Productivity or Greece?

Productivity is a very complex topic and even among experts it is difficult to exact a prescription to improve productivity. In its simplest form, productivity measures the efficiency of production. It is the ratio of production output to what is required (inputs) to produce the output. In terms of economic growth, governments look at productivity as the product of labour based on the average number of hours each employed person works and the proportion of the entire population that is employed. Labour productivity drives living standards. However, just because a person is employed does not mean that they are productive.

At the macro level, investments in physical capital, human capital and innovation drive productivity. At the micro level, productivity depends on the individual and their ability to improve their relative standard of living as a direct result of their ability to improve their personal productivity. While investment in productivity at the macro level is necessary and important, investment at the micro level is even more important. Can you imagine productivity without the individual?

Investing money to hire more people, to improve business infrastructure, and to fund more innovation won’t help if the issues directly impacting human capital, physical capital, and innovation aren’t managed first. Consider the following. An organization’s current workforce is not producing at expected levels, so the organization hires more people to improve its productivity. Is this the solution? Not necessarily. To improve productivity, first review the process to understand the contributing factors to lack of productivity. Employees are one part of the overall process, so adding more people to the process without knowing the cause of low productivity won’t solve the problem. Other factors impacting productivity may include the equipment that is being used (and how it is used), steps in the process, how steps are executed, waiting time, information management, etc.

Consider another example. British Columbia’s productivity performance is consistently below the Canadian average. One issue for this is that driver-specific issues of productivity performance within areas such as human capital are not being addressed. To improve productivity and performance, the elements that contribute to improved human capital (for example) need to be improved. This includes such things as the quality of the educational system, on-the-job training, skills shortages, capacity of workers to serve stakeholders, etc. These are all important determinants of success for overall economic growth.

British Columbia is lacking a “culture of productivity.” This is based on a report from the BC Progress Board in 2008. In recent years, other jurisdictions lacking a culture of productivity saw their economies stumble. Paying attention now to the details of productivity at the lowest level will ensure a vibrant and sustainable future. All the policies in the world won’t help improve productivity if the workers themselves are not productive. Greece learned the hard way. The rest of the world can learn from Greece.