to oversee the Workplace Productivity Agenda, and that body should be responsible for ensuring its activities are aligned with and complementary to those of existing bodies. If, however, an existing body was to be allocated responsibility for overseeing the agenda, then we recommend that the workplace focus is strongly emphasised.

The successor body should be:

  • founded on the basis of shared responsibility, consultation and active engagement with industry, firms, unions, employees and the government - this approach is important for creating a degree of independence so that the body can credibly engage with a range of stakeholders
  • established for a specified period of time and subject to a review of its purpose, effectiveness and composition towards the end of that period - we would recommend a timeframe of two to three years to provide the body with sufficient time to achieve a clear impact on workplace productivity
  • focused on short- to medium-term implementation - the body should focus on ensuring our recommendations are delivered over this timeframe, although changes to its focus may be appropriate over the longer term[20]
  • representative of a broad range of industries and different sized firms - this will support the ability of the body to achieve buy-in from a broad range of stakeholders
  • supported by a secretariat seconded from interested departments and agencies.

FUNCTIONS TO BE INCLUDED IN THE WORKPLACE PRODUCTIVITY AGENDA

We consider that the following functions need to be included in the Workplace Productivity Agenda:

Awareness raising

  • Strategic communications: A strategic communications programme that continues to raise the profile for workplace productivity and that keeps the Workplace Productivity Agenda alive by promoting the benefits and opportunities of productivity improvements. This action should engage all the key stakeholders.[21]
  • Information sharing and dissemination: An intermediary role around sharing knowledge by supporting the distribution of research and diagnostic tools and technologies with the support of all the key stakeholders.

Diagnostic tools

  • Information sharing and dissemination: An intermediary role around creating or commissioning new diagnostic support tools and other assistance to help identify possible workplace productivity improvements.

Implementation

  • Facilitation: A facilitation role to provide a catalyst for learning, such as bringing firms together for business-to-business exchanges. This could occur through a range of functions such as participation at small business days, seminars, workshops or a workplace productivity conference.
  • Funding: Providing funding support for capacity-building activities and workplace productivity improvements. (More detailed recommendations on the use of the available funding are made later in this section.) Supporting organisations that could be funded include regional development agencies, networks, industry or sector associations, clusters, business support organisations and unions.

Research and evaluation

  • Research and knowledge-deepening role to:
  • develop links to international productivity organisations, such as the Australian Productivity Commission
  • evaluate appropriate supports for microenterprises and SMEs with the specific aim of determining whether a one-on-one or small group mentoring pilot programme would be of value
  • commission and report on research into workplace productivity issues, including learnings from international best practice and research into practical initiatives and existing workplace practices that can lead to identifiable workplace productivity improvements
  • take a role in understanding the barriers to accessibility and reach and why they exist - Section 4.4 of this report has suggested some of the barriers but more work is required to fully understand why firms choose not to implement basic management strategies, despite knowing that they would be likely to derive considerable benefit from them.
  • Review: Taking an active role in reviewing government programmes to ensure that resources are focused, targeted and relevant. As the Workplace Productivity Agenda proceeds, government will remain cognisant of how best to co-ordinate and deliver its programmes to ensure that they are effective, relevant and readily accessible to firms, both individually and as a whole, and include workplace productivity as a consideration in planning and implementation.

THE WPWG COULD BE RESPONSIBLE FOR COMMUNICATIONS UNTIL A SUCCESSOR BODY IS APPOINTED

We recognise that the appointment of a successor body may take time. In the interim, we would suggest that we continue to be responsible for communications activities, including around the launch of our report.

THE FUNDING AVAILABLE FOR WORKPLACE PRODUCTIVITY INITIATIVES

In Budget 2004, the government set aside a contingency of up to $2.5 million per year to implement our recommendations. This funding allocation is intended for activities to promote improved workplace productivity, with the Working Group to advise on "the merits, establishment and operation of a workplace productivity initiatives fund".

We considered a range of possible options for the use of the available funding to support workplace productivity initiatives, including the use of a contestable funding process and direct tendering for services.

Given the level of funding available, we do not consider individual grants or a contestable fund would provide sufficient value for money, owing to the reasonably small number of grants that would be possible. Instead, we recommend the use of a flexible method of allocating funds across the functions proposed for an ongoing Workplace Productivity Agenda because this will allow for targeting areas of greatest importance each year.

The successor body should be required to identify to Ministers the areas in which it considers the most emphasis should be placed each year and the allocation of funds it proposes making across these areas and should be accountable to Ministers for the achievement of agreed outcomes.

This funding model would still involve a degree of contestability within functions such as research and knowledge-deepening and the development of diagnostic tools and technologies, while ensuring value for money through tendering for other services.

5.2 Building leadership and management capability - findings and recommendations

Leadership is an influence relationship between leaders and followers that seeks to elicit voluntary commitment and action to effect real change and outcomes that reflect their shared purpose.

Lester Levy, NZ Leadership Institute, WPWG Workshop, May 2004

DISCUSSION

Leadership and management capabilities are critical drivers of firm capability and performance.

Leadership capability involves vision and applies to an individual's or team's ability to identify new opportunities and motivate others to pursue those opportunities. Leadership capability, in particular, leadership by example, is a particularly important factor in enabling the behaviours and decision-making that will add value to a firm's systems and processes.

Effective leaders can be found at every level of a firm, whether they are formally acknowledged or not, and successful businesses are often characterised by the depth of leadership within their organisation.

As outlined in the first part of this report, management capability includes the ability to adapt to a changing environment, organisational and management capability, people and communication skills, and information acquisition and learning processes. Some of these skills are inherent, while many can be acquired in a number of ways, including mentoring, networks and on-the-job learning.

Investment in physical capital and in raising workplace skills (human capital) is most likely to succeed in instances where managers and leaders recognise the value of increasing productivity and have the necessary skills to achieve it. Improvements in management and leadership skills are about doing things better, for example, by identifying productivity bottlenecks and then devising and implementing strategies to overcome these.

As firms grow, adopt new technologies or become exporters, they require more sophisticated and specialised management processes. If they can effectively and efficiently manage these changes, organisations will be better placed to realise the productivity benefits of new resources and potentially succeed in new markets.

WPWG FINDINGS

There is a widespread perception, although little hard evidence, that weaknesses exist in the quality and quantity of New Zealand's stock of leadership and management capability. Concerns centre on the ability of New Zealand managers to take advantage of changing business environments through such measures as marketing, innovation management and building networks and relationships.

However, measuring the quality and quantity of management capability is difficult, and there has been little New Zealand research into management capability in recent years.

It is unclear how the capability of New Zealand leaders and managers compares internationally or how it differs among firms in different sectors, of different sizes or at different points in the business life cycle.

There is also a lack of information about whether the diverse range of management capability services available to New Zealand firms is well directed at their particular needs, taking into account that the management capabilities required in New Zealand are a reflection of this country's particular circumstances and characteristics. For example, a heavy reliance on international connections leads to an important need for relationship-building and export marketing skills. Cultural attributes such as an independent outlook and focus on quality of life may also pose particular challenges for New Zealand managers.

What is known is that, without strong leadership and management capabilities in a firm, it is difficult to successfully develop and implement initiatives around any of the other key productivity drivers.

To assist in building greater leadership and management capabilities, we support the following main areas of government action, all of which are currently being pursued by MED through its management capability work programme.

These are to:

  • improve understanding of management and leadership capability in the New Zealand context
  • raise awareness of the importance of good leadership and management to workplace productivity
  • improve firms' access to management and leadership development services.

EXISTING PROGRAMMES

We note the following MED-led programme of planned activities:

  • Facilitate the establishment of a Management and Business Capability Co-ordinating Project (MBCC Project)[22] to promote and secure an integrated approach to the development and delivery of management and firm capability in New Zealand. The project will aim to help the government develop and implement well focused management capability actions. It will also play a role in helping to deliver management capability initiatives.
  • Gain an improved understanding of New Zealand management capability by drawing on existing data, undertaking research and collecting new data.
  • Develop working hypotheses about how demand and supply differs across New Zealand firms at different life cycle stages for management and leadership development.
  • Develop a framework and indicators to measure management capability.
  • Use the indicators to measure the quality and quantity of management capability and how it changes over time.
  • Raise awareness of the importance of management capability, such as through a co-ordinated promotional campaign, in order to stimulate demand among firms and individuals.
  • Investigate whether existing management capability services, including Tertiary Education Commission (TEC)-funded services are sufficiently well targeted at the needs of New Zealand firms, including SMEs and microfirms. Where necessary, improve this targeting by removing overlaps and filling gaps.

WPWG RECOMMENDATIONS

In recognition of our findings outlined above, and to complement the activities and processes that are already taking place, the Working Group recommends the following additional actions:

Awareness raising

  1. Raise awareness of the importance of good leadership and management to workplace productivity by showcasing effective leaders and celebrating their success and highlighting the need for leaders at all levels of an organisation.
  2. Examine how existing government assistance programmes could be improved to raise awareness of the benefits of leadership and management development.
  3. Use industry networks to raise awareness of the importance of leadership and management capability in improving performance and to spread best practice through the sharing of management and leadership skills and experiences.

Diagnostic tools

4. Review the availability and effectiveness of existing tools for diagnosing the level of leadership and management capability in individual firms and improve them, as necessary, to ensure they meet the needs and circumstances of all types of New Zealand firms.

Implementation

5. Make it easier for firms to access government leadership and management development services in a seamless way.

6. Assess the extent to which quality standards exist for leadership and management services and, where necessary, develop such standards.

7. Bring together businesses and organisations delivering and developing courses and information on leadership and management capability to ensure that they are accessible and relevant to firms. This may include bringing together education institutions and third-party training providers and firms.

Research and evaluation

8. Research whether firms have sufficient incentives to invest in building leadership and management capability and, if necessary, take action to strengthen these incentives.

9. It is proposed that the MBCC Project advise the Working Group's successor body of their progress in carrying out its planned work programme to check that activities aimed at increasing overall productivity are well aligned, co-ordinated and complementary with the proposed Workplace Productivity Agenda. This co-operation would also provide the successor body with the ability to ensure that the Working Group's recommendations (as outlined in this report) are delivered.

10. Research the value and potential mechanisms for introducing mentoring for managers in SMEs.

11. Conduct research to gain a clearer understanding of leadership and management capabilities to avoid duplication and add value to existing programmes, such as the MBCC Project.

CASE STUDY: TOLL TRANZLINK

"We were on a downward spiral with no real future. However, we didn't let this stop us. We went for a 50-50 strategy - 50% best-of-breed technology and 50% the best in management and education. In three years, we have turned the firm around, and it is now financially stable and growing. We have an operationally sound network and a proud culture. Informed decision-making happens at the coalface or at a grass-roots level first in our company. We are now moving at pace in one direction as a world-class logistics operation that people want to work for." (Greg Miller, Group General Manager, Toll Tranzlink)

Just over two years ago, Toll Tranzlink was facing massive business challenges and significant financial losses. Poor systems and reporting at all levels in the firm meant that misinformation was running the company into the ground. In fact, the financial losses caused by the low levels of business knowledge meant Toll Tranzlink was nearly at the point of insolvency.

The poor systems were also leading to poor decision-making in the firm and inconsistent customer service. As a result, Toll Tranzlink had grumpy customers, high customer and staff churn and constant leadership and management changes. The poor financial performance also discouraged shareholders from making much needed investments to improve the firm.

In summary, Toll Tranzlink was a very poor performing company with extremely low levels of morale, a lack of trust between workers and management and generally poor productivity in all areas.

When Greg Miller joined the firm, his first priority was to stabilise the business. Once the lack of business knowledge was identified as the foundation of Toll Tranzlink's performance issues, Mr Miller set out to implement a solution that involved integrating the people and systems, implementing an enterprise-wide new management system and ensuring that a strong leadership team that included industry specialists was in place.

