Stanford Business School on teamwork and manufacturing productivity

March 19, 2008

Those who work in the most complex manufacturing environments have the most to gain from the use of problem-solving teams, according to a recently published study. As the United States concentrates its manufacturing base, workers are more likely to be working on very high-quality products that require complex manufacturing steps.

Using data from steel minimills, the study shows that teams had the greatest impact if they tackled complex tasks in these environments, enjoyed meaningful incentives, and knew that management listened to them.

Steel mills traditionally have focused on the quality and quantity of goods produced rather than how workers interact, and managers often resist the idea of taking rank-and-file workers off the factory floor or paying them overtime for meetings so they can become collaborators. Yet during the five-year study, the number of mills using problem-solving teams more than tripled - and the practice became virtually universal on lines executing the most complex tasks.

"It's not teams, per se," said Kathryn Shaw, the Ernest C. Arbuckle Professor of Economics at the Stanford Graduate School of Business, one of the study's authors. "It's having an environment that supports teamwork. You need a group of experts coming together to solve a complex problem. You're bringing people together because no one person can solve the problem as well as the group."

Minimills operate 24 hours a day, so companies can't increase yield by having people work longer. But rank-and-file employees can come up with ways to work smarter, from having more efficient training to reconfiguring production lines or finding faster ways to identify and reject unacceptable products.

Although this study focuses on a narrow aspect of one industry - "rolling mills" that reheat, roll, and cut steel to produce bar products such as rebar or I-bar - Shaw says strategic teams with appropriate incentives can have a widespread impact.

"I've visited so many companies in so many industries, and this really is the answer," she said.

There is one caveat: The teams' gains are significant only when they are addressing complex processes such as improving product quality or solving assembly line problems, not relatively simple tasks such as organizing shifts, Shaw said.

To measure productivity, the researchers used yield - the ratio of the number of tons produced that meet the quality standard divided by the number of tons that are loaded onto the production line (or the tons "charged" in the reheat furnace at the beginning of the line).