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 specific group performance:
|1||3559||1989||To hire as-needed technology experts, Thermwood offers to pay five times the normal fee, but as a percentage of sales of the product involved.|
|2||5411||2007||While technology has changed dramatically, management styles have not changed significantly during the last forty years. However, some companies are working to shake up the system. At Whole Foods Market, the main organizational unit is not the store but the team. Small work groups are granted autonomy in pricing, ordering, staffing and in-store promotion. New employees are provisionally assigned to a team, they require the votes of their peers to stay on this team. Team members are held responsible for their results and bonuses are tied to sales and performance. As a result, associates have little tolerance for underperforming colleagues.|
|3||5600||1985||To keep the level of service high at Mallard's, it attracts and retains its experienced sales staff with healthy salaries that are further sweetened by commissions that reward the achievement of both individual and storewide sales goals.|
|4||5812||1996||CKE restaurant president cut $6 M from CKE’s administration expenses and put the savings into bonuses for restaurant managers that were tied to revenues and expense control.|
|5||6324||1996||Oxford is now organizing self-selecting groups of 40 to 100 physicians into "partnerships." Doctors are paid a percentage of patients' premiums, from a so-called global budget that fixes amounts for various products.|
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