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Productivity is today’s latest and greatest “we-view-with-alarm” editorial topic. Reading the acres of recent editorial comments, expert testimony, congressional statements, and man-on-the-street opinions leads us to a pair of disquieting conclusions. First, no one really knows what productivity is, at least not in any technical, measurable sense. Second, regardless of what it is, everyone with a cause to champion or a course of action to sell believes that he or she knows the cure for the American economy’s abysmal productivity growth.
How many bushels per acre should a typing pool yield?
The economists’ classic definition of productivity— output divided by input— may still be of value to macroeconomists for comparing the productivity of continents and nations, but as a meaningful measure for office or factory, it’s pretty useless. In fact, the agribased logic of this full-factor productivity measure is scarcely adequate for measuring the productivity of the contemporary truck farm.
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Dr. C. Jackson Grayson Jr., chair¬man of the American Productivity Center, a nonprofit, privately funded and operated facility headquartered in Houston, TX, discusses the measurement problem. “Productivity is output over input. That’s a simple definition that people can grasp because the word and concept of productivity are elusive. The problem is to …translate it to a particular organization….What is output? Well, output in a factory is relatively easy to think about but when you get into it, it’s not that easy. Then you have to define all of your inputs— labor, capital and materials. Every firm and organization really has to define output and input for itself.”
Grayson, writing in the spring/ summer issue of Training Digest, lists some of the complexities of productivity measurement: “Inflation can con¬fuse whether or not a firm is productive….So what we have to do is factor out the price change….Which price deflator do you use?
“In the service area, it gets increasingly more difficult. How do you measure the output of a university?
“Let’s take labor, as an example [of a seemingly simple input measure]. You use man-hours worked and man-hours paid and you can get different kinds of calculations based on which one you use….When you move into capital, that’s even more difficult. Depreciation is not a good measure of the exhaustion of capital in a year as an input to productivity. It’s a financial accounting term. We really don’t know how to calculate our capital stock— our inventory of plant and equipment….In other words, there are many problems in measuring productivity….We really need to improve those calculations.”
If measurement of productivity is so complicated, is it worth the trouble? Based on the example of two research economists who have sifted and sorted through the measurement mess, the answer is probably affirmative. Through a complex system, Harvard Economist Dale Jorgenson and Frank Gallop of the University of Wisconsin have demonstrated that, while the growth in national productivity as a whole has slowed, the decreases are far from uniform. They are, in fact, quite industry specific. Their figures show that there is solid productivity growth in chemicals, textiles, electronics, transportation equipment and rubber. Among the substantial laggards are primary metals, mining, food, construction, paper and lumber.
This ability to separate the “successful” from the “unsuccessful,” according to Fortune economic writer Ed¬ward Meadows, is crucial if we are to focus on the nuts-and-bolts of why one industry or company or department is full-steam-ahead while others are faltering. In the words of APC’s Grayson, who has been startled at how little companies have done to measure their own productivity: “Until you can measure things, you find yourself handicapped. Measurement at the individual firm level is a high priority.”
Or, as one problem-solving expert puts it, “The toughest part of solving any problem is figuring out what the problem is. Once the problem is identified, you can put your arms around it, squeeze it a bit and let the solutions suggest themselves.” An oversimplification, true, but the fact is that it’s pretty hard to solve productivity problems when they elude definition and measurement.
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Causes, curses and cures
Lack of definitiveness about the nature of the productivity problem hasn’t dampened enthusiasm for pointing to villains and proposing solutions. For¬tune’s Meadows cites George Washington University’s John Kendrick as formulator of one fairly comprehensive framework of proposed productivity slump causes. Kendrick isolates five factors that seem to affect the productivity of a given industry.
First, he notes, productivity increases more rapidly in those industries where sales are also rising at a faster-than-average rate. Meadows suggests this makes sense because higher output allows for greater economies of scale, and frequent additions to production capacity provide frequent opportunities to innovate. Second, spending on research and development pays off in greater productivity.
The third fator is the average education of workers in the industry. Fourth, Kendrick points to industry cyclicality. Indus¬tries with heavy, periodic downturns tend not to be capable of long-term productivity improvement planning. Kendrick’s fifth rule is that, because of rigid work rules, labor unions generally retard gains in productivity.
