Let’s get practical about productivity

The head of macroeconomics at the Federal Treasury, Dr David Gruen, might not be welcome on the shop floor of his local family-run manufacturing business any time soon after his comments on the productivity of small, family-run manufacturers.

“Australian manufacturing has a larger proportion of very small firms with fewer than 20 employees than almost all other Organisation for Economic Co-operation and Development countries”, he told an economists’ conference earlier this week.

“Family-run businesses tend to exhibit inferior management performance.”

Yesterday’s story about Gruen’s comments certainly sparked some commentary from our readers, who didn’t take too kindly to being told by a bureaucrat that they are, in part at least, dragging down the nation’s productivity.

But putting aside a few barbs about ivory towers, I reckon there were a few hints from our commenters that Gruen does have a point.

All SMEs would like to do more to lift productivity, but it’s not easy. As many of our readers pointed out, there are many daily challenges in running a business, particularly dealing with an extremely difficult economic environment and what feels, to many, like an increasing compliance burden.

But the question that is so difficult to answer is: How could we help to boost productivity throughout the SME community?

Gruen and other economists typically take a top-down view of productivity – a view across the entire economy.

That’s fair enough, but that’s often where the debate ends. The result is that productivity has become a very vague term. What does it actually mean for an SME?

That depends on the business you’re in, the experts will tell you. Productivity looks different to a manufacturer and a retailer and a butcher and IT services business.

Fair enough, I’m not knowledgeable enough to argue.

But instead of turning productivity into an ambiguous term, why doesn’t the government and the business community invest time, money and resources into trying to giving SMEs the tools to define what productivity looks like in their business.

What would that look like? I’m not sure.

Maybe it’s as simple as sets of definitions, ratios, checklists and tools for different industries, such that SMEs can actually get a feel for what they need to improve and how they can get there.

Maybe it’s consultants walking the streets, popping into businesses, doing an assessment and setting a few areas to improve in.

Maybe it’s instructional videos. Heck, we’d love to run a big fat series of webinars to help SMEs really tackle this problem.

I’m not saying I’ve nailed the exact way to lift SME productivity, but what I am talking about is a focus on the practical rather than the theoretical.

Instead of fighting the war to lift productivity from the top down, could government and business fight it from the bottom up? Let’s take the war business-to-business, with practical, tangible solutions for SMEs. Perhaps David Gruen can lead the charge, starting with those family businesses…