April 11, 2006
Creating a sound workplace is good not only for your business and your employees, but for society. When it comes to labor costs, the U.S. cannot compete with China and India. Our only chance of remaining competitive is to work more effectively and efficiently and to develop new innovations continually.
Editor's Note: This column was prepared by the staff of Winning Workplaces, a not-for-profit organization that helps small and midsized businesses create better work environments.
Economist Clyde Prestowitz recently published Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, which examines a tidal wave change in the global market. According to Prestowitz, "Over the past two decades . . . China, India, and the former Soviet Union all decided to leave their respective socialist workers paradise and drive their 3 billion citizens along the once despised capitalist road."
This phenomenon has many contemplating the U.S.'s future viability in a connected global economy.
A recent report from McKinsey & Co. and the Centre for Economic Performance in London reported that the U.S. can compete. However, the key to remaining competitive is sound, high-quality management.
Researchers examined the policies and operations of 700 manufacturing companies in the U.S., United Kingdom, France, and Germany. They judged their performance in three key management areas: shop floor lean manufacturing deployment, performance management, and talent management.
The study found that poor managers have an impact that extends well beyond the companies unfortunate enough to employ them. According to the report, the quality of corporate management accounts for at least 20 percent of the difference between a productive national economy and a sluggish one.
Interestingly, they discovered that the difference is evident between countries with similar economic policies. For example, the study found that better management was responsible for 15 percent of America's 25 percent edge in hourly output over Britain's.
This is further evidence that creating a sound workplace is good not only for your business and your employees, but for society. Engaging employees is not a feel-good effort, but a business imperative, one that we cannot afford to ignore. When it comes to labor costs, the U.S. simply cannot compete. China and India already have the upper hand and will for the foreseeable future. Our only chance of remaining competitive is to work more effectively and efficiently and to innovate continually.
Manufacturing is a mature industry that has been coping with these issues for some time. Over the years Winning Workplaces has profiled a number of manufacturers in its Success Stories and Best Bosses recognition program, manufacturers with progressive management approaches that have helped them remain competitive in an increasingly difficult global market. These enterprises have succeeded in engaging employees and tapping their expertise to create new efficiencies and innovate.
For example, Georgia Berner of Berner International Corp., a manufacturer of air doors, achieved the near impossible: a long-term deal with her employees' labor union that left wages and assignments to the discretion of the CEO. Berner secured the deal in part because of an inclusive management style that engendered trust in the work force.
One key step in this unique achievement was to dismiss a micromanaging plant manager and push more responsibility and accountability down to frontline personnel. For the first time employees were asked to voice their ideas and opinions. The change proved invaluable, helping the firm avoid the kind of adversarial business-labor relationship found in similar work environments.
Lubricant manufacturer IRMCO has managed to remain profitable during tough economic times by opening its books and engaging its employees in the problem-solving process.
The manufacturer is supported by a reservoir of employee-management good will and places a premium on efficiency and innovation. For example, IRMCO educated employees on the costs associated with maintaining high inventory levels and how it ultimately affected their pay. As a result, employees adjusted production schedules to make better use of inventory. The company managed to double inventory rotations, resulting in a tremendous cost savings.
The company's use of open-book management also helped secure buy-in from employees for more investment in research and development at a time when the company was freezing salaries. The organization's commitment to R&D has resulted in the development of one of its best-selling new lubricants.
The continued health of small manufacturers like Berner and IRMCO is an issue that concerns us all. Not only does the small-business sector create the majority of U.S. jobs, it also outsources disproportionately less than large firms. The health of our economy and our job market rests with the small enterprise.