People don’t leave organisations – they leave managers. But the inverse is also true. That is, people stay, grow and perform when they’re led well. A good leader is an invaluable asset to an organisation.
In fact, it’s the relationship between leadership and performance that sits at the heart of Australia’s broader productivity problem.
Productivity is falling, despite longer hours
The latest figures from the Australian Bureau of Statistics confirm what many of us already know: productivity growth has stalled. In fact, it’s been in steady decline since 2017.
This is no small issue. Productivity is what drives national prosperity. When productivity rises, so do wages, economic output and living standards. When it falls, as it has in recent years, we see rising inequality, fiscal pressures on government and greater strain on households – all hallmarks of the cost of living crisis we’re now living through.
Some might assume this productivity drop is due to Australians working fewer hours. But this isn’t the case. According to the Productivity Commission, Australians are working 6.9% more hours than before, yet productivity has dropped by 3.7%. We’re working harder, but not smarter.
The missing link: leadership capability
From my perspective, the overlooked answer is leadership. Leadership is the engine of sustained performance and continuous improvement. And right now, too many engines are stalling.
Let me be clear: this isn’t just a corporate problem. It’s a national one. Australia’s economic future depends on reversing the productivity slump – and leadership capability is one of the most effective levers we can pull.
In the workplace, it’s not a ping pong table or a kombucha tap that inspires high performance – it’s clarity, motivation, trust and accountability. These are all outcomes of good leadership. If people know what’s expected of them, feel supported by their manager and see how their work contributes to something bigger, they’re more likely to bring their best to the table.
On the flipside, poor leadership can erode engagement and stunt productivity. This is especially true in today’s hybrid work environment. During COVID, many leaders were thrown into managing remote teams without any preparation. The watercooler conversations were gone, replaced by days filled with video calls and emails. Without the right leadership tools – clear communication, structured delegation, mutual accountability – the cracks showed. Productivity has been the victim of this.
We can’t assume someone who excels in their technical role will automatically make a great leader. Yet too often, that’s exactly what we do. We promote the high-performing accountant or engineer into a management role and only realise later that they’re sinking under the weight of the task of managing and leading their team.
Hybrid isn’t the problem
There’s been a lot of noise about whether hybrid work is to blame. With strong leadership, hybrid teams can be just as productive – in some cases, more so. The Productivity Commission has recently released research supporting this claim. In their analysis of productivity before and after the COVID pandemic, they found that hybrid work arrangements offer elements that may help to boost productivity. These elements include minimising distractions, reducing sick days and increasing worker satisfaction.
This is not to say that hybrid work is the answer to productivity. Successful hybrid working arrangements rely on strong leaders. So too does productivity.
Sustained performance and continuous improvement
When we invest in leadership – early and intentionally – we build capability before the moment of need. We prepare people for the challenges ahead, not just react to crises as they unfold. This is how we build strong benches of future leaders. And this is how we lift productivity – by creating conditions where sustained performance and continuous improvement are possible.
It’s worth noting that the skills most in demand in today’s organisations – strategic thinking, clear communication, delegation, accountability – are fundamentally human and deeply rooted in leadership. They’re not skills that AI will replace any time soon. But they are skills that require cultivation.
Are we investing enough in leadership?
At the Institute of Managers and Leaders, we are still seeing a strong investment in leadership. But this investment is not growing sufficiently to match the scale of today’s leadership challenges. Many businesses continue to prioritise technical skills, but without the leadership layer, even the most technically brilliant teams will underperform. Worse, poor leadership leads to attrition – often of your best people.
The NSW Productivity Commissioner, Peter Achterstraat AM FIML, is a strong advocate of what he calls “leveraged productivity”.
“By increasing the skills of one technician, a business might be able to increase that person’s output by 10 percent,” he explains. “But by increasing the skills of that technician’s manager, a business might be able to increase the firm’s output by 100 percent”.
And this matters. Because the impact of good leadership isn’t just felt within teams or businesses. It ripples outward. Engaged, motivated workers contribute to stronger organisations. Stronger organisations drive economic growth. And economic growth lifts the standard of living for all Australians.
“A highly effective manager can build a culture and environment where all staff, even the most productive workers, can achieve even more and can experience greater fulfilment in doing so,” adds Achterstraat.
Leadership is a national productivity issue
We need to elevate this conversation beyond HR and L&D. Leadership capability is not a nice-to-have. It’s a national imperative.
Let’s stop thinking of leadership development as a perk or a soft skill. It’s one of the most powerful tools we have to revive productivity, re-engage our workforce and rebuild a stronger, more equitable economy. And it starts not with another day of technical training, but with a clear-eyed commitment to investing in the people who lead.
Ready to lead the productivity shift?
At the Institute of Managers and Leaders, we believe leadership is the lever that drives real change. If you’re ready to build stronger, more capable managers in your organisation or develop your leadership skills, explore our range of practical, high-impact leadership courses today.
