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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
Escape common business myths to unleash game-changing productivity
Written by Shingo Prize winner Jacob Stoller, Productivity Reimagined shows how most companies are constrained by deeply engrained myths that prevent employees from reaching their full productive potential, causing frustration, poor decisions, and disappointing results. Evidence is drawn from Toyota and dozens of other companies that have countered these myths to build strong collaborative cultures and achieve sustainable growth.
Arguments are reinforced by the latest science on human behavior and systems theory and supported by more than 60 interviews from prominent CEOs, consultants, academics, executive directors, and EVPs in the context of today's pressing global issues, including labor shortage, income inequality, job-related stress, supply chain instability, and climate change. In this book, readers will learn:
- Why we are facing a global productivity crisis despite what the news media are telling us
- Why frontline employees aren't to blame for low productivity, and that the boss doesn't always know best
- Why the whole does not equal the sum of the parts, and that the past doesn't necessarily determine the future
- Why a strong workplace culture is the essential enabler for high productivity, and how to instill it
As companies face the new realities of the global economy, Productivity Reimagined is an essential resource for forward-thinking executives, managers, and business leaders looking to solve the productivity puzzle and empower their workforces to perform at their best.
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Veröffentlichungsjahr: 2024
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Table of Contents
Cover
Table of Contents
Endorsements for Productivity Reimagined
Title Page
Copyright
Preface
ABOUT THIS BOOK
Acknowledgments
PART ONE: The Productivity Challenge
1 Productivity, Real and Imagined
WHAT IS PRODUCTIVITY?
MAKING THE NUMBERS USEFUL
PRODUCTIVE OR NONPRODUCTIVE GROWTH?
DIRE WARNINGS
PRODUCTIVITY GETS SIDELINED
A DIFFERENT FOCUS
A MISSED OPPORTUNITY
FURTHER BARRIERS TO PRODUCTIVITY
THE PRODUCTIVITY CRISIS
IT’S ABOUT PEOPLE AND PROCESS
2 The Productivity Toolkit
RISING FROM THE ASHES
IDEAL PRODUCTION CONDITIONS
CONTEXT
MAKING IMPROVEMENTS
STATISTICAL LITERACY
STANDARDIZED WORK
DEVELOPING AN EYE FOR WASTE
GETTING IT RIGHT THE FIRST TIME
CREATING ORDER
THE “WHY” BEHIND THE METHODS
THE PRODUCTIVITY EDGE
PART TWO: Shattering the Five Myths
3 The Myth of Segmented Success
THE IMAGES THAT GOVERN US
YOU EAT WHAT YOU KILL
TAKING ON SALES MANAGEMENT 101
CORPORATE DYSFUNCTION
QUALITY IS A TEAM SPORT
A TEAM APPROACH TO INNOVATION
SILOED THINKING ON THE GLOBAL STAGE
PRODUCTIVITY ON THE PODIUM
TAKEAWAYS FROM THE MYTH OF SEGMENTED SUCCESS
4 The Myth of the Bottom Line
WHAT THE NUMBERS WEREN’T SAYING
A RADICAL NEW APPROACH
EARLY EXPERIMENTS
ACCOUNTING FOR SHOP FLOOR REALITY
THE DISCONNECT BETWEEN TRADITIONAL ACCOUNTING AND PRODUCTIVITY
ASSESSING COSTS WITH REAL NUMBERS
OPERATIONS AS A STRATEGIC ADVANTAGE
CONTINUOUS IMPROVEMENT ON A GLOBAL SCALE
THE POWER OF VELOCITY
PRACTICES ENTRENCHED IN IT SYSTEMS
THINKING LONG-TERM
A NOVEL INVESTMENT APPROACH
THE FUTURE OF ACCOUNTING
THE OUTSIDE VIEW
THE MYTH OF THE BOTTOM LINE TAKEAWAYS
5 The Top-Down Knowledge Myth
CHALLENGES TO THE OLD WAY
VALUING EMPLOYEES PAYS OFF
CREATING AN ENDURING CULTURE
STRENGTHENING THE MODEL
HELPING EMPLOYEES SUCCEED
SPREADING THE MESSAGE
AN EVOLVING BUSINESS MODEL
WHEN RAPID DECISIONS ARE ESSENTIAL
LEARNING ON THE FLY
THE OTHER SIDE OF RESPECT
TOP-DOWN KNOWLEDGE MYTH TAKEAWAYS
6 The Myth of Sticks and Carrots
BUILDING A COMPANY BASED ON CARING
EARLY DAYS AS A BUSINESS SUPERSTAR
LOOKING AHEAD
PUTTING CULTURE FIRST
A CHANGING ROLE
SPREADING THE MESSAGE
THE ROI OF CULTURE
A CHANGING WORLD
BUILDING A CARING CULTURE IN THE CONSTRUCTION INDUSTRY
GETTING TO THE ROOT CAUSE OF PROBLEMS
PUTTING PEOPLE FIRST
THE IMPORTANCE OF PURPOSE
A CULTURE OF OWNERSHIP
WILL THEY TAKE MY JOB?
MYTH OF STICKS AND CARROTS TAKEAWAYS
7 The Myth of Tech Omnipotence
IT LOOKS SO EASY!
