The Productivity Formula

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Dimensions of Quality

PerformanceFeaturesReliabilityConformanceDurabilityServiceabilityAestheticsPerceive quality

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Consequences of Poor Quality

Limited resourcesWhen the quality of an organization’s goods or services is

poor, the whole organization suffers. The organization loses business and therefore revenues, and it

also has more difficulty attracting other important resources.Higher costs

Businesses spend billions of dollars each year on inspections, errors, rework, repairs, customer refunds, and other costs to find and correct mistakes.

Attracting new customers costs several times more per customer than keeping existing customers satisfied.

Quality programs may carry some start-up costs, but the cost of poor quality is higher.

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Types of Quality Control

Product quality controlAn organization’s efforts to prevent or correct

defects in its goods or services or to improve them in some way.

Process quality controlQuality control that focuses on ways to improve

the product itself.

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Methods for Improving Quality Control

Statistical quality controlZero-defects approachEmployee involvement approachSix sigmaTotal Quality Management

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Quality Standards

Malcolm Baldrige Quality AwardLeadershipStrategic planningCustomer and market focusInformation and analysisHuman resource focusProcess managementBusiness results

ISO 9000BenchmarkingDelivering greater customer value

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Guidelines for Quality Control

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Trends in Productivity in the United States

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Constraints on Productivity

Management limitationsEmployee attitudes and skillsGovernment regulationsUnion rules

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Measuring Productivity

The basic way to measure productivity is to divide outputs by inputs.

To increase productivity, a supervisor needs to increase outputs, reduce inputs, or both.

Quantity without quality does not boost productivity.

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Improving Productivity

Do equal work at a lower cost, and increase output without a cost increase.

Improve process quality so that employees work more efficiently and do not have to spend time correcting mistakes or defects.

Understand the goals of quality programs and their own role in achieving those goals.

Use their specific knowledge of the tasks and processes their teams perform to find unique ways to contribute to productivity.

Use as many of these strategies as will work.Encourage and use employees’ ideas for saving money.

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Improving Productivity (continued)

Use budgetsReview budget reportsObserve employee use of resources

Increase outputIncrease output without boosting costs

Ensure the new output goals are reasonableCommunicate new goals carefully

Electronic monitoring

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Improving Productivity (continued)

Improve methodsReengineeringProcess control techniques

KaizenGive employees more control over the way they

workDesign jobs to be interesting

Reduce overheadMonitor work areasEliminate unnecessary paperwork

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Improving Productivity (continued)

Minimize wasteReduce downtimeReduce detour behaviorUse e-mail filtering softwareSet a good example

Regulate or level the work flowEnsure adequate planning for the required workWork with others to examine and solve work-flow

problemsUse temporary employees during peak periods

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The Costs of Uneven Work Flow

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Improving Productivity (continued)

Install modern equipmentCompute the payback periodFind the average rate of return (ARR)

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Payback period = Cost of new equipment

Savings per year

Average rate of return = Average annual earnings or savings

Amount invested (cost)

Improving Productivity (continued)

Train and motivate employeesMinimize tardiness, absenteeism, and

turnoverEmployees tend to arrive late or not at all if they

dislike their jobs or find them boringAbsenteeism may be the first step to leaving the

companyHigh turnover is expensive, because the

organization must recruit and train new employees

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Employee Fears About Productivity Improvement

Many employees believe that cost reductions can lead to less overtime pay, more difficult work, and even layoffs

Supervisors must respond to employee fearsBe prepared with informationPresent the information to the employeesAllow employees to ask questions

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