Viewpoint -- A Potent Combination

This viewpoint is based on results of the Fourth Annual IndustryWeek Census of Manufacturers, a massive editorial research project that was designed to collect information about U.S. manufacturing trends, best practices, and specific manufacturing performance metrics. To that end, two questionnaires were developed: a mail survey that targeted plant-level manufacturing executives and a telephone survey aimed at corporate-level manufacturing executives. The research was conducted in association with PricewaterhouseCoopers. More than 3,300 survey responses were collected during the spring of 2000. New manufacturing approaches such as lean manufacturing, agile manufacturing, and Six Sigma quality put great emphasis on achieving flexibility by developing a multiskilled, cross-functional workforce. Further, these programs emphasize the importance of training to accomplish multiple improvements in manufacturing. Fourth Annual IndustryWeek Census data provide some evidence about the operational payoff from these efforts. Cross-functional workforce. Virtually all of the new manufacturing management approaches and the experts who advise managers on how to implement these approaches suggest a heavy reliance on a multiskilled, cross-functional workforce. Further, recent evidence provided by IW's Best Plants program shows that the best manufacturers make extensive use of a multiskilled workforce. The Fourth Annual IW Census indicates, however, that this practice is far from universal. Fewer than 23% of plants report extensive use of a cross-functional workforce, while approximately 18% indicate no implementation at all. More interesting, IW Census data allow us to explore the impact of multiskilled teams on key plant performance indicators. IW Census data allow us to create a cross-tabulation of three implementation levels of a cross-functional workforce (none, some, and extensive) against high achievement on three performance measures (95% or greater first-pass yield; 95% or greater on-time delivery; and five-year productivity improvement of more than 40%). The results are clear and pretty much as expected. Extensive use of a cross-functional workforce appears to pay performance benefits. For example, only 51.0% of plants that report no use of a flexible, cross-functional workforce achieve a first-pass yield of 95% or higher, while 66.5% of plants with extensive implementation of a flexible workforce achieve first-pass yields of 95% or more. A similar story emerges for the other two performance measures. In particular, productivity increases appear to be greatly affected by adopting a multiskilled workforce, with the percentage of plants reporting a greater-than-40% increase in productivity more than doubling between plants with no implementation (3.3%) and extensive implementation (8.0%). Training. Training is a key ingredient to achieving multiple, cross-functional skills in the manufacturing workforce. It is not a surprise, therefore, that the effect of training on performance is similar to the effect of implementing a cross-functional workforce. The cross-tabulation of annual hours of training per plant employee versus the various performance measures bears this out: The more hours of training, the higher the likelihood of achieving top performance metrics. Slightly more than half (51.4%) of plants that provide fewer than eight hours of annual training per employee achieve first-pass yields of 95% or greater. The percentage of plants reporting high first-pass yields rises dramatically (67.2%) for plants that provide more than 40 hours of annual training per employee. A similar relationship exists between training and the percentage of plants reporting a high rate of on-time delivery. The most dramatic effect is seen among plants reporting five-year productivity improvements of more than 40%. Fully triple the fraction of plants reporting high rates of productivity gain provided more than 40 hours of training compared with plants that provided fewer than eight hours of training (8.9% vs 2.8%). We expected that significant performance benefits would accrue to plants that implemented workforce flexibility at high levels and to plants that provided increased levels of formal training. But IW Census data tell us more. Beyond confirming what many already believed about the performance payoffs of investments in a flexible workforce and training, IW Census data also show that training and workforce flexibility can be a potent combination. Benefits of both a flexible cross-functional workforce and training. The combination of extensive implementation of a cross-functional workforce and training can be clearly demonstrated. More notable, plants that have implemented both training and a flexible workforce at high levels enjoy a significantly greater likelihood of achieving a first-pass yield of 95% or greater than plants that have extensively implemented cross-functional workforce, regardless of training levels (70.3% vs 66.5%). Similarly, plants that do both -- provide training of more than 40 hours annually per employee and have extensive implementations of a flexible workforce -- are more likely to achieve high rates of on-time delivery. Again, striking differences occur with regard to high productivity. Plants with extensive commitments to both training and a flexible, cross-functional workforce were more likely to achieve the highest levels of productivity growth than those that implemented only a flexible workforce extensively (13.3% vs 8.0%). Intuition would lead us to believe that high levels of training and a flexible workforce are related, and that both would contribute to improved plant performance. Fourth Annual IW Census data support such a common-sense conclusion. They show that the performance differences attributable to training and a flexible, cross-functional workforce are significant. Moreover, they are achieved across a broad range of apparently unrelated performance metrics, suggesting that quality, delivery, and productivity are all enhanced by high levels of training and the implementation of a flexible cross-functional workforce. Finally, it also can be shown that there is a positive interaction between training and the extensive implementation of a flexible, cross-functional workforce. This interaction effect means that the biggest benefits occur when plants are able to do both: implement a multiskilled workforce and provide the training to support it. Both training and developing a multiskilled, cross-functional workforce require real investments, sacrificing some of today's potential output for tomorrow's gain. The IW Census data suggest manufacturers that make such investments are likely to reap rewards in terms of tangible improvements in key plant-level performance measures. Peter T. Ward is an associate professor and research director for the Center of Excellence in Manufacturing Management, Max M. Fisher College of Business, The Ohio State University, Columbus, Ohio and Rachna Shah, doctoral candidate, research assistant, Center of Excellence in Manufacturing Management, The Ohio State University.