Brent Balinski spoke to Professor Peter Gahan from the University of Melbourne and Jeffery Yeh from Homart Pharmaceuticals about the importance of High Performance Work Practices to small and medium enterprise companies.
Recent research has shown there are certain ways high-performing manufacturing SMEs tend to operate.
There’s a body of research showing a link between High Performance Work Practices (HPWPs) – a set of management tools that help get the best out of an organisation and its employees – and business success.
“A lot of that [research] is international in orientation with limited work done here in Australia,” explained Professor Peter Gahan, director of the University of Melbourne’s Centre For Workplace Leadership.
These practices are broken into three elements, based around knowledge, skills and abilities; motivation and effort; and opportunities to contribute.
University of Melbourne’s Centre for Workplace Leadership recently carried out a survey of 1,054 manufacturing SMEs (under 200 employees), the first study of its kind in the country.
The CWL has been sharing the findings from the High Performance Manufacturing Work Practices Study at a series of Manufacturing Skills Australia’s EScan 2015 events.
There are successful small and medium-sized manufacturers in Australia, of course, and some obvious differences observed between those who adopt a suite of HPWPs and those who don’t.
“The key thing that we’ve learned, I think, is that developing a high-performance set of practices that work together in a synergistic and complementary way is not rocket science,” Gahan told Manufacturers’ Monthly.
“It’s not something that’s necessarily straightforward either in the sense that the key principles are clear, you need to sort of have practices that are focussed on motivating employees, building their knowledge and skills, giving them opportunities to contribute.
“But you’ve got to make sure that the practices that reflect those principles really are customised to the workplace setting.”
Of those who have successfully implemented a range of these performance-driving habits, no two had done so in the same way.
Homart Pharmaceuticals was one of seven best-practice case studies – along with companies including Redarc Electronics and Bundaberg Brewed Drinks – highlighted in the CWL’s research.
The fast-growing supplements manufacturer was established 22 years ago with four employees. It now employs over 100 (with 30 in production) across three nations, exports to 20 countries (50 per cent of its revenues are international), and has received numerous awards.
Co-owner and operations director Jeffery Yeh said that expanding his business was guided by logic rather than a conscious adoption of a High Performing Workplace System.
“I had completely no idea what’s a high-performance workplace,” he told Manufacturers’ Monthly.
“We’re just [trying] to make sure people are happy working there, making sure they have tools and skills and an environment that [will] make them work efficiently.
Homart employs based on attitude first and skills – which can be developed later – second. Workers are provided with on the job training by team leaders, encouraged to share their suggestions (the production manager has an open door policy) and motivated through performance-based prizes and pay scales.
Other efforts to motivate staff include providing monthly pizza sessions, pilates classes and snooker and ping pong tables in the lunchroom. Workers are advised to approach team leaders with suggestions and there are weekly meetings.
Homart’s culture came about through trying to keep workers “happy, safe and efficient” explained Yeh.
“And a lot of things just fell into place when we were trying to do that,” he said.
The manager said he was surprised that his company ticked so many boxes on the HPWP checklist, but was encouraged by the other case studies showing SME manufacturers making similar efforts to motivate workers, develop their skills and encourage the sharing of ideas.
“Knowing that other companies are doing it, other successful companies are doing the same thing gives us comfort in knowing you’re doing the right thing and can continue to do that,” he said.
Companies like Yeh’s were also willing to look outside their organisation for advice. For example, Homart is currently optimising their process through a Lean Manufacturing program, guided by Blakemoresource. Yeh believes this will increase productivity by 30 per cent.
Firms who did less well with the adoption of positive human resources practices had a number of items in common, the research found.
They tended to operate in declining or turbulent markets, have a domestic rather than export focus, and tended to be concerned with their survival and poor demand. They also regularly benchmarked themselves against their competition.
Important for the adoption of a bundle of practices were phasing them in incrementally and in a way where they were complementary to each other.
Gahan said success stories, “sort of build it piece by piece, starting with a very simple system and looking to build on it that way.”
“[Also] the simple system has to have elements of all three that work together. You have to make sure they work together”
According to another of the report’s authors, the more practices from each of the three categories were implemented, the greater the benefit that was experienced.
And there’s plenty of room for improvement, with only 37 per cent of manufacturing SMEs surveyed in the research achieving a “moderate” uptake in their system of practices.
The link between HPWPs and success was compelling, and well worth considering, according to its authors.
Said Gahan: “What we were able to show in fact was that these bundles of high-performance work practices were positively and significantly associated with profitability, product quality and labour productivity.”
How does your company compare? See the Centre For Workplace Leadership’s initial findings here, including a checklist of HPWPs.
There are two more events in MSA’s Environmental Scan consultative events series, in Geelong on October 30 and Newcastle on November 7. For more information, click here.