At last a report on productivity that adds something to the debate.

It’s not the rubbish we had last week from retiring Business Council boss Graham Bradley or the Australian Institute of Company Directors’ missive on the drawbacks of corporate governance and proxy consultants with the quite stupid declaration from Don Argus that if shareholders didn’t like it, they could sell out of a company, thereby compromising his reputation as an eminent Australian businessman.

The report in today’s Sydney Morning Herald found Australians are not slackers, are highly motivated and work harder than most other countries. And buried in the report’s findings were a couple of points that shouldn’t shock employees, but will management (although if they were really honest, they’d agree).

“The inaugural Australian Productivity Pulse survey found management issues (54%), organisation structure (23%), lack of innovation (15%) and outdated technology (8%) are cited by employees as the drains on productivity. Plumridge said productivity had been on a 10-year decline. That view is supported by Mr Bradley, departing chief of the Business Council of Australia.

“Mr Bradley said last week the nation had endured decades of ‘mediocre growth and declining opportunity’ due to a productivity slump. In a Sydney speech, he called on employers and workers to ‘strike adult agreements with each other to embrace technology, improve productivity and share the benefits’.”

Put to one side the childish notion that we can share the benefits when the likes of the AICDs, the BCA and other management groups (unions?) refuse to discuss rationally executive and boardroom pay and performance, you can’t help but agree with  Bradley. Something has to be done to improve the performance of entire organisations, from the top down.

The issues listed above are all within the control of boardrooms and senior management; The findings of the report are the first I can remember where the deficiencies of Australian corporate management have been exposed by asking employees what they think, not external consultants who will only write what they are paid to write and nothing more.

The performance of management and their role in our poor productivity record in recent years has been blithely ignored by most commentators, from Reserve Bank Governor Glenn Stevens to Bradley, Joe Hockeynomics, to those on Business Spectator and the parade of critics on The Australian and The Australian Financial Review. Australian company managements have an unfortunate skill of wasting or destroying capital. Just mention the likes of ABC Learning, Babcock and Brown, Allco and the tens of billions of dollars of excess asset values written or lost by the likes of Fairfax, all the banks, News Corp, the AMP (twice in the past 15 years), BHP, Billiton, Rito Tinto, Mirvac and other property groups: the list goes on.

Australian investors (overwhelmingly superannuation funds holding the money of ordinary Australians) contributed more than $110 billion in fresh capital to corporate Australia in 2007-2009. That was something all the commentators on productivity skate over.

Capital plays a very important part in productivity, especially in its improvement and maintaining that growth. Australian companies have over invested and then poor management those invested funds and forced to make massive write-offs when the GFC hit. All that helps depress productivity growth, but try getting business groups, the Reserve Bank and others to admit that, or try and measure its impact.

And if you want perhaps the best current example of poor management and boardroom incompetence look no further than Goodman Fielder, the company that styles itself as “our homegrown food company”. It has a long history of underperformance, but it would be hard to top this year. The board spent months looking for a new CEO, and while that happened, it lost a major private bread contract from one of the country’s two major retailers. And by the time a new CEO had been found and employed, he found the company’s bread division in Australia and New Zealand had lost sales, was losing profits and was losing value.

The upshot was the writing down in the value of the bread business by $300 million ($250 million in Australia and $50 million in NZ), with a “strategic review” (Goodman seems to have one every 18 months or so) that has already found $13 million in more savings, but will no doubt find millions more and slash employment when delivered next month.

The write-downs saw the company report an annual net loss of $166.7 million for the 2011 financial year, compared to net profit of $161.1 million in 2010. Excluding the impairment charges, profit for the period was $133.3 million, down 17% from the $161 million earned in the 2010 financial year (So not very good). The company then raised $259 million in fresh capital a month after the profit announcement and diluted shareholders by 42%, all without an adequate explanation.

And late last Friday the 2011 Goodman Fielder annual report was released and for losing money in 2010-11 and especially for losing control of the bread division, the company’s non-executive directors paid themselves $1.341 million, up from $1.101 million in the 2009-10 financial year. That was an increase of 21.7%.

And chairman Max Ould was paid more, $376,700, up from $365,750, up a more sedate 3.2%. Ould didn’t earn any extra for being executive chairman from April 30 after  CEO Peter Margin left (that was announced in January) and the start of the new bloke, Chris Delaney, in the new financial year on July 4.

But even so, to pay yourself more when the company lost money, took a huge and surprising impairment charge, and paid a small final dividend payment to shareholders (Ould has 300,000 shares, so he received an extra $7500) of 2.5c a share, costing $34.5 million, which was made to look even odder (why pay a dividend after a loss?) when the company sprang the $259 million fund raising on shareholders in late September.

But the most telling commentary on Goodman’s performance came from the new CEO Delaney, at the release of the profit in late August. He said that in the second half some of Goodman Fielder’s brands were dropped by supermarkets, which made the situation worse.

“It goes without saying that our response was ineffective,” Delaney said during briefing for analysts that was reported by AAP. “In particular, in the baking division, we did not adjust to the changing environment early enough, and the changes we put in place were not effective in reversing the tide.”

Delaney reportedly said Goodman Fielder needed to revamp its operations which were being hindered by a complex and widespread portfolio of brands and unnecessary duplication of tasks within the group’s five divisions.

“And, we have not had very clear articulation of the roles of those businesses and those categories in the past, which has led to a lack of co-ordination between the divisions,” he said. Furthermore, he said Goodman Fielder had not been sufficiently innovative, or had placed insufficient resources behind innovation.

And they are the issues raised in the report today from Ernest and Young and published in The SMH: lack of innovation, leadership and management issues.

Poor management is as much the culprit in our poor productivity performance as are unions and increasing regulation. It’s about time business groups recognised that and insisted they change as much as they demand governments, unions and other groups change to lift their game.