Is management skill a factor in pay-gap?

Recent research by the New Zealand Institute of Economic Research (NZIER) suggests a contributing factor towards the pay-gap between Australia and New Zealand is quality of management and process innovation along with quality of labour and capital – rather than the amount of money invested or the types of industries it is invested into.

The report concludes there is a need for a greater focus on the quality of labour, capital, and management, and the regulatory environment. Improvement in skills, management capability, organisational quality and regulations can have a profound effect on New Zealand’s growth potential because they improve the overall economic environment and increase the capacity to innovate.

In many ways this finding takes up back to the basics, or it should. Apple computers were invented in a garage, yellow sticky notes and penicillan were reputedly discovered by accident. New Zealand was recognised in the past for its innovation in dairying and horticulture, for the design of electric fencing, jet powered motors, innovative motorcycles, new methods for shearing sheep, even labour reform and economic reform. Less than 200 years ago this entire country became established on the sweat and blood of innovation – at the time the mother of necessity.

The NZIER report also points out that the base for generating wealth has changed in New Zealand. It is not a country that extracts raw materials or manufactures mass produced products; even the opportunities for innovation in the primary sector a more limited. The majority of people work in the service sector in New Zealand, that is retail, health, education, Government and the community sector. These are sectors where the largest input, and cost is not manufacturing machinery or a hole in the ground, it is people.

The service sector is the new frontier for New Zealand. It replaces the old frontier and as such is where future wealth will be generated. In the old days the service sector was considered a place for school kids to develop work skills, mums to return to work part time and where little was required other than to turn up to work each day. No longer can this be the case. The service sector can no longer remain a backwater for administrators and those without a life. It must become the place where effective management is practiced, where people generate ideas and where wealth is created.

The service sector can be boring but no where near as boring as for the man I watched placing car seat frames into a bending machine all day long at the GM factory in Petone during the 1980’s. He didnt have anyone to talk to between his tea breaks. The service sector is driven by conversations and in there lies the energy and its strengths. When people share ideas collaboratively, great things can happen.

There will always be higher wages in Australia. It has a bigger population, there is greater demand for goods and services. It has a resources sector and the dwindling remnants of a manufacturing sector (on borrowed time) and at present these do contribute to higher wages. However, unless the million plus people working in New Zealand all decided to emigrate to Australia today, the reality is they have to find a way to generate wealth in New Zealand.

The NZIER report points the way by highlighting the importance of the service sector, by highlighting that the difference between just enough money and more than enough money is through people being the best they can be, through innovative ideas and through sharing knowledge. Two thirds of the world’s population have considerably less than the 4million people living in New Zealand. There are opportunities for sharing knowledge and building capacity globally. New Zealanders should not hide under a bushel and deny their strengths and their wisdom, instead take it to the world.

Why not start an ANZAC mentoring scheme for management. Where managers in Australia and New Zealand swap places, or work alongside each other on short term projects and share their knowledge? The Chinese economy is booming yet they could benefit from our experiences in establishing a healthcare sector, education or social services. I suspect NZer’s would be viewed as being more likely to listen and learn than people from some other countries that currently provide this advice. The NZ Government should be sponsoring this level of collaboration and fostering an environment where management and people from the NZ healthcare, education, local government, public sector and community sector should be talking with emerging nations – alongside those innovative companies engaged in the development of intellectual property such as software and technology. If each independent retailer (about 30000) were to go online and seek to sell to a global market, and each employed a single person responsible for maintaining and updating website and marketing online, they would generate new wealth and create employment. Thats just a single possibility. Don’t tell it can’t be done because that is exactly the type of management thinking the NZIER report refers to.

Let us look to the past for inspiration but turn our heads to the future and begin to understand we live in a new and emerging world, we work in different work and just as in the past, the future wealth of NZ rests in the hands of the people working – both managers and workers. In the past the service sector was seen as a place for people to go to work, to have a job, to be supported by Government for life. That was okay when other sectors such as farming and manufacturing generated taxes to provide the funding for the service sector. Those days are gone. The service sector now needs to generate value and wealth so that it can pay taxes to fund its own salary base. Lets start by creating a new vision for the value of the service sector and lets understand that the value is in people and how they think alongside how much they are paid.

Those are my thoughts for the day
John Coxon


About John Coxon

Principal consultant for John Coxon & Associates, a management consultancy working with boards and management teams in healthcare, aged care and not for profit organisations to develop effective strategic planning processes and social enterprise business plans
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