A look inside an auto plant reveals how learning by practically doing leads to higher productivity
For a period of 15 years beginning in the mid-1930s, the Horndal steelworks plant in central Sweden had been neglected. Except for minor repairs and replacement of broken equipment, no new investments were made to modernise the plant. Despite this apparent neglect, output per worker at the plant rose steadily at about 2% per year. Erik Lundberg, the Swedish economist who first observed the “Horndal effect” called it a case of “pure productivity.”
One oft-cited source of productivity is learning by doing, which is the ability of workers to raise productivity through experience. In fact, economists have credited the Horndal effect to learning by doing. The longer workers do the same type of job the better they get. The result is higher production without having to put in new machines or hire more workers.
Several studies have looked into the overall dynamics of the learning process - how fast productivity gains accrue, and whether knowledge acquired from experience can be forgotten over time and if it spills over to other areas of production. But partly because of lack of data, these studies reveal little about how learning occurs at a plant, making it seem as though productivity improvements from learning by doing arise spontaneously as production increases, without any scope for managers to affect outcomes.
To find out the specific mechanisms through which learning takes place, I along with Steven D. Levitt and John A. List, professors in the University of Chicago’s Department of Economics, analysed detailed production records from a major carmaker’s assembly plant. Beyond showing evidence of rapid learning by doing, our study, Toward an Understanding of Learning by Doing: Evidence from an Automobile Assembly Plant, provides insights into how workers’ experiences at a plant can lead to greater productivity.
The study finds that the knowledge individual workers gained while working at the plant was quickly incorporated into the production process. Workers, together with plant managers, made adjustments to the assembly line based on what they learned, changes that benefited the next batch of workers and boosted overall productivity. It’s instructive as to how piecemeal, even mundane changes can add up to substantial improvements in the production process.
LOOKING UNDER THE HOOD
We measured productivity increases from learning by doing by looking at the assembly plant’s defect rates over the course of a year. The plant assembled three variants of a model built on a common midsize-car platform. The shared platform means the three variants had similar body frames and powertrains but required different parts and assembly procedures. Immediately before we started our study, large changes were made at the assembly plant. The platform had just undergone a major redesign that included both mechanical and aesthetic changes. The automaker also altered the assembly line’s physical layout, brought in new machines and equipment, and modified the production process to emphasize that teams, rather than individual workers, would carry responsibility for a particular task in the line.
For a period of 15 years beginning in the mid-1930s, the Horndal steelworks plant in central Sweden had been neglected. Except for minor repairs and replacement of broken equipment, no new investments were made to modernise the plant. Despite this apparent neglect, output per worker at the plant rose steadily at about 2% per year. Erik Lundberg, the Swedish economist who first observed the “Horndal effect” called it a case of “pure productivity.”
One oft-cited source of productivity is learning by doing, which is the ability of workers to raise productivity through experience. In fact, economists have credited the Horndal effect to learning by doing. The longer workers do the same type of job the better they get. The result is higher production without having to put in new machines or hire more workers.
Several studies have looked into the overall dynamics of the learning process - how fast productivity gains accrue, and whether knowledge acquired from experience can be forgotten over time and if it spills over to other areas of production. But partly because of lack of data, these studies reveal little about how learning occurs at a plant, making it seem as though productivity improvements from learning by doing arise spontaneously as production increases, without any scope for managers to affect outcomes.
To find out the specific mechanisms through which learning takes place, I along with Steven D. Levitt and John A. List, professors in the University of Chicago’s Department of Economics, analysed detailed production records from a major carmaker’s assembly plant. Beyond showing evidence of rapid learning by doing, our study, Toward an Understanding of Learning by Doing: Evidence from an Automobile Assembly Plant, provides insights into how workers’ experiences at a plant can lead to greater productivity.
The study finds that the knowledge individual workers gained while working at the plant was quickly incorporated into the production process. Workers, together with plant managers, made adjustments to the assembly line based on what they learned, changes that benefited the next batch of workers and boosted overall productivity. It’s instructive as to how piecemeal, even mundane changes can add up to substantial improvements in the production process.
LOOKING UNDER THE HOOD
We measured productivity increases from learning by doing by looking at the assembly plant’s defect rates over the course of a year. The plant assembled three variants of a model built on a common midsize-car platform. The shared platform means the three variants had similar body frames and powertrains but required different parts and assembly procedures. Immediately before we started our study, large changes were made at the assembly plant. The platform had just undergone a major redesign that included both mechanical and aesthetic changes. The automaker also altered the assembly line’s physical layout, brought in new machines and equipment, and modified the production process to emphasize that teams, rather than individual workers, would carry responsibility for a particular task in the line.
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