How to Improve Canada's Lagging Productivity

We Need Less Research and More Leverage

Feb 13, 2026

This program is about the strongest most productive economic force the world has ever known, the United States. We have been for a long time. There are reminders of that here in the Smithsonian’s Museum of History and Technology. The question is not what have been or are now, but what we will be. For the first time our productivity is not increasing.
Productivity is not some esoteric economic subject: it is how much we produce and how much it takes to produce it. The object is to make more for less; if you do, everyone benefits.
Lloyd Dobbins, NBC White Paper: If Japan Can, Why Can’t We? (00:01:36)

Just Breaking: Bank of Canada Governor Calls for Structural Action

This speech just came to my attention as I was finalizing this post. Bank of Canada Governor Tiff Macklem delivered these remarks to the Empire Club of Canada on February 5, 2026—and they underscore exactly why the quality-as-leverage approach I’m describing isn’t just theoretical, it’s urgent.

THE AIM for this post is to share some thoughts on a recent OpEd in The National Post by University of Calgary economist Trevor Tombe that announces how we’re going to finally solve Canada’s productivity problems with a long-term, collaborative research project that brings together researchers from across the country. As readers will know, this is a problem near and dear to my heart as it is the whole point behind adopting a Deming view, and one that I’ve adressed on multiple occasions. So, I was initially heartened until I read the fine print:

This week, the federal government announced a $6-million investment through the Social Sciences and Humanities Research Council to support the next phase of the University of Calgary’s School of Public Policy’s Productivity Initiative, expanding it into a broader, long-term research network focused on evidence-based solutions.
Over the next 15 years, a national network of researchers and policy partners — bringing together more than 30 researchers, six federal government partners and universities across multiple provinces — will work together to generate evidence that feeds directly into real policy decisions. Academic partners with the University of Calgary already include the University of Toronto’s Rotman School of Management, Western University, McMaster University, HEC Montréal, and Memorial University of Newfoundland, with other researchers at the University of Alberta, McGill University, University of Waterloo, and more.
The aim is not one-off studies, but sustained collaboration: building people, data and analytical tools that policy-makers can actually use.

While I applaud productivity finally getting attention from the federal government, it’s more than disappointing to see that once again we’re going to study the problem to “generate evidence that feeds into policy decisions”. With respect, we already have the evidence: leadership at the Bank of Canada have been sounding the alarm for the past two years that the time has come to “break the emergency glass”. If the tariffs imposed by the US have revealed anything, it’s that we need to take directed, focused, and informed action on how to improve our productivity.

Fortunately, we don’t have to do this on our own: we can follow the examples set by Japan and 1980s-era America that were inspired and directed by the philosophy and teachings of Dr. W. Edwards Deming on quality.

tl;dr

For the impatient, Canada can boost its productivity by improving the quality of its product and services, which extends directly into the organization’s management practices. This can be thought of as moving a fulcrum under a lever to gain an mechanical advantage, either doubling or trebling the output per worker effort, or halving the effort to deliver the same output.

Thank you for coming to my TED Talk.

Productivity Follows Quality

Dr. Deming’s management theory is effective because it rests on simple, yet often overlooked, observations about how an organization or economy works. When he visited Japan in 1950 and began working with top-management on how to improve their economy, he drew the diagram below on every blackboard where he lectured to illustrated cause/effect links between quality, costs, productivity, and economic success:

Source: Deming, Dr. W.E., Out of the Crisis. (p. 4)

Distilled, it tells us a fundamental axiom of Deming’s theory of management: productivity is downstream from quality; if you want to improve productivity you MUST focus on improving quality. The next fundamental axiom Deming teaches us is that quality begins at the top. Poor quality leadership begets poor quality decisions that permeate through the whole organization, ultimately affecting the quality of work employees can accomplish.

Quality as a Function of the System of Management

What is quality? Dr. Deming taught that a product or service possesses quality if it helps somebody and enjoys a good and sustainable market. I think it is also a reflection of how well the components of the product or service fit together and work together in service of a customer need. In turn, this is a reflection of how well the people who make the product or service fit together and work together as a system, ie. how well the interactions between people, teams, departments, suppliers, and vendors are coordinated and managed.

I call your attention to my Leadership Cheat Code #3: The majority of performance (and problems) belong to the system. No amount of skill nor care can overcome the system’s design. Thus: fix the system, NOT the people.

In other words, you can only run as fast and as well as management will permit. The present systems of management we see in use almost everywhere are not designed this way, and instead throw as many hurdles and walls in your way as possible. Dr. Deming called these things Faulty Practices and Deadly Diseases. For example:

These are some (not all!) of the ways our prevailing thinking about management can get in the way of improving quality. Knowing this, how can we shift our thinking? I suggest a metaphor.

Quality as Leverage

In high-school we learn about how Archimedes gave us the math to explain why levers are so effective as force multipliers: they mechanically convert small amounts of input into large amounts of output. His Law of the Lever states that the required force you need to apply to a lever to balance a given load is inversely proportional to the distance from the fulcrum. Put simply: double the distance, halve the force.

With a little creative license we can use this as a metaphor for describing the relationship between productivity and quality as a form of mechanical advantage. Imagine your present systems of work as a lever, with effort per employee on one end and a unit of output on the other; the fulcrum or pivot point under the lever represents the efficiency and effectiveness of your processes:

In this model, quality is represented by the x-axis, productivity in terms of output on the y-axis. As we work to incrementally and continually improve the quality of our operations by addressing causes of “drag” like rework, defects, delays, mistakes, snags, miscommunication, and misunderstandings, the fulcrum slides along the x-axis to the right, creating a force multiplier with two powerful potential outcomes:

Double (or even treble) the output for the same effort per worker, or;
Half (or even quarter) the input for the same output per worker.

This is the hidden “mechanical advantage” inside Dr. Deming’s Chain Reaction: Small, sustained quality improvements over time can lead to outsized gains in productivity by changing the effective “leverage ratio” of the system.

How to Begin Shifting the Fulcrum to the Right

At the top of this article I quoted the host of the documentary that began the renaissance Dr. Deming’s career, speaking at a time when American productivity was, as ours has been, on the decline:

Productivity is not some esoteric economic subject: it is how much we produce and how much it takes to produce it. The object is to make more for less; if you do, everyone benefits.

Dr. Deming teaches us that productivity is downstream from quality: remove all the “drag” out of your system that impedes quality and you get gains in productivity almost for free. This is the “secret” behind the Japanese miracle that Deming told them they would achieve in five years if they stuck to his teachings, and they did it in four.

With all our blessings and head-start, I think we could do it in four with a bet to do it in three. There’s no need to wait around for a government-funded think tank to do it for us, though. It can begin anywhere there is a willingness to improve, all for the cost of a few copies of The New Economics and subs to this newsletter.

So: start by looking at your current processes. Can you describe them? Map them out with the people who work in them, listen to their frustrations and what disappoints them and keeps them from doing better work. Ask for suggestions on what they need and get it for them. Work with peers to learn to see with a systems view, and work on eliminating the faulty practices from your organization. Learn the new theory, teach it, even when you’re not ready because doing so will help strengthen your capabilities.

Keep your changes small and controlled so you can learn from them and mitigate fallout. Expand when you’re ready. Keep checking whether they improve your ability to deliver more to a higher standard of quality for less. Repeat.

Until next time…