THE FACTORY OF THE FUTURE
MANUFACTURING IN TRANSFORMATION
MEANWHILE, BACK AT THE OFFICE
TALKING WITH COMPUTERS
A DISCIPLINED APPROACH TO TECHNOLOGY
LEAN AND THE NEW ROBOTICS
FINDING THE MIDDLE PATH
THE MYTH OF TECH OMNIPOTENCE TAKEAWAYS
PART THREE: Business Strategies for a Better World
8 Productive Strategies for Preserving Our Planet
HEATING THE OUTDOORS
DOING MORE WITH LESS
A DIFFERENT VISION
FALSE ECONOMICS
TAKING A SYSTEM APPROACH
THE INCREMENTAL ASPECTS OF ENERGY SAVINGS
IT’S ALL ABOUT PRODUCTIVITY
9 A Prescription for Better Healthcare
A ROADMAP FOR A BETTER SYSTEM
AN ARMY OF PROBLEM SOLVERS
EFFICIENCY AND WAIT TIMES: A PERSONAL STORY
THE PIPE DREAM OF FULL UTILIZATION
A COMMON VICIOUS CIRCLE
COPING WITH FINANCIAL PRESSURES
BUILDING RESILIENT TEAMS
STEPS IN A LONG JOURNEY
IMPROVEMENT IS PART OF THE CULTURE
LARGER CONCERNS
10 An Entrepreneurial Approach to Breaking the Poverty Cycle
A PHONE CALL THAT CHANGED EVERYTHING
A NEW KIND OF AGENCY
TRANSFORMING THE SECTOR
A SYSTEMS APPROACH TO COMBATTING POVERTY
THE ROLE OF GOVERNMENT
GOING GLOBAL
CLEAN WATER INITIATIVES
AN END TO TOP-DOWN THINKING
11 Rethinking the Meaning of Disability
IT BEGINS WITH THE CHILDREN
DISSOLVING THE STEREOTYPES
TAKING ON “ABLEISM”
UNCOVERING HIDDEN BIASES
BUILDING ANTI-ABLEIST ORGANIZATIONS
WE CAN DO BETTER
12 Joy at Work
A NEW KIND OF LEADERSHIP
THE PSYCHOLOGY OF JOY
REMOVING THE BARRIERS
STARTING AFRESH
BEYOND THE METHODOLOGY
PART FOUR: Moving Forward
13 We Can Do This!
THE CASE FOR ACTION
BECOMING COMPANY B
EXPLORE AND DISCOVER
ASSESS THE CURRENT STATE
CREATE A VISION WITH SUBSTANCE
BUILD TRUST
CREATE A SAFE ENVIRONMENT
TRAIN AND TRANSFORM
REMOVE SYSTEMIC BARRIERS
RAISE THE BAR
SHARE AND LEARN
REFLECTING ON THE FUTURE
Notes
Preface
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
About the Author
Index
End User License Agreement
List of Illustrations
Chapter 1
Figure 1.1 Process is how companies convert inputs to output.
Chapter 2
Figure 2.1 Flow diagram used by Deming.
Figure 2.2 Simplified value stream map describing current state.
Figure 2.3 How value streams vary in different industries.
Figure 2.4 Plan-Do-Study-Act (PDSA) cycle.
Figure 2.5 Examples of waste in different industries.
Chapter 4
Figure 4.1 Standard Cost P&L compared to Plain Language P&L.
Figure 4.2 Conventional accounting cycle.
Chapter 6
Figure 6.1 Defining leadership qualities at Lippert.
Chapter 7
Figure 7.1 SAE designations for autonomous driving features.
Chapter 8
Figure 8.1 Diagram used by Stephen Dixon.
Figure 8.2 Energy savings from different approaches.
Chapter 9
Figure 9.1 Example of how a patient’s time was spent in an ER facility.
Figure 9.2 Kingman’s Law.
Chapter 12
Figure 12.1 Deming’s forces of destruction diagram.
Guide
Cover
Endorsements for Productivity Reimagined
Table of Contents
Title Page
Copyright
Preface
Acknowledgments
Begin Reading
Notes
About the Author
Index
End User License Agreement
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Endorsements for Productivity Reimagined
“In Productivity Reimagined, author Jacob Stoller draws on both the wisdom of the ages and the most modern ideas of workplace psychology using compelling examples to dispel the myths of what it means to be engaged and productive. He reveals a superior way of thinking that all of us can aspire to and draw on. If you’ve been stuck for a while now, this is the book to get you on the road to new levels of results.”
—Richard Sheridan, CEO, Chief Storyteller, Menlo Innovations; author of Joy, Inc. and Chief Joy Officer
“Productivity Reimagined paints a picture of the incredible outcomes possible when you create environments of caring, collaboration, and continuous improvement. Stoller’s latest is an exceptional guide for anyone looking to improve output as well as the lives in their span of care!”
—Bob Chapman, CEO, Barry-Wehmiller; author of Everybody Matters: The Extraordinary Power of Caring for Your People Like Family
“Productivity Reimagined author Jacob Stoller does a stellar job of connecting the concept and the practices of productivity and identifying the misunderstandings that so often cause productivity initiatives to be counterproductive.”
—John Shook, Senior Advisor, Lean Enterprise Institute; Chairman, Lean Global Network
“Stoller provides an exceptional blueprint for companies striving to solve the productivity puzzle and empower their workforce to excel in today’s global economy.”
—Kerry Siggins, CEO, StoneAge; author of The Ownership Mindset
“Imagine a business book that you can’t put down! Stoller is engaging, comprehensive, and concise as he draws on a wealth of real-world examples to bring the transformative ideas of Deming and Ohno to a new generation of leaders and practitioners.”
—Kelly Allan, Deming Practitioner and Principal, Kelly Allan Associates, Ltd.
“Whether you’re a CEO, manager, or entrepreneur, this book will change how you view productivity and provide the roadmap to achieving it in a way that benefits everyone. Don’t miss reading it.”
—Michael Ballé, co-founder of Institut Lean France; author of The Gold Mine Trilogy
“Jacob Stoller is a true myth buster as he navigates us through evolved mindsets and practices that show how productivity works in many contexts from the manufacturing shop floor to addressing social justice in a community.”
