Basic Business Cents
Realistic Job Creation
“Improve quality of work processes » costs decrease because of less waste and rework » productivity increases » capture the market with better quality and lower price » stay in business » provide jobs and more jobs”
Chain reaction theory by Dr. W. Edwards Deming
Much is being debated today on how to best put more people to work and decrease our unemployment rate. Politicians argue about decreasing business taxes so the companies are better able to compete in the world market. Others argue that we should put up trade barriers to protect our industries from cheap foreign labor. Still others say the consumers should only buy American. To all these arguments, Deming would say, “Wrong! All wrong!”
Dr. Deming was an American physicist who was a leader in the application of statistical methods to improve work processes. He applied these methods to help the United States quickly ramp up production of war goods during World War II and later was credited with helping the Japanese turn around their economy after the war. He taught that work is made up of a series of processes, no process is perfect, and waste and rework is prevalent in all organizations because of defective processes. No process can ever be perfect but they can all be improved.
To those who say the answer to our high unemployment rate is to tax business less, it would just reduce incentive to improve their processes. It should be noted that there is much more opportunity to reduce waste and rework in administrative and management processes than in production areas. Firms have long used industrial engineers to improve production processes but seldom in finance, marketing, service, sales, and personnel areas. Usually only management has the authority to change processes so this drive to improve processes must be led from the top. As Deming said, those who are relentless in their efforts to make their processes more efficient and effective will be better able to compete and be increase their business. With success will come growth in payroll and more people hired.
To those who say we should put up trade barriers to keep out foreign goods will only serve to deprive American consumers from good products that will make their life easier and even put some of our producers at a disadvantage because they have to pay more for products needed in their business. We say we believe in free enterprise, so we need to practice it and learn to be competitive. Besides, it would lead to an escalation of barriers that would in time haunt us. The cheap foreign labor is less of a factor because of robotics and automation that make the labor content of production less of a factor. More of a factor than labor content is the cost of administration, shipping, travel, communication, warranty, and service. I am aware of a company who, after they focused on process improvement throughout their organization, shut down their Mexican production plant and moved the jobs back to Minnesota. I do not know of any company who improved productivity by process improvement in which any employees lost their jobs. The companies simply increased market share and created more and better jobs.
And for those who argue that patriotic Americans should only “buy American”, we must ask what is American made. Some reports say that some foreign named automobiles with production plants in the United States actually have more American made parts than American named autos. The reason for that is the foreign named producers have a manufacturing concept of maintaining a close relationship with suppliers and demand that they be located in close proximity to the auto assembly plant. Therefore the components are of necessity American made.
It is reasonable to assume that our product and service companies should stop looking to the outside for help, whether it be from government or consumers, and improve their own in-house processes to eliminate waste, rework, and redundancy so they can better compete in the world market. From this we see the promise of the improvement in unemployment is revealed in Deming’s chain reaction:
Improve quality of work processes > quality increases and costs decrease > higher customer satisfaction > increased market share > jobs and more jobs.