May, 01 / Quebec, Canada/ -- Human resources development. The productivity push.

It's lagging in Quebec and MEG wants to turn that around by targeting Quebec manufacturing SMEs to improve productivity through training

Manufacturers in the province of Quebec have a tough challenge. Their productivity lags far behind companies in Ontario and the U.S., and the gap keeps getting bigger.

Determined to turn this situation around by reinforcing the skills of the workforce, Manufacturiers et exportateurs du Quebec (MEQ) has launched a program called Tremplins Formation Productivite (training-productivity springboards), an initiative targeting around 150 manufacturing SMEs.

MQ's vice-president for development and communications, Jose- Louis Jacome, explains that all of the association's activities are based on five major themes: training and skills, innovation and productivity, operations and access to markets, taxes and energy and the environment. Five committees with participants from different sectors of the industry worked on these topics to suggest ways of satisfying their critical needs. The new springboard program grew out of these discussions.

As Jacome sees it, Quebec has a large number of SMEs, some 13,000 of which are involved in manufacturing and employ nearly 642,000 workers. Many of them are experiencing fast and sustained growth and are often overwhelmed by the requirements imposed by development and progress. Corporate management, particularly, proves to be more complicated, and productivity suffers as a result. "Quebec lags well behind Ontario and the United States in productivity, and the gap is getting larger every year, according to current statistics," he confirms.

The president and CEO of MEQ, Paul-Arthur Huot, says that Quebec SMEs lag behind Ontario and U.S. manufacturing companies by about 23% and 35 % respectively. "Moreover, it has been widening every year since 1984. This negative trend absolutely has to be stopped. We can change things if we look to specialized training. It requires little investment and gives fast and forward-looking results," says Huot.

Jacome believes that in spite of the provincial government's training efforts enshrined in Bill 90 - An Act to foster the development of manpower training many SMEs still don't offer training, or use training of little strategic value. Bill 90 provides that if the payroll of a company exceeds $250,000 in one year, the company must invest the equivalent of at least one per cent of its payroll in training.

Some SMEs, therefore, arrange training solely to avoid paying this tax to the government, while others, finding the paperwork and bureaucracy involved in using the amount for training too voluminous and complicated, simply pay the one per cent. "Nearly two years ago, MEQ decided to meet these challenges by concocting the springboards program, in collaboration with Tecsult, a consulting firm, and Eduplus, a human resources development firm," explains Jacome.

In 2001, as part of a pilot project involving 20 manufacturing SMEs in central Quebec that had previously offered little or no training, the average added value for their production activities was 41 %. This served to validate the approach, tools and operation of the springboards. Moreover, the best performing companies managed an added value of 70%. The springboard program is designed to reduce this gap mainly by upgrading employee skills. In the summer of 2002, MEQ obtained the financing it was looking for to expand the program.

The MEQ initiative received the support of Emploi-Quebec and the Commission des partenaires du marchi du travail, which contributed $2.4 million and $300,000 respectively to implement the program. This amount includes the construction of a Web site that can be used by other companies if the program continues.

The program

The Training-Productivity Springboards program will be introduced first in five regions of Quebec: Quebec City, Central Quebec, Eastern Townships, Laurentians and Montreal. It will include ten springboards of 15 companies each, or two springboards of about 15 companies per region. This initiative targets SMEs with payrolls between $500,000 and $1 million that do little or no training. Launched in the fall of 2002, the hope is that it will help companies access training specifically adapted to their needs.

The new program offers a complete analysis of a company's productivity. This is a thorough analysis that takes three days. The diagnosis determines what three main activities offer the greatest potential for adding value. A human resources expert then recommends the specialized training necessary to improve these activities and which employees should participate.

The program also offers skills analysis, an Internet management training tool and an adapted training plan. The Web tool, designed especially for participants in the program, includes 100 generic profiles, some 400 specialized training offerings for the manufacturing sector and a number of management tools to help entrepreneurs manage the one per cent training investment required by law. Companies that register for this program are able to achieve an average productivity gain estimated at 30%, from the very first year of their participation.

Over a six-month period, several activities bring together the heads of the companies taking part in the same springboard, and create synergies among them. "Our approach is future-looking, dynamic and economical," says Huot. If the program operates as successfully as the exports springboards in the Agrifood sector that he created and implemented a few years ago, he'll certainly be correct. Exports in that sector quintupled during the 1990s.

