ReferenceⅡ History of the Productivity Movement and Development

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History of the Productivity Movement and Development

of the Productivity Movement in Japan
1. The productivity movement in Europe and Japan

  • Establishment of the British Productivity Council in 1948 and the European Productivity Headquarters in 1953

  • Report of the Rome Conference of the European Productivity Headquarters . . .

  • Establishment of the Japan Productivity Center in 1955 and beginning of the productivity movement in Japan . . .

  • Tripartite Organization (Three-party composition) and the Three Guiding Principles of the productivity movement . . .

2. The spirit of the International Labour Organization and the productivity movement

  • Respect for human beings as seen in the ILO Philadelphia Declaration in 1943 . . .

  • The Three Guiding Principles of the productivity movement embodying the ILO spirit

3. Concrete development of the productivity movement (improving national economic productivity and raising national living standards)

  • Dispatch of overseas inspection missions to Europe and the United States

  • Introduction to companies and development of scientific business management

  • Efforts to modernize labour-management relations

4. Participation and promotion of trade unions in the productivity movement

  • Establishment of the National Trade Union Productivity Council in 1959 . . .

  • Regional bloc organizations and national development

  • Present state of organization and activity themes

5. Features of labour-management relations in Japan

  • Relations of trust between labour and management are the basis.

  • Collective labour-management relations and individual labour-management relations

  • Cooperation and confrontation in labour-management relations (labour-management consultation system and collective bargaining)

6. What is productivity? …

  • Definition of productivity

  • Methods of increasing productivity

  • Types of productivity

7. Recent project activities and the 21st Century Productivity Declaration

  • Goals of the movement in 2003 . . .

  • 2003 report of the Special Committee on Labour-Management Relations (“Changes in Corporate Management and Labour-Management Relations in the 21st Century”) . . .

  • 21st Century Productivity Declaration . . .

Rome Conference Report of the Productivity Committee of

the European Productivity Headquarters

Above all else, productivity is an attitude of mind. It is the mentality of progress, of the constant improvement of that which exists. It is the certainty of being able to do better today than yesterday, and less well than tomorrow. It is the will to improve on the present situation, no matter how good it may seem, no matter how good it may really be. It is the constant adaptation of economic and social life to changing conditions; it is the continual effort to apply new techniques and new methods; it is the faith in human progress.

Founding Prospectus of the Japan Productivity Center

February 14, 1955

Promoters of the founding of the Japan Productivity Center

It goes without saying that more than anything else the improvement of productivity is the important basic factor in responding to the sharp changes in the postwar situation both domestically and internationally and in achieving the sound development of the Japanese economy. The essential objectives of productivity improvement are to promote the mutual benefits of labour, management, and the ordinary consumer by reducing production costs through the effective and scientific utilization of resources, manpower, and plant and equipment, expanding markets, increasing employment, and raising real wages and living standards. The importance of productivity improvement was recognized early in Western Europe, and large-scale productivity improvement movements developed in many countries in that region, especially after 1948. It is a well-known fact that these movements have already achieved spectacular results today.

As we approach the tenth anniversary of the end of the war, when we reflect on the present condition of the Japanese economy and think about the future, we are keenly aware that Japan also must now devote the utmost efforts to the improvement of productivity. The improvement of productivity, however, requires the deep understanding of not only employers in charge of production and workers but also the public in general. Adequate results cannot be expected without the cooperation of the nation. This is the reason why we are establishing the Japan Productivity Center, bringing together employers, workers, and scholars and experienced persons. We sincerely hope that the Japan Productivity Center will serve as the core body of a fair productivity improvement movement in Japan and establish the foundations for the development of the Japanese economy.

We are most encouraged by the fact that already the Japanese government has expressed much expectation of our plans and announced a policy of assistance, and the US government also has shown strong interest and offered to provide necessary support and convenience. Nevertheless, the key to the improvement of productivity lies in our own efforts and devices. Strongly aware of our responsibility as the leaders of the Japanese economy, we pledge to make the utmost efforts toward the improvement of productivity.

