Australia has a productivity problem – and it is a possible strategy issue

The productivity debate regularly cycles through familiar themes of capital investment, policy, regulation, remote work, and AI, but inside organisations, productivity is far less theoretical, writes Ilona Charles.

Productivity shows up as tired teams, growing frustration, mismatched skills, clunky systems, and leaders juggling impossible expectations.

Australia’s productivity problem is real, and it’s not a policy issue or a technology issue. As the Productivity Commission has repeatedly noted, Australia’s productivity growth has been weak for more than a decade; it is a people strategy issue, and until we treat it that way, very little will change.

In many workplaces, productivity is still seen as working harder, longer hours, greater output, and tighter deadlines. Yet Australian Bureau of Statistics data shows productivity has fallen even as Australians work record hours. Real productivity is about how work gets done, through clarity, capability, and how people are supported to perform.

Old strategies in a new world of work

Australian workplaces have experienced rapid change over a short period of time. Ways of working have shifted, and technology has accelerated rapidly. A mismatch of skills has become the norm rather than the exception, yet many organisations still rely on people strategies that were designed for a different world of work. Jobs and Skills Australia research highlights how quickly skill demands are shifting across Australian workplaces.

Strong individual contributors continue to be promoted into leadership roles with little preparation. Managers are expected to coach, motivate, lift performance, manage wellbeing, and drive change, often without clear expectations or support. When leaders struggle, productivity suffers across the organisation.

Leadership quality drives productivity more than policy

Leadership quality is one of the most powerful productivity levers organisations control. AHRI research shows a significant proportion of Australian leaders report struggling in their roles. Yet many leaders are promoted without preparation, when leadership is weak or inconsistent, decisions stall, accountability blurs, and high performers disengage, dragging down productivity over time.

Many organisations are also under-investing in skills development that genuinely aligns with future work requirements. Upskilling is regularly discussed, but too frequently it is generic or reactive. Industry research has consistently shown that skills investment alone does not lift productivity unless it is closely connected to work design. Training exists, yet it is disconnected from real roles and real challenges.

People feel this gap quickly. They experience it when systems change without proper support, or when new tools are introduced without time to learn. The end result is frustration, workarounds, and a sense that productivity efforts are something being imposed rather than designed collaboratively.

Flexibility is being treated as the wrong problem

Flexibility continues to be framed as a productivity risk rather than a design challenge; the conversation gets stuck on where people are working instead of how workflows. National productivity research increasingly points to management practices and work design as the real drivers of performance.

Blunt rules replace thoughtful design, and teams are pushed into approaches that do not reflect different roles or realities. When flexibility is handled poorly, productivity drops. When it is designed with clarity, leadership, and accountability, productivity often improves. Flexibility itself is not the issue. Leadership strength and trust make the difference.

Productivity will not improve without HR at the table

Too many productivity conversations still exclude HR or bring HR in too late. HR is treated as a support function rather than a core business driver. Australian HR research shows organisations with mature people practices consistently outperform their peers.

If organisations are serious about lifting productivity, they need to ask harder questions. Do our leaders know how to lead in this environment? Are roles and expectations genuinely clear, or have they blurred over time? Are we building the capabilities we need, not just offering development that looks good on paper? These questions should shape how work happens every day.

A people strategy problem needs a people strategy solution

Australia does not have a motivation problem; most people want to contribute to meaningful work and do it well, but when leadership, systems, and expectations are misaligned, effort leaks out of the organisation.

Lifting productivity is not about squeezing more out of people. It is about creating the conditions where people can do their best work without burning out. This is why national productivity reform is increasingly focused on workforce capability and adaptability.

That work sits squarely in the space of people strategy. And until organisations treat it as a core business issue rather than a supporting one, Australia’s productivity problem will remain exactly where it is.

Ilona Charles is the CEO and co-founder of shilo.

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