—Jason Schulist, Chief Flourishing Officer, Generative Local Community Institute
“In Productivity Reimagined, Stoller uses excellent examples to expand the vision of what productivity means. I think it will be an important contribution to the discussion about productivity.”
—Orest Fiume, retired CFO, Wiremold; co-author of Real Numbers: Management Accounting in a Lean Organization
PRODUCTIVITY REIMAGINED
Shattering Performance Myths to Achieve Sustainable Growth
JACOB STOLLER
Copyright © 2025 by Jacob Stoller. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 750-4470, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permission.
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Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor authors shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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Author Photo: Courtesy of the Author
Preface
People by nature want to be productive. The urge to work towards something that matters is the force that gets us up in the morning, keeps us going despite obstacles, and compels us to do better than we did last time. When we see the impact of our productivity, it gives us the pride and satisfaction that we’ve made the world a little bit better.
Companies want their people to be productive as well. Engaged, productive workforces enable companies to overcome barriers and constantly get better at what they do. Productivity growth allows companies to deliver their products and services faster, cheaper, and better; provide better jobs; and contribute to the betterment of their surrounding communities.
There’s a disconnect, however, between people’s productive inclinations and what actually happens in most companies.
Most people grasp this intuitively. The feeling is that even if they derive considerable enjoyment from their chosen line of work, they are stymied by all the “other stuff” they have to deal with.
The “other stuff” isn’t just necessary drudgery like filling out expense reports. It’s also the adversarial relationships, fear of speaking out, poor coordination, lack of support, and having to do things just to please the boss.
Disengagement is widespread. In the US, according to Gallup, only 30% of employees reported they were engaged in their work in 2023. Furthermore, 17% reported that they are actively disengaged.1
This disconnect causes companies to be much less productive than they should be, and that has severe implications for our economy. The GDP growth that governments report, as will be shown in Chapter 1, is becoming less and less reflective of true productivity growth. In other words, we are in a productivity crisis.
The question is, if people want to be productive and more productivity is needed, what prevents companies from connecting the dots?
The short answer is that the conventional command-and-control management approach tends to divide people and get them working at cross purposes. High productivity, on the other hand, calls for changing this approach to create a workplace culture where all employees participate in improving work processes towards a common purpose.
The command-and-control approach is deeply entrenched, and consequently companies that have achieved this transformation are the exception rather than the rule.
I have had hundreds of conversations over the years with leaders and business experts on why this transition is so difficult to make. On the surface, the conventional methods are reinforced by business school curricula, accounting principles, corporate policy documents, and decades of tradition.
My conversations have revealed that there are deeper reasons. I’ve learned that there’s a widely held belief system that makes it difficult for even the most forward-thinking leaders to abandon the status quo. This belief system, I’ve concluded, rests on five widely held business myths that fly in the face of reality yet are regarded as immutable fixtures. We will cover these in detail in this book.
They are:
The Myth of Segmented Success
: The productive resources of a company can be organized as a collection of independent components. The whole equals the sum of the parts.
The Myth of the Bottom Line
: The financials tell us everything we need to know about productivity.
The Top-Down Knowledge Myth
: Managers always have the answers and keep workers productive by telling them what to do.
The Myth of Sticks and Carrots
: Workers are most productive when motivated by rewards and threats.
The Myth of Tech Omnipotence
: Technology is the answer to all productivity problems.
The outdated thinking behind these myths has saddled companies with an organizational structure that stymies team productivity and fails to deliver sustainable growth.
ABOUT THIS BOOK
This book shows how overcoming common barriers to productivity can launch companies on a path to sustainable growth. The evidence comes from my conversations with leaders who have countered the traditional rules of top-down command-and-control management to build highly productive continuous improvement cultures in their organizations.
Their companies have achieved excellent financial results while treating and compensating their people well, delivering quality products to their customers, maintaining positive relationships with their communities, and doing their part to conserve our planet. These companies are role models for an approach to business where everybody wins.
The subjects interviewed for this book were influenced by various schools of thought. One is the Lean approach that was pioneered by Toyota. This has been widely promoted and was the subject of my previous book The Lean CEO.
Others attribute their success to the principles of W. Edwards Deming, who was a major contributor to Lean methods and an insightful critic of the current school of management.
The people who confront the myths, however, are not limited to those who follow these established methods. You will meet leaders who apply principles of psychology, engineering, and systems theory, and their own personal values to create alternatives to conventional management practices.
A word about remote work. There is wide debate about the individual productivity of knowledge workers who, since the outset of the COVID pandemic, have worked from home. However, as this book demonstrates, it’s team productivity that provides the game-changing results that derive from continuous improvement, and that requires the establishment and maintenance of a collaborative work culture. This is why some knowledge companies, several of which are featured in this book, maintain in-person work environments and expect employees to be there at least some of the time.
Another popular news subject is the influence of technology on productivity. Technology is a powerful enabler, but as we discuss in Chapter 7, it often fails to deliver the productivity gains that people expect and is not, despite what many believe, a magic bullet for solving productivity problems.
The book is divided into four parts.
Part One: The Productivity Challenge outlines the productivity problem and the methods for countering it. Chapter 1: Productivity, Real and Imagined shows how despite GDP growth and rising stock prices, companies have failed to deliver the productivity growth necessary to raise the standard of living. Chapter 2: The Productivity Toolkit provides an overview of the management techniques that a select group of companies have deployed to achieve high productivity through continuous improvement. These methods provide a reference point for the case studies that follow.
