Industry and Business, Productivity and Energy Efficiency in

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Improving productivity is one of the central concerns of businesses. In buildings, energy-efficient technologies and design strategies can improve labor productivity (output of goods and services per hour worked) far in excess of the improvement in energy productivity (output per unit energy consumed). Similarly, in manufacturing, energy efficiency can improve total factor productivity (product output as a function of all labor, capital, energy, and materials consumed in its production) far in excess of the improvement in energy productivity.


Offices and buildings are not typically designed to minimize either energy use or labor costs (by maximizing worker productivity). Almost everyone involved in building construction—such as the developer, architects, and engineers—is rewarded by the ability to minimize the initial cost of a building, as opposed to its life-cycle cost. Moreover, the designers are rarely the ones who will be paying the energy bill or the salaries of the people working in the building. The missed opportunity is revealed by the total life-cycle costs of a building (Table 1).

A systematic approach to energy-efficient design can cost-effectively cut energy costs by 25 percent to 50 percent, as has been documented in both new construction and retrofit. The evidence on how energy-efficient design can increase worker productivity has been limited, so the issue has been a controversial one.

A growing body of international research suggests that specific design approaches can simultaneous save energy and increase productivity. The fundamental goal in productivity-enhancing design is to focus on the end users—workers—giving them the lighting, heating, and cooling they need for the job. This enduse approach maximizes productivity by ensuring, for instance, that workers don't have too much light or inadequate light quality for the job. It maximizes energy savings because, in most cases, this end-use approach eliminates excess and/or inefficient lighting, heating, and cooling, and because new technologies that provide higher quality services (such as better light quality) typically use far less energy than the technologies they replace.

Daylighting—use of natural light—is a key strategy because it is both the highest quality lighting and the most energy-saving, when it is systematically integrated into a design. In Costa Mesa, California, VeriFone achieved both large energy savings and

Initial cost
(including land and construction)
2 percent
Operation & Maintenance
(including energy)
6 percent
People Costs92 percent

productivity gains when it renovated a 76,000-square-foot building containing offices, a warehouse, and light manufacturing. The upgrade included energy-efficient air handlers, high-performance windows, 60 percent more insulation than is required by code, a natural-gas-fired cooling system, occupancy sensors, and a comprehensive daylighting strategy, including a series of skylights.

On sunny days, workers in the remanufacturing area construct circuit boards with only natural light and small task lighting. In the office area, on the other hand, the design minimizes direct solar glare on computers, while providing enough daylight to allow workers there to see changes associated with the sun's daily and seasonal variation.

The building beat California's strict building code by 60 percent, with a 7.5-year payback on energy-efficient technologies based on energy savings alone. Workers in the building experienced an increase in productivity of more than 5 percent and a drop in absenteeism of 45 percent, which brought the payback to under a year—a return on investment of more than 100 percent.


An increasingly popular strategy is to give individuals control over their workplace conditions. The benefits of this approach were documented at West Bend Mutual Insurance Company's 150,000-square-foot building headquarters in West Bend, Wisconsin. The design used a host of energy-saving design features, including efficient lighting, windows, shell insulation, and HVAC (heating, ventilation, and air conditioning).

In the new building, all enclosed offices have individual temperature control. A key feature is the Environmentally Responsive Work-stations (ERWs). Workers in open-office areas have direct, individual control over both the temperature and air-flow. Radiant heaters and vents are built directly into their furniture and are controlled by a panel on their desks, which also provides direct control of task lighting and of white noise levels (to mask out nearby noises). A motion sensor in each ERW turns it off when the worker leaves the space, and brings it back on when he or she returns.

The ERWs give workers direct control over their environment, so that individuals working near each other can and often do have very different temperatures in their spaces. No longer is the entire HVAC system driven by a manager, or by a few vocal employees who want it hotter or colder than everyone else. The motion sensors save even more energy. The lighting in the old building had been provided by overhead fluorescent lamps, not task lamps. The workers in the new building all have task lights and they can adjust them with controls according to their preference for brightness. The annual electricity costs of $2.16 per square foot for the old building dropped to $1.32 per square foot for the new building, a 40 percent reduction.

