More than half of company directors believe labour quality and capability is the biggest barrier to New Zealand's economic performance.

The Institute of Directors (IoD) and ASB's 2018 Director Sentiment Survey found 61 per cent of respondents thought the labour force had tightened significantly and firms were finding it harder to find the "right person" for the job.

Confidence that New Zealand's economic performance would improve over the next 12 months was also low among the 936 directors who took part in the survey.

Just 17 per cent said they expected economic performance would improve in the next year.


The survey's biggest increase was among those who were pessimistic about the economy.

Forty-three per cent said they expected a decline in economic performance, up from 16 per cent last year, while 40 per cent expected it to remain unchanged.

It was the first time since the annual survey started in 2014 that more directors said they expect performance to weaken rather than strengthen.

Nick Tuffley, ASB chief economist, said the survey was one of a number in recent months that reflected falling business confidence.

"However, at a high level, the global growth outlook remains firm and supportive of the New Zealand export sector and, domestically, a number of supports remain in place. Weak business confidence risks holding back investment by businesses," Tuffley said.

A survey last month of more than 400 Kiwi exporters found them largely optimistic despite tensions around international trade.

More than half of the respondents (52 per cent) of the 2018 ExportNZ DHL Export Barometer said they had experienced increased international orders, while 60 per cent were optimistic that overseas orders would increase in the next year.

With focus shifting towards the Future of Work, 66 per cent of directors saying their boards had discussed the impact of technology, automation and artificial intelligence.


Felicity Caird, IoD governance leadership centre general manager, said boards have a key role in strategic talent management.

"It's good to see that 66 per cent of directors said their boards had discussed the impact of technology, automation or artificial intelligence on their organisation in the last 12 months," Caird said.

"As new technologies change the way we work, the way that organisations are led and governed is also evolving. It's critical that organisations ensure that they have the necessary capability to deliver future strategy."

But while the future may have been discussed, just 33 per cent of directors said they thought their board was equipped with the right capability to lead their organisation's digital future.

According to the survey, more boards had assessed ethics risks since last year — up from 44 per cent to 55 per cent.

Thirty-nine per cent of directors said their boards had discussed sexual harassment in the workplace, but more than a third hadn't.

"This is a positive development, although more work is still needed," Caird said.

"By building good conduct into their business models, boards will focus on long-term sustainability, good customer and shareholder outcomes, and a healthy culture for staff."

The online survey of IoD members was taken in late September to early October.