Why is Australia’s productivity falling despite record-long working hours?

Australia has entered what the Productivity Commission calls a “productivity loss” phase. Despite people working more hours than ever, labour productivity has fallen back to pre‑COVID levels. The issue isn’t effort, it’s more to do with how productivity is being defined and pursued inside organisations.

The Commission’s latest research shows that after a brief post-lockdown spike, productivity stalled again. This simply demonstrates more activity doesn’t automatically translate into more value. Organisations are pushing harder, but not necessarily smarter.

What does productivity actually mean in a modern workforce?

Productivity is not just about efficiency. It’s more about the balance between efficiency and behavioural competencies or critical thinking. It’s about how well people use their time and whether their work actually improves strategic priorities.

We see a lot of CEO’s and General Managers obsessing over outputs and speed. However, Emotional Intelligence or critical thinking might come into play. For example, persuading a key stakeholder, resolving client conflict, or generating insight that that stand out from all the data noise. These contributions are vital yet not a KPI you can necessarily track.

Why doesn’t technology automatically improve productivity?

We love using technology at the Hinwood Institute. Technology improves efficiency; however, it’s not going to improve human skills and behavioural competencies. AI can complete tasks faster, but if those tasks aren’t the right ones, the business doesn’t gain meaningful productivity.

There’s a belief that AI will allow people to “do more with less.” Yet history tells a different story. Efficiency gains often create a hole that gets filled with meetings, reporting and low‑value busywork. It’s not necessarily impactful work.

Who is responsible for employee productivity inside organisations?

Research shows that when HR becomes directly involved, employee productivity increases by 11 per cent.

Many HR leaders assume productivity will improve if core HR systems are strong. However, the research shows that productivity lifts when HR shapes how work is defined, prioritised and experienced. This isn’t just left as an ‘added bonus’ that is an an indirect outcome.

How can HR influence productivity at a strategic level?

HR can align executives on a shared, practical definition of productivity that allows attention on creating value and not just efficiency.

This might involve challenging assumptions. For example, demonstrating that even though a team has less output, they may still be creating more value, such as impacting the client or some strategic insight. What we are seeing is a greater rush and focus on investing in technology and less about investing in the behavioural competencies of a team. Without the two, the lower results might come as a shock

How can managers support employees to create greater value in the work?

Managers create the conditions for which the employee can create the value. Rather than their role being only being focused on task coordination, it can work towards enabling focus, flow and purpose.

This includes coaching people to understand the “why” behind their work, removing blocks, and helping teams say no to low‑value tasks. Simple routines, like prioritising high‑value goals on a weekly basis, can really change how work gets done.

So how do organisations identify how employees are creating value?

The value that teams are creating, can becomes visible when organisations study their highest performers and what they do differently.

High performers aren’t always the most efficient, they’re the most impactful. They establish trust, influence outcomes, negotiate and solve problems faster. People look to them for advice or direction. This is the human side of work that AI can’t replicate.

FAQ:

What are the ways that employees create value?
Work that improves strategic priorities through impact, insight, influence or innovation, not just ‘how much they get done’.

Why hasn’t productivity increased with better technology?
Efficiency is impacted by the increase in low‑value, or low impact work rather than focusing on high‑impact work.

How much impact can HR have on productivity?
Gartner’s research shows an 11 per cent productivity increase when HR is directly involved.

Can AI replace human productivity?
AI predicts and creates well, but it can’t imagine, persuade or adapt, it can’t apply empathy, critical thinking or adaptive thinking, the human side of work that creates value in the workplace.

Sources referenced: Productivity Commission research; Gartner HR Practice insights via Aaron McEwan FAHRI.

What's Next?

• If you are leader wanting to improve your leadership capabilities or a HR professional wanting to improve capabilities of you leadership team, I can provide you a free strategy session to find solutions that work for you or your team. Book Your Call Here

• Check out our upcoming free masterclasses that focus on how to Feel Good at Work, how to work Better Together,Talk Smart (communication techniques), Mission Control(leadership techniques), Essential Human Skills, and how to Tame Your Time.

Want more like this?

We send the odd useful email with content like this. If you'd like more like useful tools, tips and advice, subscribe here.