Measure Productivity in the Workplace Today!
Measure productivity in the workplace today. All you need to understand are a few key terms and concepts!
The goal for any organization is to produce products or services that meet the needs of the customer at the lowest possible cost. To meet this goal, you first need to know how to measure productivity in the workplace. But first let’s review a few key terms and concepts.
During the course of work, shown in the figure below, we use resources within the context of a process to create output consistent with the needs of the customer.
Measure Productivity in the Workplace
Sometimes, the output needs to change to stay competitive. This usually means the output needs to meet a lower price. The only way to meet this is by changing or improving the resources, process of work or both.
Service Center Case Study
Let’s look at a simple example of a service call center where management wants to handle more incoming calls. In this example, one person responses to 50 inquires during their scheduled work shift.
Measure Productivity in the Workplace
Since management wants to handle more inquires they approve more overtime. This overtime results in a net increase of 5 more inquires.
Measure Productivity in the Workplace
By increasing the hours worked, not only did the output increase, so did the cost of the resources. So what effect did this increase in resources have on production, productivity and the cost of the output? Let’s look at this further, but to do so we need to define the difference between production and productivity.
What is Production?
Production is the net change in the output and we can express it as a percentage.
Measure Production in the Workplace
What is Productivity?
Productivity is a ratio of output to resources and we can also express this as a percentage.
Measure Productivity in the Workplace
Let’s Define Output
Output is a Measure of Production
The output is usually expressed as the number of units in a given time – it’s a measure of production. This could be the number of manufactured widgets per shift. It could be the total number of packages delivered in a day. It could be the volume of a fluid dispensed in a day. It really depends on how your company counts its production.
Let’s Define Resources
Resources Add Cost
Resources are often separated into machinery, materials, and manpower. Machinery is a broad category. It includes all types of machines such as: devices, equipment, vehicles, hardware, and software. These resources are the tools people use to do work to make a product or the delivery of a service. Materials are consumables. They get transformed during the course of work. They include: raw materials, semi-processed material (work in progress), and energy (utilities). Manpower includes labor and salaried people used to do work.
Call Center Case Study
Having defined production and productivity, we can return to our example. As shown in the table below, production increased by 10%. But productivity dropped by 12% and the cost of the output increased by 25%.
Measuring and Evaluating Productivity in the Workplace
An increase in production helps meet an increase in demand, but it added more cost. In this case, more overtime caused productivity to drop. When demand increases, balance an increase to production with a need to keep up productivity. This will assure your costs are better managed.
This example points out a problem Canadian companies face when selling their products to the United States.
When sales and output costs are in US and Canadian dollars, the exchange rate can often result in profit. This is true when the Canadian dollar is below the US dollar. In this case, increases in production are often tolerated even though it results in higher output costs and lower margins. When the exchange rate is the same the exchange rate profit disappears. Without it, companies can only survive on healthy margins. If they continue to use more resources to meet production demand they will inflate the cost of the output and cuts margins further. This leads to poor productivity and makes Canadian exports to the United States uncompetitive. This is what happened post 2004 when the exchange rate difference between Canada and the US began to shrink. When the dollar was at par, Canada experienced significant job losses due to poor productivity.
So What’s the Lesson? Learn How to Measure Productivity!
As the saying goes – You don’t know what you don’t measure! When you know how to measure productivity in the workplace you’ll be able to figure out how to improve productivity, manage costs, and save jobs!
The question I would be asking is why did they employees pace slow down in the last two hours. Their is a strong correlation between reduced production, quality, and safety (manufacturing) when overtime kicks in. However, in certain circumstances I have seen where productivity of the last two hours has kept up with the prior 8 hours or have increased (i.e. last 2 hours no breaks/lunches). Imagine what the numbers would look like if they produced 6.25/hr. the last two hours. With that being said, the price/call would still exceed $1.60. Now this is where management would come in and say they actually saved money because they did not higher additional employees and take on benefit costs. Don’t get me wrong, overtime every day for months and months (or years) is something that should not be taken lightly. Interested in your thoughts.
Hello Kris, Thanks for your insightful input.
I would not disagree with what you are suggesting. The numbers in the example were simply for illustrative purposes to show how the calculation is performed.
That being said, my experience suggests people are creatures of habit. When production expectations are stable and predictable people tend to conform to those expectations. However, when demand changes and more production is required the knee jerk reaction is add overtime to meet that demand until things get back to normal. This is expected from time to time. However, I have often seen management tolerate this for extended periods. And this is where the problem comes in. The recommendation often is to increase capital spending to meet new demand. If the increase in new demand is incremental then the cost of new capital will increase the resource side of the equation and can increase the cost per unit and result in being uncompetitive.
In my opinion if management spent more time studying the process of work and changes to the existing resource side of the equation then continuous improvement efforts can often meet the incremental increase in demand. And this all starts with metrics and understanding how to measure productivity.
Best Regards,
Andrew
thanks a lot. the problem i sometimes face is how to gather the right data for analysis. employees are sometimes unwilling to provide the data one needs.
how do i first of all be able to design a simple tally card accepted by all employees for data collection ? how do i know that the right data is on the tally card?
