Solving the productivity emergency

When I served as CEO of Magna International, one of Canada’s largest manufacturing companies, my philosophy was always that employees don’t work for you — they work with you.

At Magna, we backed that statement up by making every employee a partner in profitability. It was the secret to our success: giving workers a piece of the action to generate greater productivity and ingenuity.

Overall productivity in Canada has been deteriorating for quite a while now — so much so that a Bank of Canada official recently called it a national “emergency.”

Carolyn Rogers, the bank’s senior deputy governor, said productivity in Canada has essentially flatlined over the past few years. When a longer time frame is considered, the productivity picture is much worse, showing signs of steady decline over several decades.

And while Canada has typically lagged behind the United States in productivity, that gap has begun to widen, according to Rogers, who noted that in 2022, Canadian productivity had plunged to around 70 per cent of what it was in the U.S.

Even when compared to G7 members like France, Germany and the United Kingdom, Canada has one of the lowest levels of labour productivity, according to the OECD.

If we truly are in the midst of an emergency, then how do we go about boosting Canadian productivity?

Investing more in modern machinery, equipment and new technology is one surefire way of spiking productivity, at least in the shortterm. Training workers and upgrading job skills is another. Both are viable options singled out by Rogers as potential remedies.

But for me, the best way is still one of the oldest and simplest: make employees partners in profitability and let them share in the success of the business.

The profit-sharing culture that we established at Magna, which we called “Fair Enterprise,” gave everyone at the company a stake in how the business performed and a share of the profits.

After we started sharing profits with all our employees, productivity went through the roof, and we began generating spectacular growth in sales and profits.

Magna is just one of many companies that have shown that sharing profits with employees is a tried-and-true formula for increased productivity.

A landmark 2010 study from the National Bureau of Economic Research in the U.S. concluded that profit sharing can, in fact, boost productivity. The researchers stated that not only does profit sharing “raise productivity and profits,” it also contributes to reduced employee turnover and a “greater willingness to work hard.”

What’s more, the report showed that profit-sharing programs lead to better pay, enhanced job security and better relations between employees and management.

Profit sharing carries a number of other benefits, as well. For example, some studies have shown that profit sharing not only puts more cash in the pockets of employees, it can also improve job satisfaction.

A recent report by recruitment firm Hays Canada found that 71 per cent of Canadian workers are thinking about leaving their jobs in the next year due to rising dissatisfaction. One of the main reasons for wanting to leave, according to the study, is that workers feel “unmotivated.” Is it any wonder that Canada has a productivity crisis?

If employees are given a real and tangible financial stake in companies’ success, they will be more motivated because they know that their contributions will be rewarded, and they will be more driven to find ways to improve productivity and enhance quality.

It’s just common sense: when workers get a percentage of the profits, when they feel they have something at stake, they care more, they work harder and they think about ways to make their businesses more productive.

If we fostered that kind of mentality in businesses across Canada through profit-sharing programs, we could transform our country’s economic culture and revive Canada’s former economic strength.

If we want to end the national productivity emergency dragging our living standards down, we need to start making Canadian employees partners in profitability.

Profit sharing will make companies more productive. It will raise the incomes of employees. And it will lift Canada’s sagging living standards.

MAKE EMPLOYEES PARTNERS IN PROFITABILITY.