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SUNMARY A growing number of U.S. manufacturers are concluding that they must employ advanced manufacturing technology (AMT) to survive and prosper. The experience of those who have started to use AMT suggests that companies can best benefit from these investments if they make com- plementary changes in organization and management. The critical question is what kind of changes should be made and how. The Manufacturing Studies Board of the National Research Council formed the Committee on the Effective Implementation of Advanced Manufacturing Technology, which was sponsored by the National Commission for Employment Policy, to study that question. The com- mittee, composed of nine managers, union officials, and academics, visited 16 sites where AMT had recently been implemented. Thin report contains observations from there visits and conclusions based on both field observations and the prior experience of committee member.. In the context of this report, AMT refers to an array of process technologies, including computer-aided manufacturing, computer-aided design and engineering, manufacturing resource planning, computer-aided process planning, and the integration of these technologies in computer-integrated manufacturing. Severe international competition will prompt manufacturers in most industries in every competitive country to consider the strategic role of this technology. Some will be able to exploit its potential; others will not. The technology itself will readily cross the bounda- ries of industries and countries. The human resource practices used for its implementation, however, are not so easily transferred. Manufacturers will need to spend 1

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2 more time and effort to develop the needed organizational and industrial relations capabilities for implementing and operating the technology. Indeed, some U.S. manu- facturers may not be able to improve human resource practices at the rate required to remain competitive. Realizing the full benefits of AMT will require systematic--not piecemeal--change in the management of people and machines. The committee concluded that a critical mass of interrelated changes is required in seven areas of human resource practices: planning; plant culture; plant organization: job design; compensation and appraisal; selection, training, and education; and labor- management relations. Certain basic characteristics of this new technology are fundamental to identifying human resource practices that are effective in implementing AMT. Compared with the technologies they replaced, the AMT applications the committee observed were characterized by: greater interdependence among work activities; fewer employees in a unit responsible for each product, part, or process; different skill requirements and usually a higher average skills higher capital investment per employee; more immediate consequences of the malfunction of part of the production system for.the whole system; more costly consequences of malfunctions; and more sensitivity of output to variations in human skills, knowledge, and attitude, and to mental rather than physical effort. These characteristics of AMT have prompted many manufacturers involved with the technology to initiate or intensify pursuit of the following interrelated organizational objectives: ~ a highly skilled, flexible, problem-solving, interacting, and committed work forces o a flexible, humane, and innovative management organization with fewer levels and job classifications; 0 a high retention rate of well-trained workers: and o a strong partnership between management and labor unions--where unions represent the work force. These objectives and their related human resource practices are being pursued in diverse workplaces in

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3 service and manufacturing industries employing a variety of technologies. They are part of a general transforma- tion of U.S. workplaces, a trend dr iven by competi tive forces unleashed in international markets and deregulated domestic industr fen and shaped by changing employee expectations. The committee found that while there objectives are not unique to AMT, they are especially applicable to AMT in a number of respects. For example, increased flexi- bility and problem-solving capabilities are responsive to the greater interdependence among AMT tasks. The higher priority given to employee commitment with AMT is acknowledgment of the more severe consequences of employee apathy or antipathy. The greater need for retention of employees derives from the greater invest- ment in training and the dependence on people trained to run an individual company 'a unique system. Changes in management style and labor-management relationships are prerequisites for the other objectives. The plants visited by the committee had a clearer understanding of the objectives for the work organization than of the precise human resource practicer that would achieve those objectives. Plant managers were more articulate about the need for flexibility and closer coordination, for example, than about ways to achieve them. Nevertheless, the committee found many promising trends in the specific human resource practices used to introduce and operate AMT. Frequently observed were the following six practices and corresponding rationales: Jobs with broader scope are defined to include more planning and diagnosis, and both operating and maintenance duties, in recognition that traditional distinctions between such tanks are blurring. e Work teams often are employed to manage the more tightly interdependent work role. usually required by AMT Operating decisions are more often delegated, in recognition of the need for immediate action on AMT problems and the fact that those qualified to operate the equipment also have much of the salient information and expertise. Management and unions have developed inventive selection processes for AMT jobs that preserve the concept of seniority, yet place in those jobs the candidates who are more likely to succeed. The new acceptance of this type of selection procedure results from union recognition of the higher level of skills and