Mr Miller says that Toll Tranzlink's leadership team embarked on a strategy that involved the introduction of a broad range of technological solutions to improve their business knowledge.

"At the heart of the technology strategy was the development of a 'best-of-breed' web-based system for global access to business information. This technology was designed to be used by mobile operators in the field, in trucks, in the yards or working on a forkhoist," Mr Miller says.

"This meant that Toll Tranzlink's operations data could be collected at all stages and while workers were on the move." The data collection was built into the desired business practices and processes. Many communications options existed but Toll Tranzlink settled on a strategic partnership with Vodafone to provide GPRS technology (and RF, radio band and frequency-Fleet Link).

A massive investment in behind-the-scenes technological infrastructure was needed to create Toll Tranzlink's knowledge management and visualisation systems, to make use of the new business data that was to be collected.

"As they say, a picture is worth a thousand words, so that's what we did. We turned our business data into pictures, and we have just reported a 400% return on investment (ROI) in 30 months from our investment," Mr Miller says.

The leadership team also recognised that, to get good data collection and make a difference to the firm, every staff member needed to be committed to the changes, whether they were in a Toll Tranzlink depot or driving a refrigerated truck the length of the country.

This meant developing a full suite of educational tools to teach staff how to use the new mobile data collection system and setting up two education centres. Toll Tranzlink's First Class Training School was designed for both literate and illiterate workers and covered how to self-measure within all areas of the organisation, as well as understanding the productivity drivers that are relevant to each staff member and how they can individually influence the firm's outcomes.

Toll Tranzlink's workers were introduced to the new technology by providing technology games and tests to allow them to grow and navigate with the new tools in both software and hardware. At the training school, workers were also taught about budgeting at home, in line with profit and loss reporting in a firm, to reinforce how live, accurate, daily self-measurement was a driver to improved firm-wide productivity.

Mr Miller says that, once the significant investment in training had been made, Toll Tranzlink's new enterprise management system was deployed nationally, with the leadership team taking a central role during the roll-out.

"Our new systems meant every worker had full transparency on their business decisions, down to the minute, 24/7. And we managed to do all of this concurrently and on a budget that was less than the past operation's system-licensing cost," Mr Miller says.

The successful implementation of the technology, staff and business process strategies at Toll Tranzlink has enabled far broader and more accurate reporting, with a knowledge management system that now handles over eight million pieces of real-time business information each week.

The accuracy of the information has also resulted in a 55% increase in the number of on-time, undamaged deliveries and more effective use of each truck's capacity, creating significant improvements in customer confidence and far better overall business performance.

5.3 Creating productive workplace cultures - findings and recommendations

Culture is how people behave when the boss isn't around.

Kevin McKenna, PricewaterhouseCoopers, WPWG Workshop, May 2004

DISCUSSION

A productive workforce relies on a firm having a learning environment that builds on its experiences, rather than punishing mistakes.

It also encourages creativity, independence and variety, acknowledges diversity and supports staff to volunteer information and ideas.

Firms can cultivate such an environment[23] by:

  • acknowledging and rewarding good ideas, suggestions and voluntary effort
  • having methods of performance evaluation that are clear, consistent and regular
  • recognising that individuals seek satisfaction and fulfilment both at work and outside of work
  • having open communication lines, especially about changes or developments within the firm
  • fostering good communication by providing opportunities to interact in a work and social sense
  • promoting shared goals and values, such as encouraging teamwork, shared effort and acting in a respectful manner towards others
  • leading by example, such as modelling the behaviour you want others to adopt.

Workplace culture is the set of beliefs and behaviours of individuals within a firm or workplace. Good culture is not necessarily a formal concept; rather, it is about the atmosphere that exists in the workplace - good culture is about having healthy and positive relationships within the workplace and having an environment where people want to "go the extra mile" to create value in their work and the wider firm.

Figure 11 illustrates the Vodafone approach of creating culture and identity for employees, which leads to motivated and achievement-focused staff who actively engage in the firm's overall goals and strategies. (See the Vodafone case study later in this section.)

Figure 11: Culture flow. Figure 11 is provided in the PDF version

Research in New Zealand and overseas shows that, where culture is currently not given sufficient emphasis, this may be due to the complexity of organisational culture as a concept and the difficulty people may encounter in trying to change culture. However, the contribution of a positive workplace culture to productivity performance is significant and cannot be ignored.

WPWG FINDINGS

The right culture can create improvements, especially through greater employee participation, in work processes and harnessing innovative ideas, which further raise productivity.

We believe that more emphasis could be placed on workplace culture and the benefits that a good culture can have in supporting employee participation and better employment relationships, which generally lead to productivity improvements.

Developing and supporting culture is often a difficult challenge because it is dependent on the relationships between those in individual workplaces.

It is similarly hard to identify how best to provide assistance on how to improve culture, with research showing that successful cultures are hard to replicate.

As a consequence, our recommendations in this area are more focused on helping people to identify and apply principles that can support positive workplace cultures and employment relationships.

We have determined that, for culture and employment relationships to effectively improve productivity, firms need to do the following:

  • Consider culture at the same time as they are developing and setting objectives and strategies, because to obtain these benefits,[24] the organisational culture needs to be aligned with and support the strategies of the firm.
  • Take a more participative approach to employment relations, by engaging with their employees in a meaningful and ongoing way. This needs to be a two-way process, where there is a mutual investment in the employment relationship - leaders need to model the expected behaviour and employees need to respond to the opportunity by contributing.
  • Develop leaders and managers with capability for recognising and responding to culture and employment relationships. There are also strong linkages between managerial capability and leadership, and culture and employment relationships.

Anecdotally, we heard of SME owners finding these issues difficult to deal with, although we are also aware that there are many examples of small firms where the personal relationship is paramount and motivates productive outcomes.

There is also evidence in larger firms that managerial capabilities could improve in such areas as the management of employment relationships.

PERCEPTIONS OF WORKPLACE CULTURE IN NEW ZEALAND

Research has shown that perceptions of workplace culture in New Zealand are generally positive.

A 2003 Department of Labour survey indicated that the majority of employees rated the relationships between employers and employees at their workplace as good (34%) or very good (49%), with just 5% rating employment relationships negatively.[25]

Our findings are supported by more recent research by the GIAB on attitudes to growth. This research found some reasonably significant differences between employer and employee perceptions of the state of workplace relations.

We consider that the GIAB findings[26] are likely to reflect the attitudes that New Zealanders have about the importance of workplace productivity (see Tables 1 and 2).

Table 1: Workplace actions - employee response

 

Applies a lot (10)[27]

Applies

(7-9)

Neutral

(4-6)

Does not apply (0-3)

My employer values my work

22%

51%

17%

10%

My employer encourages me to put forward my ideas

21%

43%

21%

14%

There is good staff morale

15%

46%

24%

15%

I am recognised for any new ideas that I raise

13%

34%

31%

21%

Table 2: Workplace actions - employer v. employee response

 

Employer positive response

Employee positive response

Recognising or rewarding employees that raise new ideas that help your organisation

72%

47%

Providing opportunities for employees to train and learn new skills

75%

65%

The GIAB research reinforces the common perception of New Zealanders as hard workers, who have a positive disposition towards innovation and improvements in work processes.

We consider that there are significant benefits that can come from linking this work ethic with more of a focus on working smarter.

EMPLOYMENT RELATIONSHIPS AND HIGH PERFORMING CULTURES

Evidence about employee practices from the MED research Firm Foundations: A Study of New Zealand Business Practice and Performance[28] shows widespread diversity among the adoption of what may generally be considered to be good practices (see Table 3).

Table 3: Employee practices

Question: This business ...

Leaders

All

Laggers

reviews employee performance at "all" levels

72%

30%

12%

has at least "a few" employees on pay-for-performance schemes

68%

43%

22%

conducts in-house training

100%

83%

56%

uses external training

95%

71%

39%

provides opportunities for job rotation/exchanges

65%

46%

24%

systematically measures employee satisfaction

99%

84%

62%

has processes in place to manage employee health and safety

97%

84%

54%

Research by the GIAB also suggests a lingering lack of trust between employers and employees in the workplace and raises a concern regarding employees' perceptions of the value and recognition of their contribution of new ideas to their workplace.

This lack of trust needs to be addressed. Employee participation can be seen as contributing to the success of employment relationships and therefore the creation of more productive workplaces. It is envisaged that promoting greater awareness of the value of employee participation would be a key activity for the Working Group's successor body as part of the proposed Workplace Productivity Agenda.

We consider that there is potential for further benefit from more widespread adoption of good employment relationship management practices, although there needs to be caution to ensure that the adoption of these practices does not overly formalise employment relationships.

Unions can have a crucial role to play in supporting a positive workplace culture, both as the representatives of their members within particular workplaces and as sources of information about employment practices more broadly. This role will work most effectively where there is a positive and constructive relationship between management and union representatives, based on mutual respect and recognition of the benefits of constructive engagement towards common objectives.

EXISTING PROGRAMMES

Industry, firms, unions and employees can currently access a range of support to deal with employment relations or business management issues. However, there is still an emphasis on resolving problems after they have arisen rather than in promoting a positive workplace culture.

In the 2004 Budget, the government announced funding for the establishment of a Partnership Resource to promote workplace innovation, productivity growth and improved service delivery through constructive employer/union partnerships. Work to scope the functions and form of this resource has been completed. This Partnership Resource will provide a useful complement to our recommendations.

WPWG RECOMMENDATIONS

In recognition of our findings outlined above, and to supplement the activities and processes that are already in place, we recommend the following actions:

Raising awareness

12. Model and communicate the benefits of good employment relationship practices through industry organisations, networks, clusters and unions.

13. Promote purposeful employee participation, including in change management.

Diagnostic tools

14. Review existing programmes and support to promote productive workplace cultures and develop tools, information and frameworks to address any identified gaps. This would include assessing what tools are available for measuring and addressing employment relations issues and employee participation.[29]

Implementation

15. Continue to support firms, employees and unions in improving their employment relationships and in developing supportive workplace cultures.

16. We endorse the establishment of a Partnership Resource to promote workplace innovation, productivity growth and improved service delivery through constructive employer/union partnerships.

17. Create greater dialogue between industry, firms, unions and employees on how to develop combined strategies for encouraging productive workplace cultures and building effective employee participation mechanisms.

18. Promote and roll out tools, information and frameworks for building productive workplace cultures.

Research and evaluation

19. Undertake research on employee participation mechanisms in New Zealand workplaces, including identifying good practice examples.

CASE STUDY: VODAFONE - INVESTING IN CULTURE AND VALUES

Achieving the right culture and values has been crucial to Vodafone's success over the past six years. At the heart of the Vodafone story is the belief that focus on the customer is the key to sustained business performance. Leadership's role is to create this focus with the people in the organisation.

The business results speak for themselves. Vodafone has grown its customer base from 138,000 customers in November 1998 to 1.675 million as at June 2004 - a market share of 55.4%.

Values and the Vodafone branded customer experience

Vodafone's success is one built on differentiation of the customer experience, which depends on strong alignment between the external brand and internal values. The brand personality can be defined as fun and energetic, "onto it" and creative, and the company's global vision is to enrich customers' lives, helping individuals, business and communities to be more connected in a mobile world.

The branding is reflected at an array of customer "touchpoints" including contact centres, retail stores, advertising and sponsorships.

Internally, Vodafone's culture is reflected in a unique set of values that capture this same spirit, including "straight up", "zesty", "unleashed minds" and "going for it". Making these values real, rather than just slogans, required a huge investment from the leadership of Vodafone, the managers and staff.

