Employees Are the Key to Better Performance

HUMAN resource management - the continuous education, training, and motivating of employees - is a vital yet neglected requirement for improving United States economic performance in a highly competitive world. ``Without major changes in the ways schools and firms train workers over the course of a lifetime, no amount of macroeconomic fine-tuning or technological innovation will be able to produce significantly improved economic performance and a rising standard of living,'' says ``Made in America: Regaining the Productive Edge,'' a recent report by the MIT Commission on Industrial Productivity.

Reports about the declining economic performance of the US - as symbolized by our growing position as the world's largest debtor nation - have more commonly attributed the problem to macroeconomic factors such as the budget deficit and low private savings. Higher savings, the reasoning goes, would lead to more investment in new machinery and technology, which would boost labor productivity and the standard of living.

In contrast, the emphasis on human training and investment is a striking conclusion coming from MIT, a leader for decades in technology that is built into machinery, not people. But it echoes earlier studies by Tom Peters (``In Search of Excellence''), management consultant Peter Drucker, and economist Theodore Schultz.

In commenting on America's loss of competitiveness, some business leaders also cite a declining work ethic. The MIT study rejects the ``work ethic'' explanation and gives several examples of successful US companies where creative human-resource management plays an important role. Two very different companies are Chaparral Steel and Xerox.

Consider the steel industry. It epitomized American industrial power at the time of World War II, but it has come to be known as an industrial dinosaur in global competition. However, Chaparral Steel, a mini-mill employing 1,000 people, is an example of dynamic human resource management.

Chaparral aims to be the lowest-cost world producer in its steel specialty by encouraging all its employees to experiment on the production line, not just in the laboratory, with ways to produce faster and better. Ideas come from a continuous search for new technology around the globe as well as from active links to universities. Chaparral Steel increased its sensitivity to continuing change in market demand and turned the conventional organization chart upside down by eliminating the sales department and sending production employees on sales calls.

While ``small is beautiful'' may be an important way to become creative in human-resource management, a major management reorganization emphasizing greater employee involvement had a dramatic effect on the giant Xerox company with almost 100,000 employees worldwide.

Xerox, the originator of copying machines, suffered a severe erosion of market share to the Japanese from 1975 to 1984. Since then, the company is one of the few major American firms to regain market share from the Japanese by reorganizing product development and manufacturing, greatly increasing employee involvement in technical changes, promoting a quality-control effort, and putting greater emphasis on customer satisfaction. Xerox combined the design and production processes. While the broadening of job descriptions has not gone as far as in much smaller Chaparral, Xerox is experimenting with giving production workers greater control over management functions.

The key to a recovery in American manufacturing competitiveness is continuing education and training inside and outside the company from top management to the lowest production worker. West German and Japanese companies have a far-sighted commitment to continuing on-the-job training that discourages narrow and static specialization. This commitment is best accomplished when there is a teamwork approach to production from start to finish and production employees are given greater responsibility.

The importance of creative human-resource management to the revival of American industry is clear. The question is whether the senior management in US companies is personally and genuinely motivated to look beyond short-term financial performance to longer-term investment in its employees.