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This is the final article in a four-part series that explains productivity and why it matters to investors.

In the earlier articles in this series, we looked at productivity-what it is, why it is important, and some of the factors that can help us to improve productivity. In this article, we will explore some additional factors that can influence productivity and our ability to access the benefits that improved productivity can generate.

Research and development

The more research and development that is undertaken, the more invention and innovation we can achieve and the more technology can be improved. This should enhance productivity as new products, methods, and resources are brought into use that can affect production costs, and quality.

For example, RIM developed a new technology which is still a world leader and creates jobs, income, and opportunity in Canada. Yet global pressures are intense and continually challenge RIM to invest in new technology and create better products, at the same time as it is challenged to compete in price and reliability.

One can recall the incredible success of Nortel-a company that is now a shadow of its former self. Success today does not mean success tomorrow. No company, no matter how successful, can rest on its laurels in a highly competitive global economy.

Investor Insight

An investor should keep an eye on the company's plans for spending on R&D. This will apply more to some companies than others. But, for some companies, R&D spending will be critical to enable the company to remain competitive and profitable. A company such as RIM faces constant challenges and needs to continually find ways to innovate and respond to client needs and interests. Once again, annual reports, company reports, analysts' reports, and minutes can provide insight into a company's R&D plans.

Technology transfer/implementation

Developing technology is one thing. Putting it to effective use is another matter. The more effectively that technology is applied within business, the more we can improve productivity. For example, if Canadian gold producers can developed new, better, more innovative and less costly ways to extract gold and bring it to market, our gold producers may be able to achieve productivity improvements and more efficient use of resources.

Investor Insight

Some companies are better at seeking out and integrating new technology than others. In assessing a company for possible investment, does it have a reputation as an industry leader? Does it appear to be at the forefront in terms of production techniques? What do analysts and journal articles have to say regarding the company-a technology leader? A technology laggard?

Production synergy

The extent to which the various production activities of a company support and assist one another has an impact on the productivity of the company. The same should hold true for the production activities of an industry-or nation as a whole.

For example, BCE, a major corporate force in Canada, became a group of companies involved in a wide range of diverse activities. In more recent times, BCE sold off companies that weren't related to its core interests and business. BCE worked to re-establish its "corporate synergy" to be more productive-as well as more profitable.

Investor Education: Productivity explained by Gary Rabbior



The more that different parts of a company can work to complement and support one another, the easier it can be to be more efficient-and improve productivity.

Investor Insight

In assessing a company's prospects-and if it is involved in a variety of production efforts-do the production activities complement one another? Are they quite diverse? Are one or more areas more vulnerable to a downturn than others? Do one or more areas of company activity have real "upside" potential? For a diversified company, check out all parts. All it takes, sometimes, is for one branch of the company to have really good-or really bad-results to affect the company as a whole.

The extent of competition

The more competition there is, the better individuals, businesses, and nations will have to be and the more productive they should become. If not, and if they cannot stand up to the competition, they will either decline or die. So competition challenges companies to be better-and competition usually breeds improved productivity. And the challenge of improving productivity in a competitive environment becomes all that more important. Many Canadian companies face intense competition and the more competition there is, the better they will have to be at finding ways to improve productivity.

Investor Insight

In assessing a company for investment, keep an eye on their competition-and not just today's-but competition that may be coming in the future. In addition, consider whether any of the current competition is struggling-which may open the door to more opportunity and success.

Labour/management relations

The more effective and co-operative a nation's labour/management relations are, the more this will help improve productivity. The workplace can be more productive, efficient, innovative, and reliable if labour and management have a good working relationship. The more hostile and adversarial the relationship, the more work time will be lost through disputes and the lower output and productivity will probably be. The quality of output will also likely be affected. For example, at one time, labour/management relations in Canada's Post Office were not particularly good. Strikes were quite common. Disputes were common. Morale tended to be low. In more recent times, relations have improved, strikes are now quite rare, and most would probably say that service is much better. Productivity is higher.

Investor Insight

Labour-management problems can put a big bump in the road affecting company performance. Are major contract negotiations looming? Does the company have a good record in terms of labour-management harmony or one of confrontation and production disruption?

Regulatory and tax environment

The more effective government regulation and tax policies are in promoting a healthy competitive environment, the more likely it will be for businesses to find ways to improve productivity. Regulations and tax policies can impact business costs, administrative time, production times, investment activity, and so on.

Regulations and tax policies can both hamper and help business activity. Policymakers have a very important role to play in Canada's economy-and in affecting business activity. Consider one example. As controversial as the GST has been, it replaced the Manufacturers Sales Tax, which actually put Canadian producers at a disadvantage within Canada against foreign producers. In addition, the GST doesn't apply to exports so it doesn't raise the price of our goods to foreign buyers. The MST was built into prices and, therefore, made our exports more expensive for others to buy. Replacing the MST with the GST has helped contribute to the competitiveness of Canadian producers within Canada's domestic economy. Governments then, through policies and tax measures, can affect costs and investment-and productivity.

Investor Insight

Some companies work in a much more regulated environment than others-and therefore their production activities, competitive position, and success can be affected by government policies and regulations. If considering a company for investment, consider if the company is likely to be affected by any regulatory changes-positively or negatively. For example, decisions by the CRTC can affect CTV, Rogers Communications, and other companies in the telecommunications industry.