While this approach was initially driven by the senior leadership at Vodafone, they knew that, for it to succeed, the employees throughout Vodafone needed to be committed to the alignment between brand and values. Generating this commitment involved staff focus groups to initially identify the values and intensive employee engagement through induction and values workshops to make sure that the right values had been identified. It also led to changes in leadership development, HR policies, performance management processes and the work environment.

All employees are directors of the customer experience

The emphasis on connecting the contribution that all staff made to the customer's experience of Vodafone led to decision-making being devolved to front-line employees. Vodafone's values are the guiding principles that help people make the right decisions to achieve customer satisfaction.

A simple example of what this means in practice for employees is Vodafone's change to a "dress for purpose" dress code. The "casual Friday" dress code that had been in place was identified as being at variance with the devolved decision-making strategy, so the policy was changed. Employees are still expected to meet dress standards but are given personal responsibility to decide themselves what the standards are for them depending on what their work day involves.

The benefits of the Vodafone approach are evident in the results of employee satisfaction surveys (see below) and in the reductions in employee turnover (down by a third, delivering an estimated benefit of $20 million per annum):

  • Overall satisfaction and engagement 84%
  • Importance of passion for customers 97%
  • Importance of passion for results 97%
  • Pride in Vodafone 96%
  • Role supporting company strategy 88%

This has also made Vodafone a fantastic employment brand, which means huge numbers of applications whenever jobs are available. For example, there were recently over 1,000 applicants for eight graduate positions.

5.4 Encouraging innovation and the use of technology - findings and recommendations

We need business-savvy people in the R&D sector, and R&D-savvy people in the private sector.[30]

DISCUSSION

Innovation is central to enhanced productivity. It can create higher value products and services and/or new ways of working that enable workers to operate more effectively. New ideas can be embodied in products, processes and services or in work organisation, management or marketing systems.

Innovation is already occurring in many New Zealand firms. These firms are implementing both incremental innovation - simply doing things better - and more radical innovation, such as doing new things or doing things differently.

Most innovation usually takes the form of small incremental changes, often in areas where firms already have the necessary expertise and experience. Radical innovation, such as the development of entirely new products, processes or technologies, typically requires higher educational levels and research competence along with more formal R&D. Firms can also gain the benefits of innovation where they purchase innovations, new technologies or processes that embody new knowledge, or where they adopt or adapt research findings from outside the firm.

Productivity gains are often due not so much to the invention of new products and processes but to their application and commercial exploitation. Furthermore, firms that have been successful innovators in the past can often build on their success and increasingly outperform their competitors. This suggests that investment in innovation-supporting practices not only improves a firm's current productivity performance, but also creates a platform from which it builds future success.

A large number of studies support the positive link between innovation, particularly R&D, and productivity growth.

For an individual firm, innovation can have significant benefits. More advanced technology generally is linked with higher productivity, greater market share and employment growth. Firms with more sophisticated equipment and machinery employ more skilled workers, and these workers receive higher wages. Firms, therefore, face strong incentives to invest in innovation and new technology, where they consider that the gains outweigh the costs.

Typically, estimates suggest that the private rates of return on R&D are between 10% and 20%, although there are considerable differences across sectors, with R&D-intensive sectors showing a higher rate of return.

Related studies suggest that the social rate of return to R&D expenditure is higher than the private rate of return and could range between 20% and 50%. One of the reasons this is important is that firms are likely to under-invest from the overall economy perspective if they cannot capture adequate returns to their investment.

To be able to undertake sustained innovation - that is, to be able to adapt on a continuous basis to changes in markets, technologies and competition, rather than undertake one-off innovations - requires a firm to be able to:

  • generate new ideas (where "new" means new to the firm but not necessarily new to the wider economy) - these may come from formal research, customer suggestions, observation, creativity of staff or other sources
  • evaluate these ideas in a technological and economic sense
  • integrate the ideas into the firm's processes or products through additional investment in research, development and design
  • market new or improved products or services.

But the ability of a firm to innovate depends on a variety of internal and external factors. The stock of knowledge and skills within a firm provides a platform for driving innovation and relates to its ability to adopt and adapt ideas from elsewhere. This "absorptive capacity" within a firm, which relates to its ability to implement innovation, is largely determined by the quality of and investments in the people in the organisation (across a range of areas). Over time, the ongoing capacity of the firm is further improved by internal learning, involving investments in such things as formal R&D, experimentation, adaptations and in-house staff training.

In addition, interaction with suppliers, customers, public institutions, industry associations and other organisations onshore and offshore results in the firm gathering information about ideas, technologies, markets and inputs to complement the internal innovation process.

A range of international and domestic research has suggested key supporting practices required for innovation include the following:[31]

  • Ideas management and environmental scanning processes that seek and gather ideas and knowledge widely from customers, suppliers, employees and competitors and allow ideas and knowledge to be shared, stored in a user-friendly form and made freely accessible. This is critical given that there will always be a vastly greater number of ideas outside a firm, even a large one, than there are within it.
  • A climate that does not punish mistakes but encourages ideas to flow freely through the firm, including shared understandings, routines and processes, promoting creativity and "having a go", internal collaboration and teamwork, and upskilling of people. In addition, using carefully designed reward, recognition and development systems to reinforce management behaviour that encourages innovation and gives staff considerable discretion to pursue ideas.
  • A willingness and ability to involve others, including advisors, other firms and research expertise, in the innovation process.
  • Vision, strategy and a clear understanding of what the firm is good at and its competitive advantages, strong leadership and clear strategic intent to pursue improvement and not rely on the status quo.

WPWG FINDINGS

The available evidence on innovation and innovation-supporting practices in New Zealand suggests the following:

  • On international measures, New Zealand firms rate well in terms of being "innovative" in the sense of introducing products and processes that are "new to the firm". The 2003 Innovation Survey[32] suggests that New Zealand is approximately on par with the European Union as a whole on an overall innovation rate of 44% (the proportion of firms reporting some innovative activity).
  • There appears to be a gap between New Zealand and leading countries in terms of our capacity to develop and commercialise genuinely "new to the world" products, processes and organisational arrangements. Generally, New Zealand firms are more incremental than radical innovators.[33]
  • Rates of private sector R&D are very low, both overall and as a proportion of total R&D effort. Private sector R&D ($524 million in 2002) as a proportion of GDP is well below the OECD average (0.42% versus 1.44%).[34] New Zealand tops the OECD scales for the proportion of R&D undertaken in the public sector compared with the private sector. In percentage of GDP terms, however, total research funded by the New Zealand government ($667 million in 2002) is a low 0.54%, less than the OECD average of 0.64%,[35] although the government has made increasing investment in research, science and technology in recent years.
  • New Zealand firms are strong in the take-up of off-the-shelf technology such as computers, mobile phones and the internet. Being early adopters and good adaptors of technology helps New Zealand to achieve the productivity gains from such technology slightly in advance of many of our competitors.
  • Many New Zealand firms may not be sophisticated at utilising design or marketing their products or services, and may prefer to focus mainly on selling at a competitive market price.
  • Failure to derive added value benefits of design or marketing can consign New Zealand firms to selling more on price than value.
  • New Zealand firms continue to focus primarily on quality, delivery and, to a lesser extent, flexibility. The least attention is paid to innovation. According to Firm Foundations,[36] only around 60% of firms regarded innovation strategy as important to their firm.
  • The 2003 Innovation Survey[37] ranked what firms considered to be the most significant impediments to innovation. These were a lack of management resources (56%), the cost to develop new products, processes or services (53%) and lack of appropriate personnel (51%) as impediments to innovation.
  • There is a continued focus on the short to medium term, with few firms using more broadly defined goals or visions to guide development, or planning for more than a year ahead.
  • As discussed later in the findings around measuring what matters (see Section 5.8), most firms focus on lagging indicators of performance. Firm Foundations[38] found that most firms do not use innovation measures for assessing their performance, and very few firms compared their performance with their competitors' in terms of innovation measures.
  • Most firms do not take a strategic approach to external information management, except at a relatively basic level, such as monitoring competitors' products or services, and informal and ad hoc benchmarking. This is further discussed in the section on measurement and reporting later in this report.
  • Strong linkages are crucial to the innovation process as they maximise the chances of information, skills, knowledge and technology being taken advantage of and used. Research shows that many New Zealand firms are either reluctant or unable to enter into more structured collaborative arrangements, beyond a transactional nature, or they view collaboration with a very narrow focus. (This is further discussed in the networking and collaborating recommendation later in this report.)

There are several possible explanations for New Zealand's experience with weak capital accumulation. Many of these factors are outside the Working Group's terms of reference.

Most closely related to the WPWG work are the important complementarities that seem to exist between capital investment and other drivers of workplace productivity, such as skills, human capital and workplace organisation.

Management capability is clearly also important in maximising the effective use of the capital that firms have. The recommendations in other parts of our report are directed at addressing these issues.

THE ROLE OF GOVERNMENT IN SUPPORTING FIRM-LEVEL INNOVATION

We believe there is a sound economic case for public support of innovation, and R&D in particular.

Firms may under-invest in the innovation process, from a "socially desirable" perspective, due to the technological "spillovers" where a firm's investment benefits competing firms. Government support for "public good" R&D is intended to overcome this problem.

The impact of innovation and R&D on the economy strongly hinges on its diffusion across the public and private sectors, that is, transfer from public research institutes to the private sectors needs to be more effective.

These connections are increasing, although it appears CRIs and universities are generally working increasingly with larger industry players and interacting less with SMEs.

The government provides direct support for firm innovation by funding a range of technology and R&D assistance through the Foundation for Research, Science and Technology (FRST). These include:

  • Technology for Business Growth - funds technologically capable firms to move towards high value, technology-based products, processes or service
  • Grants for Private Sector Research and Development - providing grant assistance to SMEs to undertake R&D projects that have the potential to stretch a firm's technological capability and create an enduring increase in their R&D investment
  • Technology for Industry Fellowships scheme - enables students and experienced researchers to complete R&D projects in companies
  • SmartStart - supports a range of technological project planning, assessment and investigation work.

Some public support for firm R&D and innovation is also provided through other programmes operated by FRST - Research for Industry, Research Consortia and the New Economy Research Fund. These tend to be at the research end of the R&D spectrum.

Evaluations of Technology New Zealand schemes have found that they are largely meeting their objectives, including raising the innovation capability of firms and contributing to an overall increase in firm R&D.

There are, nevertheless, a number of constraints that limit the effectiveness of these programmes:

  • The reach of the programmes is relatively limited, with only 750 projects receiving support in 2002-2003. Clearly, Technology New Zealand schemes are not in a position to reach all firms with the potential to improve their level of innovation and R&D.
  • The traditional approaches towards innovation support are based on organisations writing a formal development project proposal and submitting the proposal to a government agency, which decides on the level of support according to the quality of the proposal. We believe that a better way might be for an intermediary/advisor to help a firm identify when such a scheme would be useful, help find the candidate as needed, and perhaps not require a formal project as a condition for the allocation of the support.
  • Providing resources to support innovation is not sufficient if firms do not possess the broader capabilities to deal with innovative processes and extract value. Increased attention has to be given to the broad innovation process within and around the firm. There is still a division of effort between management and firm development support through New Zealand Trade and Enterprise (NZTE), on the one hand, and research and technology support through FRST, on the other, which can lead to a lack of co-ordination of support.

