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America's Two Minute Warning.

America's Two Minute Warning. Jack Grayson and Carla O'Dell. Free Press, $24.95.

THE FOURTH QUARTER

How Pittsburgh can beat Osaka by Tom Peters

Fortune magazine's November 9, 1987 issue featured a contro9versial cover story on the Harvard Business School. But probably few of America's corporate leaders noticed a small item on page 88, a box that summarized an interview with Honda's new president, Todashi Kume.

Honda is already, by some measures, the most productive automotive company in the world. It's product development cycle, the time it takes to design and manufacture a new modes (such as the Acura), is estimated to be one-third or one-fourth as long as that of its U.S. counterparts. Yet in the interview, Kume declared that his near-term objective, not a 20-year plan, was to triple the company's productivity. Moreover, he said, Honda already has the tools in place to do it.

Words like "double" and "triple" must be talked about the American management, too. Triple the training budget, double productivitiy, cut defeats by 90 percent, reduce inventory by 90 percent, slash product development cycle times by 75 percent.

There isn't a candidate running for president who hasn't talked about competitiveness, and what America must do to remain the world's foremost economic power. Jack Grayson and Carla O'Dell suggest that we face a more sobering question -- what do we have to do, not to lead, but to survive a major economic power int the twenty-first century?*

It's a question that both have spent a great deal fo time considering. In 1977 Grayson founded a think-tank called the American Productivity Center where his co-author Carla O'Dell was a senior consultant and vice-president before starting her own consulting company.

They believe that America can compete but warn that we can only do so when American businesses sense the competitive danger and act. So far most haven't. "(Only) a relatively small number of firms are making the kind of changes required," they warn. "The majority of American firms are not responding at all, doing very little, or engaging in a flurry of activity, much of it short-term cost-reductions, layoffs, slam-bang automation, and closings of inefficient operations...Such efforts give the appearance of adjustment but have not changed the core way firms do business."

Unlike a lot of critics of American business, Grayson and O'Dell have given us something truly useful -- a 130-page agenda of actions management can take to bolster American productivity.

They propose, for instance, a complete rethinking of the last nine decades of conventional managerial wisdom. Their agenda calls for "small operating units...fewer management levels, team structure...customer-driven schedules and procedures...flexible product mix...flexible equipment." To be sure, few of the ideas for spanking new. But the conciseness of their presentation and the authors' unique depth and breadth of experience at the American Productivity Center and elsewhere makes the book important. No one, to my knowledge, has had the audacity to combine such a profound analysis with a practical agenda.

The authors begin with the usual litany of statistics chronicling the American decline, from plummeting real wages to stagnant productivity to staggering debt to the trade fiasco and problematic SAT scores. The compactness of their list sends one reeling with bad news. After all, these are the experts on the nuances of such statistics, and they find no good news at all. they even write off the recent up-tick in manufacturing productivity as a flash in the pan, the result of "onetime cost reduction and clearing out of inefficientcies...not indicators of a fundamental turn for the better."

Mahogany walls, economic decay

In one particularly eerie passage they remaind us just how other contries have fallen off the pedestal of economic greatness. That's a familiar idea, of course, but they have a knack for making it truly frightening. The parallels between their declin and ours are chastening in their exactitude. For instance, the authors quote E.E. Williams, the British author of Made in Germany, the Victorian version of our books on everefficient Japanese management. Williams warned his nation in 1896 of industry's failure to heed the threat of German competitiveness: "(British managers) rely too much upon the superiority of England already acquired...Their methods of conducting business in many English houses is as rigid as their own cast iron....It is mainly the of scientific skills that Germany excels....They do not know as many languages and they do not take the trouble to study the needs of their foreign customers....The Germans have come to England to learn our method on the spot. (They) have been following the English step-by step, importing their machinery and tools, engaging, when they could, the best men from the best shops, copying their methods of work and the organization of their industries."

How do we avoid the fate of England? O'Dell and Grayson's guiding premise is that the answer to our woeful national economic performance lies within the firm. Of couse, "macroeconomic" variables like fiscal and monetary policy formulated in Washgiungton are important. But the more important challenges are being faced in Detroit, Pittsburgh, Tampa, and in corporations across the country. (One fault of the book is that, with the exception of an occasional mention of Federal Express, for instance, it concentrates on big, older, mainly manufacturing firms, ignoring moderate-sized firms of the $75 million-$750 million range and the service industries. Likewise, their government agenda compleltely ingores the increasingly important and innovative role of the states.)

In the form of agendas, Grayson and O'Dell present a series of proposals that can stem -- and reverse -- the slowdown in productivitiy. They believe that the problem is not so much antiquated equipment (although that's important) but the human factor, which is ingnored by managers and government officials alike. Their lists, while seemingly bland in the retelling -- employment stability, training and continuous learning, accounting, systems, symbols -- are nothing less than a management would turned upside down, as is the call for "structural changes in decision-making and control, pay, and job organization design that violates the old managerial control model learned in business schools or from former bosses."

