Return to Cardinal measures

Productivity & Waste

  • Managers need to know how much more they might offer their customers, existing and potential, and how much less it might cost

  • Imagine if a manager found that a direct competitor sold 10 times as much to a common market, or produced twice as much from the same input resources, or had unit costs 70% less than his

  • And what if a hospital manager found that a hospital in India carried out 20 times more cataract operations per surgeon, or had unit costs for hip operations less than 10% of his?

  • Explanations would surely be needed

  • Maybe the difference was due to quality or service levels offered – maybe it was better systems and less waste?

  • In the public sector, all managers should be able to make such comparisons – units are not in competition with each other – the public who fund them have a right to know what they’re doing with the tax money they’re given

  • However, in the private sector, key competitor information is usually not in the public domain so managers have to guestimate it whilst at least trying to beat their own past productivity records

  • Private sector managers thus need productivity measures which show them where outputs could be improved, where input resources and so costs could be reduced and where their priorities for improvement lie

  • Then, there are many options available to them for how to improve productivity

  • However, their first port of call should be to reduce waste – the waste of time or materials in producing outputs which would not or do not meet customers’ requirements

  • Such waste can more than double the costs of meeting demand

  • Hence waste measures are vital – but often lacking in most organisations, public and private


Productivity measures

In practice, productivity measurement is not straightforward How would you measure the productivity of a hospital, fund manager, police force, government department, bank or PR firm? At organisational level, there’s no one meaningful total productivity measure available because of the complicated mix of processes and tasks, or outputs and inputs involved Most organisations also offer …

Waste A% – Resource non-availability

Significant waste can arise because a resource that has cost money is not available for work, not used when at work, or operates inefficiently when in productive use Possible reasons for a resource not being available for productive use include: The cost of a resource being unavailable for work can be disproportionately high viz: A …

Waste U% – Resource non-utilisation

Once a resource is available and paid for, it’s usually wasteful to leave it idle – it should be used on productive work: ‘Productive work’ is work which meets customer demand – which adds value to them for which they will pay ‘Unproductive work’ adds no value to customers and includes time spent idle, waiting …

Waste E% – Resource inefficiency

Efficiency is a measure of how well a resource, task or process performs – how close it works to its maximum, its capacity Possible reasons for wasted capacity include: What if you found that one team took 10 hours to complete a task when another took only six ? And what of the worker or …

Waste Index – AUE%

Waste can occur at any stage in delivering a product or service to a customer, as follows: Input resource waste – the waste of time of labour, materials and/ or capital resources used for any task – these resources cost much the same whether used productively or not Process waste – the waste of time …

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