Working Smarter, Not Just Harder
The numbers are in ... and the U.S. should be proud of another banner year for productivity. Manufacturing productivity growth clocked in at an average annual rate of 5.1% for 2003, following a stellar 7.2% in 2002. The nonfarm business sector, too, reported respectable numbers, 4.4% in 2003, following a 5.0% year in 2002.
But do such figures stem from the fact that Americans are working smarter or just harder? On the "smarter" side of the argument, the U.S. saw a decline in annual hours worked per person between 2000 and 2002, from 1,834 to 1,815, suggesting greater efficiency.
On the "harder" side, the U.S. global advantage in per-capita productivity remains largely due to longer work hours, according to the International Labour Organization's Key Indicators of the Labour Market. In Europe, annual work hours in 2002 were just 1,342 in Norway, 1,444 in Germany, 1,545 in France, 1,581 in Sweden and 1,668 in Ireland. This helps explain why output per employed person in the U.S. was $60,728 in 2002, compared with an EU average of just $43,034. The story changes when output per hour is measured, although experts sometimes debate methodologies behind such figures. Data for output per hour worked in 2002 places Norway in the lead ($38 in comparative U.S. dollars), followed by France ($35), Belgium ($34) and the U.S. ($32).
So, it's clear that there's a lot of international competition for most efficient workforce, and this competition is bound to grow more intense. Some companies are, for example, looking to "lean manufacturing" as a way to redesign production in order to raise productivity and lower costs. The concept involves reconfiguring production processes in order to alleviate jams in assembly lines and eliminate waste. U.S. manufacturers are exploring lean manufacturing as an answer to global competition.
The automobile industry is a good example of how manufacturing innovation can provide a competitive edge. Toyota, for instance, has designed a "global body line" for assembly that allows its plants throughout the world to use the same equipment but varying mixes of labor and robotics, depending on location. Michael Robinet, vice president of global forecasting with CSM Worldwide, a Michigan-based research firm, said, "Toyota's new body line raises the bar for the global auto industry."
Enhancing white-collar productivity is on the corporate agenda, too. PricewaterhouseCoopers (PwC) is facilitating increased productivity in its knowledge workers through its online "Communities of Practice" system, designed to support professionals in their central tax group. The project uses tool kits on various topics, which may include technical background information, assessments of quality and risk management, and referrals to experts. The previous infrastructure did not allow knowledge workers to search across databases. In Harvard Management Update, Christopher Cipriano, PwC's partner in charge of U.S. knowledge management, said, "We took it to the next level by linking up these databases and allowing people to search multiple databases at one time." Cipriano expects the centralized data depository to result in increased productivity that could add $25 million to the bottom line within one year.
And General Mills is applying an innovative approach to inspire efficiency gains by studying groups that are noted for performance extremes. By applying efficiency techniques used by NASCAR pit crews in changing race-car tires, the company was able to cut the time one Betty Crocker factory line took to swap products from 4.5 hours to just 12 minutes.
This strategy of looking outside one's organization - indeed outside of one's industry - may be key to improving productivity in the future. Ravin Jesuthasan, a principal with Towers Perrin, said, "Given how efficient many organizations have become, the next big idea won't come from internal thinking."
For further statistics on productivity from the U.S. Department of Labor, Bureau of Labor Statistics, see their Productivity and Costs material at
http://www.bls.gov/lpc.
For an article highlighting worldwide labor trends, including U.S. productivity, see the ILO's September 2003 issue of World of Work magazine at
http://www.ilo.org/public/english/bureau/inf/download/magazine/pdf/mag48.pdf
Other documents used in the preparation of this TrendWatcher include:
Brown, Stuart F. "Toyota's Global Body Shop." Fortune, February 9, 2004, pp. 120[B], 120[F].
Gogoi, Pallavi. "Thinking Outside the Cereal Box." BusinessWeek, July 28, 2003, pp. 74-75.
International Labour Organization. "New ILO Study Highlights Labour Trends Worldwide." World of Work, Internet [http://www.ilo.org]. September 2003.
Rovito, Rich. "China on Their Minds." Business Journal of Milwaukee, Internet [http://www.bizjournals.com]. October 31, 2003.
Salter, Chuck. "Solving the Real Productivity Crisis." Fast Company, January 2004, p. 37.
Steinfield, Frank. "The Right Data at the Right Fingertips." Harvard Management Update, January 2004, pp. 7-8.
