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Good managers form the key to better business

12 November, 2009

An international survey of Australian manufacturing companies confirms that good managers are the key to successful businesses and highlights where Australian managers need to improve.

Management Matters in Australia analyses results from a survey of 439 medium and large firms and compares Australia’s performance with 15 other countries. The study was commissioned by the Department of Innovation, Industry, Science and Research and conducted by a team led by Professor Roy Green, Dean of Business at the University of Technology Sydney.

This is an extension of the prestigious study developed by the London School of Economics, Stanford University and McKinsey & Co which including Australia has assessed more than 4,000 firms across sixteen countries.  It allows Australian companies’ performance to be compared to our peers.

The survey rates management based on three core components: operations; performance and targets; and people.

Key findings

·         There is a strong positive relationship between good management practices and firm productivity.

·         Better management is strongly associated with improved labour productivity, sales growth, profitability, exports, and return on capital.

·         Australia ranks sixth overall among the sixteen countries that have participated in the study. There are three broad groups of countries and Australia sits in the middle group.

·         Australian firms were relatively good at performance and operations management, but less effective at people management.

·         The survey found there is considerable variation in management quality across the cohort of Australian manufacturing firms surveyed.

 

Other important findings

·         Large firms had better management scores than smaller firms.  Multinational companies perform generally best of all, family and government owned firms were the weakest.

·         Businesses with higher levels of education and skills in management and non-management positions exhibit superior management performance. 

·         The levels of tertiary qualifications within the surveyed Australian firms (both management and non-management) were among the lowest in the surveyed countries.

·         Managers in Australian manufacturing firms are poor at self assessment, tending to overestimate their own performance.

·         Businesses that export have higher management scores.

 

Implications

·         The overall performance of countries is mainly determined by its ‘tail’ of poor performers, not by the performance of its leading firms. Because of this - Australia should be aware that the top 27 percent of Indian and Chinese manufacturers are already “better managed” than the bottom half of Australian manufacturers.

·         Investing in management practices is usually a much more cost effective way for firms to boost productivity, relative to hiring additional employees or direct investment in fixed capital.

·         These operations; performance; and people management practices are not radical – they are well established and well proven approaches that are used in many Australian manufacturing firms, both small and large.

 

How can businesses benefit through enterprise connect?

·         Focusing on management improvement does pay – both for firms and for the broader economy. 

·         Enterprise Connect can through its national network of experienced Business Advisers, help Australian SME manufacturers identify where and how they can improve their management practices and work with them to do so. Over 1800 Australian firms are already part of the program.

To download the report, click here.

Source: Innovation Minister

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