Part Two: Shattering the Five Myths addresses each of the five myths through interviews with leaders who have confronted them. Chapter 3: The Myth of Segmented Success shows how companies have used a systems approach to dismantle destructive elements of their traditional command-and-control management policies and create work environments of teamwork and high engagement. Chapter 4: The Myth of the Bottom Line provides examples of how companies have moved away from reliance on financial reports to reconnect with the productive forces in their organizations. Chapter 5: The Top-Down Knowledge Myth explains how companies have enabled workers to initiate improvements using their workplace knowledge. Chapter 6: The Myth of Sticks and Carrots describes how companies have built strong work cultures by creating caring work environments where every employee feels safe and appreciated. Chapter 7: The Myth of Tech Omnipotence shows how the productive power of technology is often over-estimated, and how companies have used technology to complement the strengths of humans.
In Part Three: Business Strategies for a Better World, we look at how leaders are confronting the myths to create a better world. Chapter 8: Productive Strategies for Preserving our Planet describes how innovative engineers are countering the myths with a holistic system-based approach to reducing companies’ impact on the planet. Chapter 9: A Prescription for Better Healthcare shows how healthcare innovators are taking on the myths as they fight to mitigate the current healthcare crisis. Chapter 10: An Entrepreneurial Approach to Breaking the Poverty Cycle explains how anti-poverty activists are countering conventional myth-based thinking to enable people to initiate projects that lift their communities out of poverty. In Chapter 11: Rethinking the Meaning of Disability, we see how an agency is confronting the stereotypes that conventional management imposes on people with disabilities. In Chapter 12: Joy at Work, we hear from a company that has crushed the myths in order to create an engaging office environment that instills joy at work.
Part Four: Moving Forward, Chapter 13: We Can Do This! presents the case for moving forward, with an overview of steps that companies have taken to transition their conventional management system to one based on employee engagement and continuous improvement.
People want to be productive. Yet most employees are managed according to an outdated management system that poses countless barriers to productivity.
We have both a problem and an opportunity. It’s time to shatter the myths and get down to the business of engaging our workforces to create economic growth that benefits everybody.
Acknowledgments
This book is based on the insights and wisdom of many people who are passionate about their work and generous about sharing their knowledge. Learning from them has been a privilege and a pleasure.
I’d like to start with a special thank you to Orry Fiume, retired CFO of Wiremold, who patiently instructed me on the fine points of defining and measuring productivity, introduced me to other sources, and gave me valuable feedback on the manuscript.
I’m very grateful to a number of people who gave advice and encouragement. Kevin Cahill, CEO, and Kelly Allan, Associate Trustee, of the W. Edwards Deming Institute opened doors for me through introductions and gave advice that helped make Deming’s ideas a strong focal point in this book.
Rich Sheridan, CEO of Menlo Innovations, helped frame my thinking long before I began this project, and provided thoughtful input for this book.
Thanks also to Jon Miller and Stan Herschorn, who have been generous with their time and attention as the book developed.
Karl Wadensten, CEO of Vibco, connected me with a number of CEOs early on, and provided input and useful feedback.
John Toussaint, Executive Chairman at Catalysis, has been particularly encouraging and helpful with introductions and insights.
On a personal note, I would like to give special thanks to my family for their ongoing support and encouragement. Thanks to my late father, Claude Stoller, and my mother, Nan Black. Big appreciation to my sisters, Tia and Lisa Stoller, and my brother-in-law, Drew Detsch, who attended to family issues in my stead while I was heads-down writing this book. Thanks to my sons, Mark, Jon, and Ben Stoller, and Mark’s partner Carolyn Prouse for their cheerleading as this project unfolded, and to my wonderful wife, Susan, who went the extra mile, giving me feedback and encouragement while keeping the home fires burning.
I owe special thanks to my editors at Wiley, Stacey Rivera and Judith Newlin. It was in my discussions with Judith that the title and outline for Productivity Reimagined first took shape, and I am grateful for her expert feedback and ongoing support.
And while we’re talking about the book business, a big shout-out to my literary agent John Willig, a true professional who knows the industry inside out, is generous with his time and his knowledge, and kept me on track.
Thanks finally to all the sources who granted me interviews, patiently answered my questions, and provided either direct input or advice:
Bob Chapman, Chairman, and Mary Rudder, Senior Director, Communications, at Barry-Wehmiller; Henry Mintzberg, Professor at McGill University; Bruce Taylor, Founder and President at Enviro-Stewards; Stephen Dixon, Environmental Consultant; Michael Bremer, VP of Awards at the Association for Manufacturing Excellence; Mark Graban, Author and Senior Advisor at Kai Nexus; John Shook, Senior Advisor at the Lean Enterprise Institute; Blair Fix, Author of the blog Economics from the Top Down; Harry Moser, President at Reshoring Initiative; Alexander Wong, Professor at the University of Waterloo; Ben Armstrong, Executive Director, Industrial Performance Center, at MIT; Cliff Ransom, President at Ransom Research; Karen Martin, President at TKMG; Michael Balle, Author and Consultant; Nick Katko, President and Owner at BMA; Joseph E. Swartz, former Administrative Director of Business Transformation for Franciscan St. Francis Alliance of Mishawaka, Indiana; Rich Sheridan, CEO and Chief Joy Officer at Menlo Innovations; Charlie Murphy, Senior VP at Turner Construction; Nick Bauer, CEO at Empire Group; Sam McPherson, Founder at McPherson Business Advisors; Mike Scala, CEO at Western Shelter Systems; Mark Borsari, CEO at Sanderson-MacLeod; Ian Beert, Vice President at Partake Foods; Jim Huntzinger, President and Founder of Lean Frontiers; Mauricio Miller, Founder at Center for Peer-Driven Change; Randy Kesterson, Executive Advisor; Gary Brooks, Partner at Strategic Development Services; Alex Krutz, Partner at Patriot Industrial Partners; Cheryl Jekiel, independent HR Consultant; Scott Curtis, CEO at Training Within Industry (TWI); Jason Schulist, Founder at Generative Local Community Institute; Stephen Moore, VP of Lean Enterprise and Quality at Parker Hannifin; Bernie Rosauer, President at Wisconsin Compensation Rating Bureau; Carl Livesay, General Manager, Mercury Plastics; Mandeep Kaundal, Director at Results Washington; Larry Coté, President at Lean Advisors; Abe Eshkenazi, CEO at Association of Supply Chain Management; Anders Billeso Beck, Vice President at Universal Robots; Jamie Flinchbaugh, Founder at JFlinch; Patrice Baumann, Chief Integrated Supply Chain Officer at Enersys; Mirka Wilderer, CEO at AqueoUS Vets (AV); Nora Genster, Senior Director of Development at Northwest Center; Gene Boes, CEO at Northwest Center; Paul Nyhan, Public Relations and Editorial Manager at Northwest Center; Pierluigi Tosato, CEO at Bouvard; Steven Haedrich, Owner at New York Label & Box Works; Gary Peterson, Executive VP of Supply Chain and Production at O.C. Tanner Company; Jeffery Varney, Director, Advisory Services at American Productivity & Quality Center (APQC); Ken Snyder, Executive Director at the Shingo Institute; Tom Ehrenfeld, Senior Editor at Lean Enterprise Institute; Sherm Moreland, CEO at Design Group; Greg Guy, CEO at Air Force One; Jason Lippert, CEO at Lippert; Paula Marshall, CEO at Bama Foods; Cheryl Nester Wolfe, CEO at Salem Health; Dan McDonnell, Principal at Gemba Coach LLC; Evan Mitchell, Music Director of the Kingston Symphony; and Kerry Siggins, CEO at StoneAge.
