Australian productivity growth is slowing at a time where there is significant potential for it to be increasing, according to a new report by Chandler Macleod Group.

The Five Faces of Productivity whitepaper, which surveyed 563 senior businesspeople across Australia in September 2012, found 74 per cent of Australian businesses rate productivity as a high priority but only 20 per cent have achieved significant productivity improvements.

The retailing sector rated as the sixth most productive industry with an aggregate productivity growth rate of 10 per cent

The report found the biggest issues that’s resulted in this flat-line in productivity is because organisations are not focusing on the right productivity initiatives.

“While organisations are focussing on people management, training and process innovation, it’s at the expense of increased organisational porosity, employee mobilisation (across sites, teams, projects and countries), workforce planning, product innovation and skills utilisation – the things that will truly drive productivity,” the Chandler Macleod report says.

Talent is also still a major issue with CEOS saying the talent crunch is the main threat to business expansion, with 58 per cent of businesses reporting skills shortages. . By making talent a strategic focus, CEOs hope to ensure future growth and understand employee engagement.

At the same time there are still barriers to measuring productivity. Only 42 per cent of businesses measure their productivity at an organisational level, and of these, only 22 per cent believe that they can accurately measure productivity benefits.

“Possibly due to the complexity of the areas of measurement – or not knowing what to measure – and the potential for unpleasant and disruptive productivity enhancement changes, companies seem to find it easier not to consider productivity measurements,” the report says.

According to the report, key to productivity growth is leadership initiated by government and central bankers who need to set policies to create environment which supports widespread productivity improvements.

“However it is CEOs, CFOs and other business leaders in organisations across the spectrum of Australian industries who will drive productivity growth,” the report says.

“They need to understand what productivity means and how it can be influenced to drive output and revenue growth. Importantly, leaders need to ‘de-mystify’ productivity at a grassroots level through strategies of both incremental change and continuous improvement.”

To see the report in full, click here.