 |
| |
 |
|
|
|
|
COVER
STORY - June 2001 by Bryan Armstrong Sidebar-
Among the evidence used to make the case for doing business in Kentucky are the state’s impressive numbers on worker productivity. “Workforce is right at the top of the list,” said Rene True, director of research for the state Cabinet for Economic Development. To measure worker productivity, the Cabinet offers a fact sheet showing how much value the manufacturing process adds to the worth of products. In the most recent year for which such statistics are available, 1999, value-added across the nation averaged $163,406 per worker. In Kentucky, value-added was $180,717 per worker, or nearly 11 percent above the national average. In fact, Kentucky’s value-added per worker figure exceeded similar figures in 12 of 13 surrounding states, including Ohio, Tennessee and Indiana. Among competitor states, only Virginia had a higher value-added per worker in 1999 – $184,094. Some of the types of industries that tend to prosper in Kentucky – such as coal and automobile manufacturing – are high in value-added. Of Kentucky’s total value-added of $40.5 billion in 1999, about one-third came from transportation equipment manufacturing, such as automobiles. Nonetheless, Kentucky workers “stack up very favorably to the national averages and the quality of the workforce right now is probably the top criteria for a company to look at,” True said. In early May, the U.S. Labor Department reported that after the seasonally adjusted national productivity rate had grown by three percent in the third quarter of 2000 and two percent in the fourth quarter, it fell by 0.1 percent during the first quarter of 2001. It was the first drop in productivity since a 0.8-percent dropoff six years ago. For the entire year 2000, productivity grew by 4.3 percent. Other labor-related factors are important to business and industry prospects as well, such as availability and affordability. But worker quality – productivity – is a key factor when companies decide where to do business. “Kentucky’s workers are competitive with any in the nation,” True said. Worker productivity becomes an issue nationwide as states jockey to provide a welcoming environment for business and industry. U.S. worker productivity grows, on average, only slightly more than one percent a year, and other industrialized nations are gradually catching up to America, according to the National Center for Education Statistics. The education and skill levels of the workforce are vital to worker productivity, industry leaders and economic development professionals say. Increases in educational attainment are responsible for as much as 20 percent of U.S. growth in worker productivity in recent decades. While Kentucky historically was not known as a state that valued education, reforms of public schools and postsecondary education over the last decade have changed that perception. Kentucky state government uses the Cabinet for Economic Development website to help recruit business and industry. The Cabinet home page includes a link to “Ten Great Reasons to Locate or Expand in Kentucky.” First on the list is education. The 1997 reforms that changed the face of postsecondary education in Kentucky set a goal of raising Kentuckians’ standard of living and quality of life to the national average by the year 2020. One of the prime advocates for postsecondary education reform – Council on Postsecondary Education President Gordon Davies – had this to say in a recent editorial: “In proposing reform, Gov. Paul Patton said that its purpose is to improve lives and increase incomes. No American and no American family can aspire to a middle-class life without education beyond high school … that provides footholds on the educational and economic ladders to self-sufficiency and rewarding lives.” Some of the most progressive and successful companies in Kentucky focus on education and training as a key to worker productivity. For example, the Ford Motor Co. Louisville Assembly Plant, which has forged partnerships with local education institutions, two years ago was rated the most productive truck assembly plant in the nation, according to a report by Harbour and Associates. a Troy, Mich., company researching the automotive industry. About 150 miles to the southwest, Logan Aluminum has written a worker-productivity success story largely based on how it treats and trains its employees. Construction of Logan Aluminum began in 1980. The original investment of $500 million eventually expanded to $1 billion; Logan Aluminum now occupies more than 1.3 million square feet in a plant that sits off U.S. 431 a few miles north of Russellville in Southern Kentucky. Logan Aluminum – which is a joint venture between ARCO Aluminum, a subsidiary of British Petroleum, and Alcan Inc. – describes itself as an “industry leader in terms of product quality, customer services and cost performance and (receives) broad-based recognition for its progressive management concepts.”