PART ONEThe Productivity Challenge
1Productivity, Real and Imagined
On August 19, 2019, the Business Roundtable, a Washington, DC–based association of chief executive officers, issued a statement signed by 181 CEOs of major US corporations titled “Statement on the Purpose of a Corporation.” The new document affirmed a “fundamental commitment” to customers, employees, suppliers, and communities.
“Each of our stakeholders is essential,” the statement concludes. “We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”1
This document superseded previous declarations that companies should only advance the interests of shareholders.
While there’s evidence that this was little more than a PR gesture,2 the statement was perhaps the most significant acknowledgment by corporate leaders that our economy is not delivering on the dream of shared prosperity.
We have always believed that our system of free enterprise generates a rising tide that lifts all boats. Accordingly, businesses grow by providing goods and services that customers choose to buy. That growth leads to more and better jobs and higher profits that are reinvested to grow the business further. Companies then ensure their long-term viability by helping their suppliers succeed, supporting their surrounding communities, and treating our planet with respect. Positive outcomes for all stakeholders flow naturally from this virtuous cycle.
The Business Roundtable statement reflects a widely held sentiment that this virtuous cycle is what the public should expect from a growing economy. However, what we’re seeing is very different – a kind of growth that is creating economic inequality, marginalizing communities, and rocketing us towards a climate catastrophe.
This book argues that there is a better way, and that the key is a bold new approach to productivity. In the pages ahead, you will read about companies that have thrived by turning productivity into a competitive advantage and, in the process, have helped their employees, customers, and communities thrive as well.
First, let’s take a look at how productivity is defined and measured. Then we’ll consider how truly meaningful productivity growth has actually been absent in much of the economic growth that we’ve seen.
WHAT IS PRODUCTIVITY?
The Bureau of Labor Statistics (BLS) is the federal government agency that tracks employment-related statistics in the US. In conjunction with the Bureau of Economic Analysis (BEA), which calculates and tracks the GDP, BLS gathers, analyzes, and reports on labor economics and statistics in the private and public sectors.
BLS defines productivity in three instructional videos on its website.3 The first, What is Productivity? features Beth, an entrepreneur who makes and sells birdhouses. By improving her production methods and her skills, the video shows, Beth can increase the number of birdhouses she can make in an hour, thereby increasing her productivity.
“Productivity is a measure of economic performance that indicates how efficiently inputs are converted into output,” says the narrator. “Growth in productivity is measured by dividing the change in output over time to the change in inputs over time.”
By increasing her productivity, the video tells us, Beth can improve her standard of living, enabling her to either make more money, or work shorter hours. The key here is that Beth improves the business by finding ways to become more efficient, and higher productivity is the outcome. Productivity growth, therefore, is the kind of growth that allows businesses, and by extension society, to become more prosperous.
“The standard of living for the country as a whole depends on improvement in overall productivity,” says the narrator. “Historically, productivity growth has led to higher wages for workers and higher profits for businesses.”
The video, however, doesn’t take into account expenses other than labor and materials. In the second video, Ingredients for Total Factor Productivity, Clementine, the owner of a small bakery, brings some additional costs into the equation. These include energy, equipment, capital, and outside services such as bookkeeping. The result is a ratio called Total Factor Productivity (TFP).
Notable here is that Clementine has included what are called fixed costs, which do not vary with the amount of output being produced. The carrying costs for a new oven, for example, are now included as inputs. This can get very tricky, as we will see in Chapter 4.
However, the goal is still the same: to continually increase the output in relation to the input by producing more efficiently. “Gains in Total Factor Productivity indicate productivity growth in output that is not a result of using more inputs,” says the narrator. “It is a measure of production efficiency.”
We are then told how improving TFP is the productive force that drives the US economy forward. “Understanding total productivity growth for the US economy helps us understand how the nation can produce more without using more resources,” says the narrator. “These advances in efficiency help keep the US competitive.”
A third video, Understanding Unit Labor Costs, takes us to a sandwich shop where dozens of employees engage in various food preparation activities. If the staff work diligently and improve their skills, they will increase their output, improving the company’s profits and its capacity to pay workers and provide benefits.
