The Future of Manufacturing

By Fred Stahl

How can American manufacturing recapture its former dominance in the globalized industrial economy? The answer is Worker Leadership, a revolutionary concept for organizing and managing production that creates highly productive jobs loaded with responsibility and authority. Workers love these jobs precisely because they offer big opportunities to be creative and productive. Enterprise managers and capitalists love the profits. And revitalized unions love the shared responsibility with management for growth and profitability. Below, Fred Stahl argues that Worker Leadership is the future of manufacturing.

America can again be the manufacturing juggernaut it once was. The secret of success will be a new kind of production system. More than any other, this new system of work uses the most valuable asset of any enterprise—the minds of its workers— to lead production.

This revolutionary production system depends on an unconventional theory for organizing work and managing workers. Many managers strive to improve productivity by supervising workers using methods derived from a popular but ineffectual premise: that a happy worker is a productive worker. The new Theory of Worker Productivity releases the productive power of the workforce by applying a fresh and effective premise of human behavior in work:

A productive worker is a happy worker.

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People are attracted to opportunities to be productive because they get satisfaction from being productive. The bigger the opportunity to be productive, the more attractive the job, and the greater their job satisfaction—in any organization, not just a factory.

People are attracted to opportunities to be productive because they get satisfaction from being productive.
The practical question is how to redesign production systems to create jobs with those big opportunities. The answer is to give trained teams of workers responsibility and authority for production operations and control of manufacturing processes— what I call Worker Leadership. Though the teams are autonomous, they are not independent. They are responsible for meeting product specifications, process standards, and operating goals..

Worker Leadership builds on a physical system of production designed using policies and practices of “just-in-time” (JIT) and related methods developed by Toyota. Only with transparent, austere, and defect-free flow of work can workers take control of, and lead, production operations. The upshot is that Worker Leadership can out-produce even Toyota’s famous “lean manufacturing,” since it creates significantly bigger and more productive jobs.


A Revolution in Production

A research team from the Massachusetts Institute of Technology was the first to uncover what we now call Worker Leadership. The U.S. Air Force chartered and, together with the U.S. aerospace industry, funded the research project. Its goal was to find examples of lean manufacturing that could be applied to lower the cost of making aircraft. The researchers made an unexpected discovery—an extraordinarily innovative production system in operation at the John Deere Harvester Works in the American Upper Midwest. Dick Kleine, the general manager of the Harvester Works, had combined the methods of lean manufacturing made famous by Toyota with a system of worker empowerment unlike anything the team of manufacturing experts had seen before.

That shift in power is the heart of Worker Leadership: the transfer of substantial authority and responsibility for production from supervisors and front-office employees to teams of workers on the shop floor. The foremen are no longer in charge. (They are retrained as coaches.) A leader of a “mini-factory” at the Harvester works said of the workers “I just hang up the schedule for the day, and they take charge.” That is Worker Leadership in action!

The business results at Deere were dramatic. In the six years following the beginning of the changeover, output per production employee at the Planter Factory (then one of the divisions of the Harvester Works) more than doubled. And while total output almost tripled, the number of salaried and support employees declined by 20 percent. Not only had the blue-collar workers become more productive, they had taken on tasks formerly done by the white collars.

Accountants at Deere headquarters were also pleased by results. The financial return on the $13 million Dick Kleine got from the Deere board for capital expenditures at the Planter Factory exceeded 100 percent.

Worker Leadership builds on a physical system of production designed using policies of “just-in-time” and other methods developed by Toyota.
Subsequently, a team of manufacturing specialists from The Boeing Company conducted a two-year, worldwide benchmarking effort to find and study top-performing production systems. We found none better Kleine’s.


The Bigger Picture

Both observed practice and scholarship about workers and work have much to say about the ideas of Worker Leadership. Some researchers find that programs of worker participation in workplaces with high levels of trust increase workers’ intrinsic rewards from work and thereby improve organizational commitment. Although the data came from industrial plants with modest levels of worker involvement, the correlations support the Theory of Worker Productivity.

Other scholars alert us to hazards in the design of work, such as designing the technical side of production independent of the human side. Progressive managers agree. “Only about 7 percent of the companies that start lean actually do it,” says Rich Calvaruso, the executive in charge of lean manufacturing at the General Electric Appliances plant that opened in early 2012 in Louisville, Kentucky. “What we have been doing is trying to figure out the secret sauce that makes that 7 percent successful. We believe it is about people and the process and how they work in conjunction.” Both scholars and practicing managers agree, integrated system designs, such as Worker Leadership, can achieve world-class productivity and quality.1


Unions

Of course, in organized plants unions must be involved in the transformation to Worker Leadership, since changes in responsibilities and authority affect job content and work rules. But what are the institutional consequences for unions?

Union leaders are optimistic about Worker Leadership since it serves the interests of enterprises, workers, and unions. They see it leading to higher productivity, better quality, more profitable plants, and significantly greater industrial competitiveness, all of which translate into better jobs and greater job security.

