Newspaper article THE JOURNAL RECORD

New Studies Question Common Productivity Beliefs

Newspaper article THE JOURNAL RECORD

New Studies Question Common Productivity Beliefs

Article excerpt

Given anonymity and half a chance, corporate executives will talk about management fads as if they were a bad Cheez Doodles habit: controllable but not breakable.

They spend evenings chewing over the latest mutation of total quality and then hate themselves in the morning. They laugh sheepishly while ticking off the names of managerial miracle cures from years past _ remember work circles? _ most of which turned out to have the efficacy of Carter's Little Liver Pills.

Employees may be entitled to wonder if all new management paradigms should come with a laugh track.

Well, perhaps not. But evidence from several sources suggests that some of the self-initiated upheavals and changes in direction corporations have experienced in the last few years were misguided.

There is first a new study of manufacturing from the Center for Economic Studies at the Census Bureau that contradicts the common wisdom that cutting jobs _ "downsizing" _ is the most efficient way to increase productivity.

Examining Census Bureau data on 140,000 plants in operation from 1977 to 1987, the study found that "successful upsizers" _ companies that increased productivity and increased employment _ accounted for almost as much improved productivity as "successful downsizers," those that raised productivity by lowering employment.

One quick lesson, according to the report, is that the interplay of employment, productivity and growth is a "noisy, complex process." The particular characteristics of companies probably have more influence on their fate than industrywide trends.

Company owners look at overall data for their industry and see that productivity rises when jobs are cut.

"It's not irrational for them to infer that the thing to do is cut employment," said John Haltiwanger, a University of Maryland economist who did the analysis with Martin Neil Baily, also a University of Maryland economist, and Eric J. Bartelsman, an economist at the Federal Reserve System.

"Under certain conditions the best thing to do might be to reduce employment," Haltiwanger said. "But not always."

Rather than compare their performance with an industry standard, he contended, companies should measure themselves against other companies.

"There's a selection process in any industry," he said. "Those with the most cost-effective ways of producing and with the best product are going to do well even if the industry isn't."

None of the usual factors _ region or age or type of industry _ fully explains productivity losses and gains. The message for managers is to analyze the company before imposing a strategy, like downsizing, that may not be appropriate.

Haltiwanger declines to stray too far from his data, but he believes the study's conclusions apply beyond manufacturing. …

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