The Center for Architectural Research and the Center for Services Research and Education at the Rensselaer Polytechnic Institute (RPI) in Troy, New York conducted a detailed study of productivity in the old building in the 26 weeks before the move, and in the new building for 24 weeks after the move. To learn just how much of the productivity gain was due to the ERWs, the units were turned off randomly during a two-week period for a fraction of the workers. The researchers concluded, "Our best estimate is that ERWs were responsible for an increase in productivity of about 2.8 percent relative to productivity levels in the old building." The company's annual salary base is $13 million, so a 2.8 percent gain in productivity is worth about $364,000—three times the energy savings.


Just as in offices, energy efficiency improvements in manufacturing can generate increases in overall productivity far in excess of the gains in output per unit energy. This occurs in two principal ways: improved process control and systemic process redesign.

Process Control

Many energy-efficient technologies bring with them advanced controls that provide unique and largely untapped opportunities for productivity gains. In factories, probably the biggest opportunity is available in the area of variable-speed drives for motors. Variable- or adjustable-speed drives are electronic controls that let motors run more efficiently at partial loads. These drives not only save a great deal of energy, but also improve control over the entire production process. Microprocessors keep these drives at precise flow rates. Moreover, when the production process needs to be redesigned, adjustable drives run the motor at any required new speed without losing significant energy efficiency. Two examples are illustrative.

In Long Beach, Toyota Auto Body of California (TABC) manufactures and paints the rear deck of Toyota pickup trucks. In 1994, the company installed variable-speed motor drives for controlling the air flow in the paint booths. Applying paint properly to truck beds requires control over the temperature, air flow/balance, and humidity in the paint booths. Before the upgrade, manually-positioned dampers regulated airflow into the booths. Since the upgrade, the dampers are left wide open, while the fan motor speed changes automatically and precisely with touch screen controls, which also provide continuous monitoring of the airflow.

The improvements to the motor systems reduced the energy consumed in painting truck beds by 50 percent. In addition, before the upgrade, TABC had a production defect ratio of 3 out of every 100 units. After the upgrade, the ratio dropped to 0.1 per hundred. In 1997, the plant received a special award for achieving zero defects. The value of the improvement in quality is hard to put a price tag on, but TABC's senior electrical engineer Petar Reskusic says, "In terms of customer satisfaction, it's worth even more than the energy savings."

The Department of Energy documented another typical case at the Greenville Tube plant in Clarksville, Arkansas, which produces one million feet of customized stainless steel tubing per month for automotive, aerospace, and other high-tech businesses. Greenville's production process involves pulling, or "drawing," stainless steel tubing through dies to reduce their diameter and/or wall thickness. The power distribution system and motor drive were inefficient and antiquated, leading to overheating, overloading, and poor control of the motor at low speed. A larger, but more efficient, motor (200 hp) was installed along with a computerized control system for $37,000. Electricity consumption dropped 34 percent, saving $7,000 a year, which would have meant slightly more than a five-year payback.

The greater horsepower meant that many of the tubes needed fewer draws: On average, one draw was eliminated from half the tubes processed. Each draw has a number of costly ancillary operations, including degreasing, cutting off the piece that the motor system latches on to, and annealing. Reducing the number of draws provided total labor cost savings of $24,000 a year, savings in stainless steel scrap of $41,000, and additional direct savings of $5,000. Thus, total annual savings from this single motor system upgrade was $77,000, yielding a simple payback of just over five months, or a return on investment in excess of 200 percent.

Process Redesign

The second principal way that energy efficiency can bring about an increase in industrial productivity is by achieving efficiency through process redesign. That process redesign could simultaneously increase productivity, eliminate wasted resources, and save energy has been understood as far back as Henry Ford. Perhaps the most successful modern realization and explication of the connection between redesigning processes to eliminate waste and boost productivity was achieved in the post-war development of the "lean production" system.

To understand lean production it is important to distinguish between improving processes and improving operations:

  • An automated warehouse is an operations improvement: It speeds up and makes the operation of storing items more efficient. Eliminating all or part of the need for the warehouse by tuning production better to the market is a process improvement.
  • Conveyor belts, cranes, and forklift trucks are operations improvements: They speed and aid the act of transporting goods. Elimination of the need for transport in the first place is a process improvement.
  • Finding faster and easier ways to remove glue, paint, oil, burrs and other undesirables from products are operations improvements; finding ways not to put them there in the first place is a process improvement.

