Good Enough? How Productive Is Your Organization?

In the next few blog posts, I will explore the impact productivity has on the many facets of an organization. Productivity impacts the release of new products and new product development, strategic planning, pricing strategies, operations and administrative functions.

Businesses, at their core, deliver services and products through complex systems and processes; each of these deliverables takes time to produce. Productivity is the measure of the efficiency of how the output is produced.

Creating a productivity measurement is a three-step process:
1. Process Definition
2. Standardization Study
3. Performance Study

Process definition requires the understanding of why the process exists, who performs the process, the process inputs and outputs, process sequencing, and the delineation of where a process starts and ends. Once these factors are known and documented, the process is measured in terms of time.

Through measuring defined processes in terms of time, we can create processing time trials. During processing time trials, the process is measured from start to finish by taking several samples. In turn, this data is calculated into a baseline of average processing time also known as a standard.

Once a standard processing time is known, we measure real world processing outputs and compare them to the standard processing time, thereby creating productivity measurements. For example, if the standard processing time to create an invoice is 2 minutes and then we measure output over a 1-hour period resulting in 25 units produced, the output productivity over the sample hour is a productivity rate of 83%.

It is important to note that the initial process definition & standardization captures variables that replicate the production environment.

The process of creating productivity measurements is a powerful business tool. Defining all business processes creates a better understanding of how a business performs. Process analysis enables process improvement efforts and tells us how efficiently we are performing specific processes.

Armed with this information, we can begin to answer questions such as:

• What are our organizations points of strength?
• How long will it take to build this new product and is this process time accounted for in the business case analysis?
• How does our processing efficiency affect the Profit & Loss Statement?
• How much does it cost to process an invoice?Where are the constraints in my manufacturing processes and how much do these constraints cost?

The ability to find the answers these multi-disciplined questions is essential to staying competitive in today’s business environment.

Stay tuned for my next blog articles where I explore how productivity measurements are used as a guide in answering these important questions.