The Resultant of Forces
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The Empire Club of Canada Addresses (Toronto, Canada), 18 Apr 1963, p. 275-288
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DeYoung, H. George, Speaker
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The complex nature of productivity. The effect on productivity of the economies of scale. Measuring competitive ability by the value added to the finished goods per employee in a manufacturing firm. Figures from Canada. The optimum sized industry as the criteria of contribution to productivity. The attribute of specialization and how it contributes to high productivity. Some examples. Factors that can change the measurement of what a competitive industry is; for example, climate and policies for trade at a national level. Research as another major contributor to productivity as it provides new markets and new demands which must be filled. The need for research in Canada. Results from the Bureau of Statistics surveys. Canada at a disadvantage with relatively few large companies that can provide support for industrial research on a national scale. The factor of foreign ownership and investment. The role of Canada's Federal Government in GATT and how that affects the ability of the Canadian economy to compete. The effects of the Combines Act and its flexibility. The need for a climate accepting of change. Policies and goals set by Provincial Government, and their effects on productivity, such as the competition between provinces for attracting industry. Other factors such as educational plans in the provinces, the labour force, the attitudes of labour representatives, cooperation between labour and personnel and industrial relations people, labour-management-government cooperation, the ability of senior management, new trade policy developments, the appearance of new countries in the world market for industrial products. All of the above and more are discussed as forces working in our land, the resultant of which is our national ability to compete and to employ all of our people and to maintain and improve our standard of living. Looking at other countries, and their endeavours to harness these forces and guide them. The lack of planning and cooperation between management-labour-government in Canada. The need for courageous leadership and a definite Canadian trade policy. The goals of the National Productivity Council. Finding a way to develop understanding of these forces, of each other, and developing patience to work toward the good of all Canada.
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18 Apr 1963
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English
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Full Text
THE RESULTANT OF FORCES
An Address by H. GEORGE DeYOUNG President, Atlas Steels Limited
Thursday, April 18, 1963
CHAIRMAN: The President, Mr. Palmer Kent, Q.C.

1:00-Annual Meeting-60th-President's Report

1:05-Lt.-Col. Bruce J. Legge, Q.C., Chairman of the Nominating Committee.

-Request Mr. Vernon Hearst, Q.C.-Secretary-Treasurer-to cast one ballot in favour of those nominated or adopt resolution moved by Legge.

-Chairman declares the Directors to be duly elected for the ensuing year. Officers will be elected by the Board of Directors when the recommendations of the Nominating Committee are received.

-Motion for the appointment of the Auditors. Honorary Auditor-Mr. H. T. Jamieson, F.C.A. of H. T. Jamieson, Lemay & Co.

MR. KENT: In its January issue this year, the magazine "Canadian Business", which is the official magazine of the Canadian Chamber of Commerce, featured Mr. H. George De Young on its cover and also contained an extensive article on "What's Ahead for the Productivity Council." The article was based on an address, in the nature of a progress report on the work of the Productivity Council, given by its Chairman, Mr. De Young. This address made it clear that National Economic Planning was a fact in Canada. As this is a most important issue affecting busi ness in Canada, I am delighted that I can present to you today one who knows about the research and planning that has taken place and which will continue.

Mr. De Young was born in Grand Haven, Michigan. He attended Michigan State University and the United States Naval Academy at Annapolis, where he graduated in 1931 with a Bachelor of Science degree in Engineering. After his service in the Navy he entered the Steel industry and has risen to the important post he now holds. In 1951, he joined Atlas Steels Limited as Works Manager. Appointed to the Board of Directors in 1954, he was elected President in April 1956. In September of that same year, he became a Canadian citizen.

Mr. De Young is a director of the Toronto-Dominion Bank, the Confederation Life Association, is executive vicepresident of Rio Algom Mines Limited and is on the national executive council of the Canadian Manufacturers Association. In February 1961, he was appointed as Chairman of the National Productivity Council and, as a member of a Canadian Government Commission, he visited each member country in the European Economic Community. We welcome this distinguished Canadian to the forum of The Empire Club.

