Blog: Westpac Grow NZ survey finds businesses are happier but not necessarily more productive

Date: 
14/05/2015

Recently the Productivity Commission had an opportunity to comment on the launch of the Westpac Grow NZ survey of SMEs, the results of which make for interesting reading.
 
Many New Zealanders run their own business. SMEs represent 97% of New Zealand businesses, and make up 30% of total employment. So their business performance is key to lifting New Zealand’s productivity. We see in the survey that SMEs have experienced a lift in growth opportunities and confidence, but are not making significant plans to expand, develop new products, or invest in new technology. In the meantime, New Zealand’s labour productivity has continued to grow at a similar rate as before the GFC, whereas most other OECD economies have seen weaker labour productivity growth.

The survey results show that as the economy has picked up, the focus of SME owners isn’t so much on just surviving, but on achieving work/life balance. While that illustrates the benefits for wellbeing that come from productivity growth, it doesn’t necessarily bode well for our productivity performance going forward. To grow a sustainable economy that will give us the lifestyle we want, not just today but in the future, New Zealand still needs to lift its productivity. From all the work we’ve been doing lately, we see that innovation and technology are two key factors in this.
 
New technology – as exemplified by ICT – has been a key source of productivity growth in a number countries, particularly the US. Much of this benefit has occurred in the services sector, many parts of which have traditionally struggled to lift their productivity performance. In New Zealand, ICT investment rates have been lower than in a number of comparable countries but have caught up to an extent over recent years.

The survey found that only just over half of SMEs even have a website. If they are using social media, it is mainly restricted to Facebook, Twitter and LinkedIn. More recent technologies such as Skype, filesharing and cloud based services are not widely used, and mobile payments are also low. The survey shows that businesses have definitely seen some impact from digital technology over the last five years in sales opportunities, profitability and efficiency, but many haven’t significantly changed staff levels, logistical and distribution processes, moved processes online or changed their organisational structure.
 
This may be partly because they can’t find the right staff or give their current staff the training they need. This could reflect issues around managerial capability, which is an area in which NZ does not rate particularly well in cross-country comparisons of managerial ability.

That matters in a number of ways, not least of all because benefiting from ICT requires complementary investment in skills and having the managerial talent to reshape a business to make the most from new technology. It is not as straight forward as buying a computer and sticking it in the corner or using a webpage as a modern-day version of the yellow pages.
 
Higher productivity in US firms has been partly attributed to a higher tendency for organisational change. In contrast, poor business management in NZ may suggest a lack of organisational innovation, which is necessary to extract a productivity dividend from new technology. Unfortunately, these survey results suggest that this isn’t going to change anytime soon.
 
Murray Sherwin has been to Auckland, Wellington and Christchurch with the Westpac team recently to discuss the survey results and their implications for our productivity. I’ll be getting out to Palmerston North, New Plymouth and Hamilton over the coming weeks to do the same thing. 
 
- Paul Conway, Director of Economics and Research 

Disclaimer: Blog posts are written by staff members and do not represent the official views of the Productivity Commission.

Tags: 
Research

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