The ratio, however, is not a measure of how efficient the sandwich shop is – the costs with respect to Total Factor Productivity still apply. Furthermore, while a more capable staff can help, Labor Productivity Growth can be affected by factors that have nothing to do with the capabilities or diligence of the workers, such as variations in sales volume or disruptions due to equipment failure. As we will see, this point is often overlooked.
MAKING THE NUMBERS USEFUL
The productivity metrics described in the videos are some of the most commonly used ratios for tracking the performance of a business. The main idea here is that these numbers can be useful in guiding decisions about how to improve profitability in order to finance further growth.
In real-world scenarios, however, there are many complicating factors that can make these ratios either difficult to calculate or, in some cases, misleading. Two of these are worth noting at this point.
The first one is quality. Let’s say Beth decides to accelerate production for the spring season when birdhouses are in most demand. Faster is better according to the equation, but what if working faster has created some quality problems? These may be very difficult for Beth to detect and may not become visible until months after the product was sold. By the time the complaints start coming in, it could be too late for Beth to save her reputation. So that apparent productivity growth might come with strings attached. This problem will come up repeatedly in the pages ahead.
Another factor is the influence of changing prices on the productivity ratio. If material costs have gone up for Beth, that output over input ratio is going to decline, showing lower productivity. Furthermore, a competitor might enter the picture, forcing Beth to reduce her prices, and reducing the productivity number. A key aspect of tracking productivity accurately in order to improve it, therefore, is the ability to isolate it from price fluctuations. We’ll discuss this in detail in Chapter 4.
PRODUCTIVE OR NONPRODUCTIVE GROWTH?
The suggestion on the BLS website that overall improvements in the general standard of living can be attributed to businesses like Beth’s is certainly appealing. But is the link real or imagined?
Let’s look at how productivity is measured at a national level. Essentially, as its website explains, BEA starts with the GDP, and applies weighing formulas that compensate for inflation and other variations. National productivity statistics, therefore, are dependent on how the GDP is derived and calculated. In fact, many economists and journalists simply use the GDP as the standard for determining labor productivity.
The assumption that a rising GDP truly reflects the accumulated result of businesses producing faster, better, or cheaper without adding resources, however, is highly questionable. The problem is that many of the contributors to GDP growth have nothing to do with productivity as defined by the BLS.
“Economists take income and call it productivity, and that’s the idea behind the GDP. But if that assumption is wrong, then everything falls apart,” says Blair Fix, a political economist and author of the blog “Economics from the Top Down.”
Let’s look at the ways in which that assumption breaks down.
Moving the Goal Posts
Changes made over the years in methods for calculating the GDP have made economic growth appear stronger than it actually is. “The Bureau of Economic Analysis (BEA) has changed its methods multiple times over the years,” says Fix, “and it’s always biased towards higher growth. One example is changing how it calculates the base year for prices. In the 1990s it changed over to a method for that called chain weighting, which ended up showing higher growth. Then there are what are called imputations. The classic example of that is that if I own a home, I don’t add to the GDP by paying rent. And so, in response to that, BEA imputes the price I paid myself for rent, and that goes into the GDP. There are a whole bunch of those.”
In a study titled “Imputing Away the Ladder,” authors Jacob Assa and Ingrid Harvold Kvangraven conclude that revisions to the System of National Accounts (SNA), which is used to derive the GDP, “have had the effect of boosting the GDP of the West relative to the rest of the world.”4
A key contributor to this has been the addition of the Finance, Insurance and Real Estate sectors (FIRE), as the study explains:
“In 1993 and then again in 2008, there were reforms to the SNA that led to significant changes of the location of the so-called production boundary, which determines what is included in GDP and what is not. Many economic activities – financial intermediation, research and development and the production of weapons – were previously excluded from GDP as either non-productive or as constituting productive inputs to other outputs (hence deducted as intermediate consumption). The inclusion of these economic sectors in the production boundary since 1993 and 2008 has added disproportionately to the GDP of developed countries, which have in recent decades specialised in these activities and moved away from traditional pillars of development such as manufacturing and infrastructure-related services.”5
Under the new rules, the US continued to look rosy even as it hollowed out its manufacturing sector, while China, with its much smaller financial sector proportionally, looked less so, even as it amassed a growing trade surplus with the US.
The Rise of Financialism
The inclusion of banking activity not only biased the GDP to show higher growth, but in some cases included inputs that were harmful to the economy. For example, a new concept called financial intermediary services indirectly measured (FISIM) was added to the SNA in 1993. Accordingly, the high-risk loans that led to the crash of 2008 were judged to be contributing high value to the economy.
“In banking, spreads increase when risk rises,” explains Financial Times journalist David Pilling in his book The Growth Delusion. “If a banker judges you quite unlikely to repay a loan, she will raise the interest rate to reflect the higher risk of default. So, from an accounting point of view, the riskier the portfolio of loans the greater the contribution to growth. Put another way, the more catastrophically irresponsible bankers are, the more we judge them to be helping the economy to grow.”6
This change in focus has also caused banks to relinquish their traditional role of lending to businesses, causing their influence on real productivity growth to decline. “Back in the early 1980s, when financialization began to gain steam, commercial banks in the United States provided almost as much in loans to industrial and commercial enterprises as they did in real estate and consumer loans; that ratio stood at 80 percent,” wrote Financial Times journalist Rana Foroohar in her book Makers and Takers. “By the end of the 1990s, the ratio fell to 52 percent, and by 2005, it was only 28 percent. Lending to small business has fallen particularly sharply, as has the number of start-up firms themselves.”7
The Rent Effect
Another contributor to the gap between productivity growth and GDP growth is the growing market power of companies to charge what economists call rents, or markups in excess of what they would earn from growing their productivity in competitive markets. One study showed that markups for publicly traded companies in the US had nearly tripled between 1980 and 2014.8 Another found that 80% of the equity value of public companies is attributed to the ability of these companies to extract rents.9
“Thus, at best, rents are unhelpful to growth and efficiency, at worst, harmful,” wrote Nobel Prize–winning economist Joseph Stiglitz. “They can be harmful because they distort the economy, because they ‘crowd out’ the kind of‘good’ economic activity that is the basis of true wealth creation.”10
Noninclusive Growth
The changes in SNA practices have also placed more emphasis on investment income as a proportion of the GDP.
