National Competitiveness

The
New Same Old
ManufacturingPrinciples in the
by David A. Hounshell
From the Magazine (November 1988)

Dynamic Manufacturing: Creating the Learning Organization,

Robert H. Hayes, Steven C. Wheelwright, and Kim B. Clark (New
York: Free Press, 1988) 429 pages, $24.95.

American Business: A Two-Minute Warning, C. Jackson Grayson,

Jr. and Carla O’Dell (New York: Free Press, 1988) 368 pages, $24.95.

In the fall of 1911, Frederick Winslow Taylor rushed into print his
Principles of Scientific Management, a thin book that had been
gestating since the early 1890s. Taylor was notable in mechanical
engineering circles for his codiscovery in 1899 of high-speed steel
and for his brilliant paper in 1906, “The Art of Cutting Metals,”
which reported on over 30,000 experiments he had conducted at
the Midvale Steel Company during the 1880s. By applying
scientific techniques—like varying the speed and feed of cutting
tools or varying their shapes—he had found the “one best way” to
do any metal-cutting task. On the basis of these experiments, he
believed he could optimize the performance of the entire machine
shop, including the performance of its workers.

With evangelical fervor, Taylor vowed to root out all “systematic

soldiering” (i.e., workers doing less than an “honest day’s work”).
Doing so, he insisted, required a complete mental revolution in
U.S. industry. Taylor tried consulting and worked hard to
convince several manufacturing executives to yield control of
their production operations to him and his associates. As
managers had eclipsed owners, he taught, efficiency experts
would eclipse managers.

Taylor advocated pushing responsibility onto people who, like

him, had studied the dynamics of production. In return he
promised not only productivity increases but also peace between
capital and labor.

Unfortunately, Taylor had little initial success; in more than one

instance, he and his associates were fired by companies that had
retained their services. His reputation as a production expert
would probably have remained obscure had it not been for the
attorney and future Supreme Court justice, Louis Brandeis, who
had been hired in 1910 by an association of companies opposed to
proposed rate hikes by the eastern railroads. Brandeis latched
onto Taylor’s theoretical work, labeled it “scientific
management,” and put one of Taylor’s disciples on the witness
stand to tell the Interstate Commerce Commission how the
railroads could save a million dollars a day. Headlines throughout
the United States proclaimed Taylor’s gospel. An efficiency craze
ensued; factories, schools, homes, and even churches were soon
Taylorized—hence Principles of Scientific Management.

Taylor’s new book used parables to get his teachings across. His
favorite was the story of “Schmidt,” a stocky Pennsylvania
German who was a pig-iron loader at Bethlehem Steel. Schmidt
loaded about 12 tons of the 92-pound iron pigs each day (and then
ran home to work on his little dream house). Using Taylor’s
principles, “scientific managers” raised Schmidt’s output to 48
tons per day, and raised his daily wages from $1.15 to $1.85.

Schmidt achieved this remarkable gain, Taylor continued, not

only because of science but by being “a high-priced man.” “A
high-priced man,” Taylor recounted telling Schmidt, “does just
what he’s told to do and no back talk.” Taylor then put things on
the line with Schmidt: “When this man [i.e., the manager] tells
you to walk, you walk; when he tells you to sit down, you sit
down… Now you come here tomorrow morning and I’ll know
before night whether you are really a high-priced man or not.”
This was “rather rough talk,” Taylor conceded, but with a man of
“the mentally sluggish type as Schmidt,” it was “appropriate and
not unkind.”

Fifteen years later, in 1926, Henry Ford published an article, “Mass

Production,” in the thirteenth edition of the Encyclopedia
Britannica. In it he described revolutionary developments at the
Ford Motor Company—the highly specialized machinery, the
assembly line, and the $5 day. Interestingly enough, Ford alluded
to Taylor’s Schmidt to make clear how his approach differed from
Taylorism. Why, Ford asked, should pig iron be loaded by hand?
Why not do it with machinery or, better yet, why not eliminate the
need for pig iron by casting iron straight from the blast furnace?

In retrospect, however, Ford had actually hit on many of Taylor’s

assumptions about work without acknowledging the symmetries.
Taylor had not really envisioned Ford’s mechanized work
processes. He sought revisions in labor regimens without looking
for innovations in production hardware—while Ford and his
engineers had mechanized work processes and found workers to
feed and tend their machines.

