The results from academic studies suggest that just halving the gap in leaders’ management effectiveness between Australia and the world’s best could lift productivity by 4%, which would mean a boost to our economy by around $70 billion a year.
Australia’s current productivity gap from the United States is 23%, an estimated 29% of which can be attributed to management quality as measured by a range of factors such as goal and target setting, plan execution, talent management and promotion systems.
The productivity boost above would be more significant than that of the internet  and could lift the World Bank’s ranking of Australia’s PPP-adjusted-GDP per capita from 19th to 14th in the world. For individuals, this is equivalent to an extra $3,000 per person – approximately what the lowest 40 per cent of households spend on rent every year.
This opportunity could be worth around $20 billion to regional and rural Australia, based on its importance to employment and economic activity.
For this study, we analysed LinkedIn’s database of over 280,000 LinkedIn profiles of leaders from over 72,000 Australian businesses. We identified two types of ‘successful’ businesses:
Top Attractors – 25 companies that are successful at attracting talent as measured by number of job applications submitted, digital engagement of existing employees, and new hire turnover.
Recurring Financial Review fast businesses –businesses that have appeared in at least two out of the last three years of the Financial Review fast list.
We found that there are four key characteristics of effective leaders:
Fit for purpose education – overall, leaders are well-educated; in ‘Top Attractor’ established businesses they are 43% more likely to have a higher degree compared with the average business, while leaders in fast-growing companies are 22% less likely;
A set of core skills – beyond formal qualifications, leaders need a core set of skills, especially management and strategy skills. What is interesting is that beyond that, business maturity again plays a key role – for established businesses it’s about mastering business process improvement and change management to make businesses more agile in a fast-moving environment, whereas for successful fast-growing businesses, driving business development is a higher priority;
International experience – although clearly not a prerequisite for effective leadership, senior people at Top Attractor businesses and fast-growing businesses were two and three times more likely to have international experience than a leader at an average business;
Connectivity – leaders in successful businesses tend be more connected with their staff, suppliers and customers; the opposite of isolated. LinkedIn connections are just one proxy for leaders’ communicative and collaborative behaviours, but telling – on average, leaders in the Top Attractor businesses have 17% more connections than leaders in businesses overall, and leaders in fast growing businesses have 88% more than leaders at average businesses.
ABS BLS Data
Introducing new organisational or managerial practices increased the likelihood of achieving above average revenue growth by 3% over not doing so.
A business focus on innovation increased the likelihood of achieving above average revenue growth by 7%.
These results are from on a simple model using the ABS Business Longitudinal Survey data, which in all is based on 463 questions and 7,033 observations because we observe businesses over a five year period.
 Bloom, Nicholas, Benn Eifert, Aprajit Mahajan, David McKenzie, and John Roberts, (2013) Does management matter? Evidence from India (No. w16658). National Bureau of Economic Research.
 Productivity of the internet was calculated in Deloitte Access Economics (2015c).
 GDP per capita ranking based on World Bank purchasing power parity GDP data.
 This calculation is based on weekly household expenditure in Table 3A of the ABS 6530.0 – Household Expenditure Survey