I present Mr. George De Young who will speak to us on the subject: "The Resultant of Forces".

MR. De YOUNG: Productivity is really a very complex subject. Because of this complexity, it means many things to many people. It is really an attitude of mind in which we, as a nation, constantly strive to achieve a growing economy which is capable of employing all of our people and maintaining a high standard of living. One reason for the complexity and confusion in our minds about productivity is that it is actually the resultant of many forces bearing upon an organization or an economy while it produces its wealth. If all the forces are maximum and positive, ideal or maximum productivity can be achieved. However, this is seldom the situation.

In a manufacturing firm-on a farm-even in government, the economies of scale have a direct effect on productivity. Competitive ability can be measured roughly by the value added to the finished goods per employee manufacturing firm. In Canada, firms selling less than $100,000 worth of goods per year (and there are over 22,000 of these) had an average value added figure of $3,655 per person and many of these firms had less than $3,000 value added per employee. Firms selling between $100,000 and $1 million worth of goods a year (of which there are about 12,500 in Canada) had a value added figure of $5,500 per employee. Plants selling over $1 million worth of goods a year (which are about 7% of all Canadian industry) had a value added figure of $8,500 per employee. The highest in this bracket running as much as $20,000 per employee.

While mere bigness is not the criteria, the optimum sized industry really is the criteria of contribution to productivity. Specialization is one of the attributes which contributes to high productivity.

I am informed that in the chemical industry, if Batch-type and Refinery-type plants were made of optimum size it is possible to quadruple capacity by only doubling the capital expenditure, with a resultant reduction in operating costs of 25 to 40%.

Criteria of farm productivity can readily be ascertained from D.B.S. statistics which show a 50% volume increase and a manpower decrease of 40%. This trend is sure to continue as changes in marketing and governmental arrangements occur.

The measurement of what a competitive industry is becomes different if changes occur in climate and policies for trade at a national level. What may have been a productive competitive industry in 1950 may well be out of the race completely in 1970.

When one set of circumstances or rules change others must become flexible too. Rigidity of thought results in frustration. We are all aware of the rules and circumstances which are changing in the world, of liberalizing trade patterns and governmental combines for trade. Hence, we need recognize this powerful force having a governing effect on Canada's productivity.

Research is one of the major contributors to productivity in that it provides new markets and new demands which must be filled. While planned obsolescence becomes the subject of criticism in some cases, there are industries such as the chemical industry in which the obsolescence of commodities is very high. It has been stated that many of the industries now in existence are based on products which were unknown twelve years ago. The need for research in Canada is a very great one.

The results of Bureau of Statistics surveys have shown that Canada, for 1959, lags behind the United States and the United Kingdom by a factor of 3 to 4 in research and development expenditures. In spite of objections by some to methods of comparing national levels of research, it is evident that Canada is far behind in industrial research, by any basis of comparison.

In our competitive system most companies recognize they cannot maintain let alone expand sales, except by improving existing products, increasing efficiency, marketing new items and otherwise meeting the innovations of competitors. Obsolescence of products, equipment and processes is a continuing problem that all industry must face. Research provides the technological basis for expansion and new business, and erects a defence against technological obsolescence. It may also be the basis of diversification of a company's operations.

Our report on research in the Canadian mineral industries illustrates the importance of the factors of size in determining the amount of expenditures made for research in Canada. Companies employing 1,000 or more people, which constitutes 18% of the total surveyed, accounted for 94% of the total R and D expenditures made in the industry. Further, only 11 % out of the total number of companies doing research were responsible for 76% of the total funds spent. It is evident from these figures that it is mainly the large companies that are making the R and D expenditures.

Since there are relatively few large companies in Canada we are at a disadvantage in providing support for industrial research on a national scale.

Turning to the matter of foreign ownership, we have the situation in the mining industries where foreign control of mining and smelting operations stands at 63% and, for the petroleum and gas industry, at 75%. Of the total R and D expenditures made by these two segments of industry, 40% was spent in other countries. Similar statistics apply in other major industries.

