Rule 5: what about productivity
Let’s now focus on the other pillar: productivity. Defining your productivity objectives, to drive your ultimate goal, consists normally of two elements. The first element is related to the type of business your in. The other has to do with current problems or pain in the execution.
Type of business determines type of KPIs. For instance, when you have heavily invested in assets, like an aeroplane company, who will need KPI’s that measure asset utilization. Examples could be ‘’% of occupied seat per flight’’. This is of course, totally different for a consultant company. Their type of business is not fixed assets driven, but is a people business. They have to look at other KPIs, for instance the billing rate or level direct / indirect employees. So type of business drives you to the right KPIs to measure productivity or efficiency within your business. The KPI’s you select based on type will not change a lot as long as your type of business doesn’t change.
The second element that leads to additional KPIs is related to current issues. Where are costs out of control and which KPIs create the right focus on these costs. For instance, logistics costs are high you might look at distribution costs per unit or % logistic cost of sales. In time, the KPIs you select other KPIs since problems move from one area to another.
Marketing Manager at WGCL
Managing Partner at Team-Up International
Four element is where Your business stand on the value chain
CPM Partners
I see you are getting the picture. You’re already adressing the next rule(s). But how to do that?
Industrial Engineer at GI
I agree if KPI’s measurement are focused on the ultimate goals and current problems related to productivity. But we have to keep in the company long term program in line with their vision, even in uncertainty business situation at this time.
CPM Partners
You didn’t get the full picture. You have to take type of business into account as well.
Peter
Product Manager at Distributive Management
You must include quality when discussing productivity. For example, a company that manufactures 20 televisions a day but 50% of them are broken, does not have a high productivity. It would be interestiong to see you guidance above address that aspect of productivity. Resource utilization (from above) is another example – it doesn’t matter how much the equipment was used, it matters how much it was used in delivering products that could be sold/delivered.
CPM Partners
Thanks Peter,
quality will be dealt with soon. It is in your processes.
Regards,
Peter
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third element is Process used in excute the work