Dear all,
I am very interested in tally cards. I am just driving production without any sophisticated data following. Can you recommended simple way of data following and tally cards?
Thank you
Aleksandar
Hello Elijah and Aleksandar, can you confirm that you want to use tally cards to measure productivity?
Best Regards,
Andrew
Hello Andrew,
I would like to ask about simple way of data following in production by operators and way of collecting for the analyses. (Productivity, AOV, OEE, etc…). Would you be so kind and explain me what is tally card.
Thank you,
Aleksandar
Hello Aleksandar, give me some time and I will write a post about Tally Cards.
Best Regards,
Andrew
yes i do. i need to also know how to encourage employees to provide the right data too
Hello Elijah. Thanks for responding to my question.
Can you tell me something about:
1. the process, and
2. the kind of output it produces
This will help me visualize what it is you are trying to accomplish.
As for how to encourage employees to provide the right data. Let’s come back to that once we know what kind of output data you wish to collect.
Best Regards,
Andrew
i work with a printing company that produces books, flyers, business cards dairies etc. the problem we face is the inability to identify delays in the various departments.
the departments are 1. marketing 2. design 3. production 4. finishing 5. delivery. we also have purchasing department the buys our inputs..
the marketing department takes briefs from clients. they then send the briefs to the design department for prototypes to be created. prototypes are then sent to client for approval.
production and finishing departments produces the product. then the delivery team delivers the product to the client. inputs are only purchased after approval of samples. Our clients complain of delays. I NEED HELP
Hello Elijah, thank you for the additional information.
Let’s see if this helps you out.
First, let’s state the problem:
Problem Statement: Clients complain that Order’s take to long to process.
With respect to Order’s I am referring to flyer, business cards, books and other items your printing company creates for customers. Second, the time it takes to complete the entire Order for any specific customer is taking to long.
If my interpretation of the problem is correct then this is what I would suggest. Count each Order and document the start time when an Order moves from one step in the process to another. For example, note the start time when the marketing department takes a brief from the client. Next, note the time the brief is received by the design department. After this, note the time the brief was send to the client for approval. Do this at each stage of the process.
Once you have the entry time to one process and another the difference is the time consumed by that department to process an Order. Use this to follow each type of Order then construct a Pareto chart of the time it takes to process that Order for each step in the process by type of group (ie. construct a separate Pareto Chart for flyers, books, and business cards etc.). This gives you an idea of the time consumed by each step of the process. You will discover if the time consumed by each step in the process is similar or does one or two steps in the process consume a majority of time.
Once you review the Pareto Charts you will have a better idea which step of the process is consuming the most time. You will also know if that stage in the process is consuming the most time by type of Order (ie. books, flyers, and business cards etc.).
Knowing what area of the process to improve it half the battle. Once you identify the area for improvement you need to bring the people in that area together and make them part of the solution. Chances are they will have ideas to reduce time and get orders out to the customer faster and right-first-time.
Once you reduce the time, you can go back to the data you collected and determine if your efforts improved productivity.
I hope this helps.
Best Regards,
Andrew
thanks a lot. how do i make them accept that data collection is very important for business improvement?
Hello Elijah. Without any knowledge of your company, I can only speaking generally. Therefore speaking generally, I would make the employees a part of the solution. That requires explaining to them the importance of reducing delays especially when customers are complaining. The importance needs to be put into personal terms they can relate to. For example, customers get upset with delays, they will then find another company to provide the service, and that means lost business for you and lost jobs for employees.
You know your people and need to explain the importance of productivity and the data required to measure it. When you facilitate meetings with employees I have found that they often know how to improve the work simply because they know how the work is done. If you ask them how to improve it they will probably give some good ideas to implement.
The first place to start is to communicate the problem so that everyone has the same understanding of the problem. Once this is achieved you can facilitate meetings with them to establish a plan and course of action.
Best Regards,
Andrew
thank you very much. am very much grateful
Not sure whether it is me but are the simple maths in the example not incorrect.
8 hours @ $10 = $80 not $100 and same with O/T calculation – $110?
Hello Jeff, you are right! Thanks for letting me know about the error. I have updated the post. Feel free to check again and let me know if I slipped up on the calculations again!
Best Regards,
Andrew
Good Day!
Thanks a lot for taking me back to the time when I was still doing my diploma in operations management. I find this information very refreshing and intuitive.
Thanks very much
Noti
Dear Andrew,
do you have experience for increasing and improvements in sales area? How to increase productivity or to increase the sales?
Thank you
Aleksandar Stamenkovic
Hello Aleksandar, thanks for your question.
I recall a project with one client. A Sales process was running slow. When new business was being quoted it would go to a pricing committee for review. It should take two days to review and approve or reject. In certain instances the turn around time was taking more than 5 days. This delay lead to lost sales and a chance to bring on new clients.
The problem was a unstructured process. In the absence of a standardized process information was missing and the new sales quotes were in a re-work loop about 94% of the time. Once this bottle neck was resolved new sales flowed better. In those cases where clients were reviewing multiple quotes, that quote that arrived first often won the business!
I trust this was helpful. If you had something else in mind then let me know.