Meadows adds two more oft-mentioned factors to Kendrick’s framework: 1) government regulation and 2) the extent to which industries are converting from electromechanical production processes to electronic ones. Other factors frequently cited are erosion of the work ethic, personnel management approaches out of sync with the values and needs of to¬day’s work force, and management unused to, and unskilled at, managing for productivity. Because a number of these factors have HRD implication, they merit closer attention.
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Regulatory excess. Economist Edward Denison, of the Brookings Institution, calculated that environmental, health and safety regulations cut 1.4 points per year from U. S. productivity growth between 1967 and 1975. “There can be no doubt,” says a study by the President’s Council on Wage and Price Stability, “that much of the productivity collapse in mining and in utilities can be attributed to social legislation that protects the environment and safety of miners.”
Most authorities suggest that regulations cut productivity two ways. Regulatory excess cuts into spending for R&D and for capital investment in new plants and equipment. Corporate cash spent on devices for clean air and worker protection, the argument goes, can not be spent on new technologies for producing goods more cheaply and efficiently. This year alone, estimates Murray L. Weidenbaum of Washing¬ton University, St. Louis, business will spend nearly $100 billion to meet new pollution-control and safety regulations, thus reducing potential productivity growth by 25%. And, secondly, each new set of regulations needs a new set of regulators, and the cost of enforcement must be added to the formula.
Regardless of the effect regulation compliance may or may not play in decreasing R&D expenditures, the National Science Foundation has calculated that patents granted U.S. inventors abroad were down 25% in 1976, compared with patents granted to non-U.S. residents by the U.S. Patent Office. This and other lagging technological indicators caused Time to declare an “innovation recession” and the Carter Administration to form a blue-ribbon council of industrial CEOs to recommend ways the government can assist in reviving the technological innovation process.
Nature of the work force. Much has been made of the “fact” that the wants, needs and motivation of today’s work force require different management approaches and work structures. The premise, which is not universally accepted, became popular in 1972 when a walkout at the Lordstown, OH, assembly plant of General Motors Corp. was widely interpreted in the popular press as a rebellion of young workers against the assembly line.
Overnight, a host of writers and sociologists—most of whom had never seen an assembly line— began describing the miserable quality of working life in America. The epitome of expression of this viewpoint was the 1973 book, Work in America: Report of a Special Task Force to the Secretary of Health, Education and Welfare, edited by then Secretary of H.E.W. Elliot Richardson. According to Work in America, job dissatisfaction is so wide¬spread that it is causing lowered productivity, family stress, reduced longevity and poor physical and mental health. In short, boredom in the work place is blamed for every special woe short of drought. The preferred panacea tended to be the leaderless, or non-supervised, work team, though flexitime and part-time work of various designs were often suggested, too.
The early stages of the quality-of-working-life movement were marked by such passion and so many recriminations that most management people were scared away from meaningful experimentation. Union leaders were also unconvinced that the radical work place changes promoted by the early QWL “experts” would not, in the end, work against the blue-collar workers. Since ’73, a number of studies and worker-generated books and articles have brought some much needed balance to the issue of blue-collar blues.
Though a number of early proponents, such as Ted Mills, director of the National Quality of Work Center, claimed productivity improvements as a side effect of QWL experiments, such outcomes tend not to be the focus of this movement. At a recent conference sponsored jointly by the Work in America Institute, Inc., and the now defunct National Center for Productivity and Quality of Working Life, QWL and productivity were treated as relatively independent topics.
The consensus of the conference tended to be that productivity problems are-the province of technocrats and are solvable primarily through technological advances. Quality of working life, on the other hand, was viewed as a societal necessity: “Organizations are going to have to change,” Yale’s Dr. Edward Lawler III declared, “in order to avoid being out-of-step with the nature of the work force.” Other conference attendees suggested that the issues of promotability of women and minorities, employment of the handicapped in industry and most other current social concerns are QWL related.
Jerome M. Rosow, president of the Work in America Institute, thus summarized the concerns and thinking of contemporary QWL advocates: “The long-term answer to meeting the rising expectations of such a work force (more educated than in the past, increasingly affluent, and less orthodox in its approach to work) is to advance the quality of working life, while at the same time nurturing a healthy work ethic and using human .resources productively.”
