Do Kiwi Business Managers have what it takes?
Recap of previous article ‘Should New Zealand business spend more on R&D and Innovation?’:
In my last blog I mentioned that several factors in New Zealand have caused us to have a low Labour Productivity result compared to our OECD neighbours.
I mentioned that our “Do It Yourself” culture is one. But I mentioned that a lack of exposure to overseas firms is another. We are not getting exposed to leading edge technology that these overseas firms adopt. I also mentioned that this could be a result of our quality of management in New Zealand.
Management quality should not be under-estimated.
It’s all good adopting new technology but companies need good management capability to understand what the technology can do. New technology also necessitates new processes and sometimes new business structures to make the most of these technologies.
One of EDIStech’s clients who has revenue of over $1 Billion in 2017, purchased a very expensive piece of software (hundreds of thousands of dollars) to perform their EDI functions (Electronic Data Interchange).
Their internal IT team had trouble executing this software successfully so instead, engaged EDIStech to manage this EDI process for them. The software was deployed to produce other functions but has been well under-utilised.
There is another lesson here and that is a fully managed SaaS (Software as a Service) Solution is sometimes more cost effective than purchasing software to deploy in house. The old adage rings true here – “Stick to your knitting”.
How Experienced Management has made all the difference in the USA.
Well experienced management will make all the difference to ICT implementations. The USA from 2000, has benefited greatly from an increase in Labour Productivity, mainly due to the capability of its management to firstly implement ICT solutions but then to mould company processes and company structures around the new technology.
It is a well- known fact that larger firms attract the best managerial talent. These managers have completed management programmes that challenge their thinking to be more innovative.
A study by Grimes & Fabling in 2014 found that firms using high-performance management practices, have higher productivity growth in comparison to firms that do not. The workers of these high performing firms also earned higher wages.
Why does New Zealand have poor Managers?
Despite the productivity benefits that come from high managerial capability, cross –country surveys indicate that managerial quality in New Zealand is relatively poor.
As I stated above that is because multi-nationals attract the best talent. Privately owned and family owned businesses believe they either cannot afford or do not see the importance of employing highly talented managers with innovative skills and mind-set.
Some New Zealand firms are managed as well as anywhere in the world, but there is a long tail of firms that are not. These businesses survive mainly because the competitive intensity of the New Zealand domestic market is relatively weak.
A 2015 IMD “World Talent Report” ranks the perceived availability of competent senior managers in New Zealand as 19th out of 29 OECD countries.
So what is the answer to NZ’s Productivity Crisis? We will discuss this further in my upcoming article.
Read on in my next article ‘What is the answer to New Zealand’s Productivity Crisis?’.
References:
Achieving New Zealand’s Productivity Potential – Research paper 2016/1. Section 4.1
Management Practices across firms and countries NBER Working papers No 17850. Author – Bloom N
The ‘Suite’ smell of success: complementary personnel practices and firm performance. Author – Grimes A and Fabling R 2014
Achieving New Zealand’s Productivity Potential – Research paper 2016/1 page 48
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