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Now for the Good News : Some California Companies Have Found Prize-Winning Ways to Beat the Productivity Problems

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William G. Ouchi, author of "Theory Z: How American Management Can Meet the Japanese Challenge," is a professor at the UCLA Graduate School of Management and was chairman of Sen. Alan Cranston's Senate Productivity Award Board

In 1928, Chiksan Co. was established in Brea to manufacture piping and other equipment used in California’s oil fields. It was eventually acquired by an out-of-state corporation, FMC, but continued to operate as an autonomous plant and prospered as the oil business prospered. By 1980 it had grown to 600 employees. Then came the drop in oil profits in 1981, and the plant had to lay off more than half of its employees. The remaining 240 employees decided to do whatever was necessary to remain competitive.

The step they took was fairly simple: make use of both the brawn and the brains of every worker and manager. The results have been impressive. In sharp contrast to nationwide productivity--which hasn’t grown since 1980--overall plant productivity has risen 15% annually since 1981, even though the business outlook at FMC-Brea is still under the shadow of the weak oil industry.

And last May, at a ceremony on the UCLA campus, the company got recognition for its achievement: It was a finalist for the first U.S. Senate Productivity Award in California, an award created two years ago to encourage awareness of the importance of productivity and quality. (Each senator can give the award once each year.) What impressed the eight productivity experts brought together by Sen. Alan Cranston to judge the entries was the number of organizations, such as FMC-Brea, that had increased their productivity through some form of employee participation. The winner of the prize, Hewlett-Packard Signal Analysis Division in Rohnert Park, Sonoma County, had made use of similar techniques; so had the other finalists, the Conejo Valley Unified School District in Ventura County, Douglas Aircraft and American President Lines.

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The theory and the techniques of what’s come to be known as participative management are not new; the concept of increasing productivity through employee involvement was introduced to the academic world in 1926, when Fritz J. Roethlisberger and William J. Dickson published their now classic book, “Management and the Worker.” But the ideas weren’t embraced in the United States until the 1980s, when the success of Japanese companies indicated that much of their productivity came from employee participation.

Although U.S. industry is the most productive in the world--as a result of our high levels of technology, education and political stability--it’s a well-known fact that this nation is facing a productivity crisis. Since World War II, Japan’s productivity has increased, on average, about 7% per year; West Germany’s has grown 4.6% annually. American productivity has grown only about 2% per year.

What haven’t received as much attention as this crisis are the individual companies that are changing the way things are done. Cranston’s panel expected only a few entries; it was overwhelmed by 140 applications.

The changes at FMC-Brea are typical of the growing emphasis, in California and throughout the country, on increased employee participation, a reversal of a 85-year trend that left the thinking to the professionals and the doing to the blue-collar workers. At FMC-Brea, each department has been organized into work teams responsible for setting their own goals; measuring their own performance on efficiency, productivity and cost, and solving their own problems. Job descriptions for machine operators have taken on a decidedly non-traditional flavor: “work with little supervision,” “communicate effectively with others” and “learn and do other jobs.” Employee task forces advise the plant’s engineers who are planning computer-based manufacturing systems. Shop-floor work teams review prices quoted by subcontract suppliers and determine the allocation of materials and equipment. Between 1981 and ‘84, individual work teams achieved one-year productivity increases of as much as 45%; accidents are down 64%; absenteeism is down 50%, and on-time shipments to customers are up 64%.

“As I walked through the factory, I was looking for a disgruntled worker--every plant has some,” said Howard McNeely, productivity administrator of Rockwell International Space Systems Division in Downey and a member of the awards committee, when he visited FMC-Brea. “I spotted a dour-looking man on the loading dock and thought he was it. But when I approached him and asked how he felt about the factory’s productivity efforts, he told me, in broken but enthusiastic English, all about how the loading dock team was involved in the process and about the productivity awards they had won.”

In a competitive world, when someone comes up with a way to deliver lower prices and higher quality to customers, others must follow or perish. That competition is the driving force for change, and the force is so great, no aspect of business is immune--even if the change is as revolutionary as teamwork between labor and management.