U.S. Department of Labor, Bureau of Labor Statistics. "Productivity and Costs: Fourth Quarter and Annual Averages, 2003." News, Internet [http://www.bls.gov/lpc]. March 4, 2004.
But do such figures stem from the fact that Americans are working smarter or just harder? On the "smarter" side of the argument, the U.S. saw a decline in annual hours worked per person between 2000 and 2002, from 1,834 to 1,815, suggesting greater efficiency.
On the "harder" side, the U.S. global advantage in per-capita productivity remains largely due to longer work hours, according to the International Labour Organization's Key Indicators of the Labour Market. In Europe, annual work hours in 2002 were just 1,342 in Norway, 1,444 in Germany, 1,545 in France, 1,581 in Sweden and 1,668 in Ireland. This helps explain why output per employed person in the U.S. was $60,728 in 2002, compared with an EU average of just $43,034. The story changes when output per hour is measured, although experts sometimes debate methodologies behind such figures. Data for output per hour worked in 2002 places Norway in the lead ($38 in comparative U.S. dollars), followed by France ($35), Belgium ($34) and the U.S. ($32).
So, it's clear that there's a lot of international competition for most efficient workforce, and this competition is bound to grow more intense. Some companies are, for example, looking to "lean manufacturing" as a way to redesign production in order to raise productivity and lower costs. The concept involves reconfiguring production processes in order to alleviate jams in assembly lines and eliminate waste. U.S. manufacturers are exploring lean manufacturing as an answer to global competition.
The automobile industry is a good example of how manufacturing innovation can provide a competitive edge. Toyota, for instance, has designed a "global body line" for assembly that allows its plants throughout the world to use the same equipment but varying mixes of labor and robotics, depending on location. Michael Robinet, vice president of global forecasting with CSM Worldwide, a Michigan-based research firm, said, "Toyota's new body line raises the bar for the global auto industry."
Enhancing white-collar productivity is on the corporate agenda, too. PricewaterhouseCoopers (PwC) is facilitating increased productivity in its knowledge workers through its online "Communities of Practice" system, designed to support professionals in their central tax group. The project uses tool kits on various topics, which may include technical background information, assessments of quality and risk management, and referrals to experts. The previous infrastructure did not allow knowledge workers to search across databases. In Harvard Management Update, Christopher Cipriano, PwC's partner in charge of U.S. knowledge management, said, "We took it to the next level by linking up these databases and allowing people to search multiple databases at one time." Cipriano expects the centralized data depository to result in increased productivity that could add $25 million to the bottom line within one year.
And General Mills is applying an innovative approach to inspire efficiency gains by studying groups that are noted for performance extremes. By applying efficiency techniques used by NASCAR pit crews in changing race-car tires, the company was able to cut the time one Betty Crocker factory line took to swap products from 4.5 hours to just 12 minutes.
This strategy of looking outside one's organization - indeed outside of one's industry - may be key to improving productivity in the future. Ravin Jesuthasan, a principal with Towers Perrin, said, "Given how efficient many organizations have become, the next big idea won't come from internal thinking."
For further statistics on productivity from the U.S. Department of Labor, Bureau of Labor Statistics, see their Productivity and Costs material at
http://www.bls.gov/lpc.
For an article highlighting worldwide labor trends, including U.S. productivity, see the ILO's September 2003 issue of World of Work magazine at
http://www.ilo.org/public/english/bureau/inf/download/magazine/pdf/mag48.pdf
Other documents used in the preparation of this TrendWatcher include:
Brown, Stuart F. "Toyota's Global Body Shop." Fortune, February 9, 2004, pp. 120[B], 120[F].
Gogoi, Pallavi. "Thinking Outside the Cereal Box." BusinessWeek, July 28, 2003, pp. 74-75.
International Labour Organization. "New ILO Study Highlights Labour Trends Worldwide." World of Work, Internet [http://www.ilo.org]. September 2003.
Rovito, Rich. "China on Their Minds." Business Journal of Milwaukee, Internet [http://www.bizjournals.com]. October 31, 2003.
Salter, Chuck. "Solving the Real Productivity Crisis." Fast Company, January 2004, p. 37.
Steinfield, Frank. "The Right Data at the Right Fingertips." Harvard Management Update, January 2004, pp. 7-8.
U.S. Department of Labor, Bureau of Labor Statistics. "Productivity and Costs: Fourth Quarter and Annual Averages, 2003." News, Internet [http://www.bls.gov/lpc]. March 4, 2004.