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Tuesday, January 21, 2014

Three Ways Australia Can Compete Globally

By Don Holdsworth, Senior Adviser, Asia-Pacific

In the 1964 classic novel, The Lucky Country, Donald Horne discussed how 1860’s Australia supported itself with agriculture and mining, not technology and innovation. In 2014, Horne’s narrative still holds true.

Though Australia emerged relatively unscathed from the recent global financial crisis -- predominately due to strong trade links with then-growing China -- it faces growing concerns about its future economic success. These worries are fueled by the country’s mining boom coming to an end, making it necessary for Australia to evolve into a knowledge-based economy. Additionally, two troublesome factors have emerged: a restrictive domestic market and rising labor costs.

Australia’s relative unit labor costs have grown since 2000 by 54.1%, whereas other key global economies’ labor costs have fallen dramatically: in the U.S. by 25.9%, in Germany by 14.6%, in the UK by 20.4%, and in Japan by a considerable 46.2%. These costs make it difficult for Australian businesses, faced with a small, relatively static domestic market, to compete in foreign markets. But this is not just a problem for exporters. Lower-cost firms from overseas, especially international retailers, are taking advantage of Australia’s higher retail prices to undercut Australian businesses, particularly with online sales.

In short, for a country trying to compete globally and at a distance, Australia is becoming very uncompetitive, and uncompetitive labor costs affect every Australian.

One strategy that will help improve Australia’s long-term economic outlook is to cultivate one of the world’s most engaged workforces. In light of its inability to change its small domestic market or significantly alter real wages for fear of a cost-of-living crisis, the country must maximize the productivity of its salary dollars.

Gallup in 2012 found that just 24% of employees in Australia were engaged at work, leaving 60% who are “not engaged,”-- essentially checked-out and waiting for their next paycheck -- and 16% who are “actively disengaged” -- spreading negativity and undermining workplace productivity. Although Australia fared comparatively well in the study -- the most engaged region in the world is the United States and Canada at 30%, with Australia and New Zealand in second place -- active disengagement is still costing Australia around AU$54.8 billion per year. 

Now is the time for government and business leaders to act before economic concerns mean Australia loses its employee engagement advantage over other key regional economies such as China (6% engaged), Japan (7%), Indonesia (8%), and Singapore (9%). My advice to every organizational leader in Australia, and to every manager responsible for a team, is to:

1. Hire carefully. Strict Australian labor laws mean moving out a disengaged employee is difficult, and these employees are likely to have a negative impact on many key business metrics -- in particular lost productivity. Leaders also need to make sure to select the right people to be managers, using analytics focused on “talent to lead” as the base for any hiring decision. The talent to lead is rare: only one in 10 people have extreme or natural manager talent, and with Gallup’s research showing that 70% of an employee’s engagement is a result of a manager’s interaction with his or her team -- selecting managers should be one of the most important decisions that leaders make.

2. Be active about measurement. Don’t just rely on hardcore financial metrics to navigate the future; it is important to understand how your organization's engagement relates to key business outcomes. For example, leaders should understand how disengagement affects productivity and profitability, and how engagement can be improved to help bolster performance.

3. Align every leader with your engagement strategy. Make every leader and manager aware of the science of engagement, the impact they have on every employee, and the idea that engaging employees is not just about keeping them happy.

Australia wants to transform from a “lucky” country to a “clever” one. But no amount of investment in infrastructure or technology can override the power or financial impact of having every Australian employee arriving to work every day committed to generating value and contributing to a successful and self-sufficient future for Australia.

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