The missing variable in Australia and New Zealand’s productivity debate

The missing variable in Australia and New Zealand’s productivity debate 

CEOs are being asked to deliver more outcomes, at greater speed, with less margin for error. They must grow the business while controlling costs, adopt AI without compromising judgement, modernise technology, strengthen cybersecurity, respond to regulation, attract scarce talent and maintain stakeholder confidence. 

Every one of these priorities depends on the quality of leadership decisions. Yet almost none of the productivity debate asks a fundamental question: what happens when the people making the most consequential decisions are themselves operating below capacity? 

Australia and New Zealand unquestionably have a productivity problem. The usual prescriptions are familiar: invest in technology, lift skills, remove regulatory friction and redesign inefficient processes. Each matters, but none will deliver its full potential if the people leading the work lack the capacity to do so effectively. 

The debate has focused heavily on what organisations should produce and how efficiently they should produce it. Far less attention has been given to the cognitive, emotional, physical and relational condition of the people carrying final accountability. That omission is becoming increasingly difficult to defend. 

The CEO Institute’s 2026 Pulse research, surveying 798 business leaders across Australia and New Zealand, found that 68% believed their mental health and wellbeing had deteriorated compared with two years earlier.[1] This points to declining leadership capacity at the very moment organisations require clearer thinking, stronger judgement and faster execution. 

The uncomfortable question is unavoidable: how can we expect leaders to solve the productivity crisis while their own capacity to lead is declining? How much performance is already being lost because we measure effort while ignoring leadership condition? 

Capacity is not the same as effort

Leadership capacity should not be confused with hours worked or visible commitment. Most CEOs remain available, attend the meetings, approve investments and keep making decisions, so performance can appear intact from the outside.

But effort and capacity are not interchangeable. Leadership capacity is the cognitive, emotional, physical and relational ability to exercise sound judgement consistently, particularly when information is incomplete and competing interests cannot all be satisfied.

A leader can be operating at maximum effort while having less space to think, fewer reserves for ambiguity and reduced patience for challenge. The first casualty of sustained pressure is rarely attendance. It is often judgement.

A 2025 scoping review covering 25 studies and 2,276 participants found that sleep deprivation adversely affected decision-making across a range of settings. .[2] Experienced leaders can compensate by drawing on knowledge and capable teams, but compensation has limits and consumes energy otherwise available for strategic thinking, emotional regulation and recovery.

One of the greatest risks is the normalisation of chronic depletion. Leaders adjust their expectations of what normal functioning feels like, making deterioration harder to recognise from within the experience itself.

The organisational cost of depleted leadership

The condition of a CEO is often treated as personal, but the consequences rarely remain personal. Reduced cognitive and emotional capacity affects the speed and quality of decisions, while unclear, delayed or inconsistent decisions create uncertainty throughout the organisation. 

That uncertainty produces additional meetings, defensive reporting, duplicated work, escalation and rework. Strategic activity is displaced by whatever feels most urgent, and delegation declines because taking control can require less immediate cognitive effort than explaining a decision and trusting someone else to execute it. 

Senior executives become cautious because they are uncertain which priorities will hold. Managers wait for clarification, while teams prepare multiple versions of work or protect themselves against shifting expectations. 

None of this appears in a conventional productivity dashboard. It appears as slower execution, excessive meetings, competing priorities and talented executives waiting for decisions. In some organisations, the operating rhythm gradually adapts around the depleted capacity of one leader. 

No productivity report measures the quality of decisions that were never made because the leader responsible no longer had the capacity to make them. EnterpriseWorks’ 2026 research found that 83% of Australian and New Zealand respondents understood how their work connected to strategy, yet only 51% believed work was organised effectively around the most important priorities.[3] 

That gap requires leaders with enough capacity to make trade-offs, stop lower-value work, hold priorities steady and give others authority to act. It cannot be closed through another strategy presentation. 

The World Health Organization estimates that depression and anxiety result in 12 billion lost working days globally each year and cost approximately US$1 trillion in lost productivity.[4] Safe Work Australia has estimated that depression costs Australian employers about $6.3 billion annually through absenteeism and presenteeism.[5] 

Those figures do not capture the multiplier created when the person affected controls capital allocation, executive appointments and organisational risk. A CEO may be present every day and still become the organisation’s largest decision-making constraint. 

Capacity is personal, structural and relational 

The conventional response is to tell CEOs to take better care of themselves. Sleep, exercise, boundaries, leave and deliberate recovery matter, and leaders cannot delegate responsibility for their health. 