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4 knowledge required by AMT and the higher cost associated with mistakes in working with this capital-intensive equipment; it also results from a general improvement in union-management trust. Paying employees according to their mastery of a progressively broader range of tasks is often adopted to encourage Both the learning and flexibility in work assignments required in the operation of AMT. Managers and workers show significantly greater concern for training. The introduction of AMT has forced greater emphasis on the design and implementation of training programs for various segments of the work force. The committee cannot predict how effective all of these innovations will be over the longer term. Some of them--for example, the judicious use of team structures, the increased deleqetion of responsibility, and the more systematic assessment of individual potential for success in AMT jobs--seem to be especially promising. Others, such as pay for knowledge mastered and utilized, have a sound underlying rationale, but the committee in con- cerned about whether they can be implemented over time in a way that is regarded as fair and equitable and is cost effective. Innovation in needed in the area of pay schemes, and the pay-for-knowledge idea in a worthy innovation, but it is too early to endorse the practice generally. In addition to these specific human resource prac- tices, successful AMT implementations seem to require other characteristics. First, none of these innovative practices can be fully effective unless the planners also give high priority to addressing an overriding concern of the work force and unions--employment security. The effects of AMT on the number of jobs tend to be mixed. On the one hand, AMT can achieve a given level of output with fewer employees than required by older technology. On the other hand, without the increased competitiveness permitted by AMT, the number of jobs may decline even more. Thus, a}1 parties must understand the role of AMT in preserving or increasing market share and, in turn, jobs. Finally, to build and preserve the human commitment and skills required to operate AMY, the policies that govern employment security and ease labor dislocations must be as favorable as the competitive circumstances of the enterprise permit. Second, a critical prerequisite for effective imple- mentation is a compelling business rationale for AMT--the

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stronger its economic basis, the better. Moreover, the committee found that the better implementation efforts were accompanied by high performance expectations--major improvements in design for producibility, quality, inven- tory reduction, cost performance, and so on. Not only are high performance expectations required to justify the major capital investment, but unprecedented increments in performance expectations are also psychologically neces- sary to drive the processes of organizational invention that will help fully utilize the technology's potential. Third, AMT will be more profitable when human resource issues are understood and addressed in the planning stage and at every subsequent phase in the design, approval, and implementation of the technology. It is important to give as much thought to the human aspects of the new technology as to the technical and physical aspects. Fourth, the introduction of AMT will be more effective when management has formulated a guiding philosophy, in dedicated to improvement in plant culture, and in active across the whole range of improvements in plant, equip- ment, management effectiveness, and personnel develop- ment. To introduce AMT effectively, management must also try to build a favorable consensus among company, work force, union, and community. Fifth, effective implementation processes seem to require an openness to learning from one's experience and that of others. The introduction of new technology in a subject of industrywide and worldwide study and exchange of experience. The committee was struck by the trend in recent years for managers and union officials to take steps to learn from others' experiences. Finally, other major aspects of an effective implemen- tation process include: unprecedented efforts to communicate thoroughly to employees and their re^-esentative~ the competitive realities of the business, the conditions requiring AMT, and the plans for implementing it; a variety of initiatives to promote a positive culture for employee relations and labor relations; employee participation in the implementation activities; early assignment to the project; broad training that begins before assignment to the project; and systematic, periodic evaluation of the effective- nes~ of AMT.

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6 A noteworthy trend is the frequency with which AMT used to break with tradition. It becomes the occasion for (1) candidly examining past habits, work rules, prerogatives, and relationships, and (2) assessing their adverse consequences for motivation, cooperation, and other factors affecting productivity. Not infrequently, corporate management considered whether to locate the AMT at a greenfield (i.e., new) site or in an existing unionized plant, and used the leverage inherent in this option to induce unions and local managements to consider new operating modes. The dominant theme of the policies outlined above is that they were intended to accommodate all parties with a stake in the organization, and thereby to enlist their support. Managers gain decreased cost, increased quality, greater flexibility, decreased cycle time, improved equipment up-time, and greater ability to bring technology on line. Employees gain better information, learning and retraining opportunities, higher skilled jobs, marketable skills, advancement opportunities, more opportunities to feel part of the business and exercise influence, and, on balance, a more secure employment environment because of the increased competitiveness of the enterprise. Where employees are unionized, to the extent that its members gain, the union also gains and participates in a broader agenda of issues affecting the membership. Fortunately, the policies that are especially appro- priate for AMT are also in line with the general changes in work force management strategies that have been driven by increased competitive pressure and rising employee expectations. AMT both benefits from these trends and gives additional meaning to them.