The Three Guiding Principles of the Productivity Movement

Improving the productivity of industry is an urgent issue for achieving the independence of the Japanese economy and raising the living standards of the nation.

  From this perspective, the projected productivity movement must develop as a national movement with the deep understanding and support of all of the people. Accordingly, we understand the basic idea of the movement to be as follows:

 1. The improvement of productivity ultimately will lead to an increase of employment. With regard to transitional surplus labor, the government and the private sector shall cooperate to adopt appropriate measures to prevent unemployment by, for example, redistributing labour as far as possible from the perspective of the national economy.

 2. Regarding specific methods of improving productivity, labour and management shall cooperate in studies and consultations in accordance with the actual conditions of the company concerned.  

 3. The fruits of productivity improvement shall be distributed fairly among management, labour unions, and consumers in accordance with the actual condition of the national economy.

History of the National Labour Union Productivity Council (Zenrosei)
The Japan Productivity Center was founded in 1955 through the three-party composition of labour, management, and neutral elements and announced the Three Guiding Principles of the productivity movement of the securing and expansion of employment, consultations and cooperation between labour and management, and fair distribution of the fruits of productivity. This marked the beginning of the productivity movement in Japan.

As companies, faced with an economic slump, proceeded to carry out rationalization at that time, labour unions that agreed with the spirit of the Three Guiding Principles believed that it was necessary to promote the productivity movement in order to establish and develop the economic base in Japan. They therefore came together beyond the framework of national centers and in 1958 held the First National Labour Union Productivity Discussion Meeting, which turned out to be extremely fruitful. As well as adopting resolutions on written demands to the government, management, and others, labour unions agreed to organize a setup for the full-scale promotion of the productivity movement that transcended industrial and national frameworks. In addition, through the meeting, the demand emerged for the establishment of a parent body to promote the productivity movement on behalf of labour unions. The National Labour Union Productivity Planning and Implementation Committee was formed in 1959 as such a body, and half a year later regional committees were set up as entities to promote the productivity movement in eight blocs around the country.

The Planning and Implementation Committee defined its objectives as the national deepening of the productivity movement from the standpoint of labour unions and organization building for this purpose; it planned and put various projects into practice and became a driving force supporting Japan’s economic development. Ten years later, in 1968, in view of its track record so far, the committee changed its name to the National Labour Union Productivity Council (Zenrosei).

In the 1970s there was heightened criticism of the production-first approach of the era of high economic growth and increasing calls for improved national welfare. While recognizing that the necessity of the productivity movement remained unchanged, Zenrosei endeavored to promote the movement from a global perspective toward the creation of an affluent society based on respect for human beings. Early on it proposed that rather than limiting the scope of the productivity movement to the corporate level, there was a need to develop it to the level of the national economy. Then in 1989, on the occasion of its thirtieth anniversary, and in the light of the results of its research and activities until then, Zenrosei adopted the Thirtieth Anniversary Declaration that advocated the need for an improvement in social productivity and socially fair distribution. Zenrosei marked the fortieth anniversary of its founding in 2000.

Since its establishment until today, Zenrosei has conducted wide-ranging surveys and research on various problems relating to industrial labour and productivity and has implemented necessary joint activities as the core industry-based body tackling the productivity movement beyond the framework of national centers.

Specifically, the activities that Zenrosei has positively promoted include (1) grasping of economic trends and consultations on labour union policy in response; (2) the holding of study meetings, central and regional discussion meetings, symposiums, and so on to permeate labour union policies in response to structural changes and new economic trends; (3) promotion of liaison and cooperative relations among labour unions themselves; (4) continuous survey and research activities on the economic and labour situation; and (5) projects in liaison with the JPC-SED.

