Productivity: An urgent matter of political concern?
Productivity: An urgent matter of political concern?
By Simon Potter
JAKARTA (JP): In my home country, the United Kingdom, simply
mentioning the word "productivity" is enough to raise the hackles
of many individuals. The history of productivity in the UK is
inextricably bound up with that of the trade unions and their
often bitter labor disputes.
Even today, many working men and women regard productivity
improvement with suspicion. They think that it will take away
their jobs, or only be of benefit to the bosses, that it will
mean more work for less money, or that it will reduce job
satisfaction. Still others believe that productivity belongs only
on the shop floor and that it has no place in an office or in the
boardroom.
The bitter experience of trying to improve productivity in
industry in the 1970's and 1980's has meant that even today,
productivity has many negative overtones in British society, and
efforts at improvement are often met stiff opposition.
The situation in developing nations however, is somewhat
different. In Indonesia for example, the main difficulty is lack
of information about the subject. Despite the efforts of bodies
such as the Indonesian Institute for Productivity, many decision
makers are woefully ill-informed about productivity and how to
improve it.
Currently, productivity improvement cannot be described as a
priority, simply because Indonesia, with about a 7-percent
economic growth rate over the past decade, is doing so well.
But in the future, things are set to change. At present,
Indonesian goods are competitive on the world market primarily
because of cheap labor. Yet with the continuing development of
China, Vietnam and others, Indonesia will see this competitive
advantage wither away, and will need to be well-versed in
productivity improvement techniques if it is to continue to
compete.
The Indonesian government has recognized the importance of
productivity by making November of each year "National Quality
and Productivity Month", but there needs to be concerted effort
to disseminate information and train and educated people, if the
country's economic success is to continue.
Countries which are currently leading the field economically,
have usually placed a high priority on productivity. Japan for
example, under the auspices of W. Edwards Deming, based its'
recovery program after World War II on the twin principles of
quality and productivity, and as everyone knows, it has been
raping the benefits every since.
For others, especially developing countries and those nations
who have seen their competitiveness decline in recent years,
productivity needs to become an urgent matter of political
concern.
More and more, analysts are identifying productivity as the
single most important progenitor of socio-economic growth.
Without policies to actively encourage improvements in
productivity, governments will increasingly face mounting
difficulties.
Take the U.S. as an example. Productivity needs to be
dramatically improved if the government is to cut the federal
deficit which is currently running at some US$8,000 for each of
its' citizens, men, women and children. To make matters worse,
the nations's infrastructure, so long deteriorating is requiring
more and more funds to maintain and repair, and the population is
aging fast. Currently 3.4 workers support each retired person.
This figure could well drop to below two workers per retiree once
the baby boomers start retiring around 2010. Pay awards in excess
of productivity improvements have not helped matters; on the
contrary, they have contributed to greater inflation and
unemployment.
If the U.S. does not find a way to alleviate this situation,
intolerable political pressures will build up.
Traditionally, governments have sought a fiscal answer to such
problems. But the U.S. government appears to have reached its
taxing limit, and many businesses and industries seem to have
reached their tax paying limits. What is in fact needed is less
fiscal intervention and more incentives to increase and improve
goods and services by improving productivity.
The situations in the U.S. is more or less reflected in other
developed nations, and as a consequence we will see productivity
moving more and more to the top of the political agenda, as
traditional methods for dealing with a nation's problems are
increasingly seen to be ineffective.
It is one thing however to decide that improvements in
productivity ought to take place. It is quite another to realize
them. Even with the best will in the world, most governments will
face innumerable difficulties in implementing productivity
programs.
There are two approaches available; at the macro and the micro
levels.
On the macro level, there is strong evidence that the
following variables affect productivity: the changing composition
of the workforce, investments in human and physical resources,
technological advances and economies of scale. Governments need
to implement programs directed towards making full use of these
factors in order to improve productivity. All such programs
should be government by the following principles:
1. Facilitate the transition from an agricultural economy to an
industrial economy to an information economy.
2. Facilitate the movement of women into the workforce.
3. Provide education, training and re-training.
4. Encourage the free movement of labor.
5. Provide specific incentives for investment.
6. Provide low-interest loans for small and medium sized businesses.
7. Provide research and development funds to encourage innovation
and the development of new technology.
8. Encourage the dissemination and application of new technology as
widely as possible.
9. Encourage mergers, consolidations and strategic alliances.
10. Establish export assistance, especially for companies that
benefit most from economies of scale.
11. Aid economic restructuring to best benefit from the nation's
comparative advantages.
12. Create new jobs by improving competitive position and market
share.
Regardless of the type of economy, the basic problem remains
the same: How to make the most of often limited resources. Many
governments however, often find it hard to think of their
programs in such a way, and consequently have difficulty in
identifying what it is exactly they wish to achieve, and then
doing it.
On the micro level, that is at the level of the firm, certain
basic conditions must exist before a company can operate
productively. There must be effective control of crime and
corruption. A company cannot operate productively if it has to
bribe the police, the local government, the military, the
manpower department and so on.
There must also be minimal labor relations problems. A company
cannot function effectively if its staff are disaffected or
openly hostile.
There must be competent managers and dedicated employees and a
minimum amount of red tape and bureaucracy.
Above all, for a program of productivity improvement to
succeed, there must be a mood within the company which is
acceptable to change.
Only when these conditions exist can a company begin to think
about improving productivity. This can be done in a number of
ways, ranging from top-down management directives, to bottom-up,
grass-roots efforts. The guiding principle should always be how
to make them most from existing resources, be they capital,
technology or people. For many companies, its employees represent
the biggest portion of its' underutilized resources. Among
measures to make better use of a company's people are:
1. Make jobs more secure in order to encourage employee loyalty.
2. Pay more to employees (without hurting competitiveness).
3. Reduce job stress, improve job satisfaction.
4. Promote an employee's sense of self-worth.
5. Invest in training and education.
Productivity permeates every aspect of our lives, at work at
school and at play. The human urge to create, to produce, has
been recognized in the world of the arts for centuries, and has
been described as being inextricably bound to what human life
itself stands for.
And in this era of globalization, productivity is more and
more becoming, not simply one aspect of human existence, but an
increasingly important economic and political priority.
The writer works at the Lembaga Produktivitas Indonesia
(Indonesian Productivity Institute) in Jakarta.