survey finds employee involvement a priority for necessary innovation

Survey Finds Employee Involvement a Priority for Necessary Innovation

LEE A. TOWE

As we approach the third millennium, we are on the brink of a major turning point in work behavior: Leading-edge organizations are improving productivity by training and encouraging production workers to analyze problems and create their own solutions. This represents a sharp departure from history. Think about the slave labor that built the pyramids, the sweat shops and assembly lines that characterized the Industrial Revolution, and still exist today. Traditional organizations have operated most efficiently when laborers executed specific tasks dictated by the people in charge. Management did not expect or want any production advice from workers. But attitudes are changing. In fact, most forward-thinking organizations rank increased employee involvement to generate and implement ideas as the number-one productivity improvement priority for the next two years, according to a survey of 126 National Productivity Review subscribers.

Innovators International, Inc., and the editors of National Productivity Review administered the mail survey during the summer of 1989. Because only NPR subscribers were polled, the results reflect leading-edge views and, therefore, are not statistically representative of all organizations. The sample includes a few more manufacturing companies than service firms. Three-fourths of the respondents come from the United States, the remaining fourth are scattered among twenty-seven other countries. About 30 percent of the companies employ fewer than 500 people; another 30 percent employ 500 to 2,000; the remainder have more than 2,000 employees.

FROM QUALITY TO PRODUCTIVITY One of the most important survey findings is that organizations that have

introduced techniques to improve quality have found that those methods also increase productiviry. They discovered that the essential elements of the quality movement--employee involvement, skills training, and an organizational structure that allows the implementation of creative solutions-reduce costs and improve workers' performance as well. For example, the same meetings conducted to identify sources of quality problems also give employees an opportunity to suggest ways to improve

Lee A . Towe is the founder and president of Innovators Internaiional, Inc., a membership organization that facilitates, trains people in, and rewards creativity and innovation. He is currently the chairman of Central Iowa's Productivity Association.

Naiional Productivity ReviewNoL 9, No. IIWinter 1989190 3

LEE A. Tow

productivity, such as reducing scrap and streamlining procedures. Motiva- tion and performance rise because workers have a stake in making the system work.

Increasing employee involvement in the generation and implementation of ideas tops thirteen other activities ranked by suurvey respondents (see Figure 1). Improving the management of information, which will be facilitated by the expanding use and capabilities of computers, ranked second. Organizations will boost productivity not by generating a greater quantity of information, but rather by improving their ability to separate the wheat from the chaff. Better information management will allow companies to spot deficiencies, discover trends, and tie employee rewards more directly to performance.

The third-ranked productivity-improvement technique-provide training on how to search for and suggest improvements-reflects employers’ desire to solicit ideas from their workers. Many organizations subscribing to quality-movement principles have given employees a good understand- ing of how to recognize and analyze problems. The use of sampling, control charts, and fishbone diagrams help pinpoint the frequency and causes of problems, while the next generation of training concentrates on creative thinking skills to generate the best solutions.

Perhaps more important than the rank of each Productivity improvement action is the amount of change in priorities over the last two years, which reflects organizations’ most recent experience with techniques that have succeeded or failed.

Increasing employee involvement ranked as the number-one action priority for the next two years because it showed the largest change in priority over the last two years (see Figure 1). Employee involvement had only been the number-five priority during the preceding two years. The second most rapidly growing trend is to provide training on how to search for and suggest improvements. Employees with creative problem-solving and opportunity-identification skills will be at the cutting edge of productivity improvements in the 1990s. Increasing employee rewards tied to productivity gains had only been amediwn-low priority during the last two years. It is now higher than a medium priority. Sharing the benefits of productivity gains with employees is linked to the fourth most dynamic trend, to improve the management of information. Managers want better information, in part, so that rewards can be tied more equitably to performance.

Equipping employees with new job skills was considered a medium-low priority in the past. Now, however, companies place medium priority on expanding their employees’ capabilities. It is interesting to note that companies outside the United States placed a higher priority (6.6 on a scale of &9) on this action than did U.S. companies (5.8).

4 National Productivity RcvicwNoL 9, No. 1IWinter 1989190

SURVEY FINDS EMPLOYEE INVOLVEMENT A P R X O ~ Y FOR NECESSARY INNOVATION

Figure 1

Priorities for Productivity Improvement Actions August, I969

For e o c h of these productMty Improvement actions, phase Identify d s pnonty at your organization dudng t h e post two years and t h e next two years.

