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||5140||1993||Sysco's operating chiefs get no bonus unless their unit's pretax profit exceeds 4% of revenues and its return on capital passes 12%.|
|2||6300||2004||Decentralization is a critical part of Progressive's strategy and success. The company thinks in terms of the optimum assignment of "decision rights" that it gives the people in the organization who have the special knowledge of local markets and conditions necessary to make the best decisions. The key people that receive these rights are the 100 Product Managers who decide within each of the markets how much to charge for car insurance. The Product Managers can get as much help as they want with no transfer charges from headquarters, but the responsibility for pricing and for profits rests with the Product Manager.|
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