Success in these tough economic times depends on a lot of different factors: market situations, pricing, competition, the economy, financing and much more. Two of the most important ones don’t really depend on the kind of economic times. They depend on how productive and how engaged people are, whatever the enterprise.
Productivity gets a lot of press—it is, after all, one of the most important factors in being competitive in whatever you do. Productivity in its simplest form is output divided by input. How much do you get done for a given amount of work? The more output per unit of input, the higher the productivity (and vice versa).
Why is productivity so important? Because productivity is one of the largest determinants of job security. The more productive a company is, the more likely that the business will be doing “better.” High productivity can’t make up for a bad market or for bad management/decisions, but it can make up for a lot of other “sins.”
If you accept my premise that productivity is important, then there are a couple of points to keep in mind: 1) What gets measured, gets managed; 2) What gets managed, gets done. Therefore, if you want productivity to be good—and get better—then measure it and manage it.
The simplest example I can give of measuring productivity goes back to my days running a large bicycle company. Productivity on our assembly lines was a big issue and the immediate thought was to call the industrial engineers and have them “study” the line. But they were busy and that would mean waiting for weeks in their queue of work. Since I’m impatient, that was not an acceptable answer.
I suggested a simpler way. The line was planned to assemble 1,500 bikes in an 8-hour shift, and the staffing was 50 people. Productivity then was 30 bikes per person, per shift. If they made more than 1,500, and with no more people, productivity went up. If fewer than 50 people could still make 1,500 bikes, productivity also went up.
That’s not only a simple example, it also has another wonderful side benefit: the people could “get it.” Those working on the line could easily understand productivity and become involved in it. In fact, they asked for a visible counter mounted above the assembly line so they could see how they were doing. Now we’ve achieved several good things. The people who have the most influence on productivity are interested in how they are doing, and they understand what they must do to improve.
Because this plant had a gain-sharing bonus plan, people knew that if they improved productivity in the plant, they’d get a bonus in proportion to how much it improved.
Human nature causes people to want to achieve more, and working as part of a group added the element of peer pressure. The assembly workers were now very “involved” in their productivity. Also, if they made bad products, those were deducted from the output, so their motivation is not only to make more per shift, but also to make sure they were all good ones.
Soon, the people working on the line started coming up with ideas on how to assemble still more bikes with fewer people. But they had one concern. If they made more bikes with fewer people, wouldn’t some of the people get laid-off? One of the downsides of improving productivity is that unless the company grows enough to absorb the people who were no longer needed, there would be fewer jobs and a layoff would follow.
I chose to do something that might have been economically risky, but was psychologically right. (And turned out to be economically right too.) I promised that no one would get laid-off due to productivity improvement ideas. That’s risky, if you can’t generate more business to keep workers busy, you are paying them to do a job that no longer exists.
However, this was a large plant—2,000 employees—and absenteeism was just over 2 percent, so on any given day, we needed 40 “extra” people just to fill in for absenteeism. That 40 plus the 10 or so who were cleaning, painting or fixing parts of the plant gave me comfort that we could find work for these “victims of productivity.” And we did—no problem—because we became more competitive and the company grew!
That promise of no layoffs from good ideas was the clincher. The people pitched in and came up with a lot of improvements productivity—not just on the assembly lines but also in lots of other areas. Having the workers keep track of their productivity in a way they could understand worked wonders. I could barely walk through the plant without being called over to see the progress made in one work center or another.
About that time, our VP of Operations, Doug Dempsey suggested that we celebrate their achievements and we did. We bought enough donuts for the entire work force (almost 200 dozen) and during the breaks and lunch times, we gave awards for the best productivity (and quality) improvements each month. Doug called it “Dollars for Donuts,” and it really caught on. (The local donut shop loved it too!)
The combination of pride and productivity led to improved competitiveness created by the ideas of the people, which allowed significant cost reductions, and product improvements, which allowed the company to be more cost competitive, and to gain the added market share—which kept them all working. It is no coincidence that during this 10-year period, the company’s market share improved about 50 percent, and plant output person almost doubled.
Bottom line: productivity improvement is a critical success factor in competitiveness and in creating job security. And their pay went up handsomely in this, a United Steelworkers union plant, partly thanks to a cooperative local union president and committee, who was with us on all these moves.
Will this work in every case? No. But it does work in many cases. I have since seen huge gains from pride and productivity in a lot of companies. If we want to bring jobs back to America, then we might think about getting the American workers more involved, letting their ideas “pay off”—literally—because of gains productivity and competitiveness. That is something every American worker could be proud of.
Note: The Ohio plant described survived competitively against import “attacks” from both Taiwanese and Korean bike for more than 10 years (1982-1992) but finally fell victim to low cost Chinese imported bikes and was subsequently closed in 1998.