And yet Ford had—perhaps inadvertently—applied Taylorist

ideas, such as time-and-motion studies, to lay out machining and
assembly processes. At Ford, ultimately, the special-purpose
machines and the assembly lines set the pace of work. Taylor was
known for his studied disregard for the worker. Ford, for his part,
was devoted to the hierarchical production organization
demanded by the machines, or to the elimination through
automation of skilled jobs on the line.
Taylor and Ford came to mind as I was reading Dynamic
Manufacturing, by Robert H. Hayes, Steven C. Wheelwright, and
Kim B. Clark of the Harvard Business School, and American
Business: A Two-Minute Warning, by C. Jackson Grayson, Jr. and
Carla O’Dell of the American Productivity and Quality Center.
Since Ford’s assembly-line revolution in 1913, the books justly
imply, companies in the United States—indeed, companies
throughout most of the world until quite recently—have pursued
manufacturing along Taylorist (and Fordist) lines. They have
defined jobs and work processes with great precision and saw
business organizations as hierarchies, out of a continuing belief
that workers “systematically soldier.” They’ve shared, at least in
part, Taylor’s manifest contempt for the worker.

Rather than seeing workers as assets to be nurtured and

developed, manufacturing companies have often viewed them as
objects to be manipulated or as burdens to be borne. And the
science of manufacturing has taken its toll. Where workers were
not deskilled through extreme divisions of labor, they were often
displaced by machinery. For many companies, the ideal factory
has been—and continues to be—a totally automated, workerless
facility.

Now in the wake of the eroding competitive position of U.S.

manufacturing companies, is it time for an end to Taylor’s
management tradition? The books answer in the affirmative,
calling for the institution of a less mechanistic, less authoritarian,
less functionally divided approach to manufacturing. Dynamic
Manufacturing focuses explicitly on repudiating Taylorism,
which it takes to be a system of “command and control.”
American Business: A Two-Minute Warning is written in a more
popular vein, but characterizes U.S. manufacturing methods and
the underlying mind-set of manufacturing managers in
unmistakably similar ways. Taylorism is the villain and the
anachronism.
Predictably, both books arrive at their diagnoses and prescriptions
through their respective evaluations of the “Japanese miracle.”
Whereas U.S. manufacturing is rigid and hierarchical, Japanese
manufacturing is flexible, agile, organic, and holistic. In the new
competitive environment—which favors the company that can
continually generate new, high-quality products—the Japanese
are more responsive. They will continue to dominate until U.S.
manufacturers develop manufacturing units that are, in Hayes,
Wheelwright, and Clark’s words, “dynamic learning
organizations.” Their book is intended as a primer.

“In contrast to the assumptions of Taylorism,” they argue, “world-

class manufacturing organizations do not divide people into those
who think and those who act. Learning and applying knowledge
must be high on everyone’s agenda, at every level in the
organization.”

Grayson and O’Dell’s book is also aimed at corporate managers

who are chasing the past, but it goes beyond Dynamic
Manufacturing in calling for sweeping reforms in the institutions
of American capitalism, from public policy to the educational
system.

To be sure, Grayson (the onetime price-control czar in the Nixon

administration) and O’Dell swear off state intervention in the
economy. They argue for no further protection in international
trade, and they oppose the establishment of an “industrial policy”
by the federal government—even though Japan has built its
current economic strength on the basis of what must rightfully be
called an industrial policy. They oppose currency devaluation as a
competitiveness strategy because it results in direct foreign
investment and the selling off of national assets. They warn that
government should not overemphasize capital investment or
invest more funds for research and development.
They do, however, call for a redistribution of R&D spending away
from defense. More strikingly, they put forth an eight-point
government program for victory in the competitiveness war. They
are very specific about how to achieve better education: much
higher pay for teachers, longer school days, a greatly expanded
school year, and larger average class sizes—which is, perhaps, a
too slavish desire to emulate the Japanese educational system.
The authors’ agenda also includes greater privatization of
government services, the reform of U.S. antitrust laws, and
improvement of commercial and industrial statistics-gathering to
reflect the shift in the economy toward services. They call for
raising productivity in government and for cutting the federal
budget deficit.

