There are several factors that contribute to the learning curve phenomenon. None of the factors perform entirely independently, but are interrelated through a complex network. However, for simplicity's sake, these factors will be sorted out for discussion purposes.
• Labor efficiency. This is the most common factor, which says that we learn more each time we repeat a task. As we learn, the time and cost of performing the task should diminish. As the employee learns the task, less managerial supervision is required, waste and inefficiency can be reduced or even eliminated, and productivity will increase.
Unfortunately, labor efficiency does not occur automatically. Personnel management policies in the area of workforce stability and worker compensation are of vital importance. As workers mature and become more efficient, it becomes increasingly important to maintain this pool of skilled labor. Loss of a contract or interruption between contracts could force employees to seek employment elsewhere. In certain industries, like aerospace and defense, engineers are often regarded as migratory workers moving from contract to contract and company to company.
Upturns and downturns in the economy can have a serious impact on maintaining experience curves. During downturns in the economy, people work more slowly, trying to preserve their jobs. Eventually the company is forced into a position of having to reassign people to other activities or to lay people off. During upturns in the economy, massive training programs may be needed in order to accelerate the rate of learning.
If an employee is expected to get the job done in a shorter period of time, then the employee expects to be adequately compensated. Wage incentives can produce either a positive or negative effect based on how they are applied. Learning curves and productivity can become a bargaining tool by labor as it negotiates for greater pay.
Fixed compensation plans generally do not motivate workers to produce more. If an employee is expected to produce more at a lower cost, then the employee expects to receive part of the cost savings as either added compensation or fringe benefits.
The learning effect goes beyond the labor directly involved in manufacturing. Maintenance personnel, supervisors, and persons in other line and staff manufacturing positions also increase their productivity, as do people in marketing, sales, administration, and other functions.
• Work specialization and methods improvements.1 Specialization increases worker proficiency at a given task. Consider what happens when two workers, who formerly did both parts of a two-stage operation, each specialize in a single stage. Each worker now handles twice as many items and accumulates experience twice as fast on the more specialized task. Redesign of work operations (methods) can also result in greater efficiency.
1. The next six elements are from Derek F. Abell and John S. Hammond, Strategic Market Planning, © 1979, pp. 112-113. Reprinted by permission of Pearson Education, Inc., Upper Saddle River, NJ.
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