Those disciplines can also become a convenient way for organisations to avoid examining how leadership work has been designed. A board cannot outsource responsibility for the operating conditions it creates, just as a CEO cannot expect a broken operating model to be repaired through personal resilience alone. 

Many CEOs operate across constant digital access, expanding regulation, workforce pressure, economic uncertainty and transformation. In owner-led businesses, personal wealth, family security and the success of the business may sit within the same set of decisions. 

Safe Work Australia identifies high job demands, poor support, lack of role clarity and poor organisational change management as psychosocial hazards. WorkSafe New Zealand also states that wellbeing initiatives do not replace the duty to manage psychosocial risks created by work itself.[6] Those principles should apply to the CEO as much as everyone else. 

Boards should examine whether the CEO role has accumulated too many decisions, direct reports and unresolved accountabilities. CEOs must also confront whether their own behaviour has created dependency, even while they claim to want greater delegation. 

Capacity is restored through health, sleep, recovery and personal discipline, but it is also created through clearer decision rights, stronger executives and trusted challenge. Isolation can narrow thinking and reinforce assumptions, while peer challenge improves the quality of thinking brought to decisions without removing accountability from the CEO. 

This is not an argument for comfort. Leadership will always involve uncertainty, difficult decisions and periods of intense demand. The distinction is between acute pressure in service of an important outcome and chronic depletion that no longer improves performance. One can sharpen leadership. The other erodes it. 

Leadership systems should allow pressure to be absorbed and shared, with recovery embedded during demanding periods rather than postponed until the pressure has passed. Recovery must be part of the operating rhythm, not a reward offered once the damage has already been done. 

A governance issue hiding inside a wellbeing conversation 

Boards routinely review financial capacity, succession risk, cyber resilience and operational continuity. CEO capacity is often discussed only when there is a visible health event, performance failure or planned succession, by which point the cost may already be significant. 

Boards do not need access to a CEO’s private medical information, nor should they attempt to diagnose the individual. They do need confidence that the organisation’s most consequential leadership role can be performed sustainably. 

Are major decisions repeatedly deferred or reversed? Has decision-making become unnecessarily concentrated? Is the executive team carrying genuine accountability, or merely preparing recommendations for the CEO? Is strategic work consistently displaced by operational escalation? 

Boards should also remain alert to changes in the leader, not only the system. Reduced clarity, increased reactivity, diminished engagement, altered communication or decision-making, or a noticeable departure from the CEO’s usual way of operating may warrant curiosity and a respectful conversation rather than judgement or amateur diagnosis. 

None of these indicators proves that a leader is depleted. Together, they can reveal whether the leadership system is sustainable. A difficult quarter or poor decision should not be medicalised, but sustained changes in behaviour should not be ignored

Leadership capacity is a multiplier 

Leadership capacity is not the only explanation for Australia and New Zealand’s productivity performance. Infrastructure, regulation, skills, capital investment, competition and economic conditions all matter, and not every organisational failure can be attributed to an exhausted CEO. 

Leadership capacity is still a multiplier. Capable leaders can make imperfect systems work better, while depleted leaders can prevent capable people, sound systems and significant investments from reaching their potential. 

AI reinforces this point. Technology can accelerate work and expand capability, but it also increases the volume and speed of information leaders must govern. That raises the premium on human judgement rather than removing it. 

CEOs should examine both where their capacity is being consumed and how their energy, health and decision-making reserves can be restored. Which decisions genuinely require their involvement? Which executives can carry more accountability? What are the early signs of depletion, and where is recovery built into the working week? 

Before approving the next productivity program, technology investment or transformation, boards and CEOs should ask whether the leadership system has the capacity to make it succeed. That question belongs alongside the business case and risk assessment, not in a wellbeing program after the fact. 

A depleted CEO does not simply experience lower personal wellbeing. Their reduced capacity can constrain the entire organisation, which is why leadership capacity must be treated as an organisational asset, a productivity input and a governance responsibility. 

Productivity is not determined only by the capability of technology or the effort of the workforce. It is also determined by the quality of the judgement directing both. That is not a soft wellbeing agenda. It is leadership infrastructure, and it may be one of the most consequential productivity variables Australia and New Zealand are still failing to measure.

References

[1] The CEO Institute, The Pulse 2026, survey of 798 business leaders across Australia and New Zealand. 

[2] Examining the Effects of Sleep Deprivation on Decision-Making: A Scoping Review, 2025. 

[3] EnterpriseWorks, The Workforce Productivity Report: A New Perspective, 2026. Research included 385 Australian and New Zealand workers and was sponsored by monday.com.