By Brian Kreissl
We keep hearing about how Canadian business needs to boost productivity to be competitive, and how our workers aren’t as productive as some other countries (most notably the United States). There are important implications for human resources in all this.
The problem has numerous potential causes, including outdated technology, a somewhat risk-averse culture, low levels of investment in research and development and a lack of commitment to training and development.
In fact, the productivity crisis in the Canadian economy was serious enough to spark a warning from the Organisation for Economic Co-operation and Development (OECD) in 2011 that low productivity is Canada’s “great challenge.”
The productivity challenge
Organizations are frequently able to improve productivity and efficiency by fully or partially automating work. In turn, the company can either earn greater profits for its shareholders or pass on cost savings to its customers in the form of lower prices.
Theoretically, this benefits the economy by putting more money into the hands of the company’s shareholders or customers. In reality, however, if employees lose their jobs as a result of restructuring, the benefit to the economy is questionable (on the other hand, it may be possible to redeploy displaced workers into more highly skilled roles).
Nevertheless, it’s generally advantageous to an organization — and the overall economy — to try to improve productivity.
While the high value of the Canadian dollar has caused some difficulties for Canadian manufacturers, one positive aspect of the higher dollar is employers can better afford investments in high technology equipment and systems manufactured abroad, resulting in productivity improvements. Many experts therefore agree now might be a good time to invest in the infrastructure needed to boost productivity.
A country’s productivity is measured by dividing its gross domestic product (GDP) by the total number of hours worked. The U.S., which suffered considerably more than Canada during the last recession, was able to increase productivity while productivity in Canada actually fell.
According to the Conference Board of Canada, this was largely because of the sheer magnitude of job losses south of the border, which were considerably greater in scope than the reduction in GDP, meaning American businesses truly were managing to do more with less. In Canada, there may have been less perceived urgency around the need to boost productivity due to a less severe recession.
However, because Canada weathered the storm of the recent financial crisis better than most countries, Canadian organizations should theoretically be in a better position to invest in technology and infrastructure improvements and employee training and development.
Instead, many businesses decided to hoard their cash reserves rather than making the investments necessary to increase productivity. In fact, both Bank of Canada Governor Mark Carney and federal Finance Minister Jim Flaherty recently warned businesses of the problem of holding excess cash, recommending instead they invest the money or pay it to shareholders as dividends.
What can HR do to help?
Boosting productivity frequently means an organization becomes less reliant on human capital. In theory, at least, automation is supposed to free up workers so they are able to give up routine tasks by enhancing their skills and concentrating on more value-added work. Where this is the case, employees are forced to retrain and enhance their level of skill, frequently resulting in increased wages and improved job satisfaction.
Even if the total amount of human capital required to perform the work decreases, automation can pave the way for enhanced job design initiatives such as job enrichment and job enlargement. In turn, this can help enhance employee engagement by making work more challenging and interesting.
Yet even where total demand for labour doesn’t decrease within the organization, it’s unlikely there will be absolutely no layoffs. This is because some employees will be resistant to change or may have a difficult time retraining. However, in many cases automation may be the only way an organization or product line can survive in the face of global competition.
The implications for HR are obvious. HR has a role to play in upskilling employees, job and organizational design, change management, redeploying and downsizing employees.
Becoming more productive and competitive won’t happen overnight or without a certain amount of pain, but the end result will improve the Canadian economy and increase the level of skill and employability of workers.
Brian Kreissl is the managing editor of Consult Carswell. He can be reached at firstname.lastname@example.org. For more information, visit www.consultcarswell.com.