The new buzzword in American industry is productivity, and the buzzers seem to be loudest in the factories and offices of the giant Westinghouse Electric Corp.
Westinghouse, perhaps more than any other major U.S. corporation, has made a highly visible, system-wide commitment to staying competitive in the world marketplace by getting more and better goods from its equipment and its work force.
Westinghouse executives sound like zealous converts to an exhilarating new creed as they preach the gospel of industrial salvation through productivity. "A decline in productivity growth will erode our standard of living and our defense capability," says Edward N. Silcott, general manager for operations at Westinghouse's Defense Center in Baltimore. "We simply don't intend to get ourselves in that position."
Nearly three years after the corporation's senior executives made a collective commitment to sustained improvement in productivity, there are several indications that the campaign is getting results.
At a time when other major industries are struggling and retrenching, Westinghouse is growing, making money and investing capital at an accelerating rate. Westinghouse's productivity growth rate is far ahead of that of U.S. industry as a whole, and is outstripping the rates in the three industrial nations where productivity is growing fastest, Japan, France and West Germany, according to figures complied by the American Productivity Center in Houston.
"I was skeptical of what I was hearing at first," said Pete Moffett, an analyst at the American Productivity Center who has studied Westinghouse closely. "A lot of companies can talk a good story and have a lot of visible activities without anything really happening, but I'm impressed with what Westinghouse is doing . . . this is the way they want to run their business, and it's going to be part of their culture for a long time."
Joji Arai, director of the Japan Productivity Center in Washington, who was sent here by Japanese industry to give productivity advice to Americans, singled out Westinghouse as the company that has made the most progress in bucking the ominous downward trend in U.S. industrial productivity.
Concern about lagging U.S. productivity has escalated to the point that President Reagan appointed a 33-member committee of senior corporate executives, economists and scholars to analyze it and make recommendations that his administration promises to carry out. But for all the talk, productivity remains difficult to define and measure, especially in a sprawling, highly diverse corporation such as Westinghouse.
"How do you compare, for example, the productivity of a secretary whose boss dictates letters that take hours to edit against one whose boss produces clean copy?" Westinghouse Senior Vice President M. J. McDonough asked in a speech last year. "How do you accurately measure the productivity of a salesman who fills his order book each day, but with customers whose purchases and subsequent service requirements far outweigh the investment returned?"
In general, productivity measures the output of goods and services against the input of labor, material and equipment. The more productive an industry, the better its competitive position. The United States has led the world in productivity for decades but, at the end of the 1970s, its industrial productivity stopped growing and slipped into reverse, while Japan and other industrial nations kept gaining.
The American Productivity Center, an industry-sponsored research organization, said in its recent annual report that "a complex of national errors of both omission and commission, by both government and the private sector, has led to an abysmal collapse of productivity during the past 15 years . . . in 1979 and 1980 the U.S. experienced an absolute decline in total factor productivity."
In terms of output per hour of work, U.S. productivity declined in 1979 and 1980, and rose last year by only 0.4 percent. Japan's grew by 3.7 percent, West Germany's by 1.3 percent and France's by 2.3 percent; at projected growth rates for coming years, according to the American Productivity Center, France's real output per hour will exceed that of the United States in 1985, Germany's in 1987, and Japan's in 1999.
At Westinghouse, however, output per hour grew by 4 1/2 percent last year. The company's target for this and each of the next three years is 6 percent.
"Productivity is not a new word we just discovered. We had training programs to improve efficiency for years," said Douglas Danforth, vice chairman and chief operating officer. "We were gaining about 3 1/2 percent a year on the factory floor, but probably less than one percent a year overall. We could see we would not get the results we wanted in, say, 1986."
Since about half of Westinghouse's 140,000 employes are classified as white-collar workers, the company had to do more than extract a higher output from its factory hands if overall productivity was to grow at a healthy rate, Danforth said in an interview. Engineers, sales personnel, researchers and office workers had to be more efficient as well.