The fundamental weakness of the U.S. economy, they believe, is

related to the federal deficit but goes well beyond it. The problem
lies in the low savings rate. In fact, A Two-Minute Warning seems
to be as much meant for credit-card-wielding U.S. consumers as
for U.S. businesspeople.

If the parallels between these two books are striking, so are the
differences. Each draws heavily from industrial history to ground
its own analysis of America’s productivity problems. But the
books do not see quite the same history. Hayes, Wheelwright, and
Clark include a chapter called “America’s Manufacturing
Heritage” that reflects their vision of the golden age of
manufacturing in the United States, circa 1950. Their homily—it
really isn’t a history—tells us that the United States became a
manufacturing giant when it combined old-world skills, which
valued quality, with modern scientific knowledge, which valued
new ideas and efficiency—and kept this combination carefully in
balance.

Then three related things happened; those familiar with Professor

Hayes’s work will appreciate the drift of the argument. First, the
financial guys took charge and traded long-term growth for short-
term profits. Rates of productivity growth fell off. At the same
time, U.S. corporate complacency in world markets choked the
basic-research binge indulged in by technologically oriented
corporations after World War II. The management of industrial
R&D laboratories passed from those who had emphasized steady
improvement of products and processes to those who valued big
science and bet on great leaps forward—while military hardware
became the main objectives of R&D spending.

Finally, and perhaps most important, managers allowed Taylor’s

principles of scientific management and Ford’s notions about
hard automation to get out of hand. It was now that
manufacturing organizations became rigidly hierarchical and
authoritarian—anything but “learning” organizations. The
results, the three authors maintain, have been disastrous.

Grayson and O’Dell construct their history to sound the alarm,

not to harken back to the good old days. The United States is
following in the footsteps of Great Britain, they write, which did
not respond to turn-of-the-century warnings about America’s—
and Germany’s—rapidly rising economic power. As a
consequence, Great Britain—once the workshop of the world—
became a second-rate manufacturing nation, losing both
economic and political power in the process. Again, it is our
management tradition that is the real culprit.

Curiously, both historical arguments, illuminating as they are,

oversimplify U.S. industrial achievements because they
underestimate Taylor, overestimate pre-Taylor U.S. managers, or
both. Is it true, for example, that the British were warned of
impending economic demise just as contemporary U.S.
businesses have been warned? Yes and no.

In the 1850s, John Anderson and other British military officers

successfully pressed Parliament to fund an American-style small-
firearms manufacturing plant, which opened at Enfield in 1857.
The Enfield Armory was stocked with American-made machine
tools and managed by U.S. manufacturing experts. It turned out a
standardized rifle containing uniformly produced parts, a gun far
different from the handmade rifles and muskets produced by the
arms makers of Birmingham.

After the Enfield Armory opened, Anderson hoped it would

become a model for British manufacturers of all kinds of
consumer durables. He counseled that if his fellow citizens were
“wise in their generation,” they would “not despise this system of
manufacture but, on the contrary, will adopt it, for it will secure
for them a high vantage ground in competing with other parts of
the world.” If the British did not adopt American methods,
Anderson warned, “it is to be feared that American manufacturers
will before long become exporters…to England.” And yet the
British did not adopt U.S. manufacturing methods for another 50
years.

Why the slowness of the British response? British manufacturers

viewed most U.S. goods coming in before 1900 as being of poorer
quality than British products. Not only were U.S. goods all the
same but also they were made with lesser quality materials, were
poorly fitted together, and were not finished as perfectly as their
British counterparts. British consumers, the manufacturers
believed, expected less standardized, higher quality goods.

Actually, a small number of advanced U.S. companies, such as the

Singer Manufacturing Company, established factories in Britain
during the late nineteenth century using the same production
techniques as their sister factories in the United States. They did
well in the British and European markets; in fact, Singer’s British
factory produced goods at much lower cost than the United States
did. (Analogies to Japanese auto companies operating in the
United States are unavoidable.)

And so the American system of manufactures, as practiced at

companies like Singer, attained its ultimate logic in Taylorism
and Fordism. It is true, as Hayes, Wheelwright, and Clark recall,
that pre-Taylor America was a place of greater skill among
production workers. But the genius of American manufacturing
back then was really put to the production of goods that were
“good enough.” Our system of manufactures was built on the idea
of controlling for defects rather than pursuing—as an artist or
skilled craftsperson might—perfection. Nineteenth and early
twentieth century manufacturers in the United States understood
perfectly well that the quality of their goods was determined by
how far it deviated from an ideal form at a given price.

