Closing the 280 million public sector productivity gap

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Closing the 280 million public sector productivity gap

New Zealand’s public sector productivity is lagging behind the private sector at a cost of $280 million a year, with 52% of public sector workers sitting below the national productivity average.

Only 22% of government employees - about one in five - believe they are working at their lifetime best, compared with 27% in the private sector. And only 17% of public sector workers describe themselves as “very satisfied” in their workplace, compared with the private sector’s 25%.

When it comes to outsourcing, 44% of public service workers say the experience has delivered lower quality and higher costs, compared with 26% of private sector respondents. Only 18% in both sectors describe the outcomes as being higher quality and lower cost.

Another key finding in EY’s fourth biannual New Zealand Productivity Pulse, released today (note to editors: 5am Wednesday 5 February), indicates only a quarter of public sector workers feel they are making a difference, compared to 33% in the private sector.

EY Government and Public Sector Leader Alan Judge says while personal productivity continues to increase across the country, it’s time to close the gap between the two sectors, by paying closer attention to public sector business models and practices.

“While the public sector has a strong core of solid contributors, there is evidence that workers who could be highly productive are being held back by poor planning, management, bureaucracy and challenges in managing resources.

Judge says the report points to three areas for the public sector to improve:

• Empowering managers to become more accountable for productivity gains;

• Strengthening employee relations to achieve outcomes; and

• Resourcing for optimal productivity.

“Of course, the public sector and the private sector have different priorities, with the public sector needing to fulfill its community service and transparency obligations, as well as being subject to high levels of scrutiny,” he says.

“However, the public sector needs to ensure it has the management capability and employment practices required to support a productive workforce.”

Workers themselves agree: Nearly half New Zealand workers surveyed believe improving productivity is more important in the public sector than the private sector.

The EY New Zealand Productivity Pulse measures NZ workers’ views about their organisations’ and the own productivity. Based on a survey of approximately 750 employees spanning five industries and from all levels within organisations, it includes workers from both the private and public sectors. This particular Pulse included a larger sample of public sector workers.

Management capabilities remain a concern for the workforce as a whole. But the Pulse reveals public sector workers are significantly more likely than their private sector counterparts to agree with the statement: “Poor planning by management has negatively impacted productivity recently.”

Only 21% of public sector workers were satisfied with their manager. This was also low in the private sector with 29% indicating managers were missing a trick when it comes to motivating staff.

Judge says responsibility for motivating staff lies with managers. “Managers need the skills to reward and give feedback to workers on their productivity.”

In particular, care is needed in times of reorganization not to lose high performers, Judge says. Fifty-one percent of government workers reported cost-cutting or redundancies in the six months prior, compared with 30% of private sector workers.

“Unless managed carefully and strategically, the very process of reducing jobs will block gains in productivity. We have to ask ourselves why the public sector isn’t yielding as many workers who consider themselves as satisfied or productive as other workers. Managing and motivating workers is where the scope for improvement lies. It’s also extremely important to make expectations clear for employees and to strongly use their skills.”

The impact of outsourcing

The Pulse found public sector workers strongly doubted the effectiveness of outsourcing.

Judge says outsourcing is common in the sector, with nearly 30% of workers experiencing change in their workplace. Among those who’ve seen outsourcing in action, only 31% say it has delivered higher quality outcomes.

Of even greater concern are reports that 44% of public sector outsourcing actively reduces productivity, leading to lower quality and higher costs. This compares to 26% in the private sector, bringing into question the efficacy of traditional outsourcing for government services, Judge says.

“Policymakers assume that government service delivery inherently will be more efficient in the hands of private operators because of superior management practices and profit incentives. But there is no one-size-fits-all approach and outsourcing often fails to consider the complexities of many government services which can ultimately lead to higher costs.”

The Pulse found a strong correlation between more productive individuals and “right-sized” organisations.

“People may be cynical about workers’ self-assessment of their organisation’s resourcing but there is a clear relationship between the two,” Judge says. “Workers have an excellent feel for whether resourcing is adequate. It is simple, yet powerful, to simply ask them if they have too few or too many resources to cover workload.”

The public service is feeling the pinch. Thirty-nine percent of its workers reported they needed more staff to deliver current workloads, in contrast with 25% of their private sector peers.

Other key survey findings:

• Based on a 10-point scale, New Zealand’s productivity has increased from 7.49 to 7.54 in the past year, up from 7.3 in February 2012.

• Wastage has changed little. On average, workers across the board continue to waste 12% of their day (54 minutes).

• Improved productivity has again been driven by the individual efforts of workers – not organizational change.

• The national increase in personal productivity was driven by increases in workers’ productivity in the manufacturing, retail and wholesale trades.

• Healthcare and social assistance; professional, scientific and technical; and finance and insurance remain below their level of the previous six months.

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