Agenda - Council - 12/22/1981 - Laserfiche WebLink

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THE WEEK IN REVIEW- 81-47 - 2 - November 20, 1981 improvements. More important, the Center concentrates on helping management and labor under- stand, measure, and improve productivity at the company level. The Center's primary mission is to motivate the private sector instead of waiting for government to step in. Productivity at the Company Level Here are some ground rules usually found in a company productivity-improvement program. In tak- ing the lead role in such a program, top management should: · Demonstrate that productivity gains are an important management goal with high priority · Involve as many people as possible and obtain their commitment to the program · Have an overall plan with goals and target dates for improving productivity in critical areas · Establish measurements for quantifying goals as much as possible and for monitoring progress · Reward those who achieve the results desired from the program. Measu ring Productivity All of these ground rules are important to a successful productivity-improvement program, but one. in particular is often overlooked-establishing measurements of productivity. The basic idea for establishing measurement ratios is to apply the classic definition of productivity- output divided by input. To obtain the necessary output and input data, management should look to their companies' accounting systems for information already available on production, labor, materials, energy consumed, and capital. In addition, management should have a sharper focus on the changes in unit costs. This focus will help to pinpoint the basic causes of cost increases-- the essential first step in doing something about them. It is useful to think of all unit costs in terms of two components: cost and productivity. The first component is, more precisely, the cost of each unit of input and it is affected by such factors as inflation, supply, and demand. The second component, productivity, is the amount of output obtained from each unit of input. Meaningful ratios can help to sharpen your focus on whether changes in unit costs are caused, in fact, by changes in productivity. If any dollars are used in the ratios, they should be adjusted for inflation. Dollar values of output and input should be measured in constant dollars. Otherwise, inflation can confuse the issue. Importance of Competent People To put these thoughts into perspective, measurement is only one element of a productivity-improve-_: ment program. Underlying the success of any such program is the competence of the people in the business. The manager who recognizes .competent people, and motivates them, will tap a vast reservoir of talent and energy. People can and will do what needs to be done-if managers create conditions which ensure productivity and quality of worklife.