What do people do all day? Why Australian businesses should care.

Australia's productivity growth has hit a 60-year low, and the national discussion has defaulted to much needed, but familiar ground: tax reform, less red tape and adoption of artificial intelligence.

Important as these are, there's an internal frontier we too often ignore; what the childhood author Richard Scarry titled one of his most famous books: "What do people do all day?"

We typically don't think about the day-to-day minutiae of work as a national productivity question, but we should. A group of economists studying 18 years of findings from the World Management Survey, overseen by the London School of Economics, finds up to a third of cross-country and within-country productivity gaps can be attributed to management practices. Yet this critical lever remains largely invisible in our national productivity conversations.

…the London School of Economics, finds up to a third of cross-country and within-country productivity gaps can be attributed to management practices.

Why isn't this more talked about? Because solving it isn't easy.

The psychological forces that drive productivity are so much harder to tackle than the technical. Harvard organisational psychologists Robert Kegan and Lisa Lahey find that in most workplaces, employees are doing two jobs: the one they're paid for, and a secret second job of self-preservation. When people aren't given clarity of purpose, or a true sense that their job is essential, they redirect energy toward looking good, avoiding risk, hiding mistakes or managing politics.

Government is accountable for national priorities like productivity, and so we look to politicians for solutions. They control the policy levers. But good organisational management practices aren’t policy; they’re the product of countless decisions made by tens of thousands of firms. This makes it harder to influence or make headlines out of.

Management matters more than ever. Services now account for 90 per cent of jobs and 80 per cent of economic output in Australia. How people work is central to our prosperity. This is even more true for our growing non-market services, like hospitals, education and disability care.

The challenge for organisations today is that digital technology and artificial intelligence is fast changing the way they work, but businesses cannot afford to remain anchored to people strategies and frameworks that will lose relevance in the new world.  

In classic microeconomics, work is seen as a disutility, something people only do in exchange for money. That's a reasonable way to think about work that is inherently tedious, risky or offers no stepping stone to something better.

But, it doesn't fit our increasingly knowledge-driven economy, where non-routine cognitive work is becoming more important and prevalent. As workers become increasingly educated and skilled with AI, they apply themselves to work that is often utility-enhancing: people find pride, purpose, social connection, respect, personal growth and a sense of contribution in their work.

In classic microeconomics, work is seen as a disutility… it doesn’t fit our increasingly knowledge-driven economy

HR is now the most critical and complex function in the business. As Tony Weston, who has held senior executive roles in Transformation and People functions at Telstra, NAB and 7-Eleven, told me “CEOs need their people function building a workforce, and in turn a performance framework, that delivers core strategy and transformation, not building their own strategy alongside.”

A typical organisational instinct is to siphon off these people challenges to HR, to be solved and dealt with separately to the value-generating parts of the business. This is a mistake. In the modern economy, people strategy and business strategy should be one and the same, solving the same problems, using the same language.    

A typical organisational instinct is to siphon off these people challenges to HR

Organisations really have three core jobs. One, get clear on strategy: know what value your organisation delivers and the plan to deliver it. Two, arrange people and resources around that value: give each person a role that is clear, essential, and communicated as such and allocate resources accordingly. Make sure people understand how they contribute to the world and give them praise and feedback to help them get better. Three, pay fairly and create an environment of respect and kindness. The third part comes with surprising ease when the first two are satisfied.

What each person worries about each day is the internal productivity lever that business leaders should lean into. If you build an organisation where people see a clear link between their own actions and making the world a better place, you'll find a workplace where people naturally show up with greater productivity.

Business leaders will undoubtedly raise with government their wish list of reforms. But they should also come with a little JFK in their hearts: asking not what their country can do for them, but what they can do for their employees.