I have a thing for Wisconsin. If I'm not exactly in love with the state, I've been a pretty heavy flirt. Especially with its cultural mainstays: Madison's hockey team, rye cocktails and a comedy ode to the snowmobile suit.
And a couple of weeks ago my old flame announced the best economic development news I have heard anywhere. No, not the Foxconn initiative--where, in exchange for state tax incentives, a Chinese manufacturer will open a flat-panel plant. That is the kind of tangible economic news that political folks find it easy to highlight, even as the state has many areas where unemployment is already at historically low levels.
So Wisconsin's growth companies are already concerned about finding good people. And a growing manufacturing economy means that the problem is expected to get much worse.
The best economic initiative I've heard of anywhere addresses that shortage.
It suggests that we must deal with productivity, or risk losing our manufacturing economy to super-efficient players elsewhere.
And it's originating from a quasi-state entity, the Wisconsin Economic Development Corporation, just blocks away from Governor Walker's Capitol office.
It's called the Wisconsin Transformational Productivity Initiative (TPI), and it has every chance of achieving its goals for the state. Wanna hear this? The goals are to improve productivity of middle market firms by 40% in 5 years. That means a planned for $50 million in profits for the firms who participate.
Why is it a good deal? Three reasons:
First, this initiative has the audacity to go after the real economic development problem in the country. Let's remember that economic growth comes from changes in the labor force, capital investment or productivity.
And one of the reasons we have had spotty growth nationwide for the past several years is because we have had see-sawing productivity. For example, here is the St. Louis Fed's view of labor productivity change in percent since the end of the last recession:
Productivity is hard for a lay person to see--and at these fluctuating rates of change, hard even for professionals to get their arms around. But our Wisconsin friends are determined to put a sustained effort on manufacturing productivity. In sum, it's the right problem.
Second, they have a good team. The effort is lead by Randy Bertram, a key manager of the state's Manufacturing Extension Partnership (WMEP), a not for profit that helps with lean initiatives, training and the like. And it has a history of thinking big. A few years ago it set up a well-thought-of multi-company statewide sustainability initiative. Yes, "sustainability" means improving the ecology. In the hands of practical manufacturing guys, it also means waste reduction.
Not only that, but WMEP is joining up with a productivity expert at the University of Wisconsin, Professor Enno Siemsen, who is suggesting the tools that companies will use, and who will help supervise the productivity effects.
Which brings me to the third reason I like this initiative, which involves a bad word.
Shh. It's Managem**t
Most productivity efforts, I find, are limited to limited efforts with known results. "Let's put a new machine on the factory floor. It will replace two men."
That kind of thinking limits your productivity to direct labor effects from a tiny tool set. Siemsen says that, of all the productivity initiatives you can take--management, technology, innovation, to name a few--management provides an outsized difference in outcomes, and in ways we cannot necessarily predict.
The correlation is strong with this one
The key is the the data. Siemsen finds that the US Census--yes, the US Census, in its Management and Organizational Practices Survey, or MOPS-- has information that helps. Simply, he says, companies that follow the MOPS practices are more productive. He's sorted the data into five major groups--human capital, innovation, leadership and strategy, operations and technology. Each group has a number of proven, detailed ideas for making things run better.
For example? Well, under the category of Human Capital is a factor called "Performance Management." And that asks a number of questions, including whether a company uses data display boards. Companies that use them are more productive than companies that don't. What those companies do, and how, is not exactly clear. But the correlation is strong, so the team will suggest this tool.
The TPI is now recruiting participating manufacturers. What will make the effort a success? I can guess at a simple checklist:
Truly curious leadership;
Teams with tons of smart people just itching for new challenges, and
A process that gets it right more than it gets it wrong.
This Wisconsin initiative is a beacon for the middle market in so many ways. Please stand by. It looks like there will be abundant, positive lessons for all of us.
We can talk about it over an Old Fashioned.