This article originally appeared in the Globe and Mail January 9, 2014
Bigger is better and Canada doesn’t have enough big, according to a recent Statistics Canada study that compares labour productivity in Canada and the United States.
The study said Canada’s comparatively large share of small firms is responsible for the difference in productivity – measured as GDP generated per hour worked – between the two countries.
But some in Vancouver’s smaller business sector say the news seems out of sync with what they are experiencing. Crystal Henrickson, community manager at startup consultantcy Invoke Labs, says there are advantages to being small.
“If you actually have something that you want to change, say, adopt, adapt, you have a voice,” she said in an interview Thursday. “You don’t have to wait for your senior manager.”
This agility allows companies that are just starting out to adapt to volatile business environments and fickle trends. And when failure happens, Ms. Henrickson said, it happens quickly and quietly, which allows entrepreneurs to pick up and start over where less manoeuvrable companies would still be leaning on the brakes.
Invoke Labs had its most high-profile success in helping to nurture HootSuite, a company that within the last five years has risen from tiny startup to thriving multinational. HootSuite now has over 300 employees worldwide and is fast approaching the Statistics Canada study’s limit for what is considered a “small business.”
The study blames the difference in productivity between large and small firms on gains in efficiency that come with size. Daniel Shapiro, dean of Simon Fraser University’s Beedie School of Business, said the Statistics Canada numbers may appear disconnected with current realities because the data only span the period between 2002 and 2008.
Since then, Canada has seen the toppling of tech giant BlackBerry Ltd. and the withering away of the manufacturing sector, which had been led by auto companies whose production moved south during the recession. “The problem with those studies is, of course, they’re dated the moment they appear,” he said.
However, Dr. Shapiro acknowledged the inability of smaller firms to take advantage of larger firms’ economies of scale remains a problem for the companies and the economy as a whole. “In general, there is a very strong positive correlation between the growth of labour productivity and the growth of income per capita,” he said. “It’s the growth of productivity that makes us wealthy in the end.”
He suspects there may be new efficiency gains to be made for small firms with the adoption of new technology like 3-D printing and increased computing power. “I’ve certainly thought about the notion that the 21st-century economy will consist of more, smaller firms that are actually very productive because they’re going to be very knowledge-based,” he said.
But one of Vancouver’s most prominent small-business owners takes issue with the the entire notion of productivity measurements. Kalle Lasn, founder of alternative magazine AdBusters and the man behind Occupy Wall Street, believes Statistics Canada is looking at all the wrong data.
“Like so many smaller businesses, we are creativity driven,” Mr. Lasn said. “We measure our productivity on how many times we can come up with a Buy Nothing Day or a TV Turn Off Week or an Occupy Wall Street. This idea of measuring some sort of GDP output feels like part of some old industrial model that doesn’t really apply to modern times any more.”