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Quality circles (small, intradepartmental groups that meet frequently to target production problems and figure out the best way to solve them), employee teams and other forms of employee participation are devices that organizations--from hospitals to schools to factories--are likely to turn to in the future. No place of work is too small, too large, too simple or too complex, it seems, to benefit from such change. The Los Angeles County Animal Care & Control organization has in the past four years introduced a productivity program that has enabled it to cut its staff by 10.7% while it increased the sale of pet licenses by 28% and reduced the number of delinquent licenses by 19%. The Pasadena headquarters of Avon Products’ Western Area established 17 quality and productivity improvements that have reduced utility expenses by 5%, cut “lost minutes” in assembly by 66% and brought office-supplies usage to 22% below budget. The L.A. County Board of Supervisors created a productivity advisory committee in 1981; efforts since then involving the county’s 70,000 employees have produced savings of $23 million in 255 productivity-improvement projects now under way within the 46 county departments.

The list is a large one, and it is growing each day.

IBM Meets Dick and Jane

Thomas C. Boysen, superintendent of schools for the Conejo Valley Unified School District, is a boyish-looking man whose horn-rim glasses, easy smile and direct gaze tell you that he’s in charge but that he operates with a light touch. In his office are his chief accountant, who developed the districtwide system of a computer in each school; the president of the district’s teachers’ union, who talks knowledgeably about the need for educational reforms, and a teacher who eagerly describes the improved achievement of her students with Exhibit A, a prize pupil’s report that’s inserted between red-and-white gingham cardboard covers with Raggedy Ann and Andy on the front.

Add to them the school district’s dietitian (whose student committee persuaded her to put grated carrots in the brownie mix), the maintenance chief, the head of curriculum design, the president of the school board, and you have a team. Each has a story to tell about the efforts to improve student achievement, cut costs and raise the quality of education. The notion of this aggressive planning and teamwork seems atypical for school district headquarters; it’s as though IBM joined forces with Dick and Jane.

The Conejo Valley Unified School District, consisting of 26 schools that serve Thousand Oaks, Westlake Village and Newbury Park, embarked on a productivity improvement program in 1980. Each school formed a committee of teachers (elected by other teachers), parents (elected by other parents), the principal and, in the secondary schools, students (elected by other students). Each committee sets specific goals for targets as varied as math scores and energy savings, and the progress is monitored in monthly meetings and semiannual reports. In addition, the new computer system enables a districtwide breakdown by school and grade level of student and teacher performances on standardized reading, language skills and math tests. And the Unified Assn. of Conejo teachers actively supports an innovative program through which new teachers are now scrutinized for a year.

The results, despite a decline in student enrollment (from 20,000 to 18,000 since 1980), and in spite of tight budgets, are nothing short of success. Fundamental improvements include a $300,000 cut in the school-lunch subsidy, a 50% cut in workers’ compensation insurance rates and a 20% cut in utility bills.

On an educational level, the results are even more remarkable. Elementary students’ reading scores are 19 percentile points higher; their language skills are up 26 points; their math skills up 33. In the intermediate schools, reading scores increased 11 percentile points; language skills are up 20 points and math skills up 23. High school students improved an average of 1 percentile point in reading, 11 in language skills and 9 in math. And to top it off, the district’s aggregate educational performance in the California Test for Basic Skills--the annual test required yearly of every student in the public schools--rose from the 57th percentile in 1981 to the 76th percentile in 1984.

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Success at the Suggestion Box

The changes at Douglas Aircraft, a McDonnell-Douglas Corp. company, fall just short of revolutionary. “As we walked through the plant, we were free to ask anything of any worker--and everywhere we went, the workers knew their goals, knew the productivity improvement plan, knew what was going on,” recalled Don Vial, president of the California Public Utilities Commission and a member of the awards committee. The employee awareness can be attributed in part to an aggressive participative management training program. Since 1980, more than 2,500 employees at the Long Beach facility have undergone the training and have formed about 300 quality circles similar to those at FMC-Brea.

In addition, 7,000 manufacturing employees received training last year in management, analytical processes and shop skills. In the space of a year, a new employee-suggestion system doubled the monthly number of employee-initiated ideas. Several teams now work with hundreds of suppliers, who provide everything from rivets to navigation systems, to monitor costs and quality. Employee training this year was increased 40% over 1984. And the launching of more than 24 productivity and quality-improvement projects during the past five years increased productivity by 5% in 1983 and by 8% last year. It is expected to increase another 12% this year.

