This is the third in a four-part series that explains productivity and why it matters to investors. You can read the first two articles here: Why investors should care about productivity and Want to get paid more?
In the earlier articles in this series, we looked at why it is important for Canada to find ways to improve productivity. We discussed the importance of finding ways to improve productivity without relying on paying people less or working them harder—or both. The key to a better future for Canada—we have to hope—cannot lie in paying people less to do more. In this article, we explore some of the ways we can improve our productivity.
We will also share some “Investor Insights” along the way. Productivity performance can affect a company’s profitability and future success—two things that should be of interest to investors when considering investing in a company.
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Investor Education: Productivity as explained by Gary Rabbior |
The quantity, quality, and location of natural resources
The quantity and quality of natural resources available will affect the cost to access and use resources, the total cost of production, and how productive producers and workers can be. For example, the quantity of Canada’s oil reserves and where they are located affect the costs incurred to access the oil, refine it, and transport it to markets. Easily accessible deposits of oil in southern Alberta can be pumped, refined, and transported to markets using fewer resources, and at less cost, than more isolated deposits or tar sands deposits that need more refining. The more difficult oil to access and refine will require new methods and technology to bring down costs. So the quantity and location of our natural resources can affect our productivity.
Investor Insight
In looking ahead to a company’s potential, consider the resources the company is using—and to which it has future access. Will the quality of resources possibly decline? Is the cost to locate, transport, or access needed resources likely to rise? Is the company taking steps to secure access to the resources it will need in the future—and to control costs?
Quality of management and leadership
The better the management expertise brought to a business, the more productive it can be. The managers, and the management methods used, will affect the company’s vision and goals, efficiency, use of resources, labour relations, strategic planning, marketing, product lines, and more. And all these will affect the company’s productivity.
