Director Insights: Enabling productivity

Maybe we should believe in luck more. And many have said that “hope is not a strategy”. Sometimes, however, opportunities arise that you could not even have hoped for. That’s the case with the productivity series of events the Institute of Directors (IoD) has been hosting with support from the ASB and Spark over the past couple of months.

There has been some reporting on this and on the studies ASB and Spark each commissioned from New Zealand Institute of Economic Research (NZIER):

• “Business productivity in New Zealand: Assessing the drivers and barriers in the international context” 
• “Accelerating Aotearoa businesses one technology generation forward” 

Speakers involved in the series of productivity discussions included a director leading the charge on electric boats, a former New Zealand Productivity Commission chair, a leading chair for a varied range of primary sector companies, a technology executive now the interim chair of Te Araroa (a tramping trail running from Cape Reinga to Bluff), and a director from a group of industrial equipment retailers.

Perhaps surprisingly with directors from such wide a variety of companies and organisations, common themes about how boards enable productivity emerged. These included that:

• Business, and by implication board, leadership is needed to support improved productivity. The NZIER, in its report for the ASB, said: “We believe that New Zealand businesses have to take agency to increase productivity by building their understanding and appetite for innovation as an engine for growth and sustainability.” In this context, there was a clear view that boards need to lead by creating the enabling conditions for innovation and increased productivity.
• Comfort is the antithesis of innovation and improved productivity. A leading director recently commented on the importance of feeling “uncomfortable”, particularly chairs but also board members. One source of that discomfort can be competition. Another is having boards who are prepared to bring their wider view of the world.
• Cost cutting with a focus on short-term efficiency improvements will not drive sustained improvements in productivity. One director commented that “you can’t cut your way to greatness”. There was a strong sense from directors that boards could encourage a focus on understanding customers (or those being served) and supporting management to think about how to meet their demands.
• Boards needed to develop a better understanding of the risks to the companies/organisations, have a clear view of risk appetite and support management to see uncertainty as a source of opportunity. Risk management has become more important than ever, given financial, economic and other pressures. This reflects the local and international environment, disruptive technologies (including AI) and the ongoing likelihood of cybersecurity breaches, not to mention changing market conditions. Within this, however, are potential opportunities for those who can successfully navigate this environment, have a clear view of risk appetite and are willing to support management to explore potential opportunities created by uncertainty. 
• Directors and boards need to develop new capabilities if they are to enable productivity improvements. A board focus on compliance may get in the way of supporting management (and boards themselves) to increase their organisation’s ability to adopt and implement new ideas and technologies, and therefore support productivity improvement. A more “dynamic” capability set was needed for this to happen. Boards need to invest in themselves and create an environment in which management capability is also enhanced.

Often the discussion turned to the role of government in improving productivity. The directors involved in these enabling productivity discussions were clear that government, including research institutes and universities, is part of the innovation “ecosystem”. This was also echoed in the NZIER work for the ASB and Spark. However, financial support from the government (while welcomed by some) was not seen as a sustainable answer to innovation and increased productivity over the medium or long terms.

That leaves directors and boards in the enabling productivity hot seat. No pressure!