How productive are we in New Zealand?
Our farm’s productivity/ labour hour has increased by 72% over 12 years, an average of 6% per year. New Zealand’s productivity has only increased by between 0.2-0.6% annually over the last 10 years. Why does this matter and how does lean thinking fit in?
Farm productivity
Many organisations and farmers in NZ keep delivering the message to farmers about how productive or efficient we are – that we are the most productive or efficient farmers in the world……
But really what are we actually talking about and what are we measuring? Generally this is only about grass productivity and our carbon footprint – yes we convert grass into milk very well…. . (Although reports from Fonterra and Nestle – one of NZ’s largest ingredients customers, in 2024 suggest that farmers in NZ are actually less efficient than our counterparts in Australia).
Regardless, efficiency of grass conversion is only ONE element of our farm business. Absolutely – it is a critical element as it determines our profitability but it is only one element. There are many other critical elements that need to work together like a well oiled machine, otherwise we do not capitalise on the grass productivity. Examples of other factors are our soil health, our genetics, our information, our feed, our infrastructure, our technology, our people, and of course our processes and systems …. but also importantly our people productivity.
Awareness of Lean Management in New Zealand
A few months ago I was interviewed by a researcher at Lincoln university on the adoption of lean thinking and six sigma methodologies in New Zealand across various industries and why there isn’t greater adoption. From my experience, many businesses in NZ are simply unaware of such methodologies.
I talk about lean all over the world and if you say the word lean or six sigma in the USA, in Ireland, in the UK and every across Europe and Asia, many people know what you are talking about and have heard of it before. And this is the case in the Ag sector also. Last year I delivered a training program for the European government for dairy farmers across 18 countries, translated into multiple languages. The European government recognised lean as being one of the key strategic enablers to enable farmers in Europe to be more resilient and sustainable.
In NZ I generally get blank looks, particularly in agriculture.
Competitive and productive
Organisations around the world understand the importance of being competitive and productive and the application of philosophies or operating systems like lean thinking to enable them to achieve this. In New Zealand, I feel we don’t think we need this because we believe we are already productive especially with the rhetoric that is common in the farming sector.
But I think we could be blindsided….. and why does this matter?
New Zealand’s productivity is very low in OECD
According to the 2024 OECD data, New Zealand sits in 27th place out of the 41 countries for productivity. Ireland is number one. Ireland has a GDP/hour worked of 149.31 while NZ sits at 55.42. In the 1970’s New Zealand was apparently on par with the Scandinavian countries, but now we produce around 40% less output per hour than our Scandinavian friends.
New Zealand’s GDP per capita is around 30% below the average for the top half of the OECD countries. OECD projections indicate that it will take another 30 years for New Zealand’s economy to double in size unless we adopt some major changes in the way we operate our businesses. So what does this actually mean? Basically it’s saying that it takes New Zealand three times as many hours to produce the same amount of outputs as Ireland. In real simple terms, a person in Ireland takes 2 hours to produce output X and in New Zealand it takes a person 6 hours to produce the same output X.
Now while there are multiple complex reasons for our productivity gap including political and economical policy, foreign investment policy etc, we also have less of a “competitive” mindset being further away from the world and that impacts our focus on continuous improvement and productivity in order to stay competitive. In other markets where they have more global interaction (eg Ireland has focused heavily on becoming a global player over the last couple of decades, attracting many global businesses to the country), businesses understand that there is a lot of competition and therefore they need to focus on staying competitive through constant innovation, improvement and productivity gains.
Productivity in Ireland vs New Zealand
Ireland is a good comparison for New Zealand. It has a similar climate (slightly cooler averages by particularly similar to the south island), it has exactly the same population as NZ (2024 stats), and agriculture sits in a similar spot in GDP by industry. Differences are Ireland is only a third of the land size of NZ, while dairy and agriculture is NZ’s biggest export income, pharmaceuticals account for Ireland’s biggest exports. Ireland’s nominal GDP in 2024 was $577 Billion USD compared to $255 B USD for New Zealand (just over half!).
Why productivity matters for New Zealand
Again why does any of this matter to New Zealand? Even the other day I heard a comment along the lines of “we are a small proud little nation and I don’t need to hear about how we need to think global”. The reality is if we want money for roads, better healthcare, better education and better infrastructure in our country that is three times larger than Ireland, our small population of 2.88 million people employed paying taxes to pay for all of this might not be enough. Therefore we need to improve our income from exports, and we also need to become more productive. Imagine if we tripled the output per hour worked!!
Our farm’s productivity vs New Zealand
This is a very complex issue and one that I am most certainly no expert in. But from my experience applying lean thinking to our own farm business and seeing our own productivity per person in terms of KGMS/ labour hour increase significantly by 72% since our first season in 2013/2014, suggests that as businesses we most certainly have some control over how productive we are. At 72% over the last 12 seasons, our annual labour productivity has increased by 6% per year.
Interestingly, according to NZ stats and NZ treasury, New Zealand productivity has only increased by between 0.2-0.6% per annum over the last 10 years, with the labour productivity in agriculture actually declining in 2021/2022 by 4.3%.
Our metrics table comparing the season before we started and our last season
| Metric | 2012-2013 | 2024-2025 |
| Number of cows | 820 | 925 |
| Number of people | 5 | 5 |
| Number of labour hours/week/person | 66 | 50 |
| Number of labour hours total/ year | 17,160 | 13,000 |
| Cows/person | 164 | 185 |
| KGMS for season | 311,000 | 457,000 |
| KGMS/cow | 380 | 494 |
| KGMS/1000 cows | 380,000 | 494,000 |
| KGMS/ person (relative to same cow numbers) | 76,000 | 98,800 |
| KGMS/labour hour (based on 1000 cows) | 22 | 38 |
We can increase productivity – we just need to think differently
What these numbers from our farm business show is that productivity gains are in fact possible for businesses regardless of what is happening in our economy and politically. However it requires us to operate in a different way and have quite a different mindset. Our productivity gains show that applying best practice methodologies such as lean thinking and a continuous improvement mindset is highly effective in delivering the improvement in labour productivity that we need.
What is interesting is that even with the significant technological advancements we have seen over the last decade, including in agriculture, our labour productivity has not improved. This tells me that we need something more to improve our people productivity. What do we need? My answer is a different way of operating and thinking about our businesses.
Any business in New Zealand should be focused on staying competitive and continuously improvement. Applying best practice methodologies such as lean thinking which is used by thousands of companies globally to become more productive and competitive, is absolutely essential for New Zealand.
Let’s improve our productivity by 6% per year with Lean Thinking!
My challenge to every farm or any other business in New Zealand is to be improving productivity by 6% a year. If we can do this, so can you! There is no reason why New Zealand’s productivity hasn’t increased by 60% in the last 10 years like our farm business. Imagine where New Zealand would be if this was the case? And where our businesses would be?