Reduce the Units of Input Not Producing Output
Reduce units of Input (I) available but not producing Intermediate Cost Drivers (ICDs). This action makes Input levels more directly variable with the quantity of the ICD by reducing the amount of the available Input that is wasted or idle. For example, an employee (I) might produce one subassembly (ICD) per day. During that day, the employee spends a total of one hour waiting for parts for the subassembly. If the Company could eliminate that one lost hour of the employee's work day by providing parts in a more timely manner, the Company could reduce the number of employees (I) needed to produce the same subassembly (ICD) by 1/8th.
A. Assist Input in increasing ICDs.
Recognize efficiency. When people understand that the company is measuring efficiency, they pay more attention to what is measured.
Pay according to varying levels of efficiency: Pay for company performance:
|1||3711||2007||The Global Engine Manufacturing plant, a joint venture between Daimler-Chrysler, Hyundai and Mitsubishi employs union employees and lower-paid contract employees and gives employees a stake in the plant's success with performance bonuses. The plant is heavily automated and much more efficient than comparable operations. Workers work longer but have more vacation time and their contracts are simplified. Despite its success, analysts predict that the plant cannot be used as a model for the reform of the auto industry as it was built from scratch, employees were selected for their flexibility and education and union resistance.|
|2||3715||1995||Wabash has a profit-sharing plan that gives employees 10% of after-tax earnings. Wabash's retirement plan contributions are based not on profits but on profit margins.|
|3||3721||2001||Boeing has announced an incentive plan for nonunion workers: "We want to give employees a sense of being stakeholders." The plan will base rewards on company profit levels. For 2001, the company has raised the target to 10 days of extra pay and it could reach 20.|
|4||3751||1987||Huffy issues monthly checks separate from the paychecks, with each employee receiving his or her share of a 50-50 split of cost savings. Usually this check is about 5-8% of the basic wage.|
|5||4512||2000||SouthWest Airlines, relies on collective rewards internally such as profit sharing and stock ownership.|
|6||4924||1996||CGS' CEO has pulled the firm out of chapter 11, divested an exploration unit, cut a layer of management and tied the compensation of managers remaining to company earnings.|
|7||5141||1997||Dorothy Lane pays bonuses equivalent to 20 percent of profits; but the workers are also more productive.|
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