One reason for falling productivity and efficiency in the last two years is now being unveiled

The baby boomer generation is often maligned, but among their voluminous numbers were excellent managers who drove both efficiency and productivity.

One of the reasons why so many enterprises in Australia and around the world have suffered a fall in productivity and efficiency in the last two years is now being unveiled. But so are the remedies and with those solutions may come a reduction in the inflationary spiral.

The great danger to countries like Australia is that the public service, both in Canberra and in the states, has yet to wake up to why their efficiency is declining let alone embrace the solutions.

The baby boomer generation is often maligned, but among their voluminous numbers were excellent managers who drove both efficiency and productivity.

Then came the Covid years and they were forced to slow down. A large portion of the management elite got to like the slower retirement life, looked hard their finances and decided that they could afford to leave the “rat race”.

Suddenly, in enterprise after enterprise and the public service top management roles were thrust on the younger generation, including males and females, and too many were not prepared for it.

Not properly trained, they simply weren’t as good as their predecessors and so efficiency declined and, where possible, prices and charges were increased.

Last week’s Melbourne Mining Club lunch was addressed by Denver-based Newmont president Tom Palmer who pointed out that the reason why gold mining shares had not matched the rise in the price of gold was that most miners had encountered higher costs while revenue was set by the metal markets and not by the producers.

I emphasise that Palmer did not link Newmont’s higher costs to the management promotion gap, but in discussions around the room it was clear that other miners had been impacted by the early retirement of baby boomers

Corporate boards and government ministers had not realised that their top baby boomer executives had not trained the next generation.

Around the world, consulting businesses are emerging to help enterprises rectify the situation.

The old management consulting game saw “whiz kids” come up with far out ideas. This style of management consulting was not the answer to the problems created by unprepared managers.

Accordingly, groups have emerged that managed to convince top, retiring baby boomer managers to give up part of their ”retirement time” and teach the next generation of managers how to manage at or near the top.

Last month the Accenture group announced they acquired one of the management consulting groups that boomed by retraining under-prepared executives - Partners in Performance.

Founded by former McKinsey consultant Skipp Williamson, Partners in Performance uses a performance-based fee structure where a portion of the value delivered, through cost-savings or extra income, is shared with clients.

My guess is that over time the practice of using the skills of “retired” baby boomers will decline as they move back into full retirement mode.

But, in Australia and internationally they will be replaced by artificial intelligence. AI systems are set to bring about fundamental changes to the management of corporations and, when the politicians wake up, to the management of public services. My guess is that Accenture’s access to suitable artificial intelligence systems was one of the reasons why the two groups came together.

Meanwhile, corporate boards and ministers in charge of public servants need to take a second look at management’s constant cries of higher costs and determine whether those higher costs were actually caused by a fall in management skills.

Meanwhile, few of the baby boomers who are still in the top management saddle, plus the younger breed, have any experience in the management techniques that were necessary in the 1950s, 60s and 70s when unions shared control. (There will be some talented managers in commercial building who have developed skills in shared control with unions to complete task,s albeit at high cost).

The new industrial relations act which comes into operation in August is all about requiring re-introduction management techniques used by the post-war generation where decision making was shared with unions in larger enterprises.

In those days there were tariffs to protect Australian enterprises from the higher costs involved in control sharing and the currency was fixed. We are starting to see community calls for a return to high tariffs emerging from some industries as they realise their costs will be boosted and their efficiency reduced.

Of course in the 1950s to 1970s decision making was not shared with unions in smaller enterprises but the new act requires all enterprises employing 15 people or more to send union representatives to the local Trades Hall to be taught how to disrupt corporations to achieve a share of the management decision making.

Australian companies will need to access artificial intelligence on a scale that is much greater than most other nations.

It will be fascinating to see the artificial intelligence techniques of today being applied to solve the cost inflation created by the management systems of half a century earlier. The baby boomers can’t help in that exercise.