Clearly, one should not enter into QWL experimentation with the objective of improving productivity. From a bottom-line viewpoint, QWL efforts are “maintain” rather than “gain” strategies. From a people-to-people perspective, QWL improvement strategies simply make sense in today’s world.
Managing for productivity. Though the changing nature of the work force and anti-productive regulations are the most talked-about causes of the American productivity slump, the greatest number of solutions proposed tend to be “manage better” systems and concepts. It sometimes seems that almost everyone has at least one “what you really oughta do” theory for the manager concerned with productivity.
Noted consultant, author and professor of management Peter Drucker suggests that management needlessly inhibits the average worker. “The greatest boost to productivity,” Drucker observes, “would be for management people to learn to ask, ‘What do we do in this organization that helps you do the job you’re being paid for and what do we do that hampers you?'”
According to APC’s Grayson, most managers have little or no training in production and work methods. “Man¬agers in recent years have paid more attention to things like finance, ac-counting, taxes, mergers and acquisi¬tions than to basic operating efficien¬cies,” he says. “Few production men have risen to the top in modern busi¬ness; the accountants reign in the executive aeries. The business schools and their brightly minted MBAs sense this and pay scant attention to pro¬ductivity.”
Grayson is no fan of the dubious conventional wisdom that productivity is suffering from social change. In a recent Time article, Grayson flatly states, “I’ve heard all the rhetoric about we-don’t-want-to-work-hard-anymore, and I don’t believe it. The work ethic has not been lost. What has happened is that autocratic, bureaucratic organizations in business and public service have sup¬pressed the desires and ability of the individual to feel that he or she is contributing. People do not mind con¬tributing to the success of an enterprise, so long as they feel that they have a hand in helping to shape it and are rewarded.”
Grayson argues that productivity can be raised by giving everybody the three R’s: recognition, responsibility and rewards. Recognition in the form of plaques and photos on the wall, company dinners and other visible backpats for imaginative, high-output workers. Responsibility through al¬lowing individual initiative to ride high, including breaking up long production lines and impersonal offices into teams of workers who choose their own leaders and decide for themselves how to get the job done. Rewards in the form of cash bonuses or time off— or both.
The three R’s, singly or in combination, have been shown to increase productivity in large companies, such as General Motors, Texas Instruments and IBM, as well as in medium-size firms. Little-known Lincoln Electric of Cleveland gives productivity bonuses that come close to equaling regular wages. As a result, productivity has risen so fast that, since 1934, prices for Lincoln’s products have increased only one-fifth as much as the consumer price index.
Another approach to the man-aging-for-productivity issue considers labor-management interpersonal relations a critical factor. Professors R. Wayne Mondy and Mildred Golden Pryor suggest that mutual respect be¬tween supervisor and subordinate is a key to productivity. Using an instrument they developed called the Productivity Attitude Test, they asked numerous companies what can be done to encourage employees to be more productive; 41% replied “tell them what’s going on,” and 31% said “give them more respect.”
A similar viewpoint is expressed by Richard A. Morano, manager of management development and education, manufacturing division, Xerox Corp. “Our role as managers,” he insists, “is to prevent the occurrence of morale problems.” He suggests that among the appropriate deterrents to low morale are “straightforward, honest and open communications with employees’ and “…providing growth opportunities of increased responsibility, freedom, expanded job scope and increased participation within our own organizations.”
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What can HRD people do?
What role can the HRD specialist play in the unfolding productivity improvement push? Apparently, as large a role as he or she wishes. For starters, take a long look at your current supervisory and line-management training. How much of your training is de¬voted to compliance? Not just OSHA and EEOC compliance, but company rules-and-regulation compliance as well.
Training supervisors and managers to toe the mark vis-a-vis rules, regulations and policy can inadvertently produce reactive, defensive superiors who quote chapter and verse to employees with problems instead of ac¬tively managing them. Juxtapose against that image supervisors and managers who are taught to manage in a creative, problem-solving fashion within a set of guidelines. The latter tend to be proactive managers and supervisors who can work with people instead of simply directing prescribed activities. Incidentally, if the rules and regulations you must teach are inconsistent with rationale management, you have an interesting agenda item to pursue with the keeper of said rules and regulations.
