It came to an end officially on Jan. 21, 1993. On that day, after two successive quarters of significant economic growth, Statistics Canada declared that the economic recession, which had ravaged Canada since April, 1990, was over. But rather than greeting the federal agency’s positive announcement with relief, many Canadians bitterly challenged its rosy economic assessment. Part of the problem, according to Philip Cross, Statistics Canada’s director of current analysis, is that this economic recovery is unlike any in the past. For the first time, the historic tie between productivity growth and job creation has loosened—national unemploy-
ment has remained at about 11 per cent despite the fact that companies are reporting increased output, earnings and export levels. As well, while corporate payrolls and inventories continue to decrease, spending on office equipment and other capital goods is soaring. “As recoveries go, these are highly unusual trends,” said Cross. He added, “Traditionally, when people think of recovery, they think of job and income improvements—this is certainly different.”
The recovery cycle is not the only unfamiliar economic development currently confronting Canadians. Indeed, since the start of the recession, there has been a growing number of
profound—and bewildering—shifts in the domestic landscape. According to Lindsay Meredith, a professor of business administration at Simon Fraser University in Burnaby, B.C., the sudden convergence of new technology, global markets and an economic downturn has caused “huge structural changes” as significant as those in the last century during the Industrial Revolution. As the manufacturing base that once defined the North American economy erodes or relocates to lower-cost, less-developed nations, it is being rapidly replaced by a so-called “New Economy,” which emphasizes the services sector and knowledge-based industries at the same time as it demands a whole range of different skills from workers. Said Meredith: “The pace of discontinuous change is staggering for most working people—they are struggling for context and for understanding of a whole new economic age.”
The fundamental changes in the economy are especially disconcerting because highly visible smokestacks and smelters are increasingly giving way to intangible electronic networks and computer software programs. At the same time, the unskilled workers who have continued to rely on jobs in traditional sectors like natural resources and manufacturing are losers in the New Economy, where they are being replaced by efficient technology that does not require costly healthcare benefits or retraining programs.
As a result, oil companies and steelmakers alike are embracing new computer systems that allow them to respond quickly to sudden changes in highly competitive international markets and to keep operating costs in check. But as new technology arrives, it also brings major changes in the way that business is conducted overall. Said John Truman, vice-president of finance and planning for the Montreal-based Royal Bank of Canada: “Technology has gone from being a tool to being an engine for change—it now colors every aspect of operations.”
In a growing number of companies, the hierarchical chain of command, which has long characterized the industrial sector, is clearly giving way to a more flexible and responsive team approach to management.
Because multilayered, bureaucratic corporate structures usually take much longer to respond to changes in demand—although the eventual results may be long-lasting and effective—sprawling, diversified companies including Imperial Oil Ltd. and IBM Ltd. are streamlining their operations and thinning their management ranks.
In addition, widespread use of computers has streamlined the transmission and sharing of information, once the exclusive realm of middle management. Said James Rush, business professor at the University of Western Ontario in London: “The formal corporate structure is starting to unwind along with the traditional understanding of power.” He noted that “corporate power is now defined by who can accomplish what within certain parameters—not just a fixed pecking order.” While blueand white-collar workers are
struggling to re-orient themselves in the New Economy, a new category of employee has already emerged. Known as the “gold-collar worker,” he is computer literate, but is also skilled in other critical corporate functions such as marketing or finance. Said Eric Greenberg, research director for the New York Citybased American Management Association: “Those who can penetrate the wall and effectively blend the skills of technology with operations can write their own ticket.” He added, “It’s the age of the grand synthesis—you have to know how the boxes work and you have to apply that to the overall business.”
Focus: Such a heightened emphasis on flexibility and co-operation is already starting to extend beyond internal management style. Increasingly, companies are abandoning their attempts at vertical integration, which saw many companies embark on ill-fated ventures to become self-sufficient, and are focusing more narrowly on highly specialized niches. As a result of the acknowledgment that no business can do everything efficiently and effectively alone, there has been a marked emphasis on so-called “strategic partnerships” and corporate alliances—even among former competitors. Northern Telecom Ltd., for one, signed a joint-venture agreement with Motorola Inc. in 1992 to sell and service cellular telephones.
As Canada’s major chartered banks have scrambled to respond to their timepressed clients’ demands for such new services as debit cards and automatic teller machines, co-operation has been essential. Noted the Royal Bank’s Truman: “There has to be consultation so that all the electronic systems are compatible. The banks agree on a standard— and then compete like hell to market it.”
Royal Bank of Canada
‘Technology has gone from being a tool to being an engine for change’
In the global marketplace, countries—like companies— are also paying closer attention to the mutual benefits of co-operation by concluding such agreements as the North American Free Trade Agreement. Even though many analysts say that Mexico is an unequal economic partner for the United States and Canada, the underlying assumption is that all parties will profit by working together. In part, that approach has been dictated by the requirements of doing business in foreign markets, including language, corporate culture, system integration and co-ordination. But for many dislocated workers trying to make their way in the New Economy, the once-familiar landscape of Canadian business has already become foreign territory.
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