Foreign ownership causes forces to work on the Canadian climate for investment, for tariff structure, for use of Canadian materials. It exerts forces on the Canadian Chamber of Commerce, on the Canadian Manufacturers' Association, on political thought, on union activity-in fact on every facet of Canadian economic life.

Productivity in the economy is also the resultant of the amount of investment which is being done. Without investment we have no chance of employing the 600,000 people who have left and are leaving the farms, nor the youth entering the work force. Without investments we will surely find the present unemployment figures-bad as they aremild ones. If Canadians are serious about solving their own problems and maintaining control of their own destiny then this investment must come from Canadians.

Investment can be generated by the fact that a company has allowed itself to become so obsolete that it absolutely must make new investments to stay in business. It is also generated through research requiring new types of equipment to make use of new technologies. Investment is also inspired by a company's ability to enter developing markets which have not existed previously. It is generated by a climate of competitive endeavour in a nation that has decided to cooperatively solve its problems.

The location of these investments is the result of many forces, some of which are pretty well in the control of our government or foreign governments. The level of taxation has a direct bearing on the climate for investment. The incentives given to industry and manufacturing for making investments through tax procedures helps create the climate for productivity. The role which our Federal Government plays in GATT, insuring export markets, and in opening the Canadian market for foreign imports, have a decided influence on the ability of the Canadian economy to compete.

The present rigid Combines Act is a force having a measurable effect on productivity. The attitude of our government in making the Combines Act flexible to meet new conditions creates forces affecting all conditions. Should a policy to create climate for the formation of world competitive operations be established, controls of a different nature from those used for present purposes would be needed. The Act might be less vague, prejudging might well be essential. Many new aspects might evolve from a new concept of what a free enterprise economy is.

It is accepted in most free world closely-planned economies that it is free enterprise which is being planned. Studies of changes being made in other Commonwealth countries and in Europe could well help us if we had a climate allowing acceptance of change.

The type of statistics we use and their source have an effect on our competitive abilities and the ability to build a productive economy.

The provision of statistics which can be used without fear of inaccuracy or without controversy as to their neutrality is a need in Canada which can well be supplied by our Dominion Bureau of Statistics. The desire of the Federal Government to provide this sort of information would result directly in an influence upon the climate of our economy.

Management and labour spend days debating each other's statistics and usually generate friction in the process rather than harmony. Subtle assistance to bargaining like reliable statistics provision are more helpful to a productive climate than any labour legislation.

The policies and goals set by our Provincial Governments are a force bearing on productivity, such as the competition between provinces for attracting industry. In many cases this can only result in the duplication of investment and the fractionalizing of the already small Canadian market, thus inhibiting economies of scale to which I previously alluded. On the other hand, where natural advantages exist some cooperative arrangements to allow the exploitation of Canadian raw materials, energy and manpower towards supplying the world markets certainly should result in the most competitive type of economy.

The resolution of educational plans within the province is a controversial area which needs resolving, possibly at the Federal level. The previous government had indicated its willingness to provide funds for training and retraining. I feel this willingness will still prevail. The various provinces' response to this problem will have an immediate effect upon productivity and competitiveness of the Canadian economy and will, of course, have a direct effect on one of our Canadian idiosyncrasies, that we have great shortages of skilled workers and an unemployment of over 6 % of our work force. It is a rather startling fact that some of the larger additions in numbers to the unemployment are in the younger people of the country, people who have never had jobs. More than half of the unemployed people are those who have never gone even to high school. The contribution to the competitiveness of the economy of these forces is directly under the control of our government agencies.

One of the first factors or forces having its effect on productivity is, of course, the labour force. If abundant people are available with high skills in the craft needed and if these people are motivated to good efficiency, a positive force for high productivity results. If, however, shortages exist either in skill or in the quantity of skilled people, something less than the ideal is possible. Regardless of the ideal skill and availability, if work attitudes are negative for any reason maximum productivity will not be achieved.

