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Are workers really less productive?

Statisticians say labor productivity is on the decline, but by what measure?

Productivity measurements made business press headlines over the summer. In short, those of us working in the U.S. economy seem to be less productive.

If you go by the statistics, the apex of labor productivity occurred in the early 1960s during the postwar economic boom. We had an uptick during the 1990s and early 2000s, when new computing technologies supercharged the economy. But since then, the average output per hour of the American worker generally has been on the decline, at least according to statistics from the Labor Department.

Hal Varian, chief economist at Google, has argued that the way government tracks productivity is outdated, rooted in high-volume, Henry Ford-style production environments in which companies moved mountains to save a few seconds of widget-building cycle time. Varian argues that modern-day time-saving activities aren’t recorded, like all the time we save using cell phones, GPSs, and other ubiquitous tools of the digital age.

People have challenged how we measure productivity for decades. In a paper published by the Harvard Business Review in the 1980s, business consultant W. Bruce Chew brought up two difficulties: measuring output and connecting employee actions to those outputs. “For the line worker in an auto plant, output is basically the number of cars or components produced. The connection between worker activity and output is also straightforward—the person tightens three bolts on every car, and this action helps complete the car. Measuring the productivity of product designers is a much more subtle problem.”

Chew told the story about a sheet metal plant manager at a major electronics company. The plant manager was in charge of making prototypes, yet the parent company routinely outsourced to other sheet metal shops. The plant’s internal performance metrics paid attention to productivity measurements of labor, capital, and material. Of course, these measurements, rooted in mass production, didn’t suit the prototype environment. Customers didn’t demand large volumes; they wanted quick turnaround.

As Chew wrote: “So the new manager introduced a productivity index that focused on turnaround time … Eventually, the plant cut prototype production time from 20 weeks to three days. The reconfigured operation makes less ‘efficient’ use of labor and materials, but can anyone argue that it is less productive?” Chew wrote that in 1988, but he could have written that yesterday.

Productivity measurements can’t be perfect, but the larger point in all this is the challenge of linking worker output to the products and services people buy. This has gone a little haywire in the high-tech arena, probably because so many labor hours go into services that people don’t pay for directly, but instead are supported by advertising and marketing, including data collection. (In some sense, we pay for the Internet not with our dollars but with our privacy.) We seem to place an enormous value on marketing, enough to support some of the largest and most successful tech companies on earth. Marketing isn’t just about “getting the company name out there,” but about what makes a company different, and communicating just how valuable this difference is.

The battle for differentiation is alive and well in the fab shop. When I visit fabricators these days, I’ve noticed that customers aren’t necessarily buying products. They’re buying the services that truly set the fabricator apart.

In Chew’s example, the prototype shop wasn’t selling its prototypes; it was selling the service of quick turnaround. The shop’s customers could buy prototypes anywhere, but not the quick turnaround. Similarly, when fab shop owners talk with customers about the shop’s services, they talk about ideas, about alternative ways of manufacturing a part, and about how quick they can turn an order around. They sometimes talk about how fast a certain laser cuts or a piece of bending automation forms, but it’s usually in the context of quick response.

I’ve talked with more fabricators in recent years looking to shorten front-office processing times. Some complex jobs spend more time in quoting and engineering than they do on the shop floor. To some extent, this makes sense. Fabricators work with customers on design and engineering changes, coordinate supply chains, and bend over backward to make the customer’s life easier. That’s probably why a long-term customer may continue to do business with a certain fabricator, even if that fab shop doesn’t have the lowest price in town.

To be profitable, a fabricator of course needs to work on shortening overall manufacturing time and minimizing waste. A fabricator probably couldn’t support all its “value-adding” activities—building customer relationships, supply chain coordination, product development, quick response—without short, efficient, and smooth production, which isn’t easy in the highly variable job shop environment.

But from the customer’s perspective, the value they’re buying isn’t where the tool hits the sheet metal. And they’re not buying “productivity,” how many widgets workers can shove through the door during an hour. The value they’re buying is in the people and their ideas, to help them fabricate products better; faster; and at the right time, quantity, and price. The latest manufacturing technology has an important, some would say vital, supporting role, but the shop’s people still play the principal parts.

Put another way, customers value not the mechanical wizardry of modern manufacturing, but instead the marriage of advanced technology and good ideas. Measured by the traditional notions of worker productivity, that marriage (like any marriage) is difficult to quantify.

About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.