Page 24 - Business Principles and Management

Chapter 1 • Characteristics of Business

technology has a significant impact on productivity, businesses spend billions of
dollars annually on inventing, buying, and using new technology.

REORGANIZATION OF WORK The third and quite challenging way to increase efficiency
is through reorganizing the way work gets done. From the late 1970s through the
early 1990s, companies experienced slow growth, for reasons related to the U.S.
and worldwide economy. However, one key reason for the slow growth arose from
the competition from other industrialized nations. The typical reaction to slow
growth caused by global competition was to try to cut back on production costs by
laying off workers. A business would downsize by reducing the amount and
variety of goods and services produced and the number of employees needed to
produce them. By laying off workers, dropping unprofitable products, or even
increasing the use of technology, firms were able to cut their costs. But the problem
of producing the right products inexpensively still existed. Better ways were needed
to compete with foreign firms, many of which had lower labor costs and equal or
better quality and productivity. Some firms boldly decided to move in a direction
that was similar to tearing down the business and rebuilding it.
Many firms arrived at the conclusion that employees were their most important
resource. Further, managers learned that by empowering workers, the firm could
become more productive. Empowerment is letting workers participate in determin-
ing how to perform their work tasks and offer ideas on how to improve the work
process of the company. Empowerment dramatically changed the role of the worker.
In the past, workers performed narrow tasks on assembly lines and had little
decision-making power. After empowering workers, firms found that the quality of
work often improved, as did the efficiency of production. Although better-trained
and highly skilled workers were required, fewer managers were needed. Companies
were able to reduce the number of levels of management by pushing down the day-
to-day decisions directly to workers rather than to managers. Workers were taught
to use computers, to work in teams, and to be responsible for quality.
While practicing empowerment, some managers were also redesigning the work
flow throughout their organizations—a concept sometimes called re-engineering.
Instead of typical assembly lines found in factories and offices, production steps
were eliminated, abbreviated, or placed entirely in the hands of a team of employ-
ees. Customer complaints dropped. Fewer well-trained workers, with the help of
advanced technology and streamlined work processes, could better satisfy cus-
tomers than could more workers using outdated methods and equipment. Most
major firms—and many smaller ones—adopted these newer practices and are find-
ing that customer satisfaction has risen along with productivity.
American firms are renewing their position as strong competitors in world busi-
ness as a result of restructuring their work processes and a more intensive focus on
quality and customers’ needs. Empowering workers has contributed a great deal to
the rebuilding of the image of American business. U.S. businesses are now doing
the right things well. Furthermore, both large and small businesses are no longer
thinking only about customers in their own countries. They see prospective cus-
tomers located all around the country and around the world. American factories
operate in other countries, and businesses in other countries make and sell prod-
ucts in this country. Business today is complex, challenging, and very exciting.

CHECKPOINT

Why must companies be concerned about both effectiveness
and efficiency?

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