At present Zenrosei consists of a central committee, which decides on overall activity policies and other important matters; standing committees on planning, research, international affairs; organization and publicity, financial affairs, and measures for small and medium-sized companies; and special committees set up to investigate topical issues. Zenrosei also has regional branches that carry out independent activities in nine regions around Japan (Hokkaido, Tohoku, Kanto, Chubu, Chugoku, Shikoku, Kyushu, and Okinawa). Zenrosei develops nationwide activities in liaison with these regional branches.

What Is Productivity?

1. Definition of productivity

Productivity is the ratio of the input volume and the output volume. The larger the ratio of output volume to input volume, the higher productivity.

The input volume includes such production factors as labour, capital, raw materials, fuel, and machinery and equipment. The output volume refers to such factors as production quantity, production value, sales, added value, and gross domestic product. Incidentally, the Organization for Economic Cooperation and Development defines productivity as “the trade resulting from dividing the output by one of the factors of production.”

Usually productivity refers to productivity measured with labour as the input volume – in other words, labour productivity, or productivity per worker per hour.

Productivity is the same kind of concept as efficiency and utility; it is an indicator showing effectiveness. In comparison with efficiency and utility, however, the characteristic of productivity is that it has a specific numerical measurement.

The numerical measurement of productivity can be turned into an even more useful indicator by comparing it with the productivity of others, rather than just using it on its own. The comparison of productivity can be divided into comparison of productivity level (a comparison of the numerical values themselves) and comparison of the rate of change (rate of increase) of productivity.
2. Types of productivity

(1) Labour productivity

Labour productivity is calculated as the ratio of labour as the input volume to the output volume. Generally it is a measurement of production quantity and added value per worker or per worker/hour.

Labour productivity can be divided into productivity as seen in terms of the national economy as a whole and productivity in a specified industry, business, or company. Also, when the ratio of output volume to labour input volume is shown in terms of weight or number of units, it is called physical labour productivity; when it is shown in terms of the price of the output volume at that time, it is called value labour productivity; and when added value is divided by the labour input volume, it is called value-added productivity.

(2) Capital productivity

Capital productivity is calculated with capital as the input volume and shows output volume per unit of capital stock. Usually it is given as the ratio of tangible fixed capital, such as machinery or equipment, and output volume. It is measured in terms of, for example, production volume per unit of machinery or equipment or production volume per operating time.

(3) Total factor productivity

Rather than productivity calculated in terms of individual production factors, such as labour productivity and capital productivity, total factor productivity shows the relationship between produced volume and all production factors as the input volume, including labour and capital. Since it is difficult to directly measure total factor productivity, actually it is measured as the difference with the extent to which the rate of change of capital and labour input volume contributes to the rate of change of output volume. This difference (total factor productivity) is usually called the technological progress rate, and it is understood to reflect innovations and such factors brought about by those innovations as the qualitative improvement of labour and capital or management efficiency.

(4) GDP per person employed

GDP per person employed is an indicator showing the productivity of the country’s economy as a whole. It is calculated by dividing gross domestic product as the output volume (GDP = added value) by the total number of workers as the input volume. This is also a type of labour productivity; it is an indicator showing value-added labour productivity.

The national economic welfare indicator (affluence indicator) is sometimes used to show the standard of living of the nation; it is calculated by using the total population as the input volume instead of the total number of employed (GDP per head of population).

The JPC-SED has been issuing An International Comparison of Labour Productivity once a year since 1989. This international comparison measures national economic productivity by dividing the country’s GDP, converted into dollars at purchasing power parity, by the total number of employed persons in that country. At the same time, an international comparison is made of the national economic welfare indicator.

Objectives for 2003

It is JPC-SED's view that Japan is on the verge of disintegration. There is almost no time left to prevent this.

The various systems that brought Japan to prosperity after World War II have become obsolete, and we stand frozen to the same spot, unable to reform the country's political, economic, and social systems. In terms of the economy, it is already more than ten years since the bursting of the economic bubble, and we are confronted with a deflationary crisis such as no other developed country has ever experienced in history. If we fail to resolve this situation, it will be the start of a global depression originating in Japan.

