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Monday, 27 June 1994
Page: 1998

Senator CHRIS EVANS —My question is directed to the Minister for Industry, Science and Technology. The white paper, Working Nation, drew attention to a study being undertaken by the Australian Manufacturing Council into the spread of best practice in the manufacturing sector. I understand that the council's report was released last week. Can the minister comment on the findings of the study, in particular those regarding the relationship between the adoption of best practice and its impact on a firm's performance?

Senator COOK —The Australian Manufacturing Council is a tripartite body consisting of unions, employers and governments, chaired by the Chief Executive Officer of BHP, John Prescott. It has been responsible for studying the fortunes and behaviour of the manufacturing industry and for several major initiatives on behalf of the manufacturing industry in Australia.

  Late last year, in a joint undertaking with the New Zealand ministry for commerce and industry, the council commenced a study on the spread of best practice in manufacturing in Australia and New Zealand. It expects to complete that study in September this year. Last Thursday it issued an interim report showing how that study is progressing, and it came up with some interesting observations.

  As I said, the study examines the spread of best practice in manufacturing industry, measures the effectiveness of that as a management tool and assesses the impact of best practice on managerial performance in companies. The survey examined 1,000 manufacturing companies in Australia and 379 manufacturing companies in New Zealand. It found that, where companies benchmark themselves against the best performed companies in their industry sector in the world, the companies that undertook the rigorous self-examination of benchmarking tend to be the companies that perform among the best in Australia and New Zealand.

  When we look at the performance of those companies as against those that do not, we would categorise the benchmarkers or the best practice companies as being in the top 20 per cent in both countries and those that do not have any element of comparison of their performance with the best performed companies in the world would be categorised in the bottom 20 per cent. For the sake of this study, the AMC has tagged the top 20 per cent as the leaders and the bottom 20 per cent as the laggers and tried to get a profile of what a leading company looks like and what a lagging company looks like in both areas. When we look at that profile, we find that in sales performance, in increased exports, in a solid cash flow for the companies, in increases in employment by the companies, the leaders perform in applying best practice far better than do the laggers.

  In essence, we can summarise it by saying that the attitude of the leading companies in Australasia is not to worry or be concerned about what might be termed the preoccupations of whether or not the labour market is flexible, whether or not there is sufficient investment capital, whether or not all the sorts of things we hear about in terms of micro-economic reform have been done. The leaders do not worry about those things. The leaders worry about access to the market and how they can export their goods into the market. Their profile is one of being out there, go-getting, trying to perform and overcome the constraints.

  The laggers are inwardly focused and cite as difficulties in achieving better performance the labour market, access to finance and all of those other things that we constantly hear about. The laggers remind me in political terms very much of the opposition and its carping criticism about the performance of the Australian economy. The difference is one of approach. If one wants to perform, one is focused on the market. If one does not perform, one is focused on finding excuses for failure. That seems to be what this study shows. The AMC is developing a diagnostic which will help lagging companies that wish to be leading companies change their managerial culture and approach. It will make that available to Australian banks as well, to enable those banks to assess applications for loans, particularly from small to medium sized businesses, more effectively.