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Sunday, September 25, 2011

WHAT GOVERNMENT DOESN'T UNDERSTAND ABOUT BUSINESS

On September 8th, 2011, President Obama unveiled his "American Jobs Act" to the country in a special joint session of Congress. His intent was to somehow jump-start the economy and put the unemployed back to work. The legislation is now before the Congress for review. I am personally disappointed with the act as I consider it another prime example of how we tend to attack symptoms as opposed to root problems. High unemployment is not the problem, it is only a byproduct of a more deep seated problem, namely lower productivity as evidenced by a paltry Gross Domestic Product of 1.0%. Lawmakers offer little direction primarily because they do not understand how business truly works.

As anyone who has studied production can tell you, there are basically two ways of producing any product, either one at a time or in large quantities. Mass production affords the ability to produce more products at reduced costs. As such, industrial engineers have long known that in situations involving voluminous work products of the same type, an organization needs to observe the five basic elements of mass production as found in just about any industrial text book:

1. Division of Labor – to break the production process into separate tasks performed by workers with different skill sets.

2. Assembly Line – defining the progression and synchronization of work, thereby assuring the workers are performing tasks in the proper sequence (aka, doing the right thing at the right time).

3. Precision Tooling – for mechanical leverage and improved efficiency on the assembly line.

4. Standardization of Parts – for inter changeability and assembly by unskilled and semiskilled workers. Standardization provides the opportunity to share and reuse parts in various products, thereby reducing product costs.

5. Mass Demand – the impetus for mass production and the most critical element. Without it, there is no need for the others.

You will find these five elements in every company who offers repetitious work products, be it an automotive manufacturer, a bank or insurance company, an engineering firm, a restaurant, an I.T. company, and just about any small business you can imagine. The elements are visibly exemplified by such things as assembly lines and formal business methodologies defining "Who" is to perform "What," "When," "Where," "Why," and "How (aka, "5W+H"). It is a universally applicable concept found in big business as well as small. More organizations operate in accordance with these five elements than those who do not. AND THIS IS WHAT OUR GOVERNMENT DOES NOT UNDERSTAND!

To truly boost our economy, we need to make companies more competitive for the world stage. To do so, it is necessary to maximize all five of these components as they work in a cohesive manner. Of these elements, the president's "American Jobs Act" only addresses the first element, Labor. Here, the government proposes to cut payroll taxes and provide tax breaks for companies to hire people. There is nothing about sharpening the skills of the work force. From a practical point of view, why should companies hire workers who lack suitable skills? Simply to get a tax break? Hardly.

Let's consider how the other elements could be influenced by government if they were so inclined; there should be tax incentives for such things as:

* Modernizing and retooling the production process (thereby maximizing the effect of "assembly lines" and "precision tooling").

* Updating and enhancing worker skills.

* Minimizing waste and reusing resources.

* Attaining levels of quality output.

* Encouraging consumers to buy American products, both domestically and abroad, thereby fueling mass demand. This includes purchasing American parts and raw materials for use in our products.

Regrettably, there is no such thinking in Washington, probably because the lion's share of lawmakers are attorneys and, as such, have no real concept of production, only legal minutia. The "American Jobs Act" and any other similar proposed legislation are naive attempts to stimulate the economy by attacking the five elements of mass production in piecemeal, rather shallowly I might add.

I am still of the belief that reducing regulatory red tape encourages business, but beyond this, a tax incentive program addressing all of the variables of production, not just one, can truly put the economy back on track and thereby put Americans back to work. To do so though requires lawmakers who understand industry which, unfortunately, is currently in short supply in our capitol. We need leaders who can see the big picture, not just the myopic portions they wish to see for political gain.

Keep the Faith!

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Tim Bryce is a writer and the Managing Director of M. Bryce & Associates (MBA) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

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http://www.phmainstreet.com/timbryce.htm

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