a composite image of 9 different industry sectors
The Double-edged Sword: Which sectors support a higher Productivity – Myths and Hard Truths about New Zealand’s Low Productivity
July 31, 2023
an add showing the details of the Tauranga workshop
Tauranga Workshop – The Aeroplane Game© Simulation
August 4, 2023
a composite image of 9 different industry sectors
The Double-edged Sword: Which sectors support a higher Productivity – Myths and Hard Truths about New Zealand’s Low Productivity
July 31, 2023
an add showing the details of the Tauranga workshop
Tauranga Workshop – The Aeroplane Game© Simulation
August 4, 2023
Show all

Is Our Productivity Measure too Crude?

a golden ring surrounded by productivity measures

From the beginning of our series on the myths and hard truths of New Zealand’s low productivity, we’ve stressed the limitations of our current productivity measure. In our first episode in this series we wrote: “Productivity is measured here as GDP per FTE (or hour worked). It’s a crude and single-focus productivity measure…” We also explained the link between Productivity and Wellbeing (better than the politicians or the New Zealand Productivity Commission itself, we say in our not-so-humble opinion).

The current productivity measure supports the indefensible concept of limitless growth. Thus, since the release of the New Zealand Productivity Commission 2023 Productivity Data, we’ve emphasised the measure of GDP per FTE itself is a myth if one thinks it defines the state of our nation’s economy. Yes at 68% productive output while working 5% more hours compared to the OECD, this narrow result is not good. Yet we often perform well in other international rankings, for example, the Human Development Index, in the Ease of Doing Business report, and the Corruption Perception Index.

In a complex world, a simple measure to define the state of current affairs for a sector, region or country is appealing, but unrealistic, with too many externalities. The ‘one ring to rule them all’ from JRR Tolkien’s Lord of the Rings springs to mind: mythical. In some situations, a simple measure is appropriate: GPD per FTE is in fact a simple composite measure. But take the various other factors of productivity, an all-encompassing composite productivity measure will be too difficult. Imagine the debate on what should be in or out, what the weightings need to be, how we standardise, how we aggregate! The definition and data collection alone will take forever, and a disproportionate amount of time spent of measurement and interpretation (in lieu of taking targeted action) is the hallmark of unproductive organisation or institution.

So, our call to replace the crude GDP/FTE measure… Our solution is far too considered for politicians and pundits who want to score points, too intellectual for the biased populists who want only two buttons to press, and too confronting to those who favour the short-term over the sustainable. We should assess the state of productivity in our nation the same way a world-class business is assessed: by using a balanced scorecard approach.

The Productivity Balanced Scorecard of Aotearoa (PBSoA) should address our concerns of economic growth, of the sustainable use of resources, of the wellbeing of the participants in the value-creation process, the utilisation of our assets, and any other wasteful and inefficient aspects of our economy, to name a few.

Every good balanced scorecard has (equal) consideration for each stakeholder: the shareholders, the customers, the people, and the community. It should contain a limited but enough measures, with easy red/green interpretation for action taking and rebalancing.

Dr Ganesh Nana and the New Zealand Productivity Commission, is this too big an ask? Can I call on you and your team to develop the PBSoA as a better productivity measure? Imagine we call interpret in 3 seconds what aspects are going well, and where we need improvement?

Next time: The last in our series on New Zealand’s low Productivity, where we summarise our findings and call for action.

About the author: Geerten Lengkeek is the Managing Director of Productivity People