EXISTING PROGRAMMES

The government has recently agreed, as part of the Growth and Innovation agenda, to an extensive medium-term work programme on issues related to the innovative system and strengthening the innovation capability of firms. This includes:

  • further work on enhancing the effectiveness of existing government R&D support mechanisms
  • a review of the framework for the development and role of government in promoting standards in New Zealand
  • a review of how the government could better implement procurement policy to enhance innovation
  • detailed research to improve the understanding of the dynamics of collaboration in New Zealand
  • work on exploring options to engage organisations such as research associations, ITOs, polytechnics and industry bodies as intermediaries between public research providers and the private sector
  • pilot initiatives aimed at developing broker or intermediary mechanisms between public and private investment in innovation
  • a review of how the co-ordination of FRST and NZTE services can be improved
  • an expansion of the Technology for Industry Fellowships scheme to improve the transfer of research and technical knowledge from the public to the private sector and among firms themselves
  • increased funding for projects that build connections among tertiary education organisations (TEOs) and enterprises in GIF focus sectors.

In addition, MED is researching access to finance issues, including research using data from Statistics New Zealand's demand-side survey of firm financing.

The Working Group would like to emphasise the importance of the above actions of the Growth and Innovation agenda. We believe this agenda will provide a sound base for improving the level of innovation in New Zealand.

We highlight that there appears to be a gap in the ability of the public support for R&D and innovation to meet the applied development needs of SMEs. This may be addressed through extending or better co-ordinating the activities of current schemes and organisations or it may require new types of initiatives.

The more promising support mechanisms are likely to be the ones that gather a combination of management, marketing and technology assistance under one umbrella, rather than delivering these in isolation. Such mechanisms would be more able to respond to a broader perspective of innovation than those that tackle single steps in the innovation process at a time.

In addition, policies to promote the acquisition, absorption and use of knowledge should also take account of the need for personal contact and networking, and so local and regional schemes and peer group learning should be considered.

WPWG RECOMMENDATIONS

In recognition of our findings outlined above, and to supplement the activities and processes that are already in place, we recommend the following actions:

Awareness raising

20. Raise awareness of innovation as a broader concept than R&D or high-tech investment.

21. Promote an understanding that innovation requires a range of supporting practices within the firm, such as environmental scanning and information management, close customer relationships, a culture that encourages new ideas and teamwork, investment in staff and strong leadership.

22. Use industry networks to raise awareness and spread best practice through sharing innovation management experience.

23. Raise awareness of the importance of continued investment in the right technology for firms facing labour shortages.

24. Encourage the adoption of firm management and commercialisation programmes as part of the engineering/science course syllabus in tertiary organisations and among staff involved in innovation processes in firms (and vice versa).

Diagnostic tools

25. Evaluate the effectiveness of existing tools and programmes, particularly around the issue of firms' ability to adopt and adapt innovations and new technology. Develop tools, information and frameworks to fill identified gaps.

Implementation

26. Facilitate linkages and collaborative relationships between both firms and CRIs/tertiary institutions and research expertise, and firm to firm, to encourage the exchange of information, skills and technology, improve opportunities for capturing knowledge spillovers and build up the innovation capability of firms.

27. Consider making mentor support an integral part of the delivery of technology and innovation assistance, to provide owner/managers with some space and guidance to work on the firm rather than in the firm.

28. Improve co-ordination and responsiveness of government services making management and marketing support available alongside R&D support and improving the "front end" client advisory services so that the most appropriate support is provided to firms from the first contact, irrespective of the agency first approached.

Research and evaluation

29. Ensure research is undertaken into the issue of firms' access to finance.

30. Identify any barriers to increased capital accumulation and how these can be reduced.

CASE STUDY: JENKIN TIMBER - A TRACK RECORD OF INNOVATIVE SUCCESS

Achieving $21 million in exports last year, family business Jenkin Timber has come a long way since it was established in 1922, but its original values of integrity, innovation and foresight still underpin this successful West Auckland manufacturer.

Jenkin Timber has been named the Wood Processing, Building and Interiors Exporter of the Year in the 2004 New Zealand Trade and Enterprise Export Awards. The company was founded 84 years ago by builder Harry Jenkin, and over the decades, it has evolved into a leading innovator, manufacturer and exporter of value-added finger-jointed and solid wood radiata pine products, and it remains family-driven, with Harry's son Jim and grandson Gary directors in the business.

Operations Director Richard Carbines says the company is performing strongly, achieving 20% year-on-year growth over the past three years, with annual turnover of $30 million in 2003 - 70% generated from export sales.

To succeed in an industry typified by commodity products and pricing regimes, Jenkin Timber has sought to create a positive point of difference between itself and competitors, he says.

"We have explored and adapted innovative ways to approach our markets and people, and in doing so, have created a more stable foundation for the business to grow and ensure market potential is realised. For us, this revolves around brand development and the attributes of product, service and the overall presentation of our company and its people. This is linked to a relationship marketing approach that also includes our distribution and supply channel," Mr Carbines says.

Jenkin Timber is considered a leader in the use of technology within the timber industry, Mr Carbines says. It's an early adopter of new manufacturing technologies and also uses technology for e-commerce to track and measure performance and to analyse product characteristics.

The company moved into a new purpose-built site in 1997 and is currently undertaking a further $10 million investment programme to ensure it continues its 20% annual growth. Mr Carbines says that will give it the ability to more than double output in the next five years.

He says the company also makes a major investment in its people. "We place an extremely high value on our people. The success of any organisation is dependent on the performance of its people, and we are very committed to training and development. The average length of service with the company is 11 years. As technology changes, there's a new generation of requirements on processors such as ourselves, and we are endeavouring to train all our people to meet that challenge."

5.5 Investing in people and skills - findings and recommendations

Don't get the machinist to hang his brain at the door when he comes to work.

Geoff Vazey, Ports of Auckland, WPWG Workshop, May 2004

DISCUSSION

The knowledge, ability and skills of workers contribute to workplace productivity. Ongoing investment in foundation, technical, supervisory and managerial skills, together with improvements in work organisation, can help improve the productivity and performance of New Zealand firms. A skilled workforce can lead to more innovative behaviour and can allow the use of higher levels of technology, which, in turn, leads to further productivity gains.

The OECD, summarising international evidence, states:

  • Training does generate increased wages for trained workers, and increased productivity for those enterprises that train and innovate. Some of the gain goes to workers in wages and firms keep some: it has been estimated that these two shares are of roughly the same size...
  • Enterprise-based training has the greatest impact on performance when undertaken in connection with changes in work organisation, job structure, and, in some instances, technological innovation...[39]

There needs to be more diverse education and training responses to the changing nature of work if we are to ensure that the skills of the workforce make their full contribution to workplace productivity.

Investment in people and skills also needs to be responsive to a firm's current stage of development and productivity challenges. In order to increase the skills of the workforce in line with the needs of firms, people in the workforce need to be involved in lifelong learning.[40]

The case study of Rotaform Plastics Ltd (see below) provides an example of the potential returns from investment in people and skills at the same time that managerial capability and work organisation are improved.

Many firms are currently experiencing a shortage of skills in the existing and potential workforce that is limiting their ability to grow. The investment in the skills of the workforce needs to cover a number of distinct aspects, including:

  • helping all employees to access ongoing, or lifelong learning to respond to new technology and the changing nature of work - educational success is a critical factor in labour market success, ongoing employability and maintenance of relative income
  • enabling employees with inadequate foundation knowledge and skills to access specific literacy and numeracy training to support their learning
  • improving the applicability and responsiveness of industry training and other education and training to business needs.

Some groups that have foundation and technical skills, such as those with disabilities, face particular barriers to obtaining employment. While addressing this issue will help overcome the current shortages, this issue was outside our terms of reference.

WPWG FINDINGS

We consider that there needs to be a realistic assessment of the level of investment required to ensure that lifelong learning becomes a reality for those already in the workforce. Firms, employees and the government all need to take responsibility for their contribution to improving education and training.

Around 80% of today's workers will still be in the workforce in 10 years. This means that, even if new people coming into the workforce have higher levels of foundation skills, there is a critical need to lift the skill levels of the current workforce if New Zealand is to achieve a more productive economy.

We know that a number of investments in people and skills are being made and that upskilling alone may not produce productivity gains. We are concerned that there are barriers to sufficient investment being made in people and skills. Until these barriers are addressed, New Zealand is unlikely to make the significant investment in people and skills that is needed to achieve the high skill, high value and high wage environment that is desired.

Possible barriers to investing in upskilling include the following:

  • There is limited information about the return on investment to firms of education and training, and evidence that some employers find it difficult to assess the value of the investment they make in training.[41] For example, Heinz Watties spoke at the recent Industry Training Federation conference about the lack of return on investment noted from some training and how this was a disincentive to providing training.
  • There is a lack of clear and immediate business benefits from investments of time and money in people and skills. There is a growing dissatisfaction on the part of firms with the training options available to the workforce and a perception that the available options are failing to build sufficient "job-relevant" skills. This may be because the business benefits of training are low, are not the focus of the training being undertaken or are not being measured. In addition, many firms believe that it is not their responsibility to educate the workforce and think that, once they have trained people, they will get a better job elsewhere.
  • In some cases, employers and employees make choices about training based on the direct costs of that training rather than the incremental value to their firm. Different funding arrangements in the industry training and education environments reflect the assumption that firms benefit from workplace-based training and should make a contribution to it. This may not lead to the best possible decisions about which course is best suited to an industry's particular needs.
  • Demand for workplace-based training through ITOs exceeds the number of government-subsidised training places. This deters both employers and employees from undertaking additional workplace-based training. For example, the number of people wishing to undertake Modern Apprenticeships is greater than is presently funded.
  • Inadequate linkages are made between the investment in education and training and the complementary investments in technology, work organisation and/or management that have the potential to substantially increase the value obtained from the investment in education and training.
  • Training needs to meet a diverse and varying range of needs of different employers and employees. There are some mismatches between the training that is currently available and the quantity, quality and type of education and training required by individual firms or employees.[42]
  • The courses that are being provided are not meeting employers' requirements in terms of content or delivery. The linkages between providers and the workplace are improving as a result of the tertiary education reforms and the Tertiary Education Strategy 2002-07. Where there are good linkages, relationships appear to work well, but the relationships are not consistent between industries - geographically and across industries.
  • While there has been considerable growth in the number of employers involved in industry training (29,606 employers were involved in industry training in 2003, up 31% from the 22,353 employers in 2000), employers are still reporting variable relationships with ITOs.

FOUNDATION SKILLS

As jobs and technology change, employees' ability to learn on the job and through industry training is constrained by their literacy and language skills. This may range from minimal understanding of verbal instructions or printed material through to problems with speed, fluency or accuracy.

There has been some increase in the focus on building foundation skills (listening, speaking, reading, writing and mathematical knowledge - including the ability and inclination to use new technologies interactively) through foundation learning in recent years in response to concerns about the low level of literacy within New Zealand's workforce. About one in five adults in New Zealand is at the lowest level of literacy.[43] While this is consistent with the rate in some other similar countries, it still represents a significant problem as skills shortages choke off growth potential.

More investment in developing foundation skills within the existing workforce may be necessary for supporting sustainable employment and active participation in society. Without adequate foundation skills, workers have difficulty undertaking further learning and applying the knowledge they have gained through education and training in many settings.

This has led to a range of valuable strategies that focus on improving foundation skills through, for example, the Adult Literacy Strategy (2001), the Tertiary Education Strategy (2002) and the Adult English as a Second Language (ESOL) Strategy (2003). These strategies have led to funding for the broadening of the nature of provision of training, expanding the capacity and capability of providers to respond and, in a few cases, the delivery of foundation skills training through specialised literacy providers.

The majority of the provision and resourcing for foundation learning has, however, been for job seekers or those in pre-employment training. However, there is very limited foundation training available for those already in the workforce, and funding for this group is currently not being fully utilised.

