The consistency of unemployment
Marginal improvements not enough
Build trust, emphasize quality and service
Robert Brooks, Editor-in-Chief
The economic ups and downs of the past five years have left me in a near constant state of wonder: what’s the next fact to be undermined? What’s the next assumption I’ll have to dismiss? Amid all the change, one thing has remained reliable: unemployment. Despite strategies like economic stimulus and good intentions like worker retraining, high unemployment is a feature of our economy now.
The official U.S. unemployment rate has not dropped below 7.7% since early 2009. When that rate was posted for February it was characterized as positive, even though prior to 2009 there was a general assumption that 5-6% unemployment indicated bad economic news.
When the March figures showed new claims for unemployment benefits rose 28,000 to 385,000, in just one month, it struck me that some more assumptions will have to change.
I’ve been criticized when I opine that hiring people is not a reason for starting or operating a business. My view is that jobs should be done in the most efficient and reliable way available, and prioritizing the workers’ claims of their rights to hold on to jobs beyond their effectiveness undermines the first objective. The critics are right that it’s an insensitive view, but personal feelings have no efficiency rating.
My position is in line with the highest priority of manufacturers over the past few decades: achieving “productivity.” They raise productivity by investing in equipment and operations, and adopting practices and policies, that minimize or optimize the cost of production, and maximize the value of finished products. Productivity measures how well the investment costs are returned by business revenues. And thus, the cost of employing people should be kept to a minimum, just like every other cost.
Productivity is being measured in numerous ways that affect how we work, in the priorities we set for ourselves, and in the decisions we make. If you measure finished-part costs, kWh/ton, ROI, EBITDA, or man-hours/ton, then you’re measuring the productivity of your investment in raw materials, energy, capital, or labor. Measuring productivity is so common that achieving good productivity is no longer a distinguishing feature for a manufacturer. That’s the adjustment we’ll have to make.
Productivity measures marginal improvements, but it’s decreasingly effective at defining a business, setting it apart from its competitors, and thus decreasingly advantageous at securing new orders or holding on to a customer’s business.
Technology is a primary reason for this: any technology for cutting manufacturing cost and/or time is just as available to your competitors as it is to you. A new capability, once it has been proven to be effective and reliable, quickly becomes the customers’ preference, and then the market standard, before finally settling in as a commodity-grade level of service.
Also, we must consider that achieving productivity comes at a cost. It’s not a financial cost, at least not obviously, but constantly striving to lower actual costs leaves an organization or an individual vulnerable: we become over-extended in our obligations, unavailable for new or better opportunities. Worse, our routines become static and we overlook our shortcomings. We become less responsive to demands, less creative in our solutions. Then, the world is free to conclude we have lost our skills, or lost interest in the work we set out to do.
Anecdotally, all of us know this is happening. We take on extra jobs because we want the opportunity. We accept more responsibilities because a colleague or coworker has not been replaced — a decision made in deference to productivity.
High unemployment means that everyone who is working is overworked. Manufacturing workers are expected to have cross-functional skills. They’ve accepted that they must be available to fill in outside their areas of operation, or after hours. Clerical and managerial workers are accustomed to completing work after closing, working at home, responding to messages on wireless devices. We sense that even if things are not perfect, they may get worse. But what will we cut next?
Prioritizing productivity no longer engenders growth, and what we need now is a new standard for measuring the value of an enterprise: one that builds trust between producers and suppliers, that distinguishes the quality and service of manufacturers, and that assures and satisfies the expectations of customers.
Let’s call it “performance.” We’ll reemphasize the personal contribution that can be the deciding factor when costs, quality, and service are otherwise equal. We can reinvigorate an economy grown static because quantifying inputs no longer maximizes results. And if emphasizing performance gives us a new enthusiasm for improving our enterprises, and ourselves, then unemployment will become another assumption we can dismiss.