Ahead of China

June 26, 2006
The prevailing notion in modern manufacturing is that China has passed the U.S. in many disciplines, but a recent study reveals the contrary. Managing Editor Ken Schnepf examines why the U.S. is ahead of China in six-sigma and lean practices, as well as a variety of other areas.

While many recent comparisons have  focused on China being ahead of  the U.S., America continues to hold a strong lead in specific areas. In six-sigma and lean practices, as well as innovation and quality, the U.S. is clearly ahead, according to a recent study.

“China is nowhere near the U.S. in practices like six-sigma or lean,” says Richard Wellins, senior vice president, Design Dimensions International (DDI), Bridgeville, Pa. Wellins co-authored “Super Human Resources in China: Practices, Performances, and Opportunities Among China’s Manufacturers,” for DDI with John R. Brandt, CEO and founder of the Manufacturing Performance Institute (MPI); George Taninecz, MPI’s vice president of research; and Ronnie Tan Li Tong, vice president/managing director of DDI’s Asian division.

The report examines to what extent HR best practices have been adopted by Chinese plants relative to U.S. facilities, performance implications of adopting specific practices, how gains from individual HR efforts vary by ownership structure of the plants, and performance improvements that can be achieved by adopting a new regime of HR initiatives.

“We did the research because for a long time, we felt there was a relationship between good, solid HR practices and manufacturing performance,” explains Wellins. “Our study showed this strong relationship on numerous fronts.”

Chinese manufacturers are able to produce products for 30% to 50% less than the U.S., according to the study. There’s no doubt that China’s low costs of goods and labor have helped attract hundreds of billions of dollars in investments from all types of companies, however, the trend will not last.

“First, eventually the costs of labor in China will rise — in fact this has already started,” says Richard Wellins, DDI’s senior vice president. “Second, we need to compete on R&D/innovation, not cost. Finally, we are still far better at quality.”

Empowerment on the plant floor is another advantage U.S. manufacturers have over China. More than 35% of Chinese plants don’t empower any of their employees, according to the study. Among state-owned China plant, where autocratic leadership approaches are the norm, that number rises to 45%. Meanwhile, 47% of U.S. plants have empowerment levels of at least 25% to 100%.

“I think empowerment and quality/innovation are very related. A fair degree of empowerment gives American workers a sense of ownership about their jobs, serving their customers, and making things better,” says Wellins. “In China, there are cases where less empowering leadership leads to ‘wait and tell me what to do’ behavior.

“In the U.S. we have been fostering empowerment for more than a decade,” he says, “self-managed teams, and getting workers involved in continuous improvement, quality and safety. I think in China, especially in state-owned plants, the leader is more in control — workers work, and leaders take care of everything else. This attitude is less prevalent with the Chinese multinationals.”

In China, 32 plants (8%), coined Super HR plants, are adopting leading-edge human resources initiatives that resemble Western facilities, according to the study. Those plants are developing more skilled, higher-paid workers and are giving them the strategies and tools to improve, including more than 40 hours of formal training per production employee per year.

There are several areas of training U.S. manufacturers should get more involved in to better compete with China. “Four critical areas,” says Wellins. “For the team member, the skills are around technical excellence, quality practices and team skills. The last area is leadership excellence.”

U.S. manufacturers need to regain their edge in ambition. “The one thing that struck me in another piece of research we did on leadership is ambition,” says Wellins. “I see a drive, especially at leader levels [in China], to get ahead at all costs. That has been partially lost in North America.”

Regardless of various strategies and practices global companies increasingly developed, executives around the world are realizing that world-class manufacturing primarily relies on superior people assets, the study says. Organizations that develop effective programs for those vital people are likely to come out ahead.

For a more detailed look at the 20-page study, download a copy from DDI’s Web site at  www.ddiworld.com/thoughtleadership/hrtrendresearch.asp.

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