There is a range of barriers to increasing foundation skills in the workplace that will need to be addressed, including the following:

  • The lack of foundation skill development, education and training courses for the workforce as a result of the lack of experienced practitioners and providers - specialist skills are required to achieve effective foundation learning outcomes for adults. The limited number of providers reflects uncertainty about funding for foundation skills programmes, the difficulty of securing interest from employers, the newness of the field and limited knowledge of how to deliver high quality foundation skills training.
  • Some training that is offered is not sufficiently tailored to the particular needs of the employer and employees and/or does not generate a return on investment for both parties.
  • Employers may not be addressing foundation skill issues for their employees due to a lack of knowledge about the effect of poor foundation skills, a lack of tools to identify workers' needs, perceptions that addressing this issue is not an employer's responsibility or perceptions about the complexity of dealing with the issue.
  • Employers face a substantial proportion of the costs of undertaking foundation skills training. These are both the direct costs of the training itself (although these are sometimes subsidised) and a range of indirect costs that are often more substantial than the direct costs.
  • Poor participation in training courses as a result of the limited (or non-) availability of courses in many locations, a lack of willingness by many workers to participate and poor information on available courses.
  • ITOs have mixed levels of involvement in foundation skills training. For example, the New Zealand Seafood Industry Council Limited has some involvement in foundation skills training, while other ITOs have no involvement.
  • Foundation skills training is often not integrated with, or linked to, other training. This can mean that those with poor foundation skills do not participate in training and/or do not have the ability to utilise the skills they are learning in a range of settings.

EDUCATION AND TRAINING IN SMES

Surveys in New Zealand and overseas consistently find that SMEs[44]undertake less formal training for their staff than large firms, although there are some suggestions that more informal training occurs in smaller firms. For example, Firm Foundations[45] found that 16% of firms with fewer than 20 staff said no employees received in-house training during the past year, compared with 2% of large firms. Similar figures arise for external training (28% for firms with 20 staff or fewer and 6% for large firms).

Available research[46] suggests there are a number of barriers to SME engagement in training that need to be addressed in New Zealand, including the following:

  • Most SMEs do not take a strategic approach to training and do not normally have dedicated training budgets or managers. Rather, they focus on training that is "just enough, just in time, just for me" that seeks to address immediate problems or crises. They perceive that many courses are irrelevant to their needs and are inflexible.
  • The high fixed costs associated with training may restrict its affordability for SMEs. These costs include identifying training needs and delivery options, as well as the opportunity cost (in fees and time off work) of releasing staff for training. These opportunity costs are often higher than the direct costs of the training itself.
  • Education and training organisations, including ITOs, find it more difficult and costly to reach SMEs (and vice versa). As many ITOs face a high level of demand from larger firms, they have limited incentive to focus on the more costly and difficult SME training.
  • There are perceptions that the return on investment from education and training is uncertain and risky. For example, there are often perceptions that, once trained, the staff member will move to another firm, which results in relatively high costs for a small firm, although the firm may obtain benefits during the training itself.

EXISTING PROGRAMMES

New Zealand firms, employees and the government are already making substantial, valuable investments in people and skills, and this trend should continue. This investment is funded by a combination of private sector firms, employees and the government (see Tables 4[47] and 5[48] for details on government spending). This is reflected in the relatively strong participation in learning by adults in formal tertiary education and workplace-based training, including that provided through ITOs in New Zealand.

Table 4: Tuition-related education expenditure ($ million, GST inclusive)

Actual 1998/99

Actual 1999/00

Actual 2000/01

Actual 2001/02

Actual 2002/03

Forecast 2003/04

Forecast 2004/05

Early childhood education

294

325

331

358

394

421

460

Primary

1,624

1,731

1,780

1,838

1,891

2,063

2,061

Secondary

1,155

1,312

1,333

1,311

1,366

1,485

1,535

Special education

275

262

236

281

254

256

264

Tertiary

1,236

1,219

1,362

1,554

1,700

1,930

2,054

Total

4,584

4,849

5,042

5,342

5,675

6,155

6,374

Table 5: TEC expenditure on vocational education and training ($000)

2003/04

2004/05

2005/06

Industry Training

98,363

107,263

116,163

Youth Training

69,486

69,998

69,998

Skill Enhancement

8,222

8,222

8,222

Modern Apprenticeships

22,892

27,153

25,669

Reducing Inequalities

1,362

1,362

1,362

Gateway

5,115

7,165

9,815

Training Opportunities

96,902

96,902

96,902

Total vocational education and training

302,342

318,065

328,131

There have been a number of recent developments that are seeking to improve both the level and quality of skill levels of the New Zealand workforce, including the following:

  • The tripartite SkillNZ campaign involving Business New Zealand, the CTU and government is promoting participation in workplace learning through providing better information on its benefits and addressing barriers in specific industries that have low participation rates. Barriers are currently being addressed in the retail, hospitality, tourism and furniture industries.
  • ITOs have a leadership role on matters relating to skill and training needs by identifying current and future skill needs of employers and employees and developing strategic training plans to assist the industry to meet those needs.
  • Ongoing increases in funding for formal qualifications and significant increases in the numbers of people undertaking formal training. The number of participants in industry training and Modern Apprenticeships has continued to exhibit strong growth during recent years (see Table 6). In 2003, 14,181 of those trainees achieved National Certificates, which represents an increase of 45% from the 9,761 National Certificates achieved in 2002.

Table 6: Industry training

 

Employees participating

Employers participating

2000

81,343

22,353

2001

95,263

26,901

2002

106,997

24,576

2003

126,870

29,206

  • Greater emphasis on the responsiveness of training providers to the needs of industries, regions, communities and individual learners through the implementation of the government's Tertiary Education Strategy.
  • There is an increased (but still relatively modest) investment in foundation skills. For example, a small number of firms (such as Rotaform - see case study below) have worked with Workbase to implement workplace-based literacy programmes.
  • The Tertiary Education Commission is undertaking a scoping exercise into the level of stakeholder support for a National Centre for Vocational Education and Training Research that would promote excellence in vocational education and training research.

WPWG RECOMMENDATIONS

In recognition of our findings outlined above, and to supplement the activities and processes that are already in place, we recommend the following actions:

Awareness raising

31. Raise awareness of the need for firms to undertake skills needs assessments, so they can identify what skills they need and where they have skill gaps including identification of where improvements in foundation skills are needed. Promote the benefits of undertaking these assessments.

32. Provide information on the best ways of matching skills to the needs of firms and linking to ongoing improvements in managerial capability and work organisation.

33. Provide information on the return on investment in foundation skills for all firms and the return on investment in education and training generally for SMEs. More robust information that has credibility within the business community has the potential to change managers' perceptions, with an increase in the investment in people and skills.

34. Encourage positive perceptions by school leavers of vocational occupations as careers and promote industry training as an option, in order to increase the level of investment in these areas and to reduce the negative impact for business of skill shortages, including targeted information for school career guidance counsellors.

Diagnostic tools

35. Review the availability and effectiveness of existing tools to help employers and employees undertake an assessment of the potential return on investment in skills development generally (with tools targeted at SMEs in particular), and develop new tools to fill any gaps.

36. Provide a tool to assist firms in undertaking an assessment of skills required by a firm, the gap between the required skills and the existing skills within the firm and the steps required to address any identified skill shortages.

37. As part of the assessment of skills needs, these tools need to identify where foundation skills training is necessary and the potential return on investment that can be achieved through workplace-based foundation skills training.

Implementation

Education and training infrastructure

38. Build a strong infrastructure (including ITO capability) for the delivery of workplace-based training and ensure ITOs are involved in workplace-based training for foundation skills and training for SMEs.

39. Continue to build on the improvements in the tertiary education sector to the linkages between government, suppliers and firms so that, over time, workplace training increasingly meets the skill needs of firms.

40. Continue to provide support for the ongoing work of the Skill NZ campaign.

Support for firm-specific training

41. Develop support for firms to identify skill needs, placing those skill needs in a wider productivity and firm improvement context, and a specific brokerage role to support the investment of SMEs in skills and training. In developing these forms of assistance, consider the role that ITOs can play as a delivery agency and how this can be encouraged (and identify other appropriate organisations where no ITO exists).

Foundation skills training

42. The government needs to focus on addressing the needs of existing workers with low levels of foundation skills. This will require a substantial increase in foundation skills funding targeted at those already in the workforce. Funding should cover learning delivery, including workplace-based training, co-ordination and capacity/capability building and support for providers, practitioners and learners.

43. Integrate foundation learning with industry training so that those with lower levels of foundation skills can develop those and other skills.

44. Trial (and evaluate) new ways of delivering foundation learning to improve the quality of training in the workplace and the incentives to design improved high quality training, for example, designing programmes that closely match workplace tasks.

Research and evaluation

45. Research the effectiveness of workplace foundation skills programmes through evaluating any new initiatives that are approved as a result of our proposals to provide improved information for employers, employees, unions and the government on the best approaches to adopt.

46. Evaluate whether changes are required to the design of funding and accountability arrangements for government-funded workplace training to help ensure that SME training needs are met (for both foundation skills and wider skills training).

47. Research the effectiveness of steps to enhance education and training in SMEs through the evaluation of trials to provide assurance that the education and training are providing a return on the employer's investment and to identify critical success factors.

48. Research whether the different funding arrangements for workplace training and other tertiary education represent an unnecessary barrier to skill development in the workplace.

49. Explore the level of longer-term skill investment needed to achieve a significant improvement in lifelong learning, in order to support ongoing productivity improvements.

CASE STUDY: ROTAFORM PLASTICS LTD

Rotaform Plastics Ltd is an Auckland plastics manufacturer specialising in rotational moulding, which has experienced a dramatic improvement in company performance that has been underpinned by a very successful workplace literacy programme.

Rotaform's future success lies in producing high value, quality products in a highly competitive environment. Rotational moulding is very labour intensive, and about 70% of product quality is dependent on the skill of the worker. Rotaform is, therefore, reliant on the skills of its staff and on introducing greater sophistication and professionalism into all aspects of its firm operations.

To retain its competitive edge, Rotaform has taken a proactive approach to investing in its people and their skills. In 1998, the firm signed up to a literacy training pilot, and it was so successful, it has continued to offer the programme to its staff.

The programme is voluntary, but Rotaform found all its factory workers signed up for it. Participants' literacy skills are assessed, and they are grouped according to literacy levels. Those involved in the programme receive one hour's tuition per week and are also given homework. The literacy course is based on Rotaform's work procedures, so learning is directly relevant to the work environment. For example, one of the first things Rotaform found when the programme began was that some of their staff didn't understand the difference between a kilo and a gram, and these were the same people who were required to weigh all their raw materials by hand.

Rotaform was initially sceptical about the benefit of the literacy programme to overall productivity and firm performance, but CEO David Brumby says there has been an amazing transformation in the firm, and he attributes much of that to the rise in staff literacy skills. In 2001, for example, sales rose 34% and profits 31%. They doubled their turnover and reduced rejects by up to 50%.

The following table describes the returns Rotaform has gained from investing in its people.

Beneficiary

Benefit

Value to the firm

Employees

Capacity to be involved in the development of new products

The firm is producing sophisticated high-end products such as spa pools.

Increased motivation and pride in their work, leading to better contributions by staff to discussions.

The firm captures the expertise of those "on the ground".

Ability to work more flexibly.

The firm can become more effective by introducing new systems, confident in employees' ability to adapt to them.

Managers

Less needs for employees to refer to managers.

Management is freed up to spend more time being innovative and developing the firm.

Customers

Ability to communicate more effectively with customers.

Customers see a more professional approach from the firm.

5.6 Organising work - findings and recommendations

The last true source of competitive advantage... is organisational capability - the ability of the organisation to innovate, to motivate, to satisfy customers. And tied to that is another source of advantage: intellectual property or intellectual capital, which is the result of organisation capabilities that can't be easily copied or reconstructed.[49]

David Nadler, President of Delta Consulting Group

DISCUSSION

As organisations grow and products, technology and markets change, there is a need to review how work is organised. Studies have shown that changes within firms (implementing new technology, work processes and/or products) need to be combined with organisational change in order to reach full productivity potential.[50]

Work organisation is concerned with getting the right information resource to the right place at the right time to meet a need. Specifically, it involves the deliberate process of configuring structures, processes, reward systems and people practices and policies to create an effective organisation capable of achieving the business strategy.[51] Work organisation refers to both the organisational design process of setting up a new firm and organisational redesign in existing firms.