By 1900, the British could not touch the quality of U.S. goods—at
least not at the U.S. price—and, correspondingly, British
consumers began to make compromises. It is with standardized
production that U.S. goods conquered world markets. Eventually,
as Dynamic Manufacturing bemoans, extreme forms of
Taylorism, which made American workers feel that their products
were alien to them, led to a palpable decline in the quality of U.S.
products.

Hayes, Wheelwright, and Clark argue much more strongly the

immediate and practical claim that the United States has recently
lost its leadership in three bases of competition: relative cost,
relative quality, and relative innovativeness. This is where
Dynamic Manufacturing takes hold of the imagination.

Although many will contend that an overvalued dollar has played

an important role in the rapid loss of U.S. cost advantages, the
authors demonstrate cogently that cost problems had emerged
well before the dollar took off in the late 1970s. Like Grayson and
O’Dell, they cite figures demonstrating that U.S. productivity grew
at half the rate of Japan’s during the 1980s, and that this problem
was exacerbated by a relative decline in business investment.

Quality has posed even greater problems. U.S. manufacturers

quickly lost market share because consumers perceived their
goods as lower quality than Japanese goods. This is why the
United States has yielded leadership to the Japanese and the
Germans in many high-tech industries. Again, there has also been
a decline in R&D expenditures as a percentage of the GNP; only
1% of the federal government’s R&D budget went to promoting
industrial growth. Indeed, the United States now has a significant
“balance of patents” problem.

Hayes, Wheelwright, and Clark provide ten useful chapters to

guide U.S. managers in creating the “learning” organization—
manufacturing companies that are world class. And what better
way to begin than to review the prevailing capital-investment
process in the United States? As with a growing number of
business scholars, Hayes and his associates believe that the
modern capital-budgeting regime, with its emphasis on
discounted present value, has not served U.S. manufacturing well.
Discounted present-value methods fail to comprehend the
strategic implications of capital-budgeting decisions, especially
the ways investment gives employees opportunities to learn and
grow.

Companies that refuse to invest, they argue, fail to take into

account the impact of new technology on the organization’s
capabilities; they should bank on their organization’s ability to
achieve synergies that would be impossible without investment.
The key to a wise investment process revolves around the
achievement of a broadly “shared understanding of the
investment’s purpose and requirements…and the development of
a holistic understanding of how the investment relates to their
competitive mission.”

Once a sensible capital-budgeting process is developed, Dynamic

Manufacturing teaches, it is important that companies value the
manufacturing function. U.S. manufacturing companies
characteristically have created staff-heavy manufacturing
organizations in which commanding executives have too much
control. Manufacturing staff should be a “support group, not the
aristocracy of the manufacturing organization.”
Let us be clear, however. All of the failings of the old
manufacturing organization are symptoms. The disease,
according to Hayes and his associates, pertains to human factors,
“specifically, management factors—at least as much as it is due to
unfair competition or an unsupportive economic climate.” We are
experiencing industrial decline essentially because U.S.
manufacturing companies still operate within the paradigm of
Taylor and Ford. It is in this light that we encounter managers
obsessed with short-term profitability.

In a distinctive chapter, “The High-Performance Factory,” the

authors give wonderful glimpses of prevailing practices at new
and excellent manufacturing operations. They caution that new
investment imposes very high short-term costs on a factory, quite
apart from the costs of the newly invested capital, and they
conclude that new investment is not a viable solution for a
company that is in a “do or die” situation. They consider here and
elsewhere how the benefits of new investment come not in the
short term but over the long term. They consider product and
process development (their strongest suit), design for
manufacturability, the elimination of waste, and the reduction of
work in process.

The high-performance manufacturing organization is one that

can design a product correctly the first time—to reduce
significantly, if not eliminate, engineering change orders that can
cripple manufacturing productivity.

There is much more to Dynamic Manufacturing. This summary

has been only a taste. The point is that Hayes, Wheelwright, and
Clark believe knowledge to be the basis of a dynamically managed
factory. Are they right to suppose they depart, therefore, from
Taylor?

