Return to Cardinal measures

Physical inputs

  • 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 ten 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
  • In the private sector, key competitor information is usually not in the public domain so managers have to guestimate it and at least try to beat their own past productivity levels
  • 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 lie
  • Then, there are many options available to them for how to improve productivity
  • Their first port of call is to reduce waste – the waste of time or materials
  • Waste can more than double the costs of meeting demand
  • Hence waste measures are also needed


Productivity measurement

In practice, productivity measurement is not straightforward How would you measure the productivity of a hospital, fund manager, police force, government ministry, 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 – and most organisations …

Waste A%

Possible reasons for a resource not being available for productive use include: The cost of a resource being unavailable can be disproportionately high viz: A key team member goes absent, delaying any work by the rest of the team until he returns e.g. the surgeon heading an operating team Regular absenteeism by team members, a …

Waste U%

Once a resource is available and paid for, it’s usually wasteful to leave it idle – it must be used on productive work as much as possible: ‘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 …

Waste E%

Efficiency is a measure of how well a resource is used compared with 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 team who are present  …

Waste 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 capital resources used for any task – these resources cost much the same whether used productively or not Process waste – the waste of time spent …

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