Chapter 19 – Improving Productivity
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CHAPTER 19
Improving Productivity
LEARNING OBJECTIVES
1. Explain the three major components of organizational productivity.
2. Discuss the benefits of work-methods improvement.
3. Distinguish between motion study and time study.
4. Present a systematic approach for improving work methods.
5. Describe the Kaizen philosophy for improvement.
6. Describe the supervisor’s role in improving productivity through cost reduction and
control.
7. Summarize several cost-reduction strategies that can be helpful to supervisors.
8. Identify several areas of concern to supervisors that tend to be especially susceptible to
cost overruns.
9. Discuss the major types of inventories and explain the purposes for carrying inventories.
10. Explain the just-in-time approach to inventory control.
SUGGESTIONS FOR PRESENTATION
Suggest other areas of application
Many students tend to think of the techniques discussed in this chapter only in terms of industrial
company. These concepts become much clearer when they’re actually applied to an individual
situation.
Apply the concepts on a personal basis
Suggest that students take the points between pages 399 and 403, and apply them to their own
personal environment. These ideas can work for families, too. There may be some difficulty in
defining the “supervisor” as “self’ or “spouse” (or “parent”), but most of the concepts can apply
to a household as well as a business situation. If people are involved in a club, professional
organization, church, etc., which is having financial concerns, these ideas work there, too.
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Apply some of these concepts to the classroom
• How much did you expect to study for this? Did you end up putting in overtime? If so,
why? Was it productive?
• For those of you who were absent, which of the reasons listed on page 408-410 accounts
for your absence? Are you satisfied with the course, and feel a loyalty to it and your
classmates? Or is it boring? What could be done to improve your attendance and loyalty?
The same ideas can be applied to tardiness.
• Even materials handling can come in here. Were the materials used (handouts, films, tests,
etc.) effectively, or could they have been saved, reducing costs and time/frustration by
students? What improvements would students suggest?
REMEMBER: Don’t ask, unless you can handle the answers.
LECTURE OUTLINE
Supervision Dilemma
Jane notices that her department is not as efficient as the accounting department and she would
if high productivity is to result.
The real meaning of productivity is “to produce more with the same amount of human effort.”
This statement is based on the fact that, over the long run, far greater gains in productivity have
come from efficiency of technology and effective management than from efficiency of labor.
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Supervisors, as the first level of management, can have a significant impact on all three
productivity components.
I. Methods Improvement and the Supervisor
• The best method for performing a task is a combination of how the human body is used,
the arrangement of the workplace, and the design of the tools and equipment.
o Work-methods improvement is used to find the most efficient way to accomplish a
given task.
o Methods engineering and work simplification are other terms referring to the same
process.
• A methods improvement program should be concerned with finding the best ways of
performing a task or a group of tasks.
o Although this involves eliminating unnecessary work, it need not mean that the scope
of the task or job should be restructured.
o The objective is not to make the task or job as simple as possible, but to increase
efficiency by eliminating unnecessary work and by optimally structuring necessary
work.
II. Benefits of Methods Improvement
• The benefits of methods improvement can be significant.
o Among the potential benefits are:
▪ Reduced cost
▪ Higher productivity
▪ Satisfied employees
• The benefits of methods improvement today are not limited to industrial or manufacturing
organizations.
o Service organizations can apply the principles of methods improvement as
effectively as industrial organizations can.
• Supervisor, other managers, employees, consumers, owners, and society in general all
benefit from methods improvements (Figure 19.2)..
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III. Systematic Methods Improvement
• With methods improvement a systematic approach produces the best results.
A. Motion Study
• Motion or methods study is concerned with determining how a task is being
performed and if it can be performed in a more efficient manner.
• The first step in motion study is to identify precisely the steps of the task as it is
currently being done.
o Once these steps have been identified, they need to be evaluated. The necessity
of each step should be questioned.
o Improvements generally emerge from the questions asked in Figure 19.3.
B. Time Study
• Time study is the analysis of a task to determine the elements of work required to
perform it, the order in which these elements occur, and the times required to
perform them effectively.
o The objective of a time study is to determine how long it should take an
average person to perform the task in question.