These examples show that when one improves the process, one does not merely cut out unnecessary operations, critical though that is to increasing productivity; one invariably reduces energy consumption as well as environmental impact. Reducing warehouse space reduces the need for energy to heat, cool, and light it. Reducing transportation reduces fuel use and exhaust fumes. Eliminating "undesirables" means no glue, paint, oil or scrap; it also avoids the resulting clean-up and disposal.

Thus, there is an intimate connection between redesigning processes to increase productivity (by eliminating wasted time, which is the essence of lean production) and eliminating wasted energy and resources. The most-time consuming steps in any process also tend to produce the most pollution and use the most energy. An integrated redesign can minimize everything.

For instance, in 1996, 3M company announced a breakthrough in the process for making medical adhesive tapes, a process that reduces energy consumption by 77 percent. The new process also cuts solvent use by 2.4 million pounds, lowers manufacturing costs, and cuts manufacturing cycle time by 25 percent. The proprietary process took researchers nine years from conception through final implementation.

The Sealtest ice cream plant in Framingham, Massachusetts, modified its refrigeration and air-handling system, cutting energy use by one third. The new system blew more air and colder air, and it defrosted the air handler faster. As a result, the time required to harden the ice cream was cut in half. The overall result was a 10 percent across-the-board increase in productivity, which is worth more to the company than the energy savings.

Process redesign drives a company toward a number of practices associated with productivity gain, including cross-functional teams, prevention-oriented design, and continuous improvement. One of the best programs for continuously capturing both energy and productivity gains was developed by Dow Chemical's Louisiana Division.

In 1982, the Division began a contest in which workers were invited to propose energy-saving projects with a high return on investment. The first year's result—27 winners requiring a capital investment of $1.7 million providing an average return on investment of 173 percent—was somewhat surprising. What was astonishing to everyone was that, year after year, Dow's workers kept finding such projects. Even as fuel prices declined, the savings kept growing. Contest winners increasingly achieved their economic gains through process redesign to improve production yield and capacity. By 1988, these productivity gains exceeded the energy and environmental gains.

Even after 10 years and nearly 700 projects, the two thousand employees continued to identify high-return projects. The contests in 1991, 1992, and 1993 each had in excess of 100 winners, with an average return on investment of 300 percent. Total energy savings to Dow from the projects of those three years exceeded $10 million, while productivity gains came to about $50 million.


Not all energy-efficiency improvements have a significant impact on productivity in offices or factories. Nonetheless, productivity gains are then possible from a systematic approach to design. The key features that simultaneously save energy and enhance productivity in office and building design are (1) a focus on the end user, (2) improved workplace environment, especially daylighting, and (3) individual control over the workplace environment. The key features that save energy and enhance productivity in factories are (1) improved process control, and (2) systematic process redesign.

Joseph Romm

See also: Building Design, Commercial; Building Design, Energy Codes and.


Brill, M.; Margulis, S.; and Konar, E. (1984). Using Office Design to Increase Productivity, Volume 1. Buffalo, NY: Workplace Design and Productivity, Inc.

Ford, H. (1988). Today and Tomorrow, reprint. Cambridge, MA: Productivity Press.

Kroner, W.; Stark-Martin, J. A.; and Willemain, T. (1982). Using Advanced Office Technology to Increase Productivity. Troy, NY: The Center for Architectural Research.

Loftness, Vivian, et al. (1998). The Intelligent Workplace Advantage, CD-ROM. Pittsburgh: Center for Building Performance and Diagnostics, School of Architecture, Carnegie Mellon University.

Romm, J. (1999). Cool Companies: How the Best Businesses Boost Profits and Productivity By Cutting Greenhouse Gas Emissions. Washington, DC: Island Press.

Shingo, S. (1990). Modern Approaches to Manufacturing Improvement: The Shingo System, ed. Alan Robinson. Cambridge, MA: Productivity Press.

U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. (1997). "The Challenge: Improving the Efficiency of a Tube Drawing Bench." Washington, DC: Author.

Womack, J., and Jones, D. (1996). Lean Thinking: Banish Waste and Create Wealth in Your Corporation.New York: Simon & Schuster.

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