Productivity has become one of the most important economic and business conversations in Australia.
The Treasurer is talking about it, the Productivity Commission is examining it and business groups are advocating for reform. For good reason. Productivity growth ultimately determines living standards, wages growth, competitiveness and our ability to attract investment.
There is a risk in the way we discuss productivity. Too often we frame it as something government must solve. Tax settings matter, regulation matters and investment settings matter, but productivity is not created in Parliament.
It is created inside organisations. Every day, leaders make decisions about how work is organised, how technology is deployed, how people are developed and how resources are allocated. Those decisions collectively determine whether organisations become more productive or less productive. Government can create the conditions for success, yet business must create the outcomes.
One of the most interesting findings from the Productivity Commission’s work is that only a very small percentage of businesses operate at the frontier of innovation. Most productivity gains do not come from breakthrough inventions or world-first technologies. They come from adopting proven ideas, management practices, technologies and operating models that already exist.
In fact, the Productivity Commission’s landmark five-year inquiry found that only one to two per cent of Australian businesses innovate in ways that are genuinely new to the world. The Commission described the challenge as “Innovation for the 98 per cent” and estimated Australia’s productivity would have been around seven per cent higher had businesses done more to adopt proven practices and technologies already in use elsewhere.
That finding should fundamentally change how we think about productivity. Australia’s challenge is not simply innovation. It is adoption.
At a recent Abundium dialogue with Productivity Commissioner Martin Stokie and leaders from multinational businesses, the discussion reinforced that significant productivity gains remain available through better leadership, management and operating practices alone. The question is not whether productivity can improve. The question is what business leaders should do to make it happen.
1. Make Productivity a Leadership Priority
Productivity is often viewed as an operational issue or something that sits within finance, technology or government policy. In reality, productivity starts with leadership. The most productive organisations are usually those with leaders who are relentlessly focused on improvement, challenge established ways of working and create a culture where innovation and efficiency are everyone’s responsibility.
Leadership teams should be asking themselves a simple question: if productivity growth is critical to Australia’s future prosperity, what are we doing inside our own organisations to improve it? The answer should extend well beyond cost-cutting exercises and annual budgeting processes. Productivity needs to become part of organisational culture and leadership accountability.
2. Adopt Proven Practices Faster
The Productivity Commission’s findings suggest that Australia’s biggest opportunity may not be invention but adoption. Many of the productivity gains available to Australian businesses already exist in other organisations, industries and markets. Leaders should spend less time searching for the next breakthrough and more time identifying proven practices that can be adapted and implemented within their own organisations.
For multinational businesses, this is particularly relevant. Every day, global companies transfer ideas, technologies, leadership frameworks, management disciplines and operating models across markets. Many of the productivity gains Australia needs already exist. The challenge is identifying them, adapting them and implementing them more broadly across our economy.
3. Invest in Better Managers
The Productivity Commission has also highlighted another challenge that should concern business leaders. Skilled managers who can identify, adopt and implement better practices remain in short supply. If adoption is the challenge, leadership capability becomes one of the most important productivity investments any organisation can make.
Too often organisations invest heavily in systems and technology while underinvesting in management capability. Yet managers influence how work is performed, how teams collaborate and how effectively change is implemented. Better managers create more productive organisations because they are often the people responsible for turning strategy into execution.
4. Remove Complexity
Another theme that emerges consistently in conversations with business leaders is complexity. Productivity is frequently lost not through a lack of effort, but through unnecessary layers of process, approval and administration. Many organisations have accumulated systems and ways of working that may have made sense at one point in time but now create friction, delay decision-making and consume valuable management attention.
The highest-performing organisations are often distinguished not by what they add, but by what they remove. They simplify. They empower decision-making. They eliminate low-value activity and focus relentlessly on the work that creates value for customers, employees and shareholders.
Leaders should regularly challenge every process, approval and reporting requirement by asking a simple question: does this create value or simply create work?
5. Use Technology to Redesign Work
Technology continues to dominate productivity discussions, particularly with the rapid emergence of artificial intelligence. Yet the organisations extracting the greatest value from AI are rarely those with the most advanced technology. They are usually the organisations with leaders willing to redesign processes, rethink workflows and embrace new ways of working.
Technology matters, however technology alone rarely delivers transformation. Productivity gains occur when technology is used to fundamentally improve how work is performed, not simply automate existing inefficiencies. The leaders who gain the greatest advantage from AI will not be those who deploy the most tools, it will be those who use technology to rethink how value is created.
Australia absolutely needs a national productivity agenda and government has a critical role to play. Productivity is too important to be viewed solely through a policy lens. The most productive organisations do not wait for perfect conditions. They continuously improve how they operate, develop their people and adopt better ways of working.
If Australia is serious about improving productivity, the conversation must extend beyond Canberra and into boardrooms, executive teams and workplaces across the country. The most important productivity question facing Australia is not simply what government should do next. It is what business leaders should do next.
Because productivity is not something that happens to business. It is something business creates.
Written by Rich Hirst.
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