Boosting productivity: Why pushing your employees too far can be counterproductive

Productivity growth of 1% doesn’t seem like much. 

It’s the sort of target that feels approachable without the need for wholesale change.

But what seems like a marginal improvement can deliver in a big way for individual companies and the wider economy.

In terms of labour productivity – which is what the Reserve Bank and economists are focused on – a rise of 1% is the sweet spot, allowing workers reasonable pay rises while keeping inflation sustainable. 

Dig down to the individual business level and a jump of 1% in productivity in a high volume, low margin business could be a game changer to a company’s bottom line. 

In sectors with lower volumes and higher margins, growth of 1% means they can build competitive advantage and operational efficiency – in other words, it can make a business more resilient.

Yet many business leaders are deeply concerned about their productivity. 

The latest release of the Business Radar report released by Pitcher Partners, which captures the sentiments of Australia’s middle market business leaders, shows that 52% are very or extremely concerned about productivity. 

That sentiment suggests that business leaders are far from confident that a 1% gain is easily within reach.

The data captured in the survey shed light...