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In life, you face moments when the world as you know it suddenly changes. You may or may not see it coming; it may or may not be within your control. But one way or another, there comes a point when you suck in a deep breath, take a hard look into the proverbial mirror and assess whether you’re ready to adapt to the challenges ahead.
Business leaders face such a moment now. The economic winds that even five years ago shaped this country’s enterprises are now shifting, and kicking up dust that can obscure an executive’s vision. The loonie trading at par with the greenback. The American economy faltering as a housing crisis turns into a credit crisis, the severity of its effect on Canada uncertain. Productivity still lagging other countries, as investment in new technology falls short. Skills shortages destined to get worse, as experienced baby boomers step into retirement. New employment directly tied to immigration. Global competition from the emerging economies of China and India relentlessly on the rise. Climate change pushing western nations to redraw the economics of, well, nearly everything.
In other words, it’s time for a gut check.
The meaning of leadership changes in times like these. It’s not enough to run an efficient business. Executives need the vision to craft a strategy that prepares for an uncertain future, and do it in a way that places their businesses not in a different regional, national or even continental context — but a global one. That will require executives to question long-held assumptions about the way Canadian companies have always worked, and they must be able to inspire their employees to adapt.
Are business leaders up to the challenge? Some are. But in general, Canada seems behind the curve in terms of exhibiting the global leadership qualities that help businesses thrive. "If you look at the Canadian record, it’s clear that we’re not the global player we should be," says Anne Golden, president and CEO of the Conference Board of Canada, an Ottawa-based think-tank. "Do business leaders have the right skills? I think they do. I think our leaders are as smart as any leaders in the world. We graduate smart people. Whether they are globally oriented enough is the question. Whether they have a tolerance sufficient for risk is the right question. Whether their attitudes are sufficiently ambitious and entrepreneurial is the question."
The answers are hard to pin down. But anecdotally, some of the leading voices in business and the economy are not bullish. "There are two fundamental problems in Canadian business," says Jayson Myers, president of Canadian Manufacturers and Exporters. "One is leadership, and the other is the way people are managed. And those are two critical elements of competitive advantage for any company right now."
As a matter of public policy, there is no obvious remedy. It just seems Canadians don’t have that certain fire in the belly. "There is some truth to the notion that in the Canadian character, there is a high level of complacency, and that we’re not as hungry in terms of our character to be global best," says Golden. "In terms of knowledge and experience and attitude and appetite, we don’t appear to have as much as other countries."
One reason may be Canada’s economic make-up. The foundation of the economy is natural resources, and a banking industry to help finance their exploitation. Once resources are extracted, they are distributed: transportation industries are another pillar of the economy. Some would even classify telecommunications as a distribution industry. Governments have heavily regulated and protected many of these industries, so there has been less reason to look outside Canada’s borders. But more importantly, the competitive advantages inherent in those businesses — their hard assets — are not easily exported.
The result, some argue, is that Canadian business leaders do not have a predilection for adding value and creating wealth. "We have tremendous resources, we’ve got some of the best people in the world, we’ve got some of the best innovation and research going on in the world, but we don’t do a very good job of building wealth around that," says Myers. "We’ve got a culture that is far more used to redistributing wealth than it is to creating wealth. We create lots of marketing and financial analysts out of our business schools, but we don’t really focus on careers in creating wealth — we focus on careers in sharing wealth."
The other reason Canadian business leaders tend not to exhibit a globally competitive fire is that a disproportionate number of companies are small. According to Statistics Canada’s 2006 figures, there are roughly 2.3 million businesses in Canada — and about 1.2 million of those are self-employed individuals with no employees. Of the other million or so companies, 97.5% have fewer than 100 employees. Just 2.2% have between 100 and 500 workers, and an infinitesimal 0.3% have 500 or more. All told, 58% of companies have between just one and four employees. "That’s the fabric of Canadian businesses," says Jean-René Halde, president and CEO of the Business Development Bank of Canada (BDC), a federally owned financier that focuses on small and medium-sized companies. "I think the issue is there."
Halde has tried to compare those figures to the U.S., and after adjusting for different statistical methodologies, he figures medium-sized companies — those between 100 and 500 employees — make up something like 10–15% of American enterprises. That might be a crucial difference, because only when a company gets bigger can a chief exec step back from operations and see a bigger picture. "Too often we are caught up in the day-to-day challenges of business, and too infrequently are people taking a strategic look ahead and being able to prepare their businesses to respond to challenges, and manage change," says Myers. "Especially right now, many companies are focusing on how they can cut costs, but most have to be looking at where some of the strategic investments have to occur."
But then, small companies rarely have the capital on hand to invest in a strategic change. "The problem when you’re a [small or medium-sized business] is your resources aren’t always terribly deep," says Golden. "It’s hard to drain the swamp when you’re up to your proverbial whatever in alligators."
Why does Canada have so many small companies? Geography, and the country’s dispersed population and fractured consumer markets, are factors. But experts also point to high numbers of so-called lifestyle entrepreneurs who are satisfied with growing their businesses only to the point of attaining the three B’s: Bimmer, beach and boat. Similarly, many entrepreneurs are quick to sell when a good offer comes along, rather than risk passing it up.
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