▪ The time necessary to perform a task or a group of tasks is called the
standard time.
o The primary use of time study is to provide standards to which employee
performance can be compared.
• Time study without a preceding motion study involves six basic steps.
o Breaking the task down into its elemental steps, each of which is then timed.
o Determining which elements are essential for completion of the task.
time and the extra time allowances.
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C. The PDCA Cycle
• The PDCA Cycle, also referred to as the Shewhart Cycle or the Deming Circle, is an
approach to methods improvement that has enjoyed considerable success.
o PCDA stands for the four stages that the cycle comprises:
▪ Stage 1: Plan—where and how to make improvements
❖ Ergonomics is the study of interface between people and
▪ Stage 3: Check—evaluate the results
▪ Stage 4: Act—take action and fine-tune
IV. Kaizen Philosophy for Improvement
• Kaizen is a philosophy for improvement that originated in Japan and that has recently
enjoyed widespread adoption throughout the world.
o Kaizen literally means “good change,” and in today’s context it describes a process
of continuous and relentless improvement.
o Kaizen is not based on large technical leaps but on the incremental refining of
existing processes.
▪ It is based on the belief that the system should be customer driven and involve
all employees through systematic and open and communication.
▪ Employees are viewed as the organization’s most valued asset.
• A Kaizen blitz occurs when an organization undertakes an intense Kaizen effort
concentrated in a two- to-five day time period.
V. The Supervisor’s Role in Cost Reduction and Control
• The supervisor can suggest means of cost reduction and control ideas.
A. Establishing the Proper Environment
• The attitude of the supervisor toward costs sets the tone for the entire department.
• General guidelines for establishing an environment conducive to continuous cost
control and reduction:
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o Cost reduction should be part of the normal routine.
o Cost reduction should cover all areas.
o A climate and format for encouraging employee suggestions should be
provided.
o Incentives for cost reduction should be offered.
B. Why Do Employees Sometimes Fear Cost Reduction?
• The idea of cost reduction represents change to employees, and their first reaction is
resistance.
o Loss of overtime, reduction of regular working hours, and the loss of jobs are
some of the more obvious fears that employees might harbor.
VI. Figuring Costs
• Costs can be thought of as everything expended to produce and/or provide the product or
service. They can be broken down into several categories.
equipment and facilities.
o Scrap or waste costs—expenditures for products, parts, or services that cannot be
reworked or reused and that do not meet quality standards.
o Energy costs—charges for electricity, gas, steam, and any other sources of power.
o Overhead costs—expenditures for physical space, staff services, research,
advertising, and legal services.
VII. Cost-Reduction Strategies
• Logically, cost reduction should begin in the areas where the greatest savings can be
realized.
o Several general strategies that may be used to cut costs are as follows:
▪ Increase output
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▪ Improve methods
▪ Regulate or level the work flow
▪ Minimize waste
▪ Work closely with suppliers
A. Cost-Reduction Resources
• Supervisors should not fail to enlist the aid of all available resources.
o Staff specialists can be very helpful: cost analysts, industrial engineers, and
others in the staff can offer expertise in certain areas.
o Employees often represent the greatest potential for cost reduction ideas.
o A cost reduction committee offers the benefits of group thinking and also
heightens its members’ interest in cost reduction.
VIII. Cost Areas That Frequently Cause Problems
• Certain areas that tend to be more susceptible to cost overruns than others have historically
caused problems for supervisors.
A. Overtime
• Some organizations pay double or even triple time for certain overtime.
o In addition to the obvious cost of higher wages, overtime often has other
hidden costs.
▪ These include decreased employee efficiency, higher reject rates, and more
absenteeism (all due to employee fatigue).
• If overtime looks like it might be necessary, a supervisor should do certain things:
o Determine the cause of the overtime.
o Consider the alternatives.
o Be alert as a supervisor.
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B. Absenteeism
• Unscheduled absenteeism cannot be completely avoided.
o Employees get sick, relatives die, accidents occur, and certain personal
business must be tended to during normal work hours.
• There is an avoidable type of absenteeism—that of the employee who could come to
work but stays out instead.
