Tuesday, May 11, 2010

Is U.S. Productivity at its Limit?

According to the USA Today, printed in the Friday, May 7th, 2010 edition, a glimmer of economic hope is seeming given with news of U.S. productivity and our job market. The slowing of U.S. productivity to a mere 3.6% annual rate in the first quarter and applications for unemployment dropping over the last three weeks led analysts to predict an increase in hiring as growth in production, the output per hour of work, is predicted to slow even more.

As quoted in this article, Nigel Gault of HIS Global Insight stated, “Companies are close to the limits of what they can do with their existing staff. They are going to have to start rehiring people.”

Hogwash! Not even close! Yet Mr. Gault's prediction may end up correct despite the flawed data, in my opinion.

Instead of looking at their spreadsheets and computer models, these analysts need to go to gemba to see for themselves. The only problem is that they probably don’t know what to look for if they did. From my gemba perspective, limited to the small sample size of companies I know about, U.S. manufacturing companies have only made a small dent in productivity. They same goes for our service industries or any other category for that matter.

There are still vast amounts of waste remaining in our processes if we only could see it.

So I believe that there are still enormous opportunities in the U.S. to substantially increase our productivity.

On the other hand, I see limitations in what companies are doing to improve and the rate of their improvement. The majority of companies in the U.S. are not relentless pursuing a path of waste elimination and continuous improvement. As demand picks up (not really noted in the predictive analysis), companies may in fact start rehiring.

1 comment:

curiouscat said...

You are right. He probably meant "they need to hire people to increase production given their current capabilities." They don't think of system improvement as an option. They only think of making people work harder and hiring more people.

They (economist/analyst) do talk about productivity but it is almost always about buying new efficient machines and "IT productivity" improvement - not good old management improvement :-)