Some labor leaders see more decisive benefits: a revolution in labor relations. Here is how one official in the headquarters of an international union put it to me:

Worker Leadership promotes the vitality and growth of labor unions through a shared responsibility with management for the profitability and growth of industrial enterprises. The adversarial nature of labor unions is over; the principals of shared responsibility and cooperation in an environment of enlightened management is the future. 

If everyone cooperates in making Worker Leadership work, everyone benefits. Workers get better jobs, enterprises are more productive, management gets better profits, and unions get vital roles in improving the competitiveness of enterprises.


International Competitiveness

The United States is the world’s largest economy. Its gross domestic product far exceeds that of any other country. But there are disturbing signs of economic stagnation, if not decline, aside from the “Great Recession” that began in 2008 as part of a global economic meltdown. Unemployment has been at levels not seen in decades, job creation is stuck in low gear, and economic growth is tepid.

What can be done to help the American economy? Some policy makers and some economists see the country’s waning global competitiveness as a national policy problem. Along with some leaders of industry and of labor, they point to large and chronic trade deficits, particularly with China, and to unfair barriers to U.S. exports. They urge government action, such as getting tough with China for its trade barriers and currency manipulation.

Others disagree. According to the economist Paul Krugman, the “idea that a country’s economic fortunes are largely determined by its success on world markets is… flatly wrong,” and “the world’s leading nations are [not] to any important degree in economic competition with each other.”2 He’s correct. Trade deficits are fundamentally aggregate consequences of individual producers’ competing head-on in markets for products. It’s enterprise against enterprise.

How do manufacturing practices of competitors in China stack up against Worker Leadership? Some companies in Mainland China are successful with lean manufacturing, but most are not. Consequently, Worker Leadership built on a foundation of lean manufacturing is the fast track for American producers to achieve and sustain competitive superiority over manufacturing competitors in China.

But there’s more. My research has shown that, relative to other national cultures, workers from the American culture of rugged individualism are especially effective as leaders in the workplace. Worker Leadership harnesses the American national culture as a powerful but invisible advantage in the battle for industrial competitiveness.


I Am Optimistic

In the future, the most successful enterprises will be built by managers, workers, and unions working together and guided by Worker Leadership. They will create jobs that offer workers big opportunities to use their commitment, diligence, experience, initiative, and intellect to improve not only their personal productivity but also the competitiveness of their enterprises. The result will be the productive, dignified, and satisfying jobs that workers love.

The most successful enterprises will be built by managers, workers, and unions working together guided by Worker Leaderships who will create jobs with big opportunities.
But make no mistake. Transforming production to Worker Leadership is a tough job. The first step is the most critical and perhaps the most difficult: changing the factory culture. Managers are often stubborn obstacles to change. The top boss must lead change by either converting them to enthusiastic missionaries or moving them out of the way. At issue is whether reactionary management cultures will torpedo fresh new systems of Worker Leadership despite their potential to increase profits? Or will visionary leaders overcome the anchor draggers and seize the competitive advantages that Worker Leadership offers? Are small jobs, degrading work, autocratic supervisors, cynical managers, and motivational shenanigans immutable consequences of human power structures in production enterprises? Or will enlightened managers overcome their fear of the risks of change, relegate antique management systems to the dustbin of history, and grasp the opportunity to make the United States the industrial juggernaut it once was?

I am optimistic. I believe in the power of ideas. Stories of Worker Leadership teach us that practical men and women can transform failing enterprises into tough competitors run by teams of workers who love a market fight. Teams genuinely free to be productive are the essential ingredient. Although the ideas of Worker Leadership are simple, too many managers don’t “get it.” No matter what you do in a factory or an office, no matter where you are in the world, you can help to rescue workers, managers, unions, capitalists, and enterprises from the economic penalties and the moral morass of two centuries of cynical management. You can “get it”! Study stories of change and the twelve Essential Features of Worker Leadership and grasp the future of manufacturing!

Reprinted by permission of MIT Press. Excerpted from Worker Leadership: America’s Secret Weapon in the Battle for Industrial Competitiveness by Fred Stahl. Copyright 2013. All rights reserved.

About the Author

Fred Stahl is author of Worker Leadership: America’s Secret Weapon in the Battle for Industrial Competitiveness and a co-author of Lean Enterprise Value: Insights from MIT’s Lean Aerospace Initiative. As a Boeing Company executive he was the corporate Chief Scientist for Europe and the Director of Production Transition. He was an early leader in the MIT Lean Aerospace Initiative and later its executive director.

References

1. Richard McCormack, “Q& A: Five General Electric Appliance Manufacturing Executives Explain the Process of ‘Reshoring’ Production to Kentucky,” Manufacturing & Technology News 19 (2012), no. 3.

2. Paul Krugman, “Competitiveness: A Dangerous Obsession,” Foreign Affairs 73 (1994), no. 2: 28– 44, pp. 30 and 34.

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