Australian businesses must invest in their workforce to unlock $305 billion in lost productivity, report warns

The Australian economy is losing as much as $305 billion due to lost productivity, a study from Ernst & Young has revealed.

Surveying staff and ensuring a more engaged workforce should be on the top priority list for SMEs hoping to unlock that potential, the report warns.

The Ernst and Young Australian Productivity Pulse released today found four in five Australian workers could be 21% more productive in their roles, equating to $26,300 per worker of unrealised productivity.

The study found four in five Australian workers could be more productive, with the main obstacles being staff engagement, well-being, motivation, reward and workplace recognition.

Ernst and Young Oceania advisory partner Neil Plumridge told SmartCompany businesses must invest more in ensuring their employees are engaged in order to unlock that potential.

“It’s seen as soft and fluffy and the responsibility of the HR department, but this view is narrow sighted, a highly engaged workforce means a more profitable workforce,” he says.

Plumridge says the best way for a business to measure and improve engagement is to regularly survey its staff.

“The best organisations don’t just rely on annual or biannual surveys, they actually track employee engagement regularly, every month or every quarter. It measures the discretionary effort employees are prepared to give,” he says.

The report’s national productivity average increased from 7.25 to 7.5 over the past year, but plateaued from a high of 7.58 in August last year.

Plumridge says businesses have already felt the productivity gains from “tightening the screws” to adapt to new market conditions and now the stress of some of these measures are reversing some of the productivity gains.

“There is a bit of change fatigue through corporate Australian and businesses generally across the country. They’ve been going through a period of outsourcing, restructuring and cost-cutting.”

“People are working hard, but they’re just not producing any more than this time last year,” he says.

Plumridge says it’s the responsibility of management to alter these patterns and ensure they increase productivity.

“There is no silver bullet, it’s a mixture of many things.”

“All employees should be encouraged to stretch themselves and develop their skills and reach their potential.”

“The second thing is executives must ensure workers’ skills are matched to the job. There are around 400,000 people in Australia who have skills which are either under or over-qualified for their position.”

Thirdly, she says, there are too many parts of an organisation which still require manual labour.

“There is still a lot of form filling and bureaucracy and while businesses complain about red tape, there is some truth to this, but business managers have also done it to themselves,” he says.

The report also found the most productive state is Tasmania, with a productivity average of 7.48 while New South Wales trails behind as the least productive state with a rating of 7.35.

Plumridge says at the current rate, it would take Australia 20 years to reach its potential, a timeframe which is “way, way too long”.

“The world is changing, our competitors are getting more aggressive and productive, and we’re facing some huge challenges in terms of our demographics and production costs so there’s an imperative for faster and higher levels of productivity.

“We must get our acts together and bring forward our potential by five or 10 years,” he says.