No single formula could be applied to improve efficiency of output in all its operations because Westinghouse is one of the most diversified corporations in the nation. Its products and operations include sophisticated military electronics equipment, turbines and transformers, nuclear power plants, Longines watches, Teleprompter cable television, radio stations of the Group W network, school supplies, modular office equipment, elevators, 7-Up bottling plants, and Florida real estate. For 1981 the company reported earnings of $438 million on worldwide sales of $9.4 billion, up from $402 million in profits on sales of $8.5 billion the year before.
To coordinate the productivity campaign of this sprawling empire, Westinghouse created a separate control center in a former Chrysler auto parts plant and installed L. Jerry Hudspeth, a transformer engineer, as vice president in charge of improving the efficiency and quality control of the entire company.
"We're a very decentralized company," he said. "We have 267 locations. No one technique is applicable to both jet radar and 7-Up bottling." His center, he said, functions as an information and resource center for the operating divisions, studying ideas and techniques for improving efficiency.
In an intensive study of Japanese industrial methods, he said, "we were impressed with three things. One, the Japanese don't have any NIH not invented here factor. They are quick to copy, and they soon outperform the teacher.
"Two, they have an obsession with improving the quality of the product. This is not necessarily more costly because it turns out to be more profitable. And three, they have an absolute conviction that inventory is a waste."
He was referring not to retail inventory but to the parts and materials kept on hand at a factory during the assembly process. The Japanese have demonstrated that large inventory backlogs are expensive and unnecessary, and their reduction is a key to their industrial efficiency. Toyota, for example, holds inventory in its auto plants to one hour's worth of assembly line time. In Ford Motor Co. plants, the figure is up to three weeks.
According to Hudspeth and Danforth, excessive inventory leads to sloppy work because there is no production penalty for mistakes if a big reservoir of parts is already on hand.
"In-factory defects are easy to bury as long as you catch them before the product goes out the door," Danforth said. "If you want to deliver 100 pieces of radar equipment, you want to start with 100 sets of components and make all of them right, not start with 150 and assume you can throw out those that aren't good."
He, Hudspeth and other executives gave these examples of how the company has sought to improve productivity at various levels:
* Hudspeth set up a corporation-wide data processing system to centralize technology and avoid duplication of effort. "Engineering people always redesign something that someone else has already designed," Hudspeth said. "A group technology concept provides a data base so somebody in one division can find out what's already available or modifiable in another division and not have to start from scratch."
* Westinghouse bought its own telephone system for its operations in the Pittsburgh area at a cost of $25 million. While this does nothing to improve output, Danforth said, it insulates the company from constant escalation of phone bills and frees the cash for other purposes.
* Engineers at the Baltimore defense center devised a Standard Electronic Assembly Station (SEAS), an automated assembly process for integrated electronic circuit boards that they say has vastly reduced production time and improved quality. "We tried to wipe our minds clear of what we thought an electronics factory ought to look like," said engineer Suzanne Jenniches. "Each component is coded to verify its accuracy and quality, and we use robotic insertion of components into the board." Production time per board dropped from 8 1/2 hours to 2 1/2, she said, and the percentage of usable boards at the end of the line rose from 70 to 92.
* The company spent $600 million last year and expects to spend $800 million this year to improve plants and equipment. "We're in pretty good shape capacity-wise," Danforth said, "so primarily it's upgrading of facilities." He said Westinghouse would continue its capital investment program.
* The company has created about 1,000 "quality circles," which it defines as "groups of about 10 people who work together, on company time, to find ways of solving work-related problems."
Danforth, sounding like a Japanese executive explaining that country's different approach to worker-management relations, said in a recent speech that "the people actually doing a job are the ones in the best possible position to determine how that job can be done better. Their ideas are frequently presented so well that management readily accepts the recommendations. But most important, the ideas belong to the employes, so the implementation proceeds smoothly." It's a verse from the gospel according to Sony.