A second positive action the HRD person can take is to look at the scope of the topics you are presenting to supervisors and managers. Are you teaching any communication skills? How about work design, or measurement, or simplification? How about performance feedback or positive reinforcement techniques? Or, how about plain old problem analysis and solution? If C. Jack Grayson is correct and today’s supervisors and managers aren’t learning to manage operations outside the organization, we’d better make these skills available inside the organization.
And, finally, who better to agitate for and instigate an organization-wide productivity improvement program than the HRD specialist? Geary Rummler, managing director of Praxis Corp., suggests that “the per¬son who controls the measurement pretty much controls the results.” In the context of the productivity game, make that “he who has the numbers that demonstrate the need for a productivity improvement program can get a lot of attention where it counts.”
John McClure is chairman of the American Productivity Center’s series of one-day briefings on planning and managing productivity improvement programs. And he passes along a few tips and tricks for instituting such a program. First, don’t be afraid to sug¬gest to senior management that the need exists. McClure tells us, “Not too long ago, managers were skeptical of productivity improvement programs. But that’s past. The people who have been coming to our public seminars aren’t just curious. They want to start something in their organizations and are looking for concrete guidance.”
Second, think big. Start at the top and recommend continued commitment and follow-through. “Fully one-quarter to one-third of the people in our seminars are directors, vice presi¬dents and presidents of organizations who are ready to commit to a produc-tivity improvement program but need some guidance on what works and what doesn’t.”
Third, “Don’t let the program get stuck away in personnel just because the focus is on people. Line management must be involved and have ownership and responsibility.” And, finally, McClure cautions, “Don’t get carried away with the measurement aspect. It’s erroneous to believe that measurement alone will improve productivity. Those who get carried away with developing very sophisticated productivity measurument systems and— worse yet— computer-modeling studies never get to the job of installing a program.”
Robert E. Sibson, president, Sibson and Company, Princeton, NJ, and au¬thor of Increasing Employee Productivity, adds these guidelines: “Produc¬tivity must become one of the organization’s goals….This means, in part, that productivity must be built into the responsibilities of all supervisors; they must be given time to do the job; they must be trained to do the job; and they must, in part, be measured and rewarded on how well they do the job.” He also suggests that it’s pretty risky to attempt across-the-board productivity improvement for the whole organi-zation.
“Some companies have erred in undertaking open-ended and massive approaches toward productivity improvement. Successful companies have identified specific targets of opportunity and have developed specific plans for bringing about greater productivity in those areas and specific personnel techniques to bring about this improved productivity. Generally speaking, projects that have been successful have involved no more than 250 man-days of work and have been accomplished within six months of elapsed time.”
Sibson suggests that this piecemeal approach allows a single project to be evaluated before additional projects are attempted. That way, established successes help determine the next project. Sibson also advises that some¬one in the organization be appointed advisor, coordinator or consultant for productivity improvement. “This should be a single individual who is project manager for most, if not all, projects undertaken in the areas of greater productivity through personnel management. This brings continuity to the work and assures that the lessons learned from one experience or project are translated to others.”
And, finally, Sibson cautions against the tendency to espouse a “one-best-way” approach to productivity improvement: “There isn’t any single technique or practice that all companies can use to increase em¬ployee productivity. Each company’s opportunities differ. Therefore, specific techniques to be used and places to use them differ greatly from one firm to another and in different sections of the same organization.”
Regardless of their school ties, methods of preference or implementation strategies, all the productivity improvement experts we’ve consulted share at least one premise: INVOLVE everyone. Everyone in the organization must be responsible, accountable and reward able for improving productivity. Without sustained commitment, productivity gains will be transitory.
A couple of hundred years ago, Benjamin Franklin cautioned a group of co-workers who were about to embark on a little improvement project of their own: “We must all hang together or we most assuredly will all hang separately.” May we suggest that the same sentiment, slightly paraphrased, applies today? We must all line up to¬ gather in this matter of solving our national productivity problem. Or possibly we’ll all be lined up separately—on the bread line.
Source : Ron Zemke, Training Magazine, February 1979.
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