Increase errpbvee rewds tled to

accuracy of present tasks

ProductMtY goh

puctase & Wtvery m Improve tlming of matetlcrl

Repbce manu31 bbor Wm machines

m Swltch to a new producflon process

SCALE hOTE Srvey ponlc~nfr wue a w a 10 tdenrily me pioriq lev& of e n nern as hQh. medun. low u none h i n t MIUBS of Pb.3 and 0. remecnveiy. w u e assognea to tamme me mmri

Pad 2 yoan Next 2 yean

Nationad Productivity RevicwffoL 9, No. lrWinter 1989190 5

LEE A. Tow

PRODUCTIVITY-IMPROVEMENT GOALS Besides describing the level of importance they assigned to fourteen

productivity-improvement activities, survey participants were also asked to rank the broader goals to be accomplished by these activities. Reducing operating expenses topped the list of productivity improvement goals. Respondents assigned virtually the same level of priority, however, to improving the quality of output (see Figure 2). With the notable exception of reducing operating expenses, all the medium- or high-priority goals seek to improve or increase something. The two goals scoring below the medium priority level both concern reducing the size of the company.

How much is productivity emphasized when compared to other organizational issues? According to survey respondents, productivity ranks third among eight corporate objectives (see Figure 3). As might be expected, companies that place high priority on customer focus also emphasize quality and employee involvement. Statistically speaking, the comlation between customer focus and quality is 73 percent; the correlation between customer focus and employee involvement, 53 percent. Similarly, organizations that stress employee involvement also feel that quality is important (45 percent cornlation), as well as innovation (42 percent).

WHO IS RESPONSIBLE FOR IMPROVING PRODUCTIVITY? In most cases, top management or unit managers are directly responsible

for improving productivity (see Figure 4). The next most popular arrangements are to use a nonproduction unit to administer the productivity

Figure 2

Productivitv Imrxovement Goals

R&

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Reduce Operating Expense Improve Quality of Output Increase Revenues Improve Usage of Production Capacity Increase Amount of Work Produced Increase Innovation Improve Production Flexibility Improve Quality of Work Life Increase Automation Reduce Capital Requirements Reduce Number of Employees

*Scale of 0-9

Score*

8.0 7.9 7.3 7.1 6.9 6.7 6.7 6.6 6.0 5.6 4.8

6 National Productivity RcvuwNoL 9, No. IiWinter 1989190

SURVEY FINDS EMPLOYEE INVOLVEMENT A PRIORITY FOR NECESSARY INNOVATION

Figure 3

I Corporate Strategies for Next Two Years 1 Rank Score*

7. 8.

Customer Focus Quality Productivity Cost Reduction Employee Involvement Innovation Expansion Diversification

*Scale of 0-9

8.3 8.2 7.9 7.8 7.1 6.8 5.1 4.1

program but not be responsible for results, and to have every employee be responsible for improving productivity.

Five percent of the respondents admitted that no one is currently directly responsible for productivity improvement in their organization, while the remaining 5 percent gave answers that did not fit into any of the above categories. Twenty of the 126 respondents have the word “productivity” in their job title.

Which area of your own organization has shown the greatest productivity improvement during the past two years? If yours is like the surveyed organizations, then manufacturing, production, and operations areas have shown the greatest improvement. The other areas of improvement listed in the survey were so varied that no other generalizations can be made.

Figure 4

Productivitv ImDrovement ResDonsibilitv

Who is responsible for productivity improvement at your organization?

27% 27% 19%

17% Every employee is responsible. 10% Other

The direct responsibility of top management. Every unit manager is directly responsible. A nonproduction unit administers the program, but the production units are responsible for results.

Nationof Productivity RcvicwNoL 9, No. l/Wintcr 1989190 7

LEE A. Tom

In contrast, almost 25 percent of the respondents cited administrative, management, and white-collar functions as the areas needing the most improvement. Manufacturing was named by only about 10 percent of the companies. More than a quarter of the respondents, however, said that manufacturing had shown the greatest improvement over the past two years. Other areas identified as most in need of future improvement included engineering, sales, materials management, maintenance, and new product development.

Once companies named the mas that have improved the most over the past two years, they were asked to explain why. Responses showed that the most important factor in improving productivity has been employee involvement (see Figure 5). Quality programs-including quality improvement teams, Just-in-Time processes, statistical process control, the reduction of variation, and the Deming philosophy--ranked second. Only about 7 percent of the respondents credited top management’s direct involvement in productivity improvement efforts as the primary reason for improvements over the past two years.

Employee involvement is certainly a key element in productivity, but how many of the overall improvements have resulted from internul as opposed to e x t e r d developments? Participants attribute 66 percent of improvements to internal innovation versus 34 percent to people, processes, and machines brought in from the outside (see Figure 6). Management is credited with 63 percent of past productivity improvements, compared to 37 percent for production workers. The survey also revealed that most of the increases in productivity in the past two years came from innovations in the system (79 percent), not from products (21 percent).