• Research has shown that employees tend to come to work when they are satisfied
with their jobs and are loyal to the organization.
o Employees may stay out because they find their jobs boring.
▪ The boredom in some jobs can be lessened through alternative work
designs.
o Many organizations are implementing programs that address work/life issues to
increase loyalty and decrease the cost of absenteeism.
▪ These programs include such things as flexible scheduling (flextime), child
care, elder care, and part-time employment.
• Many organizations have decreased absenteeism by replacing traditional designated
benefits programs with paid time-off plans.
o Some organizations offer incentives to encourage employees to take fewer sick
days.
C. Tardiness
• Tardiness indicates a lack of job satisfaction and loyalty.
o As with absenteeism, some tardiness is controllable and some is not.
▪ Accidental tardiness occurs because of flat tires, severe weather, or
personal emergencies.
▪ Controllable tardiness relates to the habitual offender—the employee who
is late on a regular basis.
• Habitual tardiness should be dealt with directly:
o The habitual offender should be identified and verified through the attendance
records.
o If tardiness continues, talk to the offender again.
o If tardiness continues, follow the formal disciplinary procedure and discipline
the offender.
D. Turnover
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• Turnover is very expensive for almost any organization.
o Direct costs of replacing an employee include advertising expenses, headhunter
fees, and management’s time involved in recruitment, selection, and training.
o Indirect costs include overtime expenses, decreased productivity until the new
employee gets up to speed, other employees’ time spent helping a new
employee, and training expenses for the new employee.
• Below are five strategies that will keep turnover low:
o Build strong relationships with every employee.
o Keep the mood light.
o Continually strengthen your team.
E. Employee Theft
• Although many factors may be at the source of employee theft, major contributors
are lax selection and hiring policies, readily accessible money and products, and
managers and supervisors who project a callous and uncaring attitude.
o Building a corporate culture that supports an honest workforce is the most
effective approach. The following guidelines should be followed to establish
such a culture:
▪ Establish a clear, explicit policy on corporate theft.
▪ Set a good example in terms of not taking liberties at the expense of the
company.
accusing an employee.
▪ Do not police the workplace; be trustful of employees.
F. Materials Handling
• Materials handling involves the movement of materials. These include raw
materials, supplies, in-process materials, finished goods, and equipment.
o Associated with materials handling are not only the costs of physically moving
might be reduced.
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IX. Inventory Control
• Inventory control is primarily concerned with monitoring and maintaining a supply of
inventory adequate to meet customer demand but not greater than is necessary for that
purpose.
o The costs of poorly managed inventories can be extremely high.
o In addition to determining what levels of inventory to maintain, inventory control
systems determine when stock should be replaced, and how large orders should be.
• Inventories can generally be classified as:
o Produce on a smooth, continuous basis even though the demand for the finished
product or raw material may fluctuate.
o Prevent major problems when forecasts of demand are in error or when there are
unforeseen slowdowns and stoppage in supply or production.
• When making inventory decisions, three basic questions must be answered:
o What items to carry in inventory?
o How much of the selected items to order and carry?
o When to order the items?
A. Just-in-Time Inventory Control
• Just-in-time inventory control (JIT) was pioneered in Japan but has become very
popular in the United States.
o JIT is actually a philosophy for production so that the right items arrive and
leave as they are needed.
o The JIT philosophy applies not only to inventories of incoming raw materials
but also to the production of subassemblies and final.
o JIT is called a demand pull system because items are produced or ordered only
when they are needed (or pulled) by the next stage in the production process.
Solution to the Supervision Dilemma
Jane now understands the implementation of a structured methods improvement program, a cost-
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reduction plan as well as inventory controls.
SUPERVISION ILLUSTRATIONS
19-1: Methods Planning at McDonald’s
19-2: Making Ergonomics Work in the Office
19-3: Loyalty at Purdy Chocolates
19-4: Getting employees to work
19-5: Absences and Tardiness Get a Judge in Trouble
REVIEW QUESTIONS
1. Define productivity and describe three major components of productivity.
Productivity may be defined as units of output per employee hour. It is the result of three
2. What is the objective of work-methods improvement?
3. Name at least six potential benefits of improved work methods.
Following are six potential benefits of improved work methods: