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.
|1||0||2008||Some consultants are now urging companies to increase team sizes, so organizations can run with fewer bosses, in part by using technology to communicate and help monitor work. Pepsi Co.'s Gemesa cookie business in Mexico teaches its workers the company goals and processes so that they do more themselves to keep production running smoothly. New pay systems reward productivity, quality, service, and teamwork while personalizing underperformance. The system promotes efficiency while letting managers function more as coaches of self-motivating teams. Gemesa ran its factories with 56 employees per boss last year rather than the old 12:1 ratio.|
|2||2800||2004||Many companies are moving away from traditional annual pay increases in favor of giving out bonuses. There are varying approaches to this method. Some companies use egalitarian bonus-pay structures. If the company as a whole, or a particular division, meets established production or profit goals, then everyone benefits. Other companies operate a meritocracy in which workers in the same job could earn different pay based on their own quarterly or annual performance. Alpharma Inc., divisional profit targets drive part of the bonus calculation, with the other part based on specific goals set for each employee.|
|3||3500||2006||Companies are struggling to measure performance without hindering the team work and risk-taking necessary for innovation. General Electric Co. hasn't abandoned its system of dividing talent into three groups – a top 20%, a middle 70%, and a bottom 10%. It still drives truth into a process frequently eroded by grade inflation and helps leaders identify managers who are good at finding top talent. But, it has removed all references to the 20/70/10 split from its online performance management tool and now presents the curve as a set of guidelines. Individual groups are allowed to have a higher number of "A" players, and low achievers are getting some kinder treatment, from a new appellation to more specific coaching and intervention than in the past.|
|4||3714||1988||A new "pay for knowledge" compensation system at Eaton plant encourages workers to learn as many skills as possible. Plan wiped out 100 separate pay categories & gave mgmt greater flexibility in assigning work.|
|5||4813||1993||AT&T now awards bonuses to employees based on customer evaluations.|
|6||5331||2007||Only 85% of labor costs pay for actual work, the rest goes to vacation and sick leave. As margins shrink, some companies are adopting strict policies to limit absenteeism. Human resource officials are using software to track absences. Wal-Mart employees are required to call an automated number instead of notifying their manager of their absence. Employees receive demerits for leaving work early or coming in late and will face disciplinary action after a certain number of unauthorized actions.|
|7||5722||2007||Only 85% of labor costs pay for actual work, the rest goes to vacation and sick leave. As margins shrink, some companies are adopting strict policies to limit absenteeism. However, others are focusing on results, which they claim fosters a better work environment. IBM employees take as much or as little time as they want. At Best Buy, employees are evaluated on their output. Those who abuse the policy are ousted but the majority comply.|
|8||6300||2004||Many companies are moving away from traditional annual pay increases in favor of giving out bonuses. The bonuses are largely based on performance, meaning only the most productive companies will reap the bounty. Allstate Corp. is launching a pay-for-performance salary structure on Jan. 1. Under the new system, employees' individual performance will be graded in one of five categories. While Allstate plans to increase its compensation budget 3.8% for the coming year, who gets how much of that cash will depend on those performance rankings.|
|9||6300||2004||There are 10M claims adjusters at Progressive. Each puts together a file for each claim handled. These files are audited for accuracy, timeliness, customer service and cost using a statistical sampling method. Each adjustor is then graded on his or her "file quality." The rewards come mainly in the form of promotions and the higher salaries that go with them. In order to move up in the organization, a claims professional must produce a greater volume of "standard files", which means that the file is accurate and done right the first time.|
|10||7300||1986||To get payroll specialists to raise their output from 1,400 checks a week to 2,200, Paychex CEO raised performance standards and raised the pay of those who met them by 25%. As a result, productivity increased and turnover dropped 30% in six months.|
|11||7375||2006||Companies are struggling to measure performance without hindering the team work and risk-taking necessary for innovation. Yahoo made substantial changes to its rating system this year. It stripped away its performance labels, partly in hopes that review would center more on substance and less on explaining away a grade. But Yahoo still gives its employees ratings. To do a better job of finding and showering top performers with the rewards necessary to keep them from quitting, the company also instituted a "stack-ranking" system to determine how compensation increases are distributed. It asks managers to rank employees within each unit – a group of 20 people would be ranked 1 through 20, for example – with raises and bonuses distributed accordingly. During the reviews, employees are told how their increases generally compare to those of others.|
<<Return to Reduce Input Not Producing Output