Sometimes management scholars get findings that shake up established truths and make us rethink how firms function. These findings
are often directly important to managers as well, because they question common
practices that are used with the intention of producing better decision making,
higher productivity, and greater competitive strength – but may turn out to
have the opposite effect.
Ethan S. Bernstein published a paper "The Transparency Paradox: A Role for Privacy in Organizational Learning and Operational Control"
that has just such a finding. The established truth is that transparency in
production processes increases productivity because it allows faster learning from
others, as problems are immediately seen and effective solutions can
immediately be learned by others in the same situation. The idea is to use
visibility along a production line to drive a fast learning curve of efficiency
increases, and it is a key component of the vaunted Toyota Production System
and Total Quality Management practices.
The problem is, his research showed it to be false. In a
study design that combined observation of production practices with a
controlled experiment, he made some very interesting observations. First, he showed
that workers concealed production practices from managers even when production
lines were fully visible. Their reasons for doing so was that they had formalized
procedures for production steps (also a key quality control practice), and when
they found ways to do things faster but still with high quality they preferred
to do them under-cover rather than go through the procedure for changing the
procedures. But that meant they were worried about getting caught. Second, he
showed that the time and effort spent concealing these practices was a form of waste
that was especially high when the production lines were visible, because
managers could easily see far along the line. Third, he showed that the economic
effect of this concealment was big. When some production lines were given
privacy (through the kind of curtain that one sees between hospital beds!)
while others were left open, the private lines outperformed the transparent
ones by 10-15%. That’s a big number in manufacturing efficiency; especially for
this firm, which was a contract manufacturer that got all its profits from
making goods more efficiently than other contract manufacturers.
So what to do? Clearly, researchers need to find out whether
there are conditions that make concealment likely and costly. It is not clear
that visible production lines are costly at Toyota and all other firms using
them too. If not, then we have to ask why. Managers need to reconsider the role
of visibility in manufacturing efficiency. If privacy can give a 10 plus
percent improvement in some firms, possibly also theirs, it is a good idea to
reassess what they are doing and maybe hang some curtains as an experiment. In
a decent-sized manufacturing facility, it takes less than an hour of more
efficient production to cover the cost of those curtains!
