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a graph comparing hours worked for several OECD countries
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graphs showing GDP per hours worked
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a graph comparing hours worked for several OECD countries
We’re not Working Harder than Ever, but Harder than Everyone Else – Myths and Hard Truths about New Zealand’s Low Productivity
July 24, 2023
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We’re as Small, but not as Good as the Others – Myths and Hard Truths about New Zealand’s Low Productivity

A graph comparing GDP per hour worked for OECD countries

Only a fair comparison will give us the insights to improve New Zealand’s Low Productivity. In this third article in our series on myths and hard truths on our low productivity, we further unpack our productivity gap: we’re at 68% of productive output compared to the other OECD countries. But that is against all OECD nations, large and small. Can we realistically compare ourselves with the USA or the larger European economies? Enter the small advanced economies, and their Frontier Firms.

In David Skilling’s report prepared for the New Zealand Productivity Commission in May 2020, called: ‘Frontier firms: An international small advanced economy perspective’ he makes a compelling case for the comparison of Aotearoa/New Zealand against other small advanced economies.

Dr Skilling explains: “… the performance of internationally oriented sectors is central to the performance of small advanced economies. Productivity performance in the domestic economy is constrained in small advanced economies, because the small size of the market limits competitive intensity as well as opportunities for scale and specialisation. However, firms in internationally oriented sectors that scale into international markets are much more likely to be close to the productivity frontier.”

Frontier firms bring in foreign earnings and play a crucial role in driving economic growth and productivity improvements. They serve as benchmarks for other firms, creating a competitive environment that spurs productivity gains across the sector and the broader business landscape. Their staff move the other organisation in- and outside their sector and replicate their learnings for their new employer or become entrepreneurs and start their own firm based on their learnings. Frontier Firms are a competitive player in foreign markets, against firms of other small (and large) advanced economies. And competitive means they are better than anyone in giving the customer what they want most.

This means we can (and need to!) learn from New Zealand’s Frontier Firms, the obvious big international ones being Fisher & Paykel Healthcare, Fonterra, Xero, and Rocket Lab. But smaller and lesser-known regional Frontier Firms such as Bluelab Corporation, Escea and FI Innovations are formidable examples too, well worth learning from.

What sets these Frontier Firms apart? Apart from the individual markets they play in, the product/service niche they have found, they all have an understanding, appreciation, and targeted investment programme for HOW they run their business operations. They record and refine their business management systems, where their people are engaged in the process of continuous improvement every day. Small incremental change by everyone every day, combined with disruptive step-change targeting big opportunities. A line of sight for everyone to the mission and the goals. And no one beats them on rigour and relentlessness.

So, who can we ask for help? The major political parties appear to generally agree on the concept of ‘Frontier Firms’, but neither colour of government has been able to take effective action over the past decades of decline. But successful entrepreneurs don’t wait for government action, they take their own action, shape their own future. What action are you going to take to learn about Frontier Firms, and how will you make your business and your sector more productive?

If you would like to see the data for yourself, the Productivity Commission has provided access for everyone here: https://nzpc.shinyapps.io/pbtn23/

Next time: We’re working harder than ever. Or are we?

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