Work organisation should ensure the activities that create value within a firm are aligned with each other, and with the overall business strategy, and are functioning effectively.

Effective work organisation requires five integrated components:

  1. Strategy: a firm's vision, mission and short-term and long-term goals.
  2. Structure: the location of formal power and authority, an organisation's main components, its relationships and overall hierarchy.
  3. Processes and lateral capability: how information-sharing and decision-making occur within and across the firm's networks, processes and teams.
  4. Human resources: how a firm treats and values staff, measures performance and provides upskilling opportunities, which are the foundation to building its capability.
  5. Reward system: the goals, values and rewards within a firm that align individual behaviour and performance with organisational goals.

WORK ORGANISATION DESIGN

In order to survive in a highly competitive, global environment, it has become necessary for firms to assess and adjust their business practices in an effective and timely manner on an ongoing basis.

A high performing, adaptable organisation is often characterised by its ability to quickly combine and recombine skills, competencies and resources across the enterprise to respond to changes in the external environment.

Adaptable organisations that reconfigure effectively are characterised by the following:[52]

  • Active leadership: belief in organisation as a source of competitive advantage.
  • Knowledge movement: knowledge is collected and utilised across the organisation.
  • Learning culture: encouraging, supporting and rewarding learning behaviours.
  • Flexibility: tolerance of ambiguity, change and unpredictability, and an understanding that change is natural.
  • Integration: mobility within an organisation is natural and is encouraged.
  • Employee commitment: a strong organisational culture that results in employee commitment to the company and its products/services and a desire to "go the extra mile".
  • Change readiness: employees understand the direction that the work organisation is taking and have been involved in the process.

WHY IS WORK ORGANISATION IMPORTANT TO IMPROVING WORKPLACE PRODUCTIVITY?

Workplace organisation, such as structuring work groups or work processes, complements other strategies that firms invest in as a means to improving their productivity. Simply introducing new technology could introduce some productivity enhancement, for example, but changing the way work is organised around the new technology could produce even greater gains.

The main ways changing work organisation can contribute to improving workplace productivity are as follows:

  • Employee participation - Employees find it difficult to "own" solutions proposed within a firm if they have not played a role in the design or planning. It is essential that employees at all levels of a firm have a genuine opportunity to contribute to work organisation, to provide relevant practical advice from their respective positions and to fully understand the potential benefits.
  • Designing work to create more interesting and meaningful jobs and creating better connections between individuals and teams, both within a firm and across industry, will also help to create productivity improvements.
  • Capacity to change/innovate - The key to increasing a firm's productivity performance is the capacity to do things differently, including continual reinvention of products and services using knowledge, skills and experience in a more imaginative and effective way, at all levels of the firm.
  • Bundling of productivity strategies - Studies indicate that innovation and the use of new technology will have a limited impact on increasing workplace productivity if not combined with organisational assessment/changes.[53] It is therefore critical for a firm to combine strategies for effective results.
  • Timing - There are crucial moments when organisation design should be considered, particularly when significant changes in strategy are taking place. Choosing to plan organisational changes allows organisations to control the process more than if design is in response to crisis and/or by pressure from other firms or customers.
  • External partnerships - New forms of work practices and cultures enhance the potential for innovation and improvement, not just within firms, but by potentially enhancing collaboration between firms. Virtual networks and other forms of information-sharing can help more firms implement workplace change successfully, thereby enhancing their productivity.
  • Different models for different firms - Building organisational competence requires fundamental and sustained changes throughout the firm. However, there are no blueprints. External consultants will not be able to offer a ready-made solution to a firm. Effective workplace design requires a thorough understanding of the nature of a firm at all levels. Each firm must learn to adapt organisational structures, skills and cultures in ways that reflect their individual circumstances and potential.

WPWG FINDINGS

We believe that work organisation is not a well understood or well developed business discipline in New Zealand. For example:

  • there is currently a limited focus on both the conceptual foundations and the "how-to" toolbox and practicalities of effective work organisation within the management curriculum in New Zealand
  • structural and strategic review is reasonably common in New Zealand but generally that seems to stop close to the top of a firm, with the implications for operational activities not seen through in full, which often means the potential benefits of work organisation design for workplace productivity are not fully realised
  • it is unclear what supports may currently be available to New Zealand through business groups, unions and existing government programmes.

Despite the general understanding of the benefits of work organisation activity, the spread of new forms of work organisation has been limited in general:[54]

  • Research appears to be fragmented, and there are said to be too few bridges between academics and practitioners.
  • There is a need for a better knowledge base around the link between strategy selection, choice of business model, organisational structure and operational design as a complete and integrated process.
  • Literature and research on work organisation and workplace productivity appear limited.

Taking all this into account, we have come to the following conclusions on the issue of work organisation design:

  • There is a correlation between workplace productivity and the ability for firms to respond to external changes and adapt, innovate and change in a timely and effective manner.
  • Work organisation design appears to be a critical part of productivity strategies, including new work processes, products and technologies and a firm's ability to survive in a rapidly changing, highly competitive environment.
  • Timing is critical - there are key points in business cycles and in response to external factors, such as competition, when organisational change should be considered.
  • Productivity strategies need to be bundled and should include organisational design in order to reach full productivity potential.

One of the barriers to firms implementing organisational redesign effectively appears to be a lack of good information and understanding of the discipline and potentially the supply of training available. It should be noted that further work would be required to confirm this preliminary finding.

It is essential that employees at all levels of a firm are involved in work organisation design to provide valuable practical advice from their respective positions and in order to fully understand the potential benefits.

Good work design can also assist in creating opportunities for work-life balance and improvements in employee engagement and participation. Improvements in work-life balance practices could also lead to improvements in staff retention and reduction in staff turnover rates, with corresponding benefits to firms and improvements in workplace productivity.

We believe that more emphasis could be placed on work organisation and the productivity improvements that "good" work organisation can provide.

EXISTING PROGRAMMES

NZTE offers a number of programmes[55] that include work organisation components as part of a broader curriculum, as does formal management training such as an MBA. These programmes are complemented by well developed expertise available in private sector consultancies, although we do not have information on the take-up of these services, and through work organisation literature.

In addition, the Department of Labour is co-ordinating the Work-Life Balance Project to look at what is already being done for work-life balance and to help shape practical solutions for what more can be done. This project incorporates some elements of how work is organised.

WPWG RECOMMENDATIONS

In recognition of our findings outlined above, and to supplement the activities and processes that are already in place, we recommend the following actions:

Awareness raising

50. Make available and/or produce relevant information about how work organisation affects workplace productivity and the benefits of implementing these strategies, including the benefits of employee involvement.

51. Provide background information on tools used overseas to assess work organisation issues, such as the UK's Department of Trade and Industry Tool Kit and Danish Technology Institute tools.

52. Identify case studies and demonstration workplaces that focus on successful organisational design, processes and practices.

Diagnostic tools

53. Develop and test diagnostic tools, modifying overseas models for the New Zealand business environment, for assessing structural and work reorganisation requirements.

54. Provide diagnostic tools to assist in assessing whether a firm's structure/work design is appropriate and/or effective. This may be especially relevant to organisations in times of change, as well as when developing an ongoing strategy.

Implementation support

55. Facilitate the provision of networking and other learning opportunities as well as mentoring assistance, including facilitators and consultant practitioners, to undertake redesign assessments and to engage in redesign work.

Research and evaluation

56. Assess availability and accessibility of advice for firms, particularly small business services, and potential for intermediaries as service providers.

57. Assess the linkages between the Work-Life Balance Project and workplace productivity improvements.

CASE STUDY: THE GOOD TIME FOOD COMPANY

The Good Time Food Company is a Hawke's Bay company with a simple objective: "To Make Good Time A Good Place To Work". Founded in 1978, the company, which makes quality pies for the New Zealand market, started with a turnover of $30,000. The company now employs 38 staff, and last year, it recorded a turnover of $6 million. That is projected to grow to $8 million this year. The company also won the 2003 Hawke's Bay Business of the Year Award.

As a part of the company's overall growth strategy, it has recently launched the low fat pie into the New Zealand market and is working towards implementing the changes necessary to gain Risk Management Programme certification, which will allow them to export to various countries that have expressed an interest in their products. The success of the company is largely due to the creative staff and business management strategies of CEO Phil Pollett.

Good Time is driven by the need to get quantities of fresh pies into the market on a daily basis, and Mr Pollett believes small things can often hinder productivity. Because of the temporal nature of the business, being responsive and adapting the business is an ongoing part of their business strategy.

In 1998, Good Time recorded a 180% staff turnover for the year. This was of such concern to the company that Mr Pollett implemented a number of strategies for change. Management profiled existing staff, analysing which of them had been successful employees, and designed a pre-employment test for new staff based on the results. They also implemented a number of foundation training initiatives including writing and designing a "baking basics" tutorial. By 2003, staff turnover had dropped to 14%, and productivity has risen substantially.

Mr Pollett was quite interested in the theory of constraints in work processes to sort out bottlenecks in production. A book on this subject was simplified and given to staff who then took responsibility for applying it in their own workplace.

Staff responded to this information with great enthusiasm, and Mr Pollett was overwhelmed by the number of staff suggestions on how to improve work processes and productivity in response to sharing this information. By including his staff in this strategic approach to the business, he gained invaluable information at the staff level, and his staff became even more engaged in how the company was performing.

Mr Pollett now has plans to contract a software designer to develop a programme to help workers monitor their productivity and performance every day. They will input data on their own work into the system and will be paid productivity bonuses based on their results.

Mr Pollett believes personal issues frequently impact on the performance of his staff. Accordingly, he uses monthly staff meetings and a process of open dialogue to discuss issues that may lead to absenteeism or impact on productivity. The company has recently contracted a counsellor to provide a free service to staff. Where there are issues of poor staff performance, the company puts its efforts into structured remedial action that offers workers an opportunity to improve.

5.7 Networking and collaborating - findings and recommendations

Clusters are the building blocks of a productive, innovative economy.

Professor Michael Porter

DISCUSSION

Firms do not operate in isolation, and there are significant productivity gains to be achieved by improving the interchange of knowledge, information and ideas through both formal and informal networks and collaborative mechanisms.

There are many existing formal networks in New Zealand, including Business New Zealand, Chambers of Commerce, trade associations, the CTU and ITOs. The number of clustering initiatives has also expanded. Informal networks also play an important part in the transferral of knowledge and information.

Networks also have an important role in promoting research and development. The transfer of new knowledge ("spill-ins") from other firms or research organisations is an important source of productivity growth. Formal industry associations can also be used to undertake activities such as research or training that benefits the whole industry.

However, it appears that many New Zealand firms are reluctant or unable to enter into collaborative arrangements beyond those of a simply transactional nature. According to the 2003 Innovation Survey,[56] most innovating firms (57%) do not collaborate with other firms or institutions in developing their innovations. This is despite the fact that increasing specialisation within firms and increasing competition both facilitate and require greater collaboration.

Research has found the following impediments to the development of co-operative arrangements in New Zealand:[57]

  • Concerns about the legal limits to co-operative behaviour.
  • A culture of self-reliance.
  • A legacy of a regime of protection that fostered a mindset of insularity.
  • The widespread and rapid promotion of competition following the economic reforms.
  • The small scale of firms, sectors and markets imposing limits on the extent of specialisation and exchange possible.

