THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, July 2, 1995 TAG: 9506300675
SECTION: COMMENTARY PAGE: J2 EDITION: FINAL
TYPE: Book Review
SOURCE: BY KEITH MONROE
LENGTH: Medium: 96 lines
RETHINKING AMERICA
A New Game Plan From the Amiercan Innovators: Schools, Business, People, Work
HEDRICK SMITH
Random House. 474 pp. $25.
HEDRICK SMITH is well-known from the best-seller list and the Public Broadcasting System. He's written on the Russians and on Washington's power game. Now he takes on what ails American free enterprise.
Much of this cautionary tale will be familiar to viewers of Smith's recent public TV series, ``Challenge to America.'' In it and in this book, he looks at what Japanese and German businesses and schools are doing right and what Americans are doing wrong.
He finds that our foreign competitors don't aim at quick profits alone but at long-term survival. And that leads them to nurture employees instead of treating them like Kleenex, to value increased productivity and market share over fat margins and jazzy stock performance, to aim for a series of patient single-base hits rather than counting on the company-saving grand slam.
Even when American firms have been persuaded to give Japanese and German ideas a try (generally by getting into trouble), they have often preached team management, continuous improvement, a long-term perspective and the importance of training while continuing to practice business as usual.
Smith tells one story after another of embarrassing corporate greed, hypocrisy, shortsightedness and arrogance at companies like General Motors, RCA and IBM. He shows how they went for the quick profit rather than invest in research and development. Repeatedly, business school types, skilled in finance and marketing but clueless about manufacturing, were put in charge. Electronic companies were run by people with no knowledge of electronics, car companies by auto ignoramuses.
Over and over, innovation was unwelcome; cash cows were milked dry; core businesses were neglected to chase the latest fad; and workers were exploited to enrich management. When management fails, workers pay and management floats to Earth on golden parachutes. Such companies value conformity over candor and choose to punish rather than reward resourcefulness. Sound familiar?
When Ford got in trouble and brought in quality guru W. Edwards Deming, it tried to convince him that all the company's troubles could be traced to labor. Deming replied, ``Pleasant dreams. The workers are handicapped by the system, and the system belongs to management.''
Smith's book is not all cautionary tales, however. Much of it is concerned with the foreign examples that American firms have been slow to follow. At Toyota, the culture really does put customers and workers ahead of technology and management. At firms like Daimler-Benz and Sharp, the purpose of management is thought to be to serve workers, not to help itself. Companies actually listen to customers and workers instead of telling them, as they did at GM, to ``just follow orders and let us do the thinking.''
Sometimes there are structural reasons for foreign superiority. In Germany, companies have stakeholders, not shareholders. Employees are entitled by law to half the seats on corporate boards. Teams hire their own workers. Profit-sharing and stock ownership aren't just perks for management. Workers really are empowered by an ownership stake and a commitment to their retention and training.
In Japan, the keiretsu - a web of interlocking corporate relationships - protects businesses from market vagaries and competition. Stock ownership by a company's suppliers means as much as 70 percent of shares are not traded. In Germany, stakeholder banks often provide ``patient capital'' and the same sort of buffer against shocks. Nearly half of Daimler-Benz is controlled by Deutsche Bank.
Smith also sketches the differences in schools in the three countries. Here, students are on their own and receive little or no preparation for a life of work, particularly the 70 percent who won't graduate from college. Here competition is valued over cooperation, individualism over teamwork.
In Germany and Japan, school lessons are life lessons. Teamwork is taught from the first day in school. Students advance together or not at all. Teachers coach and guide rather than indoctrinate. Learning is more likely to be hands-on than abstract. Elaborate apprenticeship programs prepare students for the transition to employment. And businesses and parents are partners with schools, not absentees or adversaries.
Reforms of banking and investment laws could help American firms escape from the curse of short-term thinking. School reforms are badly needed if we are to match our competitors in creating a world-class work force turning out high-quality products. Government can play a constructive role. But the biggest reforms will have to come in businesses themselves.
A few success stories show it can happen here - Motorola, Saturn, Boeing, the Ford turnaround. But too often Smith shows the pretense of change has taken the place of the real thing. Anyone worried about the future of American schools and factories ought to read this gloomy book and get more worried. Too many Americans find themselves caught in the kind of business described in the comic strip ``Dilbert.'' This book reminds them it doesn't have to be that way. MEMO: Keith Monroe is a staff editorial writer. by CNB