It is high time to face the crisis confronting this country, and start working for the next generation by reforming all conventional structures in Japan. A structural reform that "reflects the will of the people" is particularly necessary. It should be extended to a thorough examination of our lifestyles, our ways of living, and our working styles. JPC-SED realizes that such reforms will entail some pain, but this is a time when the people of this country must share the pain on the basis of a national consensus and steel themselves to move forward.

Point 1: Toward true political and structural reform
JPC-SED intends to promote this nationwide movement through "special committee" activities and various other projects. While fully committing our strength to sweeping reforms of Japan, we propose a vision and strategies which Japan should follow.
Through the activities of the "Congressional Forum for New Japan (21 Seiki Rincho) " and the "Judicial Reform Special Committee”, JPC-SED will work to build a new nation filled with the creativity and vitality of the people for coming generations. To that end, we will devote our entire strength to promoting true political and structural reforms that will break through the existing structure of vested interests.
In other words, we will reexamine the very roots of the country's fundamental systems. We particularly intend to reevaluate the significance of the government, the political parties, the politicians, and the role of the public. We will try to overcome the current government-centered system of policy- making in this country, and we aim to establish a truly responsible political system which is credible to the people and capable of replacing the current political system.
Point 2: Management system innovations through improved quality of management

The concept of management quality improvement will be reflected in our productivity movement as well as the rest of JPC-SED's activities.

We will encourage a new management system to be reviewed based upon mutual trust and harmony between companies and stakeholders.
We will also study the establishment of technology management, the utilization of information technology (IT), and the fostering of managers with international leadership qualities. In order to increase their international competitiveness, we intend to expand the concept of "management quality improvement" to the service industries and to small and medium-sized enterprises. Further, in order to revitalize Japan, we will intensify nationwide activities to foster the motivations of the Japanese people to start new businesses and engage in venture business activities.
Point 3: Employment stability and review of working styles

As the employment situation grows increasingly serious, we rank stability of employment as the most important and urgent issue we face today. We will facilitate support for labor-management efforts to rectify the situation, while also developing safety nets for employment security and people's lives. We shall also endeavor to propose and enact effective measures for work-sharing. In order to bring about renovation in the employment structure, we will study SOHO and other such work modalities for the new era. Research on 'age-free' employment (employment irrespective of age) for an aging society will be continued. In the area of labor-management relations, we see that a certain level of progress has been achieved in corporate ethics and compliance, as well as in corporate restructuring. We are committed to strengthening the labor-management consultation system and other support systems that will reflect the viewpoint of workers. We will also support efforts to improve workers' mental health.

Changes in Corporate Management and Labor-Management Relations in the 21st Century
—Responding to Transformations in Corporate Governance in Japan—

(July 31, 2003)
Labor-Management Relations Committee
Discussions and reform movements regarding corporate governance in Japan are showing signs of intensifying. A major shift is being made toward emphasizing the role of shareholders. However, arguments on corporate governance should not only include companies and shareholders; they must also consider the relationships between companies and their employees. As corporate reorganization advances and personnel management gradually changes shape accompanying transformations in corporate governance, there is mounting concern about the decline in collective problem-solving and rule-forming mechanisms which have functioned relatively well toward the creation of sound corporate organizational operations up to now. There are worries that corporate reorganizations may obscure the identity of parties to labor-management consultations and negotiations, or they may expand the “vacuum” in the labor-management consultation system whereby the system will not be implemented or will not function adequately. Furthermore, as the personnel management system becomes increasingly performance-based and individualistic, more efforts must be made to raise employee morale. This would include, for example, forming rules and establishing an operation monitoring mechanism under the labor-management consultation system or other frameworks that define labor-management relations.

