European Stars And Stripes (Newspaper) - February 23, 1981, Darmstadt, Hesse                                Doily Magazine question m m automate of incentives up automated machines do 96 percent of the body Assembly work at this japanese car differences by Lester Thurow new York times As american productivity growth has slipped from positive to most of the Public blame has focused on this or that govern ment whatever part of the blame is truly Ascribable to and there is certainly it is Clear that much of the productivity problem lies within the jurisdiction of the private the productivity problem will Only be cured if the Pri vate sector is willing to cure within the private sector it is fashionable for manage ment to Point to a deterioration in labors work the belief that the next generation has less of the work ethic than the last generation has at least a but the key to productivity is not the work a willingness or unwillingness to give up Coffee Breaks is ultimately what is important is an interest in ferreting out More efficient production processes and a willingness to embrace technical think of an american worker and a japanese worker facing the introduction of some new Labo saving the japanese worker goes at it armed with a Guaran teed lifetime a Bonus based on productivity and corporate profitability and a wage rate that attaches to him As an individual and not to the particular Job that he happens to be a new Labo saving machine presents nothing but of it cannot throw the japanese worker out of a it cannot lower her wage it can Only raise the in the new machine is nothing but a potential threat to the average american it May Lead him to become it May Abol ish her particular Job and Force her to work in a lower paying occupational longheld and expensively acquired skills May disappear the potential if they exist at Are Distant and wages May eventually go up with higher productivity but there is no direct immediate linkage Between the new technology and a higher income for the affected much of the productivity growth in Japan can also be traced to a work Force that is itself interested in finding and initiating new ways of reducing the amount of labor involved in the production productivity is not solely a management Given the incentive worker initiatives on productivity Are rewarded with both Cash and american workers have no such each worker is most Apt to know better ways of doing his own but to improve the productivity of ones own Job is to reduce the number of people that the company is willing to hire in ones own Job even if the Initiator retains his he certainly does not get Praise from his Laid off compatriots or those who May be Laid off As the result of his next Good the net result is a failure to harness the individual initiative for which americans Are supposedly is it any then that american workers Are interested in restrictive work rules and resist technical change they would be stupid to do to generate High productivity management is going to have to change the system of work incentives confronting labor so that there is a direct correspondence Between those things that Are Good for society higher productivity and those things that Are Good for the individual higher America does not have to adopt the japanese incentive but it does have to work out a the problem of perverse incentives extends far beyond the shop Many particularly the Japa have pointed out that the time horizons of Ameri can companies have become so Short that they Are unwilling to invest in major new while recently teaching at the management Institute of one of americas largest i was told that the time horizons of the divisions represented in the room was it is not surprising that new products and production processes Are increasingly being introduced abroad and that the construction of completely new Industrial facilities has almost stopped in who can much less recoup the of a major new facility in years the Short time horizon should not come As a american managers Are looking Over their shoulders at investors who invest on a daily if not hourly top management is Given a Bonus based on current Middle level management has been organized into february Independent profit centers where people Are promoted or demoted based on current business school graduates Are simplicity taught that the Short run Bottom line is the Only with that Struc Ture of incentives anything but a Short time horizon would be a and there Are no economic american managements emphasis on Short run profits Springs from both mental laziness and it is easier to invest based on current profits rather than trying to figure out who will be successful 10 years Down the the investor does not have to live with 10 years of risk and a mental midget can Tell whether top management deserves a Bonus based on current it is much harder to figure out whether top management has positioned the company Well for the Long to Stop and building the products that will be needed 10 years from now is to take current american management is known Only for its risk mechanical judgments of Middle level managers based on the earnings of their profit centers generates no con it promotes managers who Are making Good profits but who should be incurring expenses to make much larger profits later or denotes managers who Are doing a Good Job in areas where the external environment makes profits difficult to in business schools it is easier to teach the quantitative methods that Are applicable in Short run profit for most of the boundaries of the problem Are it is much harder to teach Long run profit where uncertainty and the unknown Dace on the students want to use what they Are whatever government does to stimulate America will never close the productivity growth Gap with Japan or West Germany unless there Are major changes in the incentive structures facing labor and Man the Economy needs to be restructured so that each of us has a direct self interest in promoting the productivity games that Are the foundation of both our Economy and our own future Standard of editors note Lester Thurow is professor of economics and management at Massachusetts Institute of technology and author of the Zero sum the stars and stripes Page 13