Creating Jobs

Do Lean Companies Create Fewer Jobs?

No, they create more. If you assume the lean company grows sales at the same rate as some poorly management company then it may well be that the lean company creates fewer jobs. However that is not a valid assumption. Deming provided the reason in his presentations to Japan in the 1950’s with his chain reaction. From page 3 of Out of the Crisis

• Improve Quality —>
• Costs decrease because of less rework, fewer mistakes, fewer delays, snags, better use of machine-time and materials —>
• Productivity Improves —>
• Capture the market with better quality and lower price —>
• Stay in Business —>
• Provide jobs and more jobs

For an example of this process at work see GM, Ford and Toyota. Toyota defines lean (Toyota’s management system is what was called lean manufacturing by Jim Womack and Dan Jones). Toyota continues to add employees while Ford and GM have been shedding jobs.

It is true, for lean (and un-lean) companies alike, productivity is improving (it just improves more at lean companies) which means that fewer people are needed to produce the same amount as we have in the past. We have posted previously about the mistaken belief that jobs are moving overseas.

Job losses are the result of poor management – one of the core principle of lean thinking, Deming’s thoughts… is respect for people (providing good jobs, no layoffs, etc.). It is obvious that productivity continues to improve, which is a great thing. Management must manage that, and other matters, successfully. When management fails employees pay with their jobs (and very unfortunately senior management just pay themselves more and more).

The way to create jobs is to follow Deming’s chain reaction of systemic improvement.

Related: lean manufacturing portal – Dr. Deming on Management Topics – Manufacturing Jobs – No Excessive Senior Executive Pay at Toyota – Purpose of an Company