Employees are the very source and important stakeholders of corporate activities. Allowing them to participate in corporate management and raising their willingness to work are keys to improving productivity. This is another reason why the function of collective labor-management relations must be reorganized and strengthened so that it can more readily adapt to changes in corporate management and new issues in labor-management relations accompanying those changes. In any age, issues arising from changes in corporate management require efforts of both labor and management. The importance of settling problems within the framework of collective labor-management relations remains unchanged.

The general outline of the proposal is as follows.

  1. Reorganizing labor-management consultation systems along with corporate reorganization

    1. Labor and management should inspect the functions of the labor-management consultation system and its extent of the impact within a company. They must then work to strengthen or establish collective rule-forming and problem-solving mechanisms in the context of the corporate organization structure.

    1. Institutions such as labor-management consultation systems which reflect the opinions of middle-level managers as well as ‘atypical’ workers who fall outside the group of workers with regular full-time employment (e.g., part-time workers, self-employed workers, contract workers, etc.) need to be constructed.

  1. Labor and management must respond to changes in working environments and personnel management

    1. Along with trends toward performance-based and individualistic personnel management systems, personnel wage plans need to be revised and an operation monitoring scheme be established within a framework of collective labor-management relations centering on the labor-management consultation system.

    1. Full-scale efforts need to be made concerning grievance procedures for settling complaints and dissatisfactions related to evaluations and treatments.

  1. Labor-management consultation systems are important for solving management problems efficiently

    1. Labor unions based on labor-management consultations and the participation and cooperation of employees are essential for solving management problems efficiently. At the same time, considerations should be given to the formulation of insider rules and measures for internal accusations as preconditions for the above.

    2. It is necessary to lay down the conditions for developing “labor union officials” having outstanding specialized abilities who can respond to labor and management problems. As part of this effort, the establishment of an occupational training course is recommended.

Productivity Declaration for the 21st Century

The 21st century has just begun. It is fervently hoped that in the following hundred years, the world will be at peace and the lives of all people will be enriched.

In retrospect, the 20th century was one in which totalitarianism and liberalism stood against each other. It was a distressing century, which saw two devastating world wars. However, it was also an era of dynamic economic growth through continuous technological innovation. Japan also rode this wave as it endeavored to catch up with the West. This goal was achieved through the unity of its people, and Japan rose to become the world's second largest economy.

The productivity movement that was introduced as a strategic initiative for post-war recovery contributed greatly to the development of Japanese industries through the promotion of industrial democracy and modern management. This was made possible by the active support and cooperation of industrial workers, managers and members of the academia.

As a result, productivity growth was remarkable during this period. It was even lauded as a miracle by the rest of the world.

As we enter the 21st century, however, Japan is confronted with many challenging issues. They include the depletion of the world's natural resources and energy, the deterioration of the global environment, a low birth rate and an aging society, the inexorable expansion of the government's financial deficit, and despair and despondency among its young people. The most serious of all is the loss of political, governmental and corporate leadership.

To resolve these difficult issues, a national consensus toward reform and, above all, the commitment of each individual to change is strongly needed. If we succeed in our challenge, new prosperity will be ours, but failure will lead to decline.

A new national movement suitable for the new century must be launched. We must abolish the present situation, in which apathy and vested interests delay reform. Instead we should endeavor to create a new Japan. This will be the new productivity movement.

The new productivity movement will increase productivity through drastic reform of the socio-economic system based on the will of the people as expressed through the increased participation of industrial workers and managers, members of academia, consumers, NPO representatives, among others from all levels of society. It is a movement which will bring about a superior level of management in various fields.

While adapting itself to a globalized market economy, Japan will strive to attain greater prosperity and further improve the welfare of its people through respect for human dignity. This will be achieved through establishing a totally new Japanese model of development appropriate for the new century.

No matter how difficult it is, the future growth of our productivity will depend on our strong determination to overcome the present situation. Continuous attempts to achieve change will, indeed, be the productivity movement itself.

This is our declaration for the new century.

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