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research Understanding the ���Horndal Effect��� HOW CAN COMPANIES boost productivity, even when resources are low? In a working paper, Chad Syverson of the University of Chicago Booth School of Business in Illinois, and Steven Levitt and John List, both of the University of Chicago���s department of economics, explore the operations of an automobile plant to study the ���Horndal effect��� at work. The Horndal effect, a term coined by Swedish economist Erik Lundberg, was named after the Horndal steelworks plant, which operated in Sweden in the mid-1930s. Even though the plant used outdated equipment, it achieved 2 percent annual gains in productivity. The theory is that its workers increased their productivity through ���learning by doing.��� Not surprisingly, the better they got at their jobs, the more they could produce. However, the effect intensi���es when there are systems in place that encourage workers to share their knowledge. Syverson, Levitt, and List analyzed production records from a major automaker���s assembly plant. The researchers found that, as workers and plant managers gained more experience, they adjusted the assembly line as needed to boost productivity. That effect carried over, even when new workers came on the job. When the assembly plant updated its operations���buying new equipment, redesigning the plant ���oor���s layout, and revising its production processes to a team-based system���workers had to start from scratch. After the changeover was complete, ���rst-shift workers had a much higher average defect rate than second-shift workers, even though second-shift workers were less experienced on the job. Second-shift workers bene���ted from changes that ���rst-shift workers made as they gained experience. Eight weeks after the changeover, the average defect rate per car for the ���rst shift decreased by more than 80 percent. That rate fell another ten percent by the end of the study. This success was due largely to systems the plant adopted to limit the learning curve. For 60 March/April 2013 BizEd instance, teams were asked to write the problems they encountered on a whiteboard. Every two weeks, managers and other teams identi���ed the most important problems on the whiteboard and collectively developed solutions. It was everyone���s responsibility to ���build that knowledge into the production process in a more permanent way,��� says Syverson. The researchers also looked at the effect of factors such as worker absence, type of assembly process, and position of work station. Then, they analyzed the plant���s productivity gains after it introduced a different car model to its production line, which meant that workers��� previous knowledge often did not transfer to the new process. The researchers found that, over time, the Horndal effect still applied. They conclude that managers can boost productivity signi���cantly by putting systems in place that encourage workers not only to gain experience, but also to capture and share what they learn on the job with co-workers. A longer summary of the study is available at www. chicagobooth.edu/capideas/oct-2012/productivityunveiled.aspx. Find the full study, ���Toward an Understanding of Learning by Doing: Evidence from an Automobile Assembly Plant,��� at home.uchicago.edu/ syverson/learningbydoing.pdf. MONTY RAKUSE N /G LOW I MAG ES Managers can boost productivity signi���cantly by putting systems in place that encourage workers not only to gain experience, but also to capture and share what they learn on the job with co-workers.