The Bahamas Employers Confederation P.O. Box N-166 Nassau, Bahamas

PRESS RELEASE

For Release: Monday, July 29th, 2002
For Additional Information Contact:
Raymond Winder, Bahamas Chamber of Commerce
Brian Nutt, Bahamas Employers Confederation

Correlation Between Productivity and Success of Business

A survey of businesses conducted during the month of June by the Coalition of Private Sector Organizations, an umbrella group of private sector organizations, overwhelmingly points to a correlation between the productivity of employees and the success of businesses.

Productivity is a problem affecting 81% of the businesses who responded to the survey. The respondents cited the major contributing factors of low productivity as being poor work ethics, lax attitude about time, and ineffective management.

The issue of poor productivity is pervasive throughout the economy and must be addressed quickly by employers, labour and Government. This issue becomes more and more urgent each day as we move toward becoming a member of the World Trade Organization (WTO) and as the deadline approaches for completion and observance of the Free Trade Area of the Americas (FTAA).

In the face of globalization, the greatest fear of the Coalition is not that our current level of productivity will keep our economy from growing, but that our current level of productivity will cause our economy to slide downwards due to increased external competition, reducing the standard of living we enjoy today.

Increasing the level of productivity in The Bahamas needs to become a national issue. Managers and employees need to recognize that continual education and training makes them more productive while job experience makes them more efficient. These increased skills and knowledge adds to the human capital in our nation, positively impacting our economy. Managers and employees who invest in education and training make themselves more valuable, and unlike other forms of capital, human capital cannot be separated from the human who possesses it.

The need for improved productivity and efficiency in the workplace is also recognized by Union leadership, which is encouraging. A headline in The Tribune of 10th of June 2002, read "Hotel Union Told Productivity Pay Aided Barbados Economic Revival". Workers were told that such a scheme could boost Bahamian business operations. This was a view expressed by John Pilgrim, an economist and Executive Director of the Barbados National Productivity Council during a seminar on productivity sponsored by the Bahamas Hotel Catering and Allied Workers Union. He said that his country had been able to reduce unemployment by 15.6 percentage points between 1993 and 2002, from 25.4% to 9.8%; decrease inflation by 4.9%, from 6% to 1.1% and boost economic growth because a productivity pay scheme had been introduced throughout the national workforce.

In the Barbados model, its success is directly attributable to the consultative process between Government, trade unions and employers prior to the launching of the productivity scheme. Suffice it to say a Bahamas success story will hinge as well on cooperative consultation between the stakeholders.

In a recent article in Time Magazine, Sung Won Sohn, chief economist for Wells Fargo Banks in Minneapolis, Minnesota is quoted as saying, "I view productivity as the linchpin driving this economy." He went on to say that economic growth comes from two sources; labour hours and productivity, and that business profits come from two sources; volume and margins. He pointed out that productivity gains increase profit margins.

Taking the Barbados story and Mr. Sohn's points to heart, businesses that want to increase productivity must plan a program to accomplish this goal. A method of measuring productivity needs to be determined, and in order to increase the chances of the program's success, managers and employees who contribute to increases in productivity should be rewarded for their contributions.

Productivity initiatives hold the answers for economic growth but development of a system is very difficult because it exists in so many variations and in so many different environments. One thing is for certain, if we fail to respond appropriately to this challenge, then we will find our businesses slowly losing ground financially at varying degrees of speed.

Employers should look at compensation structures that are not based solely on time spent on the job, but as rewards for efficiency and productivity based on quality and quantity of work such as gratuities, commissions, performance bonuses or other incentives.

In understanding productivity there are usually three components considered, the philosophy of cooperation, the involvement system, and the financial bonus.

The Bahamas is known as a country with high labour costs. If we start programs now to increase our productivity levels thereby reducing our unit labour costs, (i.e. the labour costs needed to produce each dollar of sales), we will make ourselves more competitive and be more prepared for the FTAA which is scheduled to come into effective in less than three and a half years.

Survey Detailed Findings on Section Addressing Productivity