The fact that New Zealand does have a lot of small and medium-sized firms places an increased emphasis on networking and collaboration as a means of creating greater scale and scope.

The geographical spread of firms also means that they need assistance to create localised collaborative concentrations that can achieve this scale.

Preliminary research undertaken by NZTE and the TEC has found that there may also be less inter-firm collaboration in some larger firms. These firms often internalise the specialist skills they need because they cannot guarantee supply from New Zealand's thin markets.

A common theme in Firm Foundations[58] was an absence of strong inter-firm relationships. For example, only one in 10 firms appeared to work very closely with suppliers to improve each other's processes.

An MED-sponsored study of collaboration and linkages between New Zealand SMEs suggests that:

  • collaborations occur across the full range of SME business functions but are more evident in areas where outsourcing is more economic, such as logistics management, and where resource-pooling opens opportunities to SMEs that are otherwise beyond their capacity, such as joint marketing and market development
  • collaboration between SMEs will be frequent during early attempts at internationalisation
  • the scope and type of collaborations will change as a firm expands to include an international focus - either importing or exporting - for example, a firm that is growing its export market is likely to initially focus on collaborations with offshore distributors, and then, as its market grows, focus on manufacturing
  • collaborative relationships with demanding clients are the primary external source of new knowledge assets and innovation among SMEs in New Zealand.

This MED-sponsored study of collaboration and linkages between New Zealand SMEs is also suggesting that knowledge-based collaborations are more important in those firms that are:

  • in the early stages of an industry life cycle
  • in the early stages of organisational growth
  • locally owned
  • information and communications technology intensive.

WPWG FINDINGS

We believe that it is important to recognise the good work being done by existing networks and raise their profile. Networks and collaborative activities work best when they develop naturally, through a bottom-up process.

There is a range of networking and collaboration that can be achieved, through both informal and formal mechanisms, but the essence of any networking or collaborative relationships is the opportunity to achieve productivity gains by sharing information and knowledge with partners, suppliers and other firms in the value chain.

There is also a key role for government to act as a catalyst and broker in strengthening network formation. In particular, government can:[59]

  • facilitate the provision of information as an input into networks
  • help to bring the right parties together in co-operative activities so they can build trust
  • stimulate knowledge exchange between the various actors within networks and clusters
  • use direct intervention - for instance, in the form of R&D support - when there are clear market or systemic failures or when the private sector alone cannot undertake the task
  • act as a demanding customer, such as in relation to standards and procurement
  • strengthen co-operation between science and industry.

EXISTING PROGRAMMES

Several strands of government work are already underway to improve New Zealand's performance in the area of collaboration and networking:

  • MED's recent engagements with small firms, such as through the Small Business Days, have highlighted the need for further improvement in collaboration within government to ensure that its interactions and communications with firms are better co-ordinated. This will be addressed as part of the government's overall effort on whole-of-government alignment.
  • The Regional Partnerships Programme (RPP) has been performing well in terms of building local economic development capability and governance, and developing partnerships and networks, and institutional linkages. Suggested areas for enhancement include improving alignment and integration across regional development programmes, the ability of Māori to engage with the RPP and more flexibility in programme funding to incentivise collaboration among smaller regions. The suggested improvements are now being implemented.
  • An Incubator Support Programme promotes best practice among incubators in New Zealand, enhances networking among members of the incubator network and facilitates access among incubator tenants to other government programmes, where appropriate. Thirty-eight funding awards have been made to 18 incubators since the programme was started in 2001. An industry association, Incubators New Zealand, has now been established to promote the industry and support incubators in New Zealand. This should provide incubators with collective ownership of their development and a sustainable structure to maintain their industry.
  • The Beachheads Programme assists companies in specific sectors to establish a presence in global markets through the establishment of forward offshore marketing bases, and sharing of the costs of accommodation and a business development manager. This allows them to reduce the risks/costs associated with establishing a presence close to their customers and/or suppliers. Beachheads have so far been established in Singapore (ICT and high-tech), London (high-tech), Silicon Valley (ICT) and Fort Lauderdale (marine).
  • NZTE is moving to focus its resources on targeted global opportunities for New Zealand firms and opportunities for New Zealand firms to form strategic partnerships with international organisations.
  • MED, Ministry of Foreign Affairs and Trade (MFAT) and NZTE (with other parts of government) are working, within the context of the Closer Economic Relations agreement with Australia and trade negotiations with other countries, to identify and facilitate opportunities for further networks and collaboration with other countries like Australia and China.
  • MED and NZTE are planning to extend their work with sectors, aimed, among other things, at increasing networking and collaboration within each sector and between the sector and government organisations.
  • MED is working with the Kiwi Expat Association (KEA) to further develop and exploit global networks based around expatriate New Zealanders.
  • MED and NZTE are planning to examine how to make the Enterprise Development Fund and Growth Services Fund more flexible for assisting collaborative initiatives.
  • MED and the Ministry of Research, Science and Technology are planning some research work to improve our understanding of the drivers of and incentives for collaboration and linkages, both between firms, and between firms and other institutions.
  • Te Puni Kōkiri is working with Māori business networks to support their sustainability and to promote strategic alliances, including alliances between these networks and mainstream business networks.

WPWG RECOMMENDATIONS

In recognition of our findings outlined above, and to supplement the activities and processes that are already in place, we recommend the following actions:

Awareness raising

58. Identify the full range of networking and collaborative opportunities and mechanisms already available and ensure firms are aware of how to use these effectively.

59. Identify and disseminate examples of best practice in networking and collaboration and case studies showing the resultant benefits.

60. Explore the scope for using employer and employee organisations as complementary mechanisms to help spread key awareness messages.

Diagnostic tools

61. Review whether existing tools to diagnose business capability are putting sufficient emphasis on the extent to which firms are utilising networking and collaboration both within New Zealand and internationally and adapt these tools, as necessary, to ensure that they are including this emphasis.

Research and evaluation

62. Review whether the impact and reach of existing firm capability services (in addition to the Enterprise Development Fund and Growth Services Fund) could be increased by adding further networking and/or collaborative elements to spread the benefits beyond the primary beneficiary.

63. Undertake more detailed research into why networks are established and, more particularly, what constitutes best network design and operation, particularly in relation to enhancing productivity.

CASE STUDY: KIWI EXPAT ASSOCIATION PROVIDES POSITIVE LEADS FOR BATTERY BREAKTHROUGH

A breakthrough battery technology developed in New Zealand and being marketed to the world by a company of expatriate New Zealanders is attracting strong interest from military and consumer electronics firms in the United States.

The revolutionary zinc battery technology, which lasts much longer than existing types of batteries, was developed by the Nanomaterials Research Centre at Massey University in Palmerston North and has been exclusively licensed to purpose-built San Francisco company Anzode.

Anzode Chief Executive Chris Officer, a former Massey University graduate and staff member, first learned of the breakthrough when visiting in 2003 and immediately recognised the technology was almost market ready and would be extremely attractive to investors.

However, Mr Officer, a US resident, had to acknowledge the technology was outside his expertise. While struggling with a way forward, he was invited to a meeting of the Silicon Valley chapter of Kiwi Expat Association (KEA), where he met people who helped him structure the company, secure the technology, protect the intellectual property and work out the commercialisation strategy, including obtaining early funding.

KEA member John Ritchie, a San Francisco lawyer, quickly convened a meeting of an impromptu advisory group. Linda Jenkinson, who had vast experience starting companies in the US, offered invaluable advice, and Howard Moore, who was in the final stages of taking a New Zealand-originated company to initial public offering (IPO) in the US, provided guidance and ultimately became chairman of Anzode.

"As a result, I talked to a wide range of experienced and connected New Zealanders who helped shape my thinking. At the end of this process, I had secured enough funding to get through the negotiation process with Massey University and secure the technology," said Mr Officer.

This case study was reproduced with the permission of the Kiwi Expat Association - see www.keanetwork.com.

5.8 Measuring what matters - findings and recommendations

Key performance indicators should be appropriate to people's level of control, within their sphere of influence and in their language.

Alan Bennett, Fonterra, WPWG Workshop, May 2004

DISCUSSION

Workplace productivity measurement and reporting tools assess workplace productivity performance and use the findings to assess the success of an organisation's strategies. Measurement and reporting on the firm's performance is integral to realising the productivity potential of a firm's use of other drivers of workplace productivity.

There is some New Zealand evidence that good measurement and reporting practices affect business performance. MED research[60] shows that New Zealand firms are using a broad range of indicators to measure their performance. This research:

  • suggests high performance is associated with close monitoring of competitors' products (through benchmarking), a focus on financial performance and measurement of employee satisfaction; however, there is heavier emphasis on assessing performance in terms of financial or quality measures than in areas that might provide an earlier indication of performance (and any problems), such as human resource or innovation measures[61] - only around a quarter of firms give a "great deal" of attention to these measurement areas
  • shows that only 2% of those New Zealand organisations surveyed are undertaking best practice benchmarking, although 48% are undertaking performance benchmarking - by comparison, various American and European studies suggest that between 60% and 88% of US and European firms undertake benchmarking.

One reason for this may be that many New Zealand firms still do not understand how to use external measures, and even if they do, they do not have the time and/or resources to do it properly.[62] This includes identifying the key processes and indicators that a firm compares itself against, identifying suitable comparator firms and getting access to the comparator information. This is despite a range of software and online tools that can make measuring and collating certain types of information easier, which may suggest an accessibility issue.

WPWG FINDINGS

In looking at the issue of workplace productivity measurement and reporting, we have come to the following conclusions:

  • Good measurement and reporting practices are linked to assessment of an organisation's strategy and how to better achieve strategic objectives.
  • There is no one right way to undertake measurement. Firms must choose a form of measurement, either internal and/or external, and a form of reporting that best meet their information needs.
  • There needs to be a commitment to measurement throughout the firm and to communicating the results of the measurement in a way that relates individual and team performance to the overall business performance.
  • There is no definitive evidence of the scope or effectiveness of measurement and reporting practices in New Zealand.

While MED has undertaken some investigation of measurement and reporting practices in New Zealand firms, we do not have a definitive picture of the nature or extent to which firms undertake these activities.

We lack information on how firms decide to undertake measurement activities and how they choose relevant measurement indicators. There is also a research gap in terms of evidence of whether best practice monitoring makes any difference to firm performance, how best practice is determined and what the barriers are to firms using best practice, especially if it makes a significant difference to their performance.

EFFECTIVELY MEASURING AND REPORTING ON WORKPLACE PRODUCTIVITY

Workplace productivity measurement and reporting is not a new concept, with many firms already undertaking measurement activities. The main challenge in effectively measuring and reporting on workplace productivity is whether measurement practices are tailored enough to provide effective information for a firm to make good productivity decisions.

High performing firms tend to take a balanced approach to performance measurement, including developing finance, cost, market/quality, process, staff and innovation indicators.[63] Key considerations for applying "good" measurement and reporting practices are as follows:

Measuring what matters

  • Measurement practices need to be linked to achieving the firm's strategic objectives, and management decisions and communication needs to take into account the information that is being provided. Good measurement can assist in leading and managing change, especially at transition points.
  • Indicators should be selected that provide practical and useful information.[64] Measuring those processes with the greatest potential value for organisational improvements is as important as measuring to reducing costs.
  • Measurement and reporting also need to be tailored to the individual firm and to balance both qualitative and quantitative factors, including finance, organisational culture and human capital. Some examples of measurement and reporting include return on investment measures for skills development, culture assessments and follow-up assessments of change.

Involvement

  • Measurement needs to be simple and understandable so that all levels of a firm can understand what the results mean in relation to their own personal or team performance and how their performance contributes to the organisation's overall performance.
  • Targets can be broken into sub-targets that relate to individual or team areas of responsibility. Employees should be involved in designing an organisation's key performance indicators.
  • Importantly, people need to be able to trust the information about the targets to which they are contributing. Measurement need not be subservient to culture but can help to inspire an objective-based culture.