In fact, the authors often articulate their arguments in the

manner of Taylor. They write that, to achieve a dynamic learning
organization, “it is not simply a matter of changing a few things;
almost everything must be changed and changed dramatically.”
Taylor, remember, also stressed that the successful adoption of
his system required a complete mental revolution. There is the
same tone, the same kind of exhortation.

No doubt, we are talking about two revolutions here—the

presumably holistic revolution of Hayes, Wheelwright, and Clark
on the one hand and, on the other, Taylor’s command-and-
control revolution. But in both cases, the key is knowledge-based
manufacture, and the critical question is, who controls the
knowledge? The general goal is to push authority for the system of
manufacture into the hands of people in the organization most
competent to devise that system—and to help those people learn
more.

Nor is it true that Japanese factories are so very holistic. Think

about Japanese quality circles. Hayes and his associates
recommend QCs, but only after several preliminary steps have
been taken: “improving a factory’s basic housekeeping, correcting
its known short-comings, building its technological competence,
establishing a philosophy of continual improvement, [and]
getting workers’ inputs to process design issues.” Taylor believed
that just such steps were critical before the scientific manager
brought out the stopwatch, i.e., to calculate the one best way to do
a given manufacturing task.

Moreover, Sony, Matsushita, and Sanyo have recently said that

their U.S. factories are “not yet ready” for QCs—just as Taylor
argued that a foundry at Watertown Arsenal in Massachusetts was
not yet ready for the stopwatch. (It seems an overly zealous
disciple began time-and-motion studies and then watched the
foundry workers go on a wildcat strike, an action that resulted in
the banning of the Taylor system from all government facilities.)

True, if the Japanese-run American factories are ever ready for

QCs, one can envision the stopwatch in the hands of workers
themselves—or at least some workers—not managers. But just
because it is now line leaders and ambitious “associates” (Honda’s
euphemism for workers) who design ways to make work more
stringent, we can hardly conclude from this that factories have
become opportunities for worker self-realization. Hierarchy is still
a tragic fact of Japanese production, perhaps of all production.

Or consider Grayson and O’Dell turning their arguments on

Japanese manufacturers who have made profound changes in
productivity and quality at factories that were formerly run by
U.S. manufacturing firms. The sample cited is not big: Sanyo in
Arkansas and the Toyota-General Motors NUMMI plant in
Fremont, California are most conspicuous. Is there not room for at
least some skepticism here too?

Formerly, the GM Fremont plant had some 7,800 workers; now

under Toyota management, the plant produces more cars than
ever with only 2,500 workers. But if one looks carefully around
the plant, the ghosts of both Taylor and Ford appear. The 2,500
workers who eventually reentered the Fremont plant did so only
after management assessed their “fitness” for the new
manufacturing regime, that is, their willingness to accept—and
contribute to—rigorous new standards for timeliness and
performance. Scientific selection of workers is Taylor’s first
principle.

The Fremont plant under NUMMI is not identical to the Fremont

plant under General Motors, moreover. The level of automation
and computer control is far greater than before. The NUMMI
plant, like plants in Japan, is hardly a picnic ground for workers,
even if the floors are kept clean enough to eat off of. (Every visitor
to Ford’s Highland Park, Michigan plant between 1913 and 1915
remarked how spotless the place was.) Indeed, the great, initial
productivity gain was realized in the production of a single,
standardized model of the Chevrolet “Nova”—which reminds one
of Ford’s Highland Park plant in the era of the Model T. Workers
are tightly coupled with machines, and they don’t set their own
pace.
 I like to think that the Japanese have not buried the paradigm of
Taylor and Ford, but have at once brought it to a new level of
refinement and wrapped it in a fresh mantle of respectability. The
Japanese may have pushed greater responsibility for the
strictures on operators down the line to the shop floor. Would that
have made any difference to Schmidt?

ABusiness
version Review.
of this article appeared in the November 1988 issue of Harvard

DH
David A. Hounshell was a Marvin Bower Fellow
at the Harvard Business School during the
academic year 1987–1988 and is professor of
history at the University of Delaware. He is the
author of From the American System to Mass
Production, 1800–1932 (Johns Hopkins
University Press, 1984) and coauthor of Science
and Corporate Strategy: Du Pont R&D 1902–
1980 (Cambridge University Press, 1988).

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