Sun | Dec 15, 2019

Douglas Orane | Baking a bigger pie rather than fighting over how to slice it

Published:Sunday | November 17, 2019 | 12:31 AM
GraceKennedy’s main building and Head Office in downtown Kingston.
Douglas Orane
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I am originally an industrial engineer by vocation and so have had a lifetime fascination with how to improve productivity. In Jamaica, we are very good at analysing problems but not as good at implementing solutions.

I would like to take a qualitatively different approach to solving what I call the productivity paradox in Jamaica. I will pose the paradox as a question: “How can a country with so much talent and creativity rank among the worst in the world, having declining productivity over the last four decades?”

In 1970, at age 22, I returned to Jamaica from the United Kingdom as a young, recently graduated industrial engineer. I was accompanied by a small army of like-minded graduates, convinced that we would make Jamaica a developed country in 20 years’ time, that is, by 1990.

Here was the result 20 years later when I was 42 years old: gross domestic product (GDP) per capita, a good measure of our total population’s well-being and productivity, had increased by only 0.29 per cent per year.

Then, in the year 1990, as a relatively young executive in GraceKennedy, I was determined that by the year 2010, we could learn from the past and become a developed country in 20 years’ time. There I was in 2010, at age 62, and here were the results: GDP per capita had slowed to an anaemic 0.18 per cent growth per year.

NOT GOOD ENOUGH!

Fast-forward to the year 2030. If I am alive, I will be 82 years old, and I will ask the question: “What has been the average increase in productivity for our country since 2010?” For the period 2010-2017, GDP per capita has actually turned negative to minus 0.34 per cent per annum. But worst of all, average labour productivity per employed person has actually declined by a disturbing 12.76 per cent in the 48 years between 1970 and 2018. Not good enough! We have been in reverse gear! However, Jamaica is still a nice place to live, as articulated by Tony Rebel.

“What a nice place to live,

Sweet Jam Down,

The only problem is,

Dollars nah run”

To help me understand this paradox, I had breakfast with Dr Charles Douglas, the recently retired head of the Jamaica Productivity Centre. However, it was more than breakfast; it was a tutorial in measuring productivity. He explained to me the mysteries of calculating total factor productivity, and its relationship to GPD growth.

What I learnt is that GDP growth is the total of labour productivity growth (LP), capital intensity growth (KP), and a third catch-all element called total factor productivity, or TFP. I had to write it all down to remember it.

For the mathematically minded, here is the formula:

dGDP = dLP+ dKP + dTFP

Included in TFP is technology, innovation, education, training, human capital, management, infrastructure, and finally, luck. This third element, TFP, in developing countries, typically contributes in the range of 40 per cent of GDP growth. However, in the case of Jamaica, it is a negative figure! I couldn’t believe my ears!

I have been reflecting on these sobering facts since our breakfast, and I have come to the conclusion that there can only be one primary cause for this outcome. It is this. I lay it squarely at the feet of our individual and collective leadership of our country, and that definitely includes me, and I would think everyone else in a leadership capacity over the last 40 years. We have failed to embed a culture of productivity, which would have led to a virtuous upward cycle of improving the well-being of our people.

I’ve stated this assessment in private in the recent past, and my friends have got very upset with me. They reply, “But Douglas, look at the many areas of progress we have made?”

However, I point out, “How else can we explain the facts of the last 40 years?”

THE BUCK STOPS WITH US

I will go straight to the heart of what I see as the solution: demonstrating transformational leadership and spreading those transformational skills outwards across the wider society.

I had the honour to lead GraceKennedy from being a domestically focused conglomerate in the 1980s to being well on the way towards becoming a global consumer group in food, and, regionally, in financial services. A fundamental underpinning for this success was continuously increasing, within our group of companies, the productivity of everything we did, and this continues today.

However, as a leader, I have a confession to make. I failed to find a way to widely transmit those self-grown successes, learned by trial and error, to spread outwards throughout the wider society, to the diversity of entities and institutions that make up the fabric of our nation. And there are other leaders in our society who need to accept responsibility for this dismal productivity phenomenon.

Yes, there are many examples within our society of individual performances of various entities that have increased productivity continuously, and at times dramatically, but collectively, our leadership in all areas, the private sector, the public sector, the political parties, the trade unions, the professions, the education system, our families, and even the churches, have not found a way to galvanise our efforts for the greater benefit of everyone who lives in our society.

It’s a painful admission for me to make, after a lifetime of work, and after much soul-searching, but I put this question to you. If you were a 19-year-old young man living as a squatter on a gully bank, with a suboptimal education over the previous 15 years, and now considering whether to join a gang, or not, as the way forward, how much would you, as that youth, be responsible for the current absence of high productivity in Jamaica? Only we, as leaders, can ultimately be held accountable. The buck stops with us.

In my future articles, I plan to share a few case studies that can give us clues about dramatically increasing productivity and then summarise with a personal list of next steps that can lead us on the path to becoming a developed country. Watch this space!

All statistics in this article are courtesy of Jamaica Productivity Centre.

Douglas Orane is the retired chairman and chief executive officer of GraceKennedy Limited. Email feedback to columns@gleanerjm.com