 |
Canadian businesses are being urged to boost their productivity, but it's a tall order for companies facing an array of financial and competitive pressures.
Finding money to invest in technology, equipment and worker training can be a daunting task for small and medium-sized businesses in turbulent times.
"Companies have been hit at the same time by the rising Canadian dollar and increasing competition from Asia," said André Bourdeau, BDC Acting President and Chief Executive Officer and Executive Vice President, Financial Services and BDC Consulting Group of the Business Development Bank of Canada (BDC).
Low spending by Canadian firms on machinery and equipment is a key factor in a widening productivity gap between the U.S. and Canadian economies, according to a Conference Board of Canada report released in October.
A 1997 study, cited by the Conference Board, found that technological advances from capital investments accounted for 63 per cent of post-war labour productivity growth in the U.S.
Canadian companies, in general, need to boost investments in equipment, especially in information and communication technology, the Conference Board states.
But business groups are concerned that small and medium-sized companies aren't getting access to the financing they need for capital improvements.
"If they can't get financing, they won't be able to modernize their plant and equipment. So it's a direct impact on productivity," said André Piché, Director of National Affairs for the Canadian Federation of Independent Business.
Bourdeau said companies should first examine their work processes to eliminate inefficiency and waste. BDC's consulting services can assist companies to assess the leanness of their operations.
If new equipment is required to enhance productivity, BDC can offer up to $5 million, plus an additional 25 per cent for costs relating to set up, retraining workers and consulting services, Bourdeau said.
When the Canadian dollar was low against the U.S. dollar it was cheaper for companies to increase production by hiring more workers rather than importing expensive machinery and technology, economist Jay Myers noted.
"Now all the pressures are the other way," said Myers, Chief Economist at Canadian Manufacturers & Exporters. " I think we'll see productivity performance picking up in Canada. It will have to, simply because many companies will not be able to survive at a 75 or 80 cent dollar."
Myers agreed with Bourdeau that companies must first use lean management techniques to cut waste and focus on areas of their business that produce value for customers.
"You start by looking at the business, not by thinking that an investment in technology is going to solve the problems," Myers said. "Investments in equipment can lead you down the totally wrong path unless that equipment is appropriate to the type of productivity and innovation you're trying to drive through your business."
But companies will need additional working capital to make improvements in their operations, often relatively small sums, Myers said. Many companies find that kind of money hard to come by from lenders.
Financing can also play an important role in boosting Canada's productivity by helping smaller companies to grow. Larger companies tend to have higher rates of productivity, probably because they can afford to invest in research and development and have access to larger markets and more capital.
Head West Energy Inc. of Edmonton has been able to grow its business with the help of a BDC loan to purchase equipment for a water purification plant in the Alberta oilpatch.
"We've got all that equipment utilized right now and we already need more," said Head West Vice President Dave Meer, whose company offers oil-and-gas companies proprietary technology for water and fluid purification. "This business is a bit capital intensive but it's profitable. It takes capital before it starts churning out money."
For more information, call 1 877 BDC-BANX (232-2269).
Articles of interest
 Canadian entrepreneurs working to close productivity gap
Lean manufacturing payoff can be dramatic
Women entrepreneurs get on track for success
Venture capital industry shows signs of recovery
Seed investing creates champions of tomorrow
|
|
