People-managing our way to productivity
The symptoms of economic decay in New Zealand are clear. Productivity is low and falling; our gap with Australia is large and rising. We spend more hours at work yet produce less value per hour. Commentators, business leaders and politicians lament our productivity and wonder grandly where our Next Big Opportunity might lie: in minerals, or protein or green technology. But, as the great English economist John Maynard Keynes said, economists should be humbly useful, “like dentists”. Dentists don’t just describe the decay: they offer a cure.
Two research groups’ recent studies excite me by way of potential diagnosis and treatment. First, Nicholas Bloom and John Van Reenen of Stanford and the London School of Economics have diagnosed a striking correlation between specific management skills and productivity. They find that management practices can account for a third of the differences in productivity between firms and countries. Secondly, Roy Green and Renu Agrawal have applied that index locally. The results? New Zealand ranked low to middling overall and spectacularly poorly at people management. Specifically, New Zealand managers are amongst the worst in 16 countries surveyed at retaining, promoting and nurturing talent.
When did you last hear “talent” mentioned in your workplace? High-scoring countries like the US do things Kiwi managers may have never heard of. Senior managers hold “talent meetings” on how to retain high performers. Firms reward managers for recruiting talent. In high-productivity workplaces, an integral part of being a talented manager is recognising that managers themselves are not the main talent: they are the talent managers.
Our universities provide a world-class education, as The University of Auckland’s rankings reflect. But if our workplaces cannot handle talents, then our best graduates will depart for countries that can. In a cross-country comparison, Australia scored significantly more highly on talent management. In contrast, graduates staying in New Zealand find a workplace that promotes on the basis of tenure or friendship and an overhang of underperforming baby-boomers.
So what about treatment? First, we must change managers’ overwhelming self-belief. The average New Zealand business founder rates the chances of his business surviving at 75 percent and other businesses’ chances at 52 percent; the real rate is 42 percent. Managers need to realise that poor people management can sink start-ups and old businesses alike.
Government and researchers must lead the way to develop simple management training and education interventions that can lift firm productivity. Management consulting firms also need to validate their interventions. There are too many marketing, consulting and HR practitioners who follow fads rather than science.
So, my proposal to remedying the decay is to moot that both the problem, and the Next Big Opportunity, for New Zealand’s productivity – and, perhaps, for its retention of graduates – lie partly in how our workplaces manage the talent that our universities grow. Maybe that is the most apt economic reading of the beautiful motto “He tangata, he tangata, he tangata” – “It is the people, the people, the people”.
Associate Professor Rhema Vaithianathan is the director of The Centre for Applied Research in Economics [CARE] in the Business School’s Department of Economics