A company can have its production system positioned just right in relation to market requirements and still be technologically obsolete. The appropriate technology must be used to support the chosen strategy.
Slow Adoption or Advanced Process Technology:
The charge has been made that during the past decades, American managers have increasingly relied on principles which prize analytical detachment and methodological elegance over insights into the subtleties and complexities of strategic decisions, based on experience. The analytical detachment and methodological elegance referred to here are the discounted cash flow and short term financial measurements, such as return on investment (ROI) and their rigid use that produce a short term mind set. These techniques place an emphasis on whether or not a new technology will become profitable this year or next year. They have been used as a substitute for managerial insights and judgment concerning the long term viability of an innovation.
Not only has management’s attention been focused on mergers and acquisitions, but its related focus on short term performance has militated against important investments in expensive new and existing technologies. Let alone longer term investments in R & D. Meanwhile Japanese industries have invested heavily in advanced process technology, accounting in part for their low cost high quality products.
Work Force and Job Design:
With the rise of organized labor in the 1930s, the personnel and industrial relations functions developed as counterpoise to organized labor and, as with other staff functions, absorbed a great deal of the powers of the line organization. It seems odd that the crucial issues of wage determination (which translates into labor costs) design of work rules, and job design have become virtually staff functions, since these are critical components of operations strategy that should be integrated with system positioning, process technology and other elements of a coordinated operations strategy.
The staff specialists, doing the best they could, looked at their problem as a system of trade offs. Their attitude was Give a little here and there in order to get something which amounted to an industrial equivalent to political appeasement Peace at almost any price – peace in our time.
But what are the hard constraints that cannot be transgressed? When does one cripple the organization’s ability to say the course? Somehow the guiding hand that should have been in touch with the total, long term implications was missing. The process has been good foe neither labor nor management, which has become evident as firm after firm and industry after industry have lost their markers to foreign competition, with jobs perhaps permanently lost to foreign competitors.
Collective bargaining should command the attention of top management. Also, a new balance in the management collective bargaining team needs to be established. This may require a broader balance in the educational and experience backgrounds of both operations and industrial relations executives. The end result should be the recognition that most of the results of collective bargaining agreements become a part of operations strategy and should be a conscious part of that strategy rather than a happening. This does not mean that staff specialists should not exist, but it does mean that their activities need to be coordinated with operations strategy and that the long term competitive implications of proposed labor agreements must be assessed more carefully.
Finally, the advances in process technology have set the stage for revolutionary changes in the labor management relationships. Employment in manufacturing in the coming 10 to 20 years will decline, not only as a proportion of the work force but also in absolute numbers. A large fraction of the remaining jobs will be of a new character and scope. The dividing line between jobs in management and production will be less clear, and part of operations strategy in the future will involves rethinking the labor management relationship in the light of this change.