The attitudes of maturity of labour representatives are a decided force. The establishment of nationally oriented goals within the labour movement cannot come over night but it is reassuring to know that Canadian senior labour statesmen recognize a responsibility for making the pie larger before cutting it up.

Imagine their problem in changing direction and removing rigidity of thought throughout their ranks. Is organization and jurisdiction more important than members' status and conditions? I don't really wish to argue this point today but the interplay of forces from the confusion of short and long term goals-the varied interpretation of aims-the remnants of old philosophy-the reaction to management rigidity-impose forces of serious consequence to a labour leader wishing to make rapid progress towards a cooperative industrial society. I would like to quote from the official journal of the Canadian Labour Congress

"These are some of the facts which have prompted labour leaders during the last few years to seek top level labour-management cooperation, so that together, in consultation with government, there can be a joint attack on national economic problems. Many of these problems transcend the needs of particular industries and involve the economic welfare and future of the whole nation.

"It would be foolish to suggest that there are no barriers of mistrust and suspicion which will make cooperation difficult. It would also be naive to forget that there are traditions and prejudices which must be re-evaluated before cooperation can become an effective reality.

"Regrettably there are still many Canadian employers who have yet to recognize that trade unions are here to stay or that workers desire some form of union security. On this point, the Joint Mission reported of Sweden: 'There is no question of union recognition in Sweden. Swedish employers not only approve of their employees belonging to unions, but they welcome it because they believe it results in greater orderliness in labour-management relations.'

"We must also recognize that some labour organizations have not adapted themselves to contemporary conditions. A number of unions are now revising their structure and practices to bring them up to date. Others have yet to recognize that problems exist, let alone take steps to resolve them."

Contributions from the people of industrial organizations in all fields present an interplay of forces not always recognized.

If technological ability is of the highest quality then again a positive force is created. Engineers whose prints or figures leave something to be desired, create a negative result on productivity. How many willing workmen wait while somebody's figures are made to gibe with the job that is being done? It certainly is not indicative of a highly competitive or productive organization.

When something is said in Canada about cooperation there are many whose sole contribution to solving our problems is to criticize and obstruct-who say at once you can't import our solutions. I agree-we can't. As a matter of fact even in Sweden, that land held up as an ideal, everything is not coming out just as one might wish.

Let me read the .conciusion of a speech to the Steel Mill Association in Sweden by Mr. Wilhean Haglund, President of Sandvikens 3ernverk, a Swedish steel manufacturer:

I would suggest the following course: 1. Not to require a further increase in the standard of living above what can be obtained through harder work. 2. To renounce general increases of costs until countries with which we have to compete reach a cost level approaching our own. 3. To keep the present length of the effective time of work and not introduce other cost increasing elements which further limit the industry's competitive ability.

The Swedish steel trade today wishes to cry out loudly to make it heard far away-'Stop the increase of cost!'

It may even be that studying constructively the changes would indicate things to avoid as well and we should not miss the opportunity to learn.

Personnel and industrial relations people do not always have cooperation with labour among their goals. In common with some labour representation they may feel they thrive more on chaos. Containment of the opposition is a very real existent philosophy, and to be reckoned with.

Perhaps you recall the article in the April 5th Globe and Mail by Devon Smith, captioned "Cannot Import Labour Relations, Canada Warned."

Government-labour-management cooperation in the European style may be more fashionable than realistic, senior industrial relations executives said yesterday in Toronto. They cautioned that the type of labourmanagement-government cooperation now contemplated for Canada could speed up the result it is meant to avoid-massive government intervention.

Cooperation must begin at the employee-supervisor level and no amount of effort has turned up a substitute. Management may have too much of a passion for harmony. Conflict within an organization is not necessarily bad, and can yield constructive results and a dynamic organization.

I ask just one question-how can anyone contemplate what kind of cooperation is good for Canada unless all three parties discuss the matter having a mutual desire to find the Canadian solution? I know one thing absolutely-you will never get plant level cooperation while the senior management and labour leaders are bickering.