“The majority of Americans share in economic growth through the wages they receive for their labor, rather than through investment income,” wrote Jay Shambaugh and Ryan Nunn in the Harvard Business Review. “Unfortunately, many of these workers have fared poorly in recent decades. Since the early 1970s, the hourly inflation-adjusted wages received by the typical worker have barely risen, growing only 0.2% per year. In other words, though the economy has been growing, the primary way most people benefit from that growth has almost completely stalled.”11
Accordingly, much of the GDP growth does not reflect a rise in the standard of living for the average citizen.
“It isn’t the amount of money that a society has in circulation, whether dollars, euros, beads, or wampum,” wrote Nick Hanauer and Eric Beinhocker in their paper “Capitalism Redefined.” “Rather, it is the availability of the things that create well-being—like antibiotics, air conditioning, safe food, the ability to travel, and even frivolous things like video games. It is the availability of these ‘solutions’ to human problems—things that make life better on a relative basis—that makes us prosperous.”12
DIRE WARNINGS
In June 1980, TV journalist Lloyd Dobyns made a sober prediction. “Unless we solve the problem of productivity,” he said, “our children will be the first generation in the history of the United States to live worse than their parents.”13
The remark came at the close of a two-hour documentary titled If Japan Can Then Why Can’t We? It was reported to be one of the most widely watched documentaries in television history. The program was aired amidst growing concern about the rising dominance of Japanese manufacturing and the corresponding failure of US companies to keep pace with rising global standards.
A number of events during the 1970s accelerated the crisis. In 1973, the OPEC embargo effectively signaled the end of the cheap energy era that had fueled America’s industrial juggernaut. The national debt had soared during the Vietnam War, and when the vets came home, unemployment soared to 8%.
To make matters worse, the post–World War II boom that had propelled America’s unparalleled growth had begun to slow. Inflation began to spiral out of control, and the American standard of living started to decline. At the same time, the stock market declined steadily. The Big Four American automotive producers continued to lose ground, and by the end of the decade, Chrysler had declared bankruptcy, and Ford and General Motors were losing money.
What Japan had done, the show demonstrated, was outproduce American companies by more than a two-to-one ratio with far less equipment, technology, natural resources, and expertise. The big difference was that Japanese companies were using superior management practices to create far more value added per worker than the American factories. And they were doing it with the active participation of millions of employees who were committed to an “all-hands-on-deck” effort to improve productivity.
Furthermore, the Japanese automakers were producing products of higher quality than what Americans were used to. The ongoing joke at the time was that you could drive a Toyota or a Honda down the highway and not hear the wind whistling around the doors. The cars also needed fewer trips to the repair shop and retained a higher resale value.
The concluding 12 minutes of the program featured an interview with Dr. William Edwards Deming, who at the time was virtually unknown in the US but was a household name in Japan. As a leading authority on statistical quality control, Deming had been sent by the US government to assist in Japan’s post–World War II reconstruction.
Deming’s work in Japan had begun with a series of lectures to electronics manufacturers. He wasn’t, however, simply putting forward statistical equations and methods, nor was he presenting quality as a siloed discipline for quality inspectors. For Deming, this was about building a participatory culture around quality, which he saw as inseparable from productivity.
The events were so successful that a Japanese business group, the Union of Japanese Scientists and Engineers (JUSE), began to sponsor his lectures. Deming returned numerous times, and his lectures and seminars drew thousands of participants. Inspired by his methods and those of his colleague Joseph Juran, JUSE created a quality standard called “Total Quality Control,” which became the basis of a national quality movement in Japan.
Hundreds of companies joined JUSE and began to pursue excellence using the TQC standard, and millions of people joined ad hoc work groups to make incremental improvements in their workplaces. Efforts ranged from pursuing productivity targets, savings in energy, or reducing defects and rework. In 1951, JUSE honored Deming by creating a prize in his name for companies that achieved excellence in TQC. Hundreds of companies engaged in comprehensive long-term improvement projects to win this highly coveted prize.
During the documentary, Dobyns asked Deming what Japan’s secret was. Deming said there was no secret. “I think people here expect miracles,” he said. “American management thinks they can just copy from Japan – but they don’t know what to copy!”14
What was needed, Deming said, was a complete rethinking of how corporations were run. “There’s no one coming out of a school of business that ever heard of the answers that I’m giving your questions – or probably even thought of the questions,” he told Dobyns.15
PRODUCTIVITY GETS SIDELINED
Concerns about the failure of US companies on the global stage led to a Congressional investigation on the productivity crisis. The resulting report, titled “The Productivity Slowdown: Causes and Policy Responses,” was published by the Congressional Budget Office (CBO) in 1981, and framed the problem as a major crisis. “Many Americans feel that the US economy performed dismally during the 1970s,” reads the introduction, “and that the outlook for the future is not much better.”16
Deming’s revelations, and a widespread fear of Japan’s growing dominance, spurred a flurry of activity that culminated in what is known as the quality movement. Companies invested in their quality departments, and many of Deming’s statistical methods became standard practice.
In the late 1980s, methods used in Japan were introduced in the US by Shingijutsu – a consulting organization made up of former leaders at Toyota-affiliated companies. Toyota had been actively sharing its methods with its suppliers, essentially letting the cat out of the bag. These methods, which included just-in-time (JIT) and other concepts, became collectively known as “Lean.” Today, Lean methods are widely used in companies throughout the world, including in many companies you will meet later on in this book.
