The secret ingredient to understand productivity

We shall first draw the attention to the “productivity” definition and its perceptions in the commutative consciousness. Those perceptions are imprinted in our minds subconsciously even if we are not aware of them. Whatever is entrenched in the collective consciousness sneaks to our subconscious mind even if we are unaware of it. When you became aware of it, you are then free to accept, reject or tune your personal perception about it. Before that, it governs your thoughts and reactions subconsciously.

Productivity, What is it?

Regardless if you are driving your definition from the product point of view, the financial point of view or the labor point of view, productivity is always some Output divided by an Input.

Similar machines, if set up identically and provided with the same input, are expected to produce equal number of products within the same time slot. So, we can measure their productivity as products/unit of time. If the number of products varied at the end of the shift, we have two choices. First one, we can jump to a conclusion that one machine is less productive than the other one. The second choice, we need to question if all other parameters where kept really identical. If the answer to the second question is YES, then we need to question the machines equal capability. We can find a good example if we are milling a keyway in a shaft on 2 Milling machines and they do it in different timing.

The secret ingredient behind the productivity calculation

The inputs to the productivity equation are very simple Some quantifiable output that we calculate its relation to another quantifiable input. Examples of output can be plastic bottles produced or number of orders fulfilled from a coffee kiosk on a busy subway station. Inputs carry the magic. Whatever you select as an input to get the relation relative to, is what you care most about. Moreover slight changes makes huge differences. Examples of input:

• Time period; shift, 24 hours, available time for production, month
• Specific time periods; The early morning rush hour, the first day after maintenance, the first day after size or material change.
• Labor; direct machine operators, maintenance and operation teams, all work-floor team, all labor including admin.
• Material; main raw material quantity used (not the quantity purchased), side additives quantities used
• Cost; labor cost, direct labor cost, all labor cost, material cost, all cost

While all these valuable inputs and outputs reveal helpful results, there is one single ingredient that is not quantifiable but gives a hell of meaning to all these calculations; The Context.

What do we mean by the context?

When you calculate the productivity of a certain raw material and compare it to a previous period, there are few questions that will make the drawn results more meaningful or colorful. Is it a new raw material lot received? Is the source of raw material the same? For how long it had been stored? Were the operators upset due to new admin rules issued? Similarly for the productivity of a new team at the coffee kiosk on the busy subway station during the rush hours; Was this day a weekend? Were there national holidays? are the curfew period interfering with this period? Did we change the milk supplier? Did we change the colors of our cups?

Productivity, can it give a deceiving indication?

I enjoyed the explanation from HBR in a 1988 article. A car-tires manufacturer has 2 manufacturing sites. They are almost identical . And, they compete for the best productivity figures. One of them adopted a new product that will:

• decrease Produced units/year by 5%,
• increase the material consumption by 5%, i.e. material productivity is decreased (material productivity=produced units/material used)
• increase labor cost by 5 %, i.e. productivity per labor is doubly decreased because the produced units decreased and the number of labor increased. Labor Productivity = Produced units/Number of labor
• The management decided to sell this product at an extra cost of 30%
• The sales team productivity will decrease as they will sell less units
• Projects team of this work site spent 2 years studying and testing on this single project.
• The new product is Car tires that live for 30,000km instead of the old model that lives for only 20,000km

The other work site still produces the standard tires. Their project team applied a few improvement that cut cost down by 1% which is a good achievement and a reasonable amount of extra profit.

At the end of the year both plants sold their product as usual. When calculating and comparing the productivity indicators, the worksite that adopted the new product is behind the one with the old product in every aspect. However there was one achievement; It increased its profit by 20%.

Productivity is like many other indicator, it may give an easy to understand indication. But, isolating it from the other parameters can be deceiving and might lead to wrong decisions. The comment that popped up at the yearly review meeting of this tires manufacturing company was hilarious: Why the production unit that brought higher profit is worse in every other indicator??

Personal productivity

You can use same indicators with your team members. But, keep in mind to compare the productivity at equal inputs and within the same context. Or, at least, use a correction factor to cater for the differences. Your best milling machine operator can take few days to complete a complicated job. Other milling machine operators finish several simpler jobs per day. Then you can’t compare their productivity. Same applies when you assign you best R&D (Research and development) Engineer a study task that involves adding new equipment to the production line. This might take few month of study. During this period his monthly output is a big zero. Unless, you both had agreed on some monthly or weekly milestones.

If you revisited some of the above examples, you can see that productivity gives simple indications that sums up complex situations. Those examples involves a lot of context than their superficial look:

• Crew productivity=Number of good products/shift. Measured per week or month
• Material Productivity = Produced Units/Input Material. You can use it for each of your raw material or for the main ones. Better results come from longer periods to minimize other momentarily fluctuations.

So, when the financial team issues the productivity indicators for the next quarter be ready with the operation context to agree or defend the results