Last month, I talked about the productivity problem we have in our industry and illustrated how that translates into low incomes for industry participants.
Specifically, I showed how output value per person employed is very low compared with the fishing industry in Iceland and the food industry in Canada, among others. If people in our industry want to have better incomes, we have to improve our productivity and that will require change — innovation, in other words.
A recent report prepared for the Government of Canada entitled Innovation Canada: A Call to Action, observed that, “The material standard of living in a society depends on productivity – the value of goods and services produced per hour of work… over the long run, it is labour productivity growth that drives increases in average per capita incomes and business competitiveness. Productivity growth, in turn, is primarily the result of innovation.”
Many people believe innovation is about inventing new products but it is much more than that. The authors of the report quoted above said, “In a phrase, innovation means ‘new or better ways of doing valued things.’ Business innovation occurs when a new or improved ‘something’ — a good, a service, a process, a business model, a marketing tool or an organizational initiative — is put into practice in a commercially significant way. Innovations must of course start somewhere but, unless and until an innovation spreads widely, it is of relatively little economic or social significance.”
The fishery operates as a business. It sells products to customers for a price. That price must cover the operational and capital costs incurred to create the products and deliver them to the customers. To attract the capital needed for investment, it also must allow the business to be profitable.
Business is competitive. Any one business must compete with others trying to attract the same customers and their spending. In that competition, some perform better than others, in terms of attracting and serving customers, operating efficiently, and earning a profit.
Why are some businesses more successful than others? It is an interesting question and one that has led to a lot of study and a range of answers.
Fundamental to understanding the answers, however, is the fact that every business is a group of people who are — or should be — working toward a common goal. People provide the energy that drives the business. Everything else — mainly physical assets, materials, money, partnerships of one kind or another, and information — simply represents tools people use to carry out their activities in trying to achieve the overall goal.
The quantity and quality of the tools used can certainly make a difference in the results achieved. But the results are mainly influenced by people, specifically through decisions they make, things they do, the tools they decide to use, and how they use those tools. This presents several challenges.
First, business is a team effort.
One person cannot achieve much alone. The bigger the ambition, the bigger the team required to achieve it. And similar to a sports team, different people bring different knowledge, skills, commitment, and effort.
To be successful, they have to work well together, blending their talents in productive ways. Wayne Gretzky was probably the greatest player in the history of the National Hockey League. In 20 years in the league, his team won the Stanley Cup just four times. During those four years, he had a strong supporting cast. During the other 16 years, his talent wasn’t enough to overcome weaknesses in other members of the team or the way they played together.
Second, on average, people are average.
It is possible the people in a small organization may all be above — or below — average. But the larger an organization is and the longer it operates, the more likely its people will, on average, be average. It is difficult to achieve above-average results, when the people expected to achieve them are average.
Third, people have minds of their own and often have different goals from those of the organization that employs them, as I have discussed in this column before.
If personal goals differ from organizational goals, it reduces the commitment and effort applied to achieving the organizational goals, regardless of the knowledge and skills they bring to the task.
Fourth, it is the task of the leaders — the managers — of a business to determine the goals to be achieved, organize effort, and motivate people to achieve them.
As Peter Drucker, the famed management guru of the 20th Century once said, “Management is the organ that converts a mob into an organization and human effort into performance. The task of management is to make people capable of joint performance, to make their strengths effective and their weaknesses irrelevant.” It is a difficult task and one few people are either trained for or good at. The vast majority of managers will tell you managing people is the most challenging and frustrating part of their work.
Success often depends on the chemistry between a manager and the people managed. The transformation of the Stanley Cup-winning Pittsburgh Penguins after a change of coaches during the 2015-16 hockey season illustrates the difference the chemistry between a team and its manager can make.
Several different approaches have been used to meet the challenge of engaging a substantial group of people in pursuit of a common goal.
For most of human existence, most people were simply compelled by force to do things under threat of death, bodily injury, banishment, or starvation. Slavery would be an example. In the military, there is a long tradition of using a highly-disciplined command-and-control system to coordinate the effort of a large group of people doing different things over a large battlefield.
As manufacturing developed, human effort was organized in ways that minimized people’s opportunities to use their own freedom to make decisions and required them to use physical effort within very narrow boundaries. Henry Ford’s automobile assembly line and McDonald’s system for making and serving hamburgers are examples.
When people became frustrated doing repetitive routine tasks, equipment was developed to replace them. But that means the people who remain are required to use their brains, as well as their bodies. Managing their effort requires a lot of skill and new methods have had to be developed for managers to use. Essentially, those methods involve setting goals people will respond to, creating a strong organizational culture, and offering incentives and rewards for outstanding performance.
The foregoing discussion is important, because the fishing industry is extremely competitive, both globally and locally. Every participant is looking for a competitive edge, but it is very difficult to find a raw material or develop a product or process that can’t be readily copied by others.
It is a large industry that depends on effort by a large number of people. Ultimately, success depends on how well those people do their jobs and work with others in a team effort.
On the other hand, it is very difficult in an industry made up of large numbers of people who own their own businesses and make their own decisions based on what they think is best for them — not for the industry as a whole — to coordinate harvesting, processing, and marketing to provide customers what they want, when they want it, and maximize output value.
In this situation, people make decisions without understanding — or caring about — the big picture. But that doesn’t just happen in the fishery.
Steve Jobs, the founder of Apple, once said, “A lot of people in our industry haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have.” The same could be said about the fishing industry — and particularly, the industry in Atlantic Canada.
Iceland has achieved extraordinary results partly because they have set a national goal of maximizing output value per kilogram of catch, something that benefits everybody. It has been able build a strong industry culture around that goal, to motivate people throughout their industry to cooperate in various ways to achieve it. And the participants are rewarded through high incomes for doing so, despite the fact that Iceland’s resources are mainly low-value pelagic and groundfish species.
It is a lesson we need to learn in Atlantic Canada. Our industry is very much divided and uncoordinated, because different participants have different goals and do not cooperate well. The result is that we get much lower value from our resources than we should and everyone is worse off.
That will become an even greater problem as our industry sees our high-value shellfish resources diminish in abundance and lower-valued groundfish become a larger part of our raw material supply. Groundfish markets are large but they are also intensely competitive. If we don’t do things differently than we have in the past, our performance as an industry will be below the levels achieved by our competitors, so we won’t be either competitive internationally or economically viable. And incomes will suffer because of it.
Setting goals that can motivate large numbers of people working independently to coordinate their effort will be essential, if we want to do better. That is the task of our industry’s leaders. But in carrying out that task, they will have to look beyond the narrow goals of their individual organizations to the broader goals that can benefit the entire industry.
Ultimately, true leadership involves creating conditions that enable ordinary people to achieve extraordinary results.