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:
On returns

No. Industry SIC Year Notes
1 0 1986 Wometco began raising margins in low-margin enterprise by giving key managers an equity interest.
2 0 2005 McKinsey has identified five common features that could constitute a code of leading-edge practice. Second, successful deal partners institute substantial and focused performance incentives – usually a system of rewards equaling 15%-20% of the total equity. Such incentives heavily target a company's leading officers as well as a handful of others who report directly to the chief executive. In addition, best practice deal partners require CEOs to invest personally in these ventures. Formulas that failed to account for the individual circumstances of a company's officers or that spread incentives too widely proved less effective.
3 2800 1996 Under a new plan at Monsanto, executives will get options to purchase stock at prices that ascend over time. Tied more to performance than traditional executive stock offers.
4 3760 1989 Lockheed announced a $500 million employee stock-ownership plan giving workers a 17% stake. Strong incentive for higher employee performance.
5 3861 1989 Polaroid Corp's employees acquired some 20% of the company. The more retirement nest egg is tied to company's stock, the more people are pushed to do best they can for company.
6 4214 1986 To turn Bekins around, new mgmt changed incentive plan for senior executives to a measure of return on assets.
7 5411 1995 Publix enjoys lower labor costs. Publix has used aggressive mgmt & tenets of employee ownership to create a culture that values efficiency & service.
8 6211 1986 Hellman, Friedman's principals have an equity stake in the company.

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