Recent productivity figures for the United States tell a tale worth noting:
• In the last half of 1999, productivity rose at a 5% annual rate, closing out at 2.9% for the year
• The productivity growth rate for 1995 through 1998 was 2.6%
• The productivity growth rate for 1990 through 1994 was 1.8%
• During the 1980s, annual productivity growth rates averaged 1.6%
• During the 1970s, the annual productivity growth rate was 1% (Business Week, 21 February 2000).
Not only are these numbers impressive, manufacturing productivity has led the way in this 35 quarter, uninterrupted expansion of productivity growth, most recently at 11%. Labor costs are well behind economic growth rates, and all forms of compensation, including bonuses and stock options, are slowing. Inflation appears to be under control.
In the early part of last century, it took manufacturing 20 years to reorganize to take advantage of electric power, so it follows from this theory of long-wave technology cycles (10 to15 years) that industry is just beginning to capture the benefits of the personal (i.e., decentralized) computer and attendant information systems. Technology matters.
It is rather remarkable in an economy of near-full employment that there is minimal inflation. It defies much of what is held sacred in economic theory. But, again, technology is the answer. Rather than build up the workforce that would be threatened by the next down turn, companies are investing in technology instead. The declining price of capital and increasing price of labor makes this a natural strategic alternative. Suddenly, the development of labor-saving equipment and systems makes sense.
In airports, there are lines of people at the e-ticket kiosks. In supermarkets, people check out without clerks, and recycle their own cans and bottles. They fill and pay for their own gas, get money without tellers, and no longer have to go to the Post Office for stamps. Cisco Systems estimates that it has saved $2 billion over the past four years by implementing Net-based ordering (Business Week, 20 March 2000).
Now it is the auto industry’s turn. Many in its workforce are nearly ready to retire, and in some plants it has already begun. A report from the Bureau of Labor Statistics confirms this. Employees over the age of 50 increased by 21% from 1990 to 1997; the overall number of employees, on the other hand, increased by just 9%. Next time you are in an auto plant, ask what the average age of the workforce is there. Well into their 40’s would be a good guess.
What is the answer? Again, it is likely to be technology. But let’s hope it will be technology with a new, millennium twist. Let’s not let this work force retire without their active participation in designing the next generation of technology in our plants and offices. These are the people who grew up with these magnificent productivity gains and the people who are in the know.
About 10 years ago we finished a three-year study of 50 U.S. plants that had undergone significant modernization. Most of these durable goods plants, including seven auto assembly and fabrication facilities, were responding to stiff competition, primarily from Japan. Many were very successful in adapting these new computer-based plant technologies like flexible automation to their operations. They averaged well over 30% quality improvement and over 50% throughput enhancement, and excellent financial returns. But many of these plants struggled with these new technologies. In 100 questionnaires that we collected in this project, we could not find a single instance where a blue-collar worker participated with a design (not manufacturing) engineer on a modernization project. Saturn Corp. was able to avoid this mistake when the Spring Hill plant was designed; why can’t the rest of the industry do it?
Let’s not make the same mistake this time around. New technologies require new philosophies of work and new strategies and organization structures to be successful. This begins with the planning stage of the process. The auto industry should consider setting up planning councils with wide membership from the workforce, including line and skilled trades employees for the future of their plants and the industry. Technology matters, but there will never be (at least in our lifetimes) a people-free work environment in manufacturing. Make it count now, before this workforce retires and it is too late, or we will pay the price all over again. Learn from history and build on this wonderful run of productivity growth this generation has given us, with the help of technology as a tool—not as an end in itself.