The migration in manufacturing jobs and facilities from the U.S. to China and other countries has been getting a lot of attention lately. Recently my LGO classmate Benj Christensen and I had the opportunity to discuss labor issues over lunch with Thomas A. Kochan, Professor of Work and Employment Research and Engineering Systems at MIT’s Sloan School of Management, who’s called for a “Jobs Compact” for America.
Working as a young supervisor of a very senior union workforce at a steel mill in Indiana before coming to MIT, I saw the impact of the long history of bad management-labor relations, and I worked hard to establish trust on a personal and team level as a way to get things done. I asked Tom about the argument he made in his “Jobs Compact” that unions serve a larger societal impact, especially in this economic climate.
He replied that when unions decline, income inequality grows, “which on an aggregate level is bad for the economy.” Unions play an important balancing role by ensuring that worker incomes are fair even as the company becomes more profitable and creates more jobs, which is something everyone wants.
“We need laws that allow unions to operate successfully, but we also need laws that promote positive labor-management relations,” Tom said.
Tom pointed to Southwest Airlines, a company that didn’t fight unionization at its inception but relied instead on flexibility and collaboration between workers and management to become (and remain over many years) more profitable than any other company in its industry.
We’re hearing a lot about the return of some manufacturing jobs to America as the costs of transportation and Chinese labor increase. This is encouraging, but we asked Tom if he thinks it’s too late for the U.S. to take the lead in creating the next electric vehicle battery or another innovative technology.
“Historically it’s been too easy for companies to make decisions on the basis of labor costs,” Tom said. But as concerns grow about labor costs, fuel prices, transportation and carbon footprints, more companies are looking at whether we can and should do some of this work back in the U.S. “There are more conversations going on about the real total costs of outsourcing.”
Those conversations are starting to include the realization that you can easily boost (or rebuild) worker skills in a given geographic area, but suppliers and sales distribution infrastructures as well as government incentives are more fixed in location, “and to bring all that back to the U.S. once it’s moved overseas is hard,” Tom said.
How can we as future leaders in manufacturing and operations help create jobs here in the U.S. while also generating profits for our companies? Given his focus on labor issues, Tom’s response was somewhat surprising. The key, he said, is the American educational system. Four-year colleges, community colleges, and industry need to collaborate to make sure America’s schools are producing people with the skills that industry needs. Tom also talked about free online programs such as MIT OpenCourseWare and MITx, which can provide some of the education and training people need without the increasingly burdensome costs of a four-year residential college degree.
Industry also needs to take a more active role in encouraging K-12 students to pursue STEM (science, technology, engineering and math) education, Tom said. For example, companies could partner with schools on summer jobs and offer year-round role models to show students how STEM skills are used in the workplace and how this kind of expertise pays off for workers.
What we also may need, he said, is another “Sputnik moment” that galvanizes the U.S. public to invest in education and technology.
Benj, who helped optimize patient flow through ICUs during his LGO internship at Massachusetts General Hospital, observed that we’re both somewhat atypical for MBA students in not focusing on finance in either our education or our career plans. Benj noted the ascendancy of finance in general, particularly in corporate governance, with an emphasis on short-term results. He asked Tom how we can broaden our corporate focus to include other issues, whether operational or societal, that will have a significant impact on long-term returns—financial returns, but also broader societal returns.
“It’s going to be very hard to change that (finance emphasis), but it has to start here in the educational system,” he said. “Just by being interested, you and other LGO students represent a counterbalancing force. We have to demonstrate that there are alternative ways to manage that are successful for shareholders as well as other segments of society.”
Matt Kasenga is an LGO candidate, Class of ’13
MIT Leaders for Global Operations (LGO) is co-hosting a conference at MIT on May 8-9 on “The Future of Manufacturing in the U.S.” Registration is closed, but you can follow the proceedings on Twitter (#MITmfg) and the LGO website.
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