Articles

Improving New Zealand's productivity

Productivity gains require a focus on workflow, writes John Haylock BankLink's Practice Performance Manager.

Our political and economic leaders have frequently noted that New Zealand's lack of productivity is a key reason why our average incomes have fallen behind those in Australia.

Thankfully, it seems the government is now getting serious about the issue of improving the country's productivity. We're getting our own Productivity Commission loosely based on an Australian model which has been operating for more than 10 years.

But what will the Commission actually do? Its main functions include:

• Inquiries into productivity-related matters and reporting back to ministers
• One-off reviews of existing regulations
• Reviews of the efficiency and effectiveness of regulatory agencies
• Regulatory impact analysis of a small number of proposed new regulations
• Research into productivity-related matters, to build up its institutional knowledge
• Promoting public understanding of productivity-related issues.

Phew! My productivity just dropped reading that list. I am sure these are all worthwhile initiatives but are they really going to help close the income gap with Australia? I don't think so.

All those functions will keep a bunch of policy analysts happy for a few years but produce precious little immediate benefit. While regulations and the agencies that implement them can be improved, that is not where the real gains can be made. New Zealand is already rated amongst the easiest countries in the world in which to do business. What seems to be lacking in the functions of the Productivity Commission is any focus on initiatives that directly improve the performance of the more than 500,000 enterprises in New Zealand.

Having worked with accountants in public practice for more than 10 years, I know that there are big opportunities for many accountants to improve their productivity. The best run practices outperform the average practice by a significant margin. Based on the benchmarking figures that are available the accountancy profession has the potential to improve its overall productivity by at least 50 percent – perhaps even 100 percent.

I'm not talking about improving chargeable hours here. I'm talking about real productivity as measured by throughput of work and revenue generated per employee. Similar productivity gains are possible right through the private and public sector – make those changes and the income gap would close and perhaps even reverse.

In the private sector there are clear economic incentives to improve performance and investment does occur to improve performance. The public sector lacks those same incentives. That's why I was delighted to learn about some major productivity improvements occurring in the public health sector. Since 2008 various District Health Boards have participated in 'The Productive Ward' programme more commonly called 'releasing time to care.' The key goal of the programme is to increase direct patient time for nurses.

By reorganising their workflows nurses in the trial increased their direct care time from 30 percent to 53 percent of their shift. That is a massive 77 percent increase in time spent with patients – surely a great measure of productivity. This was mainly achieved by substantial reductions in both administration and 'motion,' i.e movement between jobs. The trial was so successful it has been extended to other DHBs and to surgeons, anaesthetists and theatre nurses to improve quality and efficiency in hospital operating theatres.

The key to the success of this programme is hidden away in a summary of the initial trial. It notes that "Implementing Releasing Time to Care increases time staff have available to spend delivering care to patients" and most importantly (if worded rather awkwardly): "Focus not on how staff then use this capacity rather on next improvement opportunity." In other words, they improved their productivity when they took their day-to-day focus off being busy and focused it on improving their systems.

This is exactly the same message I preach to accountants. To improve your productivity you need to stop focusing on trying to maximise your chargeable hours (ironically and wrongly called 'productivity') and instead focus on improving your systems. If you continually improve your systems your genuine productivity will continually improve as a result. I'm delighted that the government has chosen to support the 'releasing time to care' programme in our DHBs. This is exactly the sort of productivity improvement programme our new Productivity Commission should be encouraging instead of focusing on regulatory reform.

This article first appeared in The Journal. It is reproduced with the permission of the NZICA.