Manufacturers in the United States produce about 100 billion cans a year, or about five billion pounds of aluminum cans. About one-third of those cans come from sheet processed by Logan Aluminum. The company makes aluminum sheet from aluminum ingots and recycled cans. The raw materials are melted in furnaces at more than 1,300 degrees Fahrenheit and formed into ingots – 300 inches by 78 inches by 30 inches – that weigh 50,000 pounds apiece. The ingots then are pushed through rollers, over and over, until the process produces a thin sheet of metal. “It gets longer and thinner and longer and thinner,” said C. Mike Harris, president and chief executive officer of Logan Aluminum. “When it gets thin enough we roll it into a coil.” Logan Aluminum ships 35,000 truckloads of its finished product each year. So how did the company go from having zero customers 20 years ago to producing metal for one-third of all aluminum cans in the United States? “That’s a testimonial to expanded production and the management system that we put in place,” Harris said. Logan Aluminum employs 1,000 people, 98 percent of whom come from Logan County or counties that touch Logan, Harris said. They are well-paid, averaging $40,000 a year in salary and benefits. The way Logan Aluminum recruits and develops its employees today is rooted in the conditions that prevailed in American industry 20 years ago, when the company was founded. The steel industry was in decline, and Chrysler was in trouble, Harris recalled. “The prevailing wisdom in industry was that there was something wrong with people,” Harris said. “The minority feeling was there was nothing wrong with people; there was something wrong with work.” So Logan set out to design “a better way to work.” The company charged teams with researching progressive, high-performance management styles and exploring the possibility of making employees substantial stakeholders in the company. The result: A team-oriented atmosphere in which groups analyze and improve processes, and decision-making authority is pushed to employees’ level. “It’s not one guy who says, ‘This is what we ought to do,’ “ said Bill Herr, plant manager. “Our people understand where our competitive edges are.” Logan has no specific education requirement for employment but has a “sophisticated hiring process that factors in behavioral assessment,” Harris said. “We have an extensive training system in our plant. Every employee has an annual training plan.” Training includes fundamental safety courses on environmental issues, personal protective equipment and blood-borne pathogens. Logan also focuses on technical training and soft skills such as team building and communications. Most of the instructors are Logan employees, but the company also has established relationships with nearby Western Kentucky University and Bowling Green Technical College. The average employee has “1.2 years of college, which is very high,” Harris said. All Logan employees are salaried and receive the same benefits. No seniority system exists. Compensation is based on skills and performance. “As employees learn new skills, they are paid more,” Harris said. “We pay people for what they know.” Asked to describe the ideal Logan employee, Harris said, “There are certain qualities we are trying to assess – energy, participation, decisiveness, integrity.” Logan workers Eric Burnett, a 16-year veteran from Bowling Green, and George Appling, a 13-year employee from Russellville, appreciate the input that they are allowed to have in the hiring process. “We can see how well they (new employees) will fit with our team,” Appling said. “We kind of all mesh together.” They also like the team concept, which “allows us to do our job,” said Appling, who works in plant operations. “We make decisions on what we do on the floor,” he said. As technology in the industry has improved, training has increased in importance, Burnett said. “The industry is not getting any easier,” he said. “You have to keep up with technology, or you’ll be left behind.” Such continuous improvement has assisted Logan Aluminum in setting industry standards in safety, quality and cost. Worker productivity is key to all three. How has Logan achieved such high worker productivity? “There
are three reasons,” Harris said. “One is
technology. One is our physical assets, our equipment.
The third thing is our management system … how we
utilize people to create a competitive advantage. |
 |
|
Copyright 1996-2001, by Kentucky Business Online. All rights reserved. Editorial
content is copyright 2001, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
When Kentucky
officials pursue a business or industry that it hopes
will move to the Commonwealth, economic development
professionals send to the company a packet of three dozen
or so fact sheets.
Logan Aluminum makes
aluminum sheet that eventually becomes aluminum cans
– and lots of them.