Figure 5

Top Nine Causes of Improvement Over the Past Two Years

Number of Category Responses Employee Involvement 16 Quality Programs 15 Improved Pmcess/Methods 15 Top Management 9 Equipment 9 Technology 8 Training 6 Computers 6 Automation 6

8 ~ ~~

National Productiv?y RcvicwNoL 9, No. 1IWinier 1989190

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LEE A. TOWE

When asked about the focus of current affairs, respondents stated that on the average, 60 percent of their time is spent improving present skills and methods as opposed to developing new ones (see Figure 7). The sixty firms that identified themselves as manufacturing companies said 36 percent of their resources are currently allocated to improving productivity among service workers. It appears, then, that the distinctions between manufacturing and service, blue collar and white collar, are becoming less pronounced.

QUANTIFYING AND REWARDING PRODUCTIVITY The majority of survey respondents (73 percent) regularly use quantifi-

able measures to evaluate productivity. The long list of methods cited reveals that there is no single measurement technique viewed as most important. The lack of a universal standard accentuates the multitude of factors that affect productivity. As the employee involvement movement forces controls closer to the production process, each company’s appraisal methods will become even more individual. The measures noted can be divided into five categories:

Comparisons Actual costs vs. budget Output vs. planned output Labor hours vs. standard times Machine efficiency vs. efficiency of all machines

Figure 7

Focus of Current Productivity Improvement Efforts Dtvlslm of current productivity improvement efforts between:

60% Improvement of present

413% Development d new skills and methods

skliis and methods

52% Manufacturing workers & oqulpmen t

48% Service woaerr & equipment

10 National Praductive RcvkwNoL 9, No. IlWintcr 1989190


Percentages Percent time used of capacity available Percent on-time issues Percent raw materials yields Percent rework hours of total labor hours

Ratios Times inventory turned Total labor: Sales Indirect labor: Direct labor Volume: Head count

Revenue per team member Expense dollars per production unit First installment debtors paid per collection person Hours per drawing Rejects per thousand

Job turnaround time Unscheduled down time Tool transition time Machine efficiency in bottleneck areas Procurement lead time Quality as acceptance by customers

Quantity Per Variable

Time Series

Although the survey found that tying employee rewards to productivity gains is fast becoming a priority among respondents, only 41 percent of them currently have employee reward systems tied directly to productivity improvements. Those that do noted that the reward criteria include reliabil- ity, improvement over last year, profit, capital targets, and service excel- lence. Three organizations mentioned that rewards are administered via a suggestion system; one said they are part of the regular performance appraisal process. As for the rewards themselves, the most popular are monetary bonuses, gainsharing, profit sharing, and recognition in the form of publicity.

THE BASIS OF EMPLOYEE INVOLVEMENT Why is employee involvement just now beginning to gain wide accep-

tance? The short answer is that it finally makes economic sense. Three factors have combined to make employee involvement feasible:

Faster Response Times Are Required to Beat the Competition’s Response to Changing Customer Nee&. Customers’ insatiable appe- tite for new and improved products, combined with the erosion of

National Productivily RcviewNoL 9, No. 1lWinter 1989190 zz

LEE A, TOWE

geographic monopolies, has forced companies to quicken their response to opportunities and threats. organizations can adjust more quickly when production workers understand the reasons and concepts that support their tasks.

Think of a choir that has a tradition of learning songs by rote and presenting a concert each year. If the choir decides to expand its repertoire and give many more concerts, its members can no longer depend on the rote-leaming system because there is not enough time for them to hear and memorize each specific part. The singers must learn to read music. In other words, they must leam the process so that they can adapt to change more quickly.

In the same way, employee involvement produces a work force that understands the major concepts behind each process. Hence, response time to changes in products and tasks is much shorter. And because the major concepts remain constant, the changing tasks produce less anxiety among workers. Shorter Product Cycles Necessitate Shorter Payback Periods. Management historically has made changes by creating a detailed plan, incurring large start-up capital expenditures, and then assigning specific tasks to workers. Initial costs of any change were high. Long product lifecycles paid back the initial expenses and then generated profit. This is true of both service and manufacturing entities.

In today’s environment, however, the shortened product cycles do not provide long enough runs to pay for large initial outlays. Hence, the production workers are being asked to shoulder the responsibility for making continuous improvements in the process. Making many smaller improvements at the production level provides incremental innovations that are less expensive and less risky than the historical sweeping changes. Workers Are Better-Informed Than They Used to Be. The newspapers, magazines, journals, and electronic media of the information age provide workers with a broader knowledge base than ever before. This information allows workers to recognize processes that can be improved and to adapt ideas that have been used elsewhere to develop better products and processes.

These three factors are dramatically changing the way organizations conduct business. The production worker, whose traditional role was to be a cog in the wheel, is becoming the change agent. The productivity expert’s responsibility for locating and carrying out improvements is dissipating. Today, productivity personnel are charged with training others to seek and act on opportunities for enhancing productivity.

