Productivity Measurement PDF Print E-mail
Written by Glenn Felix   
Wednesday, 16 June 2010 09:48

Productivity Measurement

By Glenn Felix, IPC

Continuing our ascent up the high performance pyramid, this article touches on the basics of performance measurement — the surest path toward mission accomplishment.

in pursuit of high performance1

Productivity
Performance is best viewed through a productivity lens where results are balanced against the resources needed to accomplish those results.  Conventionally, productivity is an equation equal to output divided by input:



More output, less input is the aim.  Elaborating on this ratio, productivity can be further characterized in a multi-factor manner, with “high demand” output added to the definition.

Obviously here too the aim is to maximize the numerator and minimize the denominator.  Since the numerator produces revenues and the denominator generates costs, the productivity equation is also a formula for profitability.

Everyone’s Mission
With this comprehensive view of “performance,” the organizational success mission is straightforward:  "continually improve productivity."  Coupled with sound marketing, profits will follow.  They are the natural consequence of a productivity-minded organization.

Employees share this mission.  Profits through productivity help control costs, and the prices a company must charge for its products.  This enhances competitiveness, contributes to job security and affords opportunities for job advancement.  More directly of course, improved labor efficiency enables a company to increase wages without incurring an increase in labor costs.  This too works to the advantage of all.  

Productivity Measurement
Definition ... leads to measurement which accomplishes four important leadership aims:

1.  Clarify organizational purpose
2.  Crystallize goals and objectives
3.  Provide feedback on performance
4.  Impart recognition for good work

The simple act of regularly tracking materials recovery, energy usage, or grade percentages, says, "this is important."  Noting ‘current’ performance, and identifying target objectives adds a direction component.  With an expectation defined, updated measures provide regular feedback on how improvement efforts are proceeding.  Recognition, verified by hard data, extols those who make progress.  

No other management strategy accomplishes so much.

One further observation — productivity, or performance measures are often based on dollar values.  But to accurately determine improvements, results need to be regularly adjusted for price and cost changes.  This adds complexity to the measurement process.  

A better strategy — and communication practice — is to strive to instead track and report non-dollar activities:  pounds per labor hour, product yield percentages, defects per unit, etc.  Cost/price changes can then be largely ignored, and the measurement process is much simplified.  The fact that dollars are ignored does not compromise the financial integrity of this approach.  Unit values can easily be translated to financial consequences.

Food Processing Measures
Lots of stuff can be measured.  The key to truly effective measurement though is to track those activities that can make the most difference to the top and bottom lines.  It’s not our goal in this brief discussion to drill into all the possibilities, but here is a list of potential candidates.

Materials
Production Output / Raw Product Input
Waste Added Materials / Production Output
Waste Packaging Materials / Prdctn Output
Optimal Waste Conversions

Quality
Premium Grade Percentages
Performance to Critical Control Points
Processing Error Rates
Performance to Test Results
Performance to Control Limits

Labor
Output per Labor Hour
Employee Turnover
Tardiness and Absenteeism
Overtime Percentage
Support FTE to Direct FTE
Time to Fill a Position

Utilities
Output per Therms of Natural Gas
Output per KWHs
Output per Gallons of Water
Output per BTUs
Waste Treatment Costs per Unit

Transportation
Transportation cost / 100 pounds
Transportation miles / 100 pounds
Load Capacity Usage
Rail v Truck v Barge — Volume / Miles
Empty Haul Percentage
Outside Storage Costs

Safety and Health
Safety Incidents
Safety Lost Time Days
Housekeeping / Safety Audits
Food Safety
5S Factor Ratings

Capacity Utilization
Production to Capability
Percent Equipment Uptime
Overall Equipment Effectiveness
(Availability x Performance x Quality)

Customer Service / Satisfaction
On Time Deliveries
Accurate Deliveries
Responsiveness to Customer Complaints
Satisfaction Survey Feedback

(Marketing Possibilities)
Customer Turnover
Market Share
Sales & Marketing Cost / Total Revenues
Advertising Response Rates

(Still Other Possibilities)
Community Service Hours
United Fund Participation Percentage
Matching Company Charity $$
401k Participation Percentage
 

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