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:
On profits

No. Industry SIC Year Notes
1 2600 1985 Scott has altered its incentive system: pay for the top 600 people is now based partly on their contribution to profits.
2 6021 2004 Many companies are moving away from traditional annual pay increases in favor of giving out bonuses. Companies are focused on bonuses for several reasons. Inflation remains relatively tame, meaning companies aren't feeling pressured by the economy to raise salaries. Job creation remains lethargic, so there is little pressure on business to raise pay in order to attract workers. Companies are also wanting to keep their fixed costs low. At Bank of America Corp., bonus-pay plans now stretch to the lowest employee ranks and are based on both companywide profits and the results of individual business units.
3 6211 2005 Over the last nine months, Schwab has reduced costs by $600 million, so its return on capital is climbing again, as are its profit margins. The company also put in place for every division, profit and loss measurements, so that the managers of the division, profit and loss measurements, so that the managers of the divisions are compensated based on contribution to the company.
4 6552 1990 All Crow employees received a base salary of $18,000; remaining earnings were tied to the profitability of their development projects.

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