In their plea for "redefining the organization" the authors decry the tendency of American business to confirm workers to "functional silos" where they neither the creativity to be happy with thier work nor the freedom to respond to crisis. Grayson's American Productivity Center has pointed to many companies that have seen their productivity shoot up by working to gether, not separately. In the book, they cite Goodyear's Lawton, Oklahoma plant, staffed by 164 teams of five to 27 members each called business centers, which are not only independent but have unusual responsibilities. the teams set their own goals for productivity, cost, waste, and most measures of business performance. They're overseen by four plant coordinating teams -- but their overrifing agenda is teamwork and flexibility. The result? Goodyear's chairman, Robert E. Mercer, boasts: "The Lawton-delivered tire cost will beat the cost of comparable tires from the lowest-cost foreign producers, meaning the 3Koreans who think the Japanese are lazy."

On the issue of pay, Grayson and O'Dell join the growing (but not yet successful) ranks of those urging much greater use of variable compensation: "Most American employees, blue-collar and white-collar, correctly believe there is little connection between their pay and producitivity or quality...A 1982 survey of Japanese workers found 93 percent believe they will benefit from improvement in their employers' performance. That is not the result of blind loyalty. consider that in 1986 less than 0.9 percent. of Americans' earnings were in the form of flexible bonuses; in Japan, it was 28 percent....Flexible compensation would give Americans a clear financial stake in productivity and quality improvement, but that is rearly the case in the United States now."

Perhaps the most compelling item on their agenda calls for American managers to put a greater emphasis on "training and continuous learning." At a time when the trade deficit is soaring, and U.S. companies are scrambling to find ways to outsmart their Asian competition, merican companies are devoting fewer resources to training. Grayson and O'Dell note that the number of employees trained and the number of hours of training in the United States in 1986 were down by more than 14 percent from 1985.

"The Japanese spend three to four times the U.S. annual amount per employee on training....The Japanese company-based training system revolves around the concept of a flexible worker. The aim is to select and prepare employees not for one job, but at least two or possibly three, and then to continue to provide learning experiences throughout their working lives....As an order of magnitude, our estimate (is) that most firms should consider doubling or tripling allocations of time and money for training (emphasis added)....(Many) managers believe that training is a cost, not an investment, that it takes people away from their "real work...accounting theory does not put human assets on the balance sheet...the tax code does not encourage to permit capitalization of personel acquisition development costs...many managers fear that once employees are trained they will leave for higher-paying jobs with the compeition...this narrow and traditional view must change."

The authors muster the numbers with skill but they also write with an eye towards the little but telling signs of lethargy in many corporations: "We have walked into many corporate offices where we can literally feel the loss of vitality and flexiblity. Not a physical decay, certainly, but an aura of stodginesss and allegiance to standard operating procedures exudes from the heavy pile carpets, the mahogany walls, and the shelves of policy manuals."

Is anyone listening?

While they devote most of their attention to reforming american firms, Grayson and O'Dell do have an agenda for those in Washington. Democrats, who are promoting some of the most protectionist legislation in two generations, should take heed to their arguments against closing markets. The Reagin administration ought to take notice to their strong arguments against currency devaluation as a way of promoting U.S. trade abroad.

And to those reformers who do understand the threat of foreign compeition, they make a compelling argument against an industrial policy that puts government in the ackward position of deciding how to allocate capital. "Many of the authors and administrators of policies and laws are lawyers...and economists and other scholars who know little about actual business operations....Government cannot plan long range and cannot stay on top of rapid and continuous adjustments called for in a dynamic marketplace."

Grayson and O'Dell do see an important role for the government, especially in education. One major problem is that the United States is educating a bright elite at top universities, but not a high average level of citizen. "The result is a norrow pool of U.S. talent, not the deep and wide base, as their is in Japan, of skilled technicians, machine operators, supervisors, and service people who can write computer programs, follow blueprints and technical manuals, builds, maintain, and troubleshoot their own equipment, interpret statistics for quality control, work well in teams, and learn as they go." In Japan, they write, the average worker can do all this because he or she has been taught, among other things, to understand graphs, charts, and statistics, and can work with some mathematical notation. In the U.S., those skills largely belong to a few engineers who are increasingly separated from daily manufacturing operations.

I will look with interest to the reception that this book receives. Will the authors, even in light of the Crash of '87, be tagged alarmists? Will their suggestions be called outrageous? I wouldn't be surprised. There's been a steady undertone to the criticism of my most recent book. Thriving on chaos: Handbook for a Management Revolution -- the ideas are too revolutionary, the goals too bold. (Some of those ideas are carbon copies of those found in Grayson and O'Dell's analysis. For instnace, I propose a several-fold increase in training budgets.) The Grayson and O'Dell analysis, in my opinion, is fundamentally correct. My only argument is that perhaps they should have been a little less true to their foot-ball metaphor. If it had been my book, I would have titled it: America: The Thirty-Second-Warning.

Tom Peters's latest book is Thriving on chaos: A Handbook for a Management Revolution. (Alfred A. Knopf).
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Author:Peters, Thomas J.
Publication:Washington Monthly
Article Type:Bibliography
Date:Feb 1, 1988
Words:2062
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