“The plant was unusually clean and uncluttered,” Vial said. “What impressed me most, however, was the deep involvement of the union in every aspect of the quality and productivity process. The union leaders were present throughout our visit. There wasn’t anything that they couldn’t hear or that we couldn’t ask them.”

Trailblazing

Operator of 21 U.S. flagships, three of which are the largest container ships to have been constructed in the United States, American President Lines also provides integrated rail and truck transportation.

Working with its six maritime unions, the 137-year-old company in Oakland created joint labor-management steering committees on its ships. From the committees came new designs for work assignments, with the result that a ship can now carry the same payload as before but with a crew of 21 rather than 31, a move that preserves the line’s competitiveness. The company also designed its own lightweight rail cars to hold containers stacked piggyback, effectively doubling the size of the freight but not the size of the train crew.

In addition, a new computerized tracking system allows an APL ship on a typical tour of 35 days to call at eight ports, handle 6,700 containers, balance each load for safe weight distribution and yet minimize the handling of each container. That’s resulted in a 10% gain in productivity. And installing new cranes in places as distant as Karachi and Subic Bay increased productivity by 200%.

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The people of APL--management and union--strongly believe in the technological revolution that they are bringing to the intermodal transportation business. Articulate advocates for their vision of this frontier, they make it clear that they are out to lead the pack.

Factory Workers With a Passion

Cranston’s award committee sent Alice Cochran, an organizational effectiveness consultant, and Wayne Rieker, founder of Rieker Management Systems, to visit the Hewlett-Packard Signal Analysis Division. Rieker, who’s credited by many with pioneering the quality-circle concept in the United States during the1950s, has seen just about every productivity and quality approach there is. He’s a tough nut. And he was impressed.

“This was way beyond anything else I’ve encountered,” he recalled. “We met with workers and foremen, and we were invited to stop at any work station and ask any question. We could feel that everyone in the plant was excited about our visit, waiting to snag us and tell about his or her own innovation.”

The ability of 1,300 people to work as one integrated team at the plant made them the collective winners of the Senate award. The division manufactures complex electronic-measuring equipment (selling for $5,000 to $60,000), and over the past four years, HP-Rohnert Park increased its revenue per employee by 41.7% while increasing costs by less than the rate of inflation. The work that the people do is basically factory work: connecting and soldering wires, winding coils, assembling and testing parts, assembling and testing completed instruments. Through a participative management program, initiated in 1979 and launched with intensive training, all 1,300 employees have formed into quality teams of 6 to 15 workers, every manufacturing process has been examined, and each team has come up with its own ideas for improving productivity and quality.

One instrument-testing department, for example, decided that it had become too bureaucratic, so its 60 workers reorganized themselves into a more entrepreneurial, decentralized form and came up with improved procedures for testing instruments and better ideas for assigning people to jobs, improvements that reduced their labor hours per instrument from 32 to 26, thus saving $331 per instrument. Another department studied the several thousand parts kept in stock and found that only 130 accounted for half the total volume of parts used. In devising a new way to handle these parts, the workers reduced scrap losses, rework and warranty failures and cut labor hours by 58%.

“At one work station,” Rieker said, “We encountered a young man who looked as though he was right off the streets of San Francisco--multicolored hair straight up in spikes--really San Francisco-weird. He described for us, in the most technical terms, how he and his co-workers had created a portable calibration system with which to set the completed instruments to the necessary standards.

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“At another station, a young hourly worker proudly told us how he had taken it upon himself to train the others in his section in the importance of attaching a grounding wire to their leg and their workbench while working on instruments. If they failed to do so, he said, the body’s static electricity could ruin a $10,000 instrument. He showed us charts of the training programs he had run, and of the group’s resulting improvements in productivity, and he was doing it all on his own time, getting his work done faster than before so that he could provide training to others.

“It was an unusual plant tour, because rather than having the managers explain things to us, the workers told the story. It was the animated way in which they talked; they were the people who had done it. It wasn’t management’s thing, it was theirs.”

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