Senior management ability and philosophy are factors in the multiplicity of reacting forces. Even with the best philosophy and desire at the top, getting uniformity throughout the whole organization takes years. If management does not plan the work, does not set the proper goals, does not create the proper organization, does not choose the proper people or create the proper atmosphere through good communications, good productivity cannot be achieved.

We often hear arguments to the effect that all phases of productivity are management's responsibility and hence all prerogatives are also management's. This may be true but there is some room to question whether it is all black, all white, or whether there are some grey areas.

Beneath the effects of new trade policy developments, the appearance of new countries in the world market for industrial products will have inevitable repercussions upon the economies of the advanced industrial states. New techniques are being developed and utilized at a very high rate. All this means that the changes in economic structure, to which states and individuals have to adapt, will be very great. The rapid acceptance of such changes as imply a re-allocation of manpower and other productive resources toward the most efficient sectors is a precondition for maximum progress.

From the point of view of the individual, economic changes can, however, appear as both costly and troublesome. They may involve a change of workplace and type of occupation, as well as the breakaway from an accustomed environment, from old friends and cherished habits. They may mean the abandonment of old skills, of security ereated by seniority rights or adherence to a social insurance scheme. Financial loss is often incurred when looking for a new job, selling one's house and moving to a new place, or accepting a low income before new skills are acquired in a new occupation.

According to time-honoured economic and social doctrines the individual was supposed to shoulder all these burdens himself, when the economy needed his services in another form or place than before.

In actual fact there is no automatic mechanism that makes a rational readjustment very probable. Ironically enough, the individual most often is made aware of his need to readjust by being deprived of his means for readjustment; he becomes unemployed, or, in the case of a businessman, bankrupt. Financially, and psychologically depressed, he is hardly in a position to make a sound decision regarding his most rational future place in the economy.

Traditional manpower policies, e.g., in connection with employment insurance schemes, are still largely built upon the idea that this is the natural state of things. If an unemployed worker does not accept the first good (which is often the worst for him) job he is offered, he is cut off from the right to get any unemployment benefit, instead of being helped efficiently to seek, and get himself better suited for a job, where he could make his best long-run contribution to production. On the other hand "soft" insurance schemes which lure the worker to remain unemployed indefinitely in the hope of returning to his old job or of finding just a similar one, are of course no better, even from the human point of view-not to speak of all the subsidies and other costly devices countries provide to keep employment in obsolete and declining industries.

Does this indicate that management has no interest in unemployment? I'm sure they will deny it. Whose responsibility this is, is still debated-but never in a cooperative atmosphere. Many questions plague those of management who wish to progress. Has a manager the right to make a disastrous decision affecting the livelihood of all his people -just because he has the title of manager? Just because a man is on salary is he entitled to two weeks layoff notice, while just because a man is on hourly rate must he have only two hours? When the labour force of the farm is reduced by 600,000 people, who is responsible for providing new opportunities? If not farm management, does it follow that industrial management must accept the load?

Mr. Chairman, I have used perhaps too much time outlining a few-just a few-forces working in our land, the resultant of which is our national ability to compete and to employ all of our people and to maintain and improve our standard of living.

We have seen in the world today, in other countries, an endeavour to harness these forces and guide them in lines which will work toward the national good. While the countries which have undertaken this are generally those which were dislocated because of war, or are just newly emerging into the industrial era, we have seen that great strides have been made in these countries because of the simple managerial techniques of establishing a goal and building an organization and establishing communications with all segments of the economy toward reaching this goal.

This has been given an unfortunate name-planning. In this area Canada has had a decided lack. One of the greatest voids in our ability to do this sort of work has been the great lack of management-labour-government cooperation. Perhaps Canada does not want, or need, this cooperative effort. At least there are many who voice opposition. Up to now this is all they have done. They have not come up with a solution to our problem of insufficient growth. I am sure we can find a solution through a joint effort.

Statesmanship, hard work, dedication and patience are needed in Canada to provide a climate in which discussions of these forces I have mentioned can constructively take place. We must have more top managers willing to explore these questions with labour and government leaders. Real representatives of industry who can speak for their industry cannot be named in Canada today.