Toyota has also become the role model of continuous improvement that many companies aspire to. There are dozens of books about Toyota and its leadership philosophy, and the company’s methods are widely proliferated through courses, seminars, and industry events. Toyota also shares its methods widely through its affiliate not-for-profit educational organization, the Toyota Production System Support Center (TSSC).
Through the ensuing quality movement, organizations made significant improvements. Workplaces became safer, defects decreased, and production lines became less wasteful. Just-in-time, the practice of ordering materials in smaller batches to reduce the costs and disruptions of handling inventory, became standard practice in supply chains. And many of these improved quality management practices were codified in international ISO standards that cover not only industrial efficiency, but environmentally sustainable practices in virtually every industry.
However, the true productive power of the methods Deming and Toyota had put forward was seldom realized. In the following sections, we’ll look at why.
A DIFFERENT FOCUS
Perhaps the most influential proponent of modern command-and-control management was Alfred Sloan Jr., the iconic CEO of General Motors. His 1963 book, My Years at General Motors, is still regarded by many as the definitive work describing the structure of the American corporation. The key to GM’s success, Sloan wrote, was allowing his divisions – Chevrolet, Buick, Cadillac – the flexibility of pursuing their markets while exercising centralized control. “How could we exercise permanent control over the whole corporation in a way consistent with the decentralized scheme of organization?” he wrote.17
Control was all about controlling the purse strings. “Silent Sloan,” as he became known as, was very much a “behind the scenes” manager who depended on financial reports for his decisions. This was in stark contrast to the approach of Japanese companies that would soon be grabbing market share away from GM.
Toyota’s leaders, by contrast, were keen observers of shop floor productivity, as documented in Welcome Problems, Find Success by Kiyoshi “Nate” Furuta. As the top HR executive at Toyota, Furuta was at the table when Toyota made some of its most important strategic decisions.
“Toyota Japan used a single manufacturing KPI: productivity,” he wrote. “Other factors – such as quality, safety, and employee morale – were determined to be drivers that boosted labor productivity.”18
Senior management meetings at Toyota, he wrote, were all about productivity. “On a monthly basis, we discussed productivity improvement towards the annual target at executive meetings at a host plant (rotated every month)…. Plant management checked progress on labor productivity and its drivers, such as quality, safety, run ratio of assembly, or daily equipment uptime based on a daily plant productivity indicator.”19
Managers were also held accountable for return on assets (ROA). “I believe that when processes or operations are improved, a good business result will follow,” Furuta wrote. “But business management also requires forecasting and making decisions based on unforeseen events: What will demand be? How much should we invest? How much cash should we have?”20
“To fulfill customer need, we have to install capacity, and when we do so, we incur risk and we also bring into the equation some complexity in terms of how we think about profitability and productivity,” notes John Shook, Senior Advisor at the Lean Enterprise Institute, who wrote the Foreword for Furuta’s book. Toyota’s results, financial and otherwise, have been nothing short of phenomenal. Toyota continued to grow its productivity even through the 2008 meltdown that precipitated GM’s insolvency. “This single KPI at Toyota Japan spurred amazing results: productivity increased at 3–5% a year for almost a half century, even during times of recession, or when Toyota was relinquishing production volume to overseas plants.”21
The key difference is that while GM’s executives were sitting in boardrooms discussing reported results and then using those to surmise what the company’s problems were (some refer to this as managing through the rearview mirror), Toyota’s executives were focused on shop floor events, constantly on the lookout for subtle signals from the workforce. This emphasis on frontline activity exposed them to the conditions that were driving the performance of the company, allowing them to exercise far greater foresight in their decisions.
A MISSED OPPORTUNITY
In 1984, GM and Toyota entered into a unique joint venture. GM was keen to learn the secrets of Toyota’s phenomenal productivity, while Toyota was planning to build factories in the US and wanted to gain an understanding how it could implement its Toyota Production System in a North American work environment.
The resulting enterprise was called New United Motor Manufacturing Inc. (NUMMI). Through the partnership, a shuttered GM plant in Fremont, California, was revived. This had been GM’s worst performing plant, characterized by poor morale, a plethora of quality problems, and a toxic relationship between workers and management.
Nate Furuta, the executive who negotiated the labor agreement with United Automotive Workers (UAW), commented on the atmosphere preceding the agreement. “Employee grievances numbered in the thousands, and stories were rampant that workers intentionally sabotaged processes and products. Fremont under GM was the exact opposite of mutual trust.”22
Because much of the original workforce was hired, the experiment provided a true apples-to-apples comparison between the Toyota Production System and GM’s traditional command-and-control methods.
The venture proved to be a phenomenal success. Workers embraced the Toyota Production System, learned the methods, and experienced respect that they never saw in the previous plant. “Workers preferred the NUMMI system to the old combative one at GM,” Furuta wrote. “Many told us they enjoyed coming to work for the first time in their lives.”23
In the first four years of the partnership, the plant rose from the worst-performing GM plant in North America to the best. The success was documented in the groundbreaking book The Machine That Changed the World by Jim Womack and Daniel Jones. Many hoped that the overwhelming evidence of this superior management system would revolutionize management practices in the US.
That, however, never happened. GM pulled out of the venture as part of the restructuring from its 2008 bankruptcy, and the NUMMI experiment was discontinued in 2010 by mutual agreement between Toyota and GM. Both parties had benefited from the experiment. Toyota had gained insights on how the Toyota Production System can work in a diverse unionized environment outside of Japan. GM had gained competencies in Toyota methods such as kanban and 5S. But GM senior management, it appears, never appreciated the importance of the culture that was so central to Toyota’s success.
