THE FOUR CRITERIA FOR MEASUREMENT EFFECTIVENESS

P R O D U C T I V I T Y

B Y

D E S I G N

The four criteria for measurement effectiveness QUALITY Overall Quality Overall quality refers to quality of products, services, as well as overall process for producing those products or services. Quality is linked to productivity because of the basic truth that defects are not free
Example of the relationship between quality and productivity Case 1: A company producing soft drink containers needs $10,000 to produce 100,000 bottles. The percentage of defects is 20 % Therefore: If the percentage of defects if perfectly 0% then: The costs per bottle would be (10,000/100,000) = $0.1 or 10 cents

P R O D U C T I V I T Y

B Y

D E S I G N

With the percentage of defects of 20 % : The cost per good bottle would be (10,000/80,000) = $0,125 or 12.5 cents; Some possible additional costs: Re-working cost of 10 cents per bottle Inspection costs Replacement costs Cost of Business loss Lawsuits

P R O D U C T I V I T Y

B Y

D E S I G N

Case 2: After improving quality, the company producing soft drink container requires $11,000 for making 100,000 bottles. The percentage of defects can be reduced to 0.1 % With the percentage of defects of 0.1 % then: The cost per bottle is (11,000/99,999) = $0,11 or 11 cents; Other consequences: Cost Reductions of bad quality impacts

The relationship between quality and customer (Quality is determined by its customers) A company should consider customers needs A survey or data collection method is required to identify customers needs

P R O D U C T I V I T Y

B Y

D E S I G N

MISSION and GOALS

Variables to be measured must be important and related to the organizations mission and goals: For example: Mission and goals of an ice cream company : serving customers the ice cream they wish to consume, neatly, in pleasant surroundings, efficiently, and safetly Therefore, the measures to improve productivity may involve: Measuring customer satisfaction Measuring the speed of service Measuring the cleanliness the business area

P R O D U C T I V I T Y

B Y

D E S I G N

Single measure versus family measure of productivity

The perfect productivity measure must be very complex when representing true phenomena of productivity change . In general, productivity measurement comes into reduction with the reasons of objective, operational and measurable dimensions Productivity measurements can be a single measure or a family measure

For example:
Besides selling its products, a hamburger company has also some other goals: Providing a safe and happy location for birthday parties for neighborhood children Wishes to build the net worth of its hamburger stands real estate Providing training opportunities at its business for local high school students

P R O D U C T I V I T Y

B Y

D E S I G N

The possible single measure would be : Number of hamburgers sold Amount of resources used (if other objectives seem to be minor) Or a formula that combines all the objectives into a single productivity ratio ( with the risk of having difficulty in tracing back the root cause of productivity change

P R O D U C T I V I T Y

B Y

D E S I G N

The possible family measure would be: Number of meaningful training opportunities Percentage of gross sales spent on training

Number of hours used for birthday party room Percentage of budget dedicated to birthday party room Annual increase in net worth of property Annual costs of capital improvements Number of hambugers sold Total expenses

P R O D U C T I V I T Y

B Y

D E S I G N

In a large and complex organization, mission and goals should be made as the focal point for improvements of any parts of organizations (sub-organizations) under its control. If not, it will cause the threat of sub-optimization

The threat of sub-optimization:

the threat of measuring and improving aspects of operation not essentially vital to overall organization productivity.

P R O D U C T I V I T Y

B Y

D E S I G N

REWARDS AND INCENTIVES

Rewards and incentives should be given to show the benefits of productivity improvements to the workers EMPLOYEE INVOLVEMENT Employees know the characteristics of the jobs being handled and its weaknesses Employees involved in the development of productivity measurement systems are willing to practice and apply it Achieving the necessary goal of awareness and understanding of productivity measurement purposes and procedures

P R O D U C T I V I T Y

B Y

D E S I G N

CHARACTERISTICTS OF PRODUCTIVE WORKERS

Always try to find new ideas and better solutions

Always voluntarily try to give suggestions for improvements

Always spend their time effectively and efficiently Have positive response to their jobs Able to appropriately participate in the collective works whether as a leader of a member Able to motivate themselves

P R O D U C T I V I T Y

B Y

D E S I G N

Have good knowledge and understandings of their work Willing to accept their counterparts new ideas or suggestions Have good personality with others Concern about resource in-efficiency Have good record of attendance Working above the average Quickly adopt new issues