Back in 2012, Canada was given a “B” grade for labour productivity, ranking fifth out of 16 countries, according to the Conference Board of Canada. And the growth of labour productivity — measuring the amount of goods and services produced by one hour of labour — had been lower than that of the top countries for many decades, hurting international competitiveness.
Those lagging levels were cited by Scotiabank CEO Brian Porter recently when he spoke during the company’s annual shareholders’ meeting in April, stating that, ultimately, it’s up to the private sector to provide the necessary boost.
“Instead of focusing on quarterly results, companies and investors should focus on value creation over the longer term. While longer-term thinking is important for all business leaders, it’s also important for political and community leaders.”
Federal and provincial governments need to focus on free and open trade, says Porter, as well as building up Canada’s economic infrastructure and increasing productivity.
“Productivity is the most important determinant of a country’s per capita income over the long term,” he says. “And yet, Canada’s labour productivity has lagged behind our peers globally for some time. In some ways, it’s Canada’s Achilles’ heel.”
To address the issue, both the government and private sector need to examine innovation and skilled labour, says Porter.
More and more employers — in every industry — are swimming in the same talent pool, he says. The focus needs to shift towards developing talent and nurturing innovation.
“While governments can create the conditions for innovation to thrive, Canadian companies need to step up to be the primary drivers,” says Porter.
“Canada is fortunate to have some of the best-educated young people in the world. Nevertheless, the above-average youth unemployment rate reflects, in part, a disconnect between the skills of many graduates and the needs of their future employers.”
The connection between the skills gap and Canada’s labour productivity is one being investigated by Finance Minister Bill Morneau, who established an economic advisory council to examine the issue.
The Advisory Council on Economic Growth is comprised of 14 members, all of whom have are leaders in business or academics. The council will guide Morneau in developing a growth strategy for Canada’s labour productivity, with a strategy to be delivered by the end of 2016.
The misalignment between the skills of Canadians and those in demand by employers will be examined closely, according to Ministry of Finance spokesperson David Barnabe.
“There are too many unemployed Canadians still looking for work and too many businesses looking for people,” he says. “Helping Canadians get the skills and experience they need to fill the jobs available now and in the future is an important priority for the government.”
The government must play its part by making smart, strategic investments and working with the private sector to create conditions for productivity-enhancing investments, says Barnabe, highlighting the critical participation of the private sector.
“Key decisions that will drive higher income growth through increased productivity growth are made by individuals and businesses across Canada,” he says.
The role of HR
The issue of labour productivity is an especially hot topic among HR professionals, says Deb LaMere, vice-president of employee engagement at Ceridian in Minneapolis, Minn.
“It’s an area human resources is getting further and further into,” she says. “Particularly... the ongoing discussion around big data and human resources-centric programs concerning big data are affecting productivity measures.”
Employers in every industry are struggling to streamline costs and maximize output, says LaMere. From a human resources perspective, this means examining costs related to issues like absenteeism and turnover.
A high turnover rate, for example, results in recruitment and productivity costs.
“When you have a high turnover rate and you’re constantly recruiting, it’s not only the cost of recruitment, it’s also the cost in lost productivity in work hours that goes along with it,” says LaMere. “There’s research out there that says it’s up to $500,000 in costs when you have someone turn over. And that’s the recruitment and the loss of productivity not just while you’re hiring but also the ramp-up time once you’ve hired someone.”
As a result, putting processes in place to engage employees and create a culture that encourages long-term service is crucial for productivity, she says.
“Employee engagement is just a huge piece of productivity and it leads back to the programs that are implemented.”
First and foremost, employers need to understand and fulfill the basic needs of the workforce, says LaMere. Communication is necessary to establish what those needs are, and once the employer knows, the implementation of recognition and bonus systems goes a long way to ensure basic needs are met.
As engagement and productivity rise, she says, these recognition and bonus programs can be enhanced to further increase employee output. In pushing to understand its workforce, an employer should also continually examine its culture and the role that plays in productivity.
“What is your culture? What do you stand for? What is your vision, mission and values? That’s another piece that employees will attach themselves to,” says LaMere. “If you can engage your employees on this level, it will lower the rates of turnover and absenteeism and really lead to increased productivity and, ultimately, revenue.”
Managing workplace culture is the most crucial piece of protecting and improving productivity, according to Warren (Smokey) Thomas, president of the Ontario Public Service Employees Union (OPSEU) in Ottawa.
“Over the years, in the public service, we’ve seen front-line numbers diminish. You’re trying to make people do more, with less, with fewer people,” he says. “What happens is you start to see burnout. People get tired and they make mistakes or they just start to think, ‘The hell with it’ and they don’t work as hard as they can.”
Pushing workers to maintain productivity, while resources dwindle and co-workers disappear, will eventually cause employees to reach a breaking point, says Thomas.
“I marvel when I go into a workplace where labour relations are really bad and management can’t believe it, they’re just astounded that workers don’t like them. Workers resent them,” he says. “It’s like people don’t matter anymore. Everywhere you go, employees are saying, ‘They don’t care about us. They don’t give a s--- about us.’ Employers are turning a blind eye to workers’ needs, to workloads.”
In the current labour market, more and more employers are relying on precarious, part-time work, says Thomas. Young employees are becoming disillusioned and these feelings of being unsupported and unvalued by management have a negative impact on productivity.
Joint labour-management training is a huge step employers can take to improve labour relations and, as a result, improve workplace culture and productivity, he says. Joint training in issues such as effective communication and relationship-building — as well as the development of joint objectives for future improvement — are a concrete way management can address negative feelings in the workplace.
If employers are serious about addressing these deep-seeded issues affecting productivity, however, a genuine commitment must be made, says Thomas.
“When you reach an agreement, there’s got to be a commitment on the management side to stick with it and not slide backwards.”
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