Each springboard unites an average of 15 companies in a region, amongst which discussions and group debates are organized. At these meetings, participants may decide, for example, that there are six companies that have inventory problems and order three days of specialized training intended for this specific group. This group work creates major economies of scale. The cost of training in the example above was thus divided by six.

Jacome points out that these courses are very specialized. "We're not talking about sending people to take long-term training. It has to produce a direct and fast impact on the company's activities," he insists. Moreover, a course on how to evaluate productivity is taken by all participants so that they can quantify their success later.

This first phase is just the beginning, suggests Jacome. "If we want to fix the problem and the current trend toward negative productivity, we have to reach many more companies, using highly structured and well-designed processes, as is the case with this program," he affirms. Conducting this exercise in 150 companies won't change Quebec's statistics, but with 1,000 or 2,000 companies involved, the impact will be visible.

The current phase will last 18 months - three 6-month stages with five springboards each. Jacome believes it's important to act right now if the province doesn't want to find itself with a much worse problem in five or ten years' time. He believes that a larger and forwardlooking program - like the springboards - is necessary, rather than setting up various small initiatives in scattershot fashion. Since everything is currently being organized, it will be easy later to propose other phases in which the economies of scale will be even greater. A report will be given to the government at the end of the current phase, so that it can evaluate the program's relevance.

Disapproval

The program hasn't met with unanimous approval in the Quebec business community. When the program was launched, the Canadian Federation of Independent Business (CFIB) reacted by issuing a press release claiming that the money of SMEs was being wasted by the Quebec government and MEQ. At that time, the vice-president of the Quebec CFIB Chapter, Richard Fahey, was categorically opposed to projects of this kind, as was made public by the minister delegate for employment and social solidarity, Agnes Maltais, and by Paul- Arthur Huot of MEQ.

"Despite the fact that the CFIB, which represents some 3,500 manufacturing companies, has denounced the Act promoting the development of manpower training over the years for its excessive administrative complication and the way it financially penalizes SMEs, the government and MEQ have agreed to subsidize around 150 enterprises on benchmarking projects, at a cost of $2.4 million, using the hard-earned money of a large number of the owners of small and medium sized businesses in Quebec," declared Fahey when the new program was announced.

The CFIB noted that Quebec SMEs are triply penalized by the one per cent tax on their payroll. Although CFIB surveys confirm that about 96% of them are conducting training based on the Act, the paperwork required is so complicated that 77% complain about it, forcing the owners to pay the tax rather than complete the forms and other administrative requirements. The CFIB claims that to add insult to injury, the grants have traditionally been distributed haphazardly and first and foremost benefit big companies and corporate groups.

"It is indecent for these sums of money that SMEs earn by the sweat of their brow to wind up in the hands of government agencies that come up with projects to explain to SMEs how to do training, even though they are already doing it," Fahey insists. "Quebec's SMEs carry the cost of handing out grants without anyone asking whether the government red tape ou\ght not to be reduced or the tax eliminated instead."

Jacome is disappointed in the CFIB reaction. "It's incredible that they say that," he says. In his view, in fact, the money goes back to the SMEs. He adds that registration for this program costs $1,500 and in return, the companies each receive a dozen days of training from consultants, the equivalent of about $12,000 in value for services that they would otherwise have to pay for. He says that the companies that pay the one per cent tax are SMEs because big companies usually spend at least the equivalent of two per cent - and it's often much more than that. The smallest companies don't consider training important, yet they are the ones for whom such a program is most necessary.

MEQ works solely in the manufacturing sector, whereas the CFIB is concerned with all kinds of enterprises, including self-employed workers. Jacome sees this as a major difference because when it comes to training, some companies include expenses like business lunches, which isn't the case when specialized training is involved.

Four springboards are already in operation: one in Drummondville, another in Victoriaville (both in central Quebec), one in the Eastern Townships and the fourth in Quebec City. In Montreal, MEQ is still recruiting. Companies in the metropolitan region seem to be harder to convince because training is already much more accessible and consulting is more broadly offered.

Since MEQ annually sends merchandise worth $120 billion from Canada to more than 120 different countries and three out of every four jobs in the manufacturing sector depends on foreign trade, Jacome firmly believes that the impact of the program will be extremely positive and that, eventually, Quebec manufacturers will be able to eliminate their training and productivity deficit.