Why Productivity Is More Important Than Ever For Businesses
HALIFAX — There is a prominent narrative out there that businesses are helpless when it comes to inflation, the labour shortage, and other issues brought on by Covid-19. But a new study by the Business Development Bank of Canada suggests otherwise.
The study, titled Inflation, Labour Shortages and Supply Challenges: Embrace Productivity to Thrive in the Current Context, surveyed 1,000 Canadian businesses and compared the most productive 10 percent with others in the same industry.
While 61 percent of all Canadian businesses say inflation is a challenge, only 39 percent that “focus on productivity” had the same worries. While 58 percent of businesses say they are facing labour problems, only 40 percent of “productive businesses” have been affected by the employee shortage.
Even when it comes to supply chain issues, there is a stark contrast between the two groups. While 42 percent of average businesses say they have trouble getting their goods, only 28 percent of “productive” businesses have that problem.
The study also found that businesses that rank in the top 10 percent for productivity make six times more sales and earn five times more profit.
“I think this is really powerful,” said Pierre Cleroux, BDC’s chief economist. “It shows that businesses that make an effort to change or improve their productivity get rewarded for that.”
“The efficiency of your business; you control that 100 percent. There’s some factors coming from outside that you don’t control, like supply chain disruptions, supply of labor, even related to our aging population, but what you control is how you make things happen in your business.”
Through the study, Cleroux found there were two areas that commonly led to businesses losing productivity. One was disorganization on the operational side of things.
“They don’t realize that if there’s some blockage. In the manufacturing sector, for example, they will be delayed; things will be wasted. There will be overproduction. The business that is misaligned and that will result in inefficiency.”
The other big factor in lost productivity is the underutilization of technology. Cleroux says technology, especially in the digital world, can free up manpower from repetitive, tedious, tasks. It also saves a lot of money at a time when it costs a lot more to put a person on payroll.
“Technology doesn’t replace people but makes it easier for the employee to do their tasks and take the routine away from their job. Also, it protects the business against price increases and salary increases. So, technology and automation have a huge difference on the performance of the business.”
Cleroux said the pandemic has brought about some positive changes for businesses, as many sectors have been forced to adapt. He tells the story of a small pharmacy owned by a husband and wife. Due to the labour shortage, they couldn’t find employees. So they invested in a sorting machine for prescriptions, which drastically increased their productivity.
“There’s an investment there (in the sorting device). But the payoff is it’s really efficient. So this small found a way, by investing in automation, to really change the game for their business. And there’s a lot of examples like that in every sector of the economy. Now you can invest in technology that would make your life easier.”
Cleroux and the study suggests businesses follow four steps to be more productive:
- Measure how your company is doing with others in the industry;
- Optimize by figuring out what is wasting your time and money;
- Digitize to be more efficient;
- Continuously improve your products, services and processes, including the training of your staff.
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].