Commitment to improving productivity, willingness to learn, and attitude to failure

The more committed an individual, a business, or a nation is to improving productivity, the more productive the individual, business, or nation is likely to be. For example, Canada's auto parts and auto assembly industries have faced increased global competition in recent years. However, Canadian auto parts and auto assembly companies and factories have made a strong commitment to improving productivity. They have made some hard decisions and significant investments. Labour and management have worked together in a commitment to succeed and compete in world markets. As a result of achieving increased productivity, Canada's auto parts and auto assembly activities have done well and are considered to be some of the best, and most efficient, in the world.

The more open one is to learning and adopting new ways, information, techniques, tools, and technology, the more one should be able to improve productivity. As a good "Canadian" example, consider Canada's international hockey performance. For many years, Canadians felt they were the best in the world, and we probably were. But then the Europeans, Soviets (now Russians), Czechs, and others started to improve. They became much more competitive with Canada.

But our "hockey industry" was willing-and determined-to learn, to improve, and to be the best in the world. We combined what we knew with what others had learned, and we improved. Canada is, once again, winning world hockey championships. The same applies to our companies. If there is a willingness to learn, there is usually a commitment to do better-and that can improve productivity.

In addition, the degree to which a person either gets discouraged or learns from failure will affect one's ability to succeed and improve productivity. Failure and mistakes are often accompanied by opportunities for insight, learning, and experience.

For example, Magna International, a major Canadian auto parts manufacturer, did very well for many consecutive years. Then, a few years ago, Magna became a company at risk. The company looked carefully at its mistakes, reoriented itself, and, once again, experienced a period of strong growth and economic success as a successful company-in a very competitive industry. A willingness to learn-a commitment to excel-and a determination to succeed can be important factors leading to improved productivity.

Investor Insight

In considering a company for investment, consider whether the company seems to have a commitment to improving productivity through such things as investment, employer training, innovation, etc. Also, consider any evidence of a willingness to learn. Companies are often vulnerable to mistakes (for example, Maple Leaf Foods, Toyota, etc.) but can come out even better in the end-depending on how they handle, and learn from, mistakes. This brings us to another factor for investors to consider.

Most entrepreneurs fail-often quite a number of times-before they succeed. The key is to try and be there when they do succeed. Don't overlook an opportunity because the company leadership may have been involved in a failed venture in the past. Consider whether their new idea is a good one-addresses a real opportunity-and has a good chance of succeeding. Good entrepreneurs see mistakes and failures as learning opportunities-and insights into achieving success in the future. A good "entrepreneurial company" will do the same.

So there you have it-15 factors that can affect our productivity. Fifteen factors that can affect the ability of a person, a company, an industry, or a country to achieve economic success. And there are more.

As you can see, improving productivity doesn't mean paying people less and working them harder. We can improve productivity by:

• Using resources that are most readily available, easily accessible, most renewable, and least costly

• Improving the quality of management to make better decisions regarding how and where resources are used

• Improving the quantity and quality of innovation and its successful application by businesses and successful entrepreneurs

• Investing in quality education, training, and retraining so that workers have improved skills and capabilities

• Investing in the health and safety of workers so that there are fewer absences, less turnover, and better health and attitudes in the workplace

• Investing in quality infrastructure to support economic activity and help reduce costs, time, bottle-necks, etc.

• Making wise investment decisions so that our resources are put to their most efficient use

• Improving technology transfer and application of new methods to reduce costs, increase output, improve quality-or all of the above

• Achieving synergy among different production activities so that they complement one another and help achieve efficiencies

• Ensuring there is healthy competition to encourage improvement and innovation

• Creating and implementing effective tax and regulatory policies that help and encourage improved productivity rather than hampering or hindering it

• Committing to improving productivity so that it is assigned priority within a company or organization

• Demonstrating a willingness to learn-and learn from mistakes and failures-to make improvements in the future

• Maintaining a positive attitude to change and opportunity

• Achieving good labour/management relations

We know that it is important for Canada to improve productivity. The question is: how can we best do that? What are our strengths? What are our weaknesses? What steps should be taken to position our nation so that we can achieve economic success in the future-sustain jobs, create jobs, create incomes, increase incomes, create wealth, address our needs, raise our standard of living, and improve our quality of life?

Our investments in capital, innovation, and new technology will be important factors affecting our future productivity-and our future economic success.

The "sectoral make-up" of our economy will also be important. Will we invest in, and develop, those industries and sectors where productivity and opportunities to improve productivity are higher? Or will resources be shifted into less productive sectors with more limited opportunities for improving productivity in the future? The answers to these questions will be very important to Canada's future.

Another consideration will be our success in participating in a growing global economy. Industries that engage in trade are usually better and faster at incorporating new technology-to stay competitive. Therefore, the extent to which we invest in, and develop, "tradeable industries" will also affect our future productivity-and success. The future is full of opportunity and challenge. It remains to be seen how Canada will fare.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
MFI-T
Maple Leaf Foods
-2.8%22.21
MG-N
Mistras Group Inc
-0.52%9.56
MG-T
Magna International Inc
-0.27%73.79
MGA-N
Magna International
-0.11%54.48
MGA-T
Mega Uranium Ltd
-8%0.345
RCI-N
Rogers Communication
-0.49%41
TM-N
Toyota Motor Corp Ltd Ord ADR
-0.19%251.68

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