To establish a real federation of employers in Canada will take a long time. We must go through the interplay of forces as it affects companies and individuals. The need must become acute enough to cause people to bypass personal goals for greater national goals and for the longer term good of our children. The number of senior managers who are working to this end is growing.

While labour can present a more unified front, they too have need for more maturity. Fortunately, in Canada we have a nucleus of labour statesmen willing and anxious to accept responsibility for cooperation toward the national good. They have an awesome job ahead of them in spreading this attitude throughout labour ranks.

Mr. William Dodge, Vice President of the Canadian Labour Congress, spoke in Kitchener and said about this problem:

Probably one of our greatest problems is that of convincing the rank-and-file membership of unions that, in the complex world of today, bread and butter issues cannot always be settled in terms of cents per hour and fringe benefits, which are simple objectives gained through the well understood mechanism of collective bargaining and, sometimes, the use of the strike weapon. Most union leaders already understand the complexity of the issues confronting the modern union.

Labour's role will therefore become an extension of its traditional role of bargaining with employers. Instead of merely bargaining at the plant or industry level to secure for workers a fair return for their labour and some recognition of human dignity, unions will have to take on new responsibilities.

We shall have to be prepared to participate in decisions on monetary policy, economic development, maintenance of full employment both nationally and regionally, the problems of trade, social welfare, and even the cultural aspects of our national life.

From our government leaders, Canada can well do with less politics and more courageous leadership than we have been getting. A definite Canadian trade policy must be forthcoming. Those responsibilities resting in public and private sectors must be delineated.

To find a way for top level cooperative communication from these three groups is the over-riding goal of the National Productivity Council. A way must be found to develop understanding of these forces-to develop understanding of each other-to develop patience to work toward the good of all Canada.

When we solve this problem we may all be much older. We must take a long term view. Monsieur Peugot told me, during our visit to the Common Market, in answer to my question as to whether he could vote for a German for the president of a united states of Europe: "Not me. My son, perhaps. My grandson, surely." When we have the climate, then the details will fall into place.

With this view, our Council is proceeding toward its goal of fostering and promoting an accelerating growth in the productive effort of the Canadian economy so we may employ all of our people and insure an improving standard of living for all Canadians.

THANKS OF THE MEETING were expressed by Mr. Alexander Stark, O.C.

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The Resultant of Forces


The complex nature of productivity. The effect on productivity of the economies of scale. Measuring competitive ability by the value added to the finished goods per employee in a manufacturing firm. Figures from Canada. The optimum sized industry as the criteria of contribution to productivity. The attribute of specialization and how it contributes to high productivity. Some examples. Factors that can change the measurement of what a competitive industry is; for example, climate and policies for trade at a national level. Research as another major contributor to productivity as it provides new markets and new demands which must be filled. The need for research in Canada. Results from the Bureau of Statistics surveys. Canada at a disadvantage with relatively few large companies that can provide support for industrial research on a national scale. The factor of foreign ownership and investment. The role of Canada's Federal Government in GATT and how that affects the ability of the Canadian economy to compete. The effects of the Combines Act and its flexibility. The need for a climate accepting of change. Policies and goals set by Provincial Government, and their effects on productivity, such as the competition between provinces for attracting industry. Other factors such as educational plans in the provinces, the labour force, the attitudes of labour representatives, cooperation between labour and personnel and industrial relations people, labour-management-government cooperation, the ability of senior management, new trade policy developments, the appearance of new countries in the world market for industrial products. All of the above and more are discussed as forces working in our land, the resultant of which is our national ability to compete and to employ all of our people and to maintain and improve our standard of living. Looking at other countries, and their endeavours to harness these forces and guide them. The lack of planning and cooperation between management-labour-government in Canada. The need for courageous leadership and a definite Canadian trade policy. The goals of the National Productivity Council. Finding a way to develop understanding of these forces, of each other, and developing patience to work toward the good of all Canada.