12 N d i o ~ l Productiv@ RevicwNoL 9, No. llWinkr 1989190


IMPLICATIONS FOR THE FUTURE The production process is becoming completely integrated into the

organization. At service and manufacturing firms alike, management is focusing more attention on assisting production efforts, and layers of management are being replaced by clusters of self-reliant work groups. Production workers are learning, refining, and using observation and analysis skills to increase productivity and improve quality. They are also tapping creative thinking techniques to foster innovation. All of these changes will create a demand for new skills, job descriptions

that are in tune with the organization’s mission statement, new career paths, flatter organizations, and improved feedback.

THE NEW SKILLS FOR QUALITY AND PRODUCTIVITY Use of control charts, the Pareto principle, cause-and-effect analysis and

other techniques, has enabled individuals to improve their observational and analytical skills. The next generation of training, however, will teach creative thinking techniques. In fact, 96 percent of the survey respondents feel that creative thinking is either important or very important to people responsible for productivity improvement (see Figure 8). Production workers will be taught how to make remote associations, recognize analogous situations, approach problems from new perspectives, and more.

According to the traditional model, problem-solving entails five steps: 1) defrne the problem; 2) create alternative solutions; 3) select a solution; 4) implement it; and 5 ) evaluate the results. Quality analysis training has

Figure 8

Importance of Creative Thinking The importance of creative thinking to those

responsible for productivity improvement.

73% Very important 23% Important 4% Somewhat important

4%

National Productivity RcviewNoL 9, No. 1IWinter 1989190 13

LEE A. Tow

helped workers improve their ability to define problems and evaluate results. Formal presentations to management, increased worker authority, and other structural arrangements have facilitated the implementation of solutions. The weak links in the problem-solving process are the develop ment and selection of innovative solutions. The next wave of quality and productivity training will focus on these areas.

Getting Closer to the Mission Statement Many tasks and routines that rarely changed in the past are in continual

flux these days. Job skills that remained the same from generation to generation will now change significantly three or four times within a worker’s lifetime.

To ensure stability, maintain direction, and reduce stress, people will focus less on the daily tasks of a job and more on the concept. Job descriptions will start to reflect the organization’s mission statement. For example, a job description that now says, “Assemble doors by aligning three sections, inserting two pins, and welding six points” will read, “Produce defect-free doors to the customers’ satisfaction by using interper- sonal, thinking, and motor skills as a member of a project team.” Besides helping people and organizations adapt to change more quickly, this type of job description frees employees to create new means to an end. Employees will be able to break through yesterday’s restrictive, task-oriented bounda- ries and discover new production methods within a larger conceptual framework.

Trends in Career Paths and Organizational Structure The future will bring new career paths and more fluid organizations.

Less emphasis will be placed on making it up the ladder. The ultimate goal will no longer be how high a person can climb in the corporate structure before retirement, but on the number and worth of accomplishments amassed during a lifetime of special projects. The most rewarding career path will resemble a leisurely cruise around the world that stops to explore many ports, instead of a nonstop flight with a destination that is always one day away.

Corporate structures will become flatter and more flexible. Duties cumntly canied out by separate staff departments will become integrated into production jobs. Companies will also make greater use of employee leasing firms, hiring specialists to work for explicit periods of three months to three years. Not all staff members will be assigned to permanent departments. Trained in creative thinking techniques to enable them to identify new opportunities, investigate possible process improvements, and resolve chronic industry problems, many employees will be part of func- tional pools from which they are assigned to results-specific projects.

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SURVEY FINDS EMPLOYEE INVOLVEMENT A P R I O ~ Y FOR NECESSARY INNOVATION

The New Feedback Loop Simultaneously reaching the goals of improved quality, employee

involvement, and customer focus requires new customer feedback loops. Making production workers responsible for continuous improvement necessitates direct communication between customers and production employees.

The bulky customer research report that used to filter through layers of staff departments and management, resulting in a dictate to the operations manager, will become obsolete. Reliance on such reports will give way to structured open houses, where production workers and customers can exchange thoughts and opinions. Suppliers and vendors will conduct one- day personnel exchanges. In addition, more front-line wodcers will assume customer liaison duties. Power lunches between salespeople and buyers will become secondary to working lunches between the production workers and customers.

THE ULTIMATE GOAL: MAXIMIZING HUMAN POTENTIAL The dawn of the year ZOO0 promises to be an exciting time. Finally,

organizational goals are becoming aligned with individual self-interests. And the result should be an environment that maximizes human potential.

Robots will increasingly perform the monotonous aspects of blue-collar work, while computers will handle the tedious portions of white-collar work. Only jobs requiring creative effort will remain the exclusive domain of human beings. The organizations that function best will utilize employees as whole people. Everyone will be expected to think, create, and contribute-and not m e d y be a cog in the wheel.

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survey finds employee involvement a priority for necessary innovation

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