Creating and Sharing Wealth ∼. the added value approach Part 1
| Published date | 01 January 1979 |
| DOI | https://doi.org/10.1108/eb054921 |
| Date | 01 January 1979 |
| Pages | 7-10 |
| Author | Brian Wilson |
| Subject Matter | HR & organizational behaviour |
Creating
and
Sharing
Wealth
~
the
added value
approach
Part
1
by Brian Wilson
Professor of Human Resources, Cranfield School of Management
Introduction
This article explores the concept of Added Value, its
definition and importance, in planning for national and
company productivity.
The article is in two parts. Part 1 concerns itself with
national considerations and analyses the effect of added
value on labour productivity and industrial investment.
Four possible government initiatives for increasing Gross
Domestic Product and for sharing it amongst employees,
shareholders and taxation are put forward.
In a subsequent issue Part 2 of the article focuses on
the company and the employees. From an examination of
rewards and payments systems, added value is put for-
ward as an idea that can revolutionise employee rela-
tions.
Several practical suggestions are made for the use
of added value ideas from a representation of balance
sheets to a basis for industrial democracy.
Part 1: Added Value and National Prosperity
The definition of Added Value
Added Value is the difference between sales income and
the cost of goods and services, adjusted for changes in
level of stocks and work-in-progress. Pictorially, the
total sales income can be shown as a cake and the Added
Value as a doughnut.
The national wealth, the Gross Domestic Product
(GDP),
is the sum total of the value added by the manu-
facturing and service industries, the creators of wealth.
Our country's immediate problem is that this is just not
sufficient to cover the level of social services, hospitals,
schools, roads etc, to pay the wages and salaries of civil
servants and local government officials (all spenders of
the country's wealth) and also to meet the wage and
salary expectations of the wealth creators.
Put another way, our problem is how to generate the
wealth necessary to give the standard of living and of
social services which we all desire. It is suggested that
this could be done in three ways:
(1) Increase the number of people in wealth creating
work
Compared with our industrial rivals, we have allowed
our industrial base to become greatly eroded, as the fol-
lowing table will indicate:
Percentage Engaged
Country in Manufacturing
UK 30
France 40
Germany 40
Japan 50
Table 1. Approximate national percentages of total
employees engaged in manufacturing
This problem has already been recognised by Government
and considerable thought is being put into how to stimu-
late the development of small businesses which, in this
country, represent a mere 20 per cent of manufactur-
ing employment as compared with about 40 per cent
in France and Germany and about 50 per cent in Japan.
(2) Increase Labour Productivity
In this area too we compare unfavourably with our in-
ternational competitors. It is difficult to separate labour
from capital productivity but, in those cases where levels
of capita] investment are similar, the UK productivity
per employee almost always shows up in a poor light.
However, it should be noted that we do work our rather
more limited assets harder in this country.
The easy answer is that shop floor attitudes are to
blame, and sometimes this is so, but what is usually over-
looked is that attitudes are the direct results of manage-
ment's control and reward systems. A recent comparison
[1] between Stone Platt, a British textile machine manu-
facturer and its recently acquired, and very similar Am-
erican subsidiary, Saco Lovell, showed that the 1.4—
2.5 X higher productivity in the various areas of oper-
ation was not due to a superior quality of American
labour. Nor was it due, in this case, to superior capital
investment, nor to economies of scale. It was concluded
Employee Relations
1,1
1979 7
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