Different firms will have different needs

  • While "good" measurement practices tend to include particular criteria (as outlined above), different firms will have different measurement needs. For example, SMEs may choose to use data collection processes and measurement practices that focus on a few key indicators, due to the labour intensity of measurement activities relative to their workforce or turnover.
  • A range of internal and external measurements, such as benchmarking, participation in business excellence awards, and sustainable development reporting, is available. Customisation of these measurements will ensure that the information meets an individual firm's specific needs.
  • Firms that choose to undertake external assessment will need to find suitable partners. The identification of appropriate partners may be costly. However, these partners need not be within-industry partners. For example, the effectiveness of a real-time data collection process in the transport sector might be assessed against a similar process in a manufacturing production line.

EXISTING PROGRAMMES

MED offers a benchmarking tool for firms on its website, based on the Business Practices and Performance Survey (2001). In addition, Statistics New Zealand offers a range of information that firms can use for benchmarking purposes.

NZTE also supports the development of measurement and reporting systems through its Enterprise Development Fund and Growth Services Fund. Grants through these funds are available for developing and implementing improvement strategies, including ISO 9000 and systems evaluation and development.

In addition, there are public sources of information and support on measuring and reporting available to firms. For example, the Business Performance Improvement Resource (BPIR) (www.bpir.com) offers a wide range of information and a model that firms can use to implement measurement and reporting practices specific to their line of business.

WPWG RECOMMENDATIONS

In recognition of our findings outlined above, and to supplement the activities and processes that are already in place, we recommend the following actions:

Awareness raising

64. Raise awareness of the value of measurement and reporting as an integral part of workplace productivity strategies.

65. Develop greater accessibility to both public and private information and other resources available to assist firms in measurement and reporting activities.

Diagnostic tools

66. Provide diagnostic support to assist firms in getting started on measuring and reporting.

Research and evaluation

67. Undertake further research to better understand:

  1. the type of measurement and monitoring that is effective in identifying good performance
  2. the nature of measurement and reporting practices in New Zealand and how good measurement practices contribute to increased workplace productivity, such as the Ministry of Economic Development continuing to include questions relating to measurement practices in its business practice surveys
  3. the determinants of firm performance using good microdata and research techniques.

CASE STUDY: FONTERRA CO-OPERATIVE GROUP LTD

Fonterra is the fourth largest dairy company and the second largest milk processor in the world, with revenues of over US$8 billion, 20,000 staff worldwide, major operations in 40 countries and sales to more than 100 countries. Within New Zealand, Fonterra is owned by more than 12,000 farmer shareholders, is responsible for 22% of New Zealand's total exports and has 26 manufacturing sites (18 in the North Island, eight in the South Island).

In 1999, the General Secretary of the Dairy Workers Union (DWU) identified a shop-floor based improvement methodology in Australia. The DWU believed this represented an opportunity for upskilling its members, increasing the scope of their roles and providing long-term sustainability for Fonterra and, therefore, DWU members. Kiwi Dairies bought a licence for this methodology and started implementing it at Whareroa in 2000. Kiwi Dairies named the initiative Manufacturing Excellence (ME), and when Fonterra was established, a decision was made to undertake a controlled roll-out across the organisation. The key philosophy behind ME is that it is a joint DWU/Engineering Printers and Manufacturers Union (EPMU)/Fonterra initiative.

As a part of the ME initiative, Fonterra implemented a Visual Performance Measurement (VPM) system, which is based on identifying key performance indicators for each work team (based on the firm's key drivers and the major losses in the area), agreeing with the team on improvement objectives and providing them with visual, short-cycle feedback on their performance against these objectives.

The VPM gives the team visibility on their performance and improvements, establishes a drive for improvements, ensures timely corrective action at source, gives the team ownership and accountability for their performance, makes the workplace transparent and empowers the work teams with information to make decisions. Staff involvement is also integral to the way the performance measurement is used.

on to Appendix 1: Workplace Productivity Working Group Membership


[17] Westpac Economic Overview, July 2004, page 2.

[18] Ministry of Economic Development (2004) SMEs in New Zealand: Structure and Dynamics, Wellington.

[19] Mills D and Timmins J (forthcoming) Firm Dynamics in New Zealand: Comparative Analysis with OECD Countries, Working Paper, Wellington, New Zealand Treasury.

[20] For example, as a result of the proposed review of the ownership body’s purpose and effectiveness, in the longer term, the ownership body may shift to more of a monitoring and supporting body.

21 Knuckey, S and Johnston, H (eds) (2002), Firm Foundations: A Study of New Zealand Business Practice and Performance, Ministry of Economic Development, Wellington, page 59, Figure 14, Employee Practices.

22 This should be a first step that precedes the development of more comprehensive diagnostic tools, as well as the expansion of these tools to be targeted at different types of firms or made more industry specific (as recommended under “Ongoing Research and Evaluation”).

23 The Institute of Professional Engineers New Zealand Inc. (2004), Growing Smartly – A Review of National Policies for Fostering Research, Development, Innovation and Entrepreneurship in New Zealand.

[24] For example, the contribution of innovative ideas, a better public profile improving recruitment chances and improvements.

[25] Waldegrave T, Anderson D and Wong K (2003) Evaluation of the Short Term Impacts of the Employment Relations Act 2000, Department of Labour, Wellington, page 43, available at www.dol.govt.nz/PDFs/ERA%20Evaluation.pdf.

[26] Growth and Innovation Advisory Board (2004) The Report on Research and Growth in Innovation, available at www.giab.govt.nz/work-programme/growth/research-summary/research-summary.pdf.

[27] Employee responses are rated on a scale of 1 to 10.

28 OECD (1998), Human Capital Investment: An International Comparison. These statements reference OECD (1994) “The OECD Jobs Study, Evidence and Explanations” and Black, S and Lynch, L (1996) “Human Capital Investments and Productivity”, American Economic Review.

29 The focus of the Working Group means we emphasis the benefits of lifelong learning for driving a stronger economy, and benefiting workers and firms. We recognise that the concept of lifelong learning is far broader, and must also focus on the intrinsic benefits and qualities of education.

[30] The Institute of Professional Engineers New Zealand Inc. (2004) Growing Smartly – A Review of National Policies for Fostering Research, Development, Innovation and Entrepreneurship in New Zealand.

31 There are many possible reasons for mismatches, including the time it can take to develop courses and qualifications that meet immediate business needs, different understanding between firms and providers on whether a training course will meet a firm’s needs and difficulties employers had understanding how to access the tertiary education system arising from its complexity.

32 International Adult Literacy Survey, which was conducted in New Zealand in 1996. In practical terms, that means they couldn’t normally calculate the total cost of a purchase from an order form or be able to find a specific intersection on a street map. There is a concentration of those with low levels of literacy among the unemployed and in primary and manufacturing sectors of the economy.

33 In New Zealand, firms with fewer than 20 employees are normally regarded as SMEs. This is smaller than in other jurisdictions where firms with 50 or 100 employees may be regarded as SMEs.

[34] There is some evidence that private sector R&D spending has been increasing recently, and the challenge is to sustain these improvements.

35 Most of these findings are set out in a literature review and stakeholder survey undertaken by the Small Business Fund.

36 A study conducted using data from businesses in the UK, US, France and Italy concluded that the marginal productivity of labour does not change significantly if new technologies or changes in work organisation are introduced separately. Cristini, A, Gaj, A, Leoni, R, “The Gains from Investing in Workplace Organisation”, 2003.

[37] Statistics New Zealand (2004) Innovation in New Zealand 2003, available at www.stats.govt.nz

38 Galbraith, J, Downey, D and Kates, A (2002), Designing Dynamic Organisations.

[39] OECD (1998) Human Capital Investment: An International Comparison. These statements reference OECD (1994) The OECD Jobs Study, Evidence and Explanations and Black S and Lynch L (1996) “Human Capital Investments and Productivity”, American Economic Review.

[40] The focus of the Working Group means we emphasise the benefits of lifelong learning for driving a stronger economy and benefitting workers and firms. We recognise that the concept of lifelong learning is far broader and must also focus on the intrinsic benefits and qualities of education.

[41] Report of the Business New Zealand Skills and Training Survey 2003: Findings of research conducted by Business NZ and the Industry Training Federation of NZ for the Future of Work Research Programme, Department of Labour, June 2003.

42 Campbell-Hunt, C and Corbett, L (1998), “The Path to Competitive Advantage: Strategic Development in New Zealand Businesses during the 1990s”, School of Business and Public Management, Victoria University of Wellington; Chapter 2 of Yeabsley, J (ed) (2001), Global Player? Benchmarking New Zealand’s Competitive Upgrade, NZIER Research Monograph 67, Wellington.

43 Knuckey, S and Johnston, H (eds) (2002), Firm Foundations: A Study of New Zealand Business Practices and Performance, Ministry of Economic Development, Wellington.

44 OECD (1999), Managing National Innovation Systems, page 61.

45 Knuckey, S and Johnston, H (eds) (2002), Firm Foundations: A Study of New Zealand Business Practices and Performance, Ministry of Economic Development, Wellington.

46 Financial performance indicators are often out-of-date, not leading indicators from a business improvement perspective and can lead to short-term investment decisions.

[47] Source: Budget Economic and Fiscal Update 2004.

[48] Source: TEC Statement of Intent 2003/04 to 2005/06.

49 Critical questions that firms need to ask about performance information are: is the information useful and relevant? – information on performance should be based on the need to manage processes better, meet stakeholders’ needs, track the business against goals and targets, or act strategically; do firms get the performance information they need when they need it?; is the information accurate or is it too approximate?; is it analysed and summarised or in a form that is easy to use?; is everyone in the firm working off the same performance information and is it available to all staff that need to use it?

50 Katherine was supported by Carla White, Acting Chief Executive of Workbase.

[51] Galbraith J, Downey D and Kates A (2002) Designing Dynamic Organisations, Amacom, New York.

[52] Ibid.

53 Peter replaced Jeremy Corban as the Treasury’s representative on the Working Group.

54 The Ministry of Economic Development (MED) has undertaken a review of firm practice in its publication Firm Foundations. It groups firm practices under the following headings: Leadership and Planning, Employee Practices, Innovation and Technology (all to be investigated by WPWG); Customer focus, Quality and Supplier focus; Information and Benchmarking; and Information Technology. Successful firm practice is often about more than any particular policy; rather it is about how the practices work together.

55 This is being examined separately by MED and so should be seen in the context of specific skills that are acting as barriers to the adoption of high performing practices.

[56] Statistics New Zealand (2004) Innovation in New Zealand 2003, available at www.stats.govt.nz/NR/rdonlyres/BC5F8BB8-A0B1-4456-B841-1EB04A1AE5F2/0/innovationinnz2003.pdf.

[58] Knuckey S and Johnston H (eds) (2002) Firm Foundations: A Study of New Zealand Business Practices and Performance, Ministry of Economic Development, Wellington.

[60] Knuckey S and Johnston H (eds) (2002) Firm Foundations: A Study of New Zealand Business Practices and Performance, Ministry of Economic Development, Wellington.

[61] Financial performance indicators are often out of date, not leading indicators from a business improvement perspective and can lead to short-term investment decisions.

[63] Examples of these indicators are: finance and cost indicators – revenue, profit and loss, cash on hand, return on investment, cost per unit, inventory costs; market/quality and process indicators – customer satisfaction, customer complaints, market share, comparisons with competitors, response time, returns and rework, percentage on time; staff indicators – staff satisfaction, staff turnover, skills development, absenteeism, morale; innovation indicators – investment in new products and services, cycle time, research and development expenditure.

[64] Critical questions that firms need to ask about performance information: