What Measures Process in Terms of Efficiency and Productivity?

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Every company should be able to measure their employee and overall company competence. This is a relevant process that should be evaluated well so that the road to progress of the company is unhindered. Check additional information about measures process.

The management of the company should include the measurement of their own performance. In order to measure this well, it should include two of the essential process measures, which are the efficiency and productivity. In the former, there is an equation that is used to assess this. The actual output is divided by the standard output and the total will be multiplied to 100%. This sums up to efficiency.

To determine the standard output, you have to look into your company's historical data. Examine the experience and the job itself. The number is not a random one and is definitely derived from the series of the historical times of your company. For instance, your company works in automotive collision. There is an insurance company that determined that it takes 2.5 hours to replace the fender. Thus, the standard output here is equal to 0.4 fenders in an hour. That insurance company is willing to pay $50 dollars for every hour of labor. Of course the supplies and the parts are separately billed. Meanwhile, your employees receive $35 dollars an hour.

Now, let us say, that it took your men four hours to work on the replacement of the fender. The question here is: What is your company's labor hour effectiveness and will the job help you earn money?

Use the equation and find out. Divide the results of one fender and four hours and one fender with 2.5 hours. The answer will be 0.625. Now multiply this with 100% to get 62.5% in efficiency. The insurance company will pay $50 per 2.5 hours and you will pay your employees with $140. Thus, you lose $15 in every fender. To make more money, you should increase your employees' performances to 70% or higher.

With the case of productivity, you can measure this with the formula that states that productivity is equal to outputs divided by inputs. Examine your records and find out the quantity and the amount of each unit. Again, let us say that you work on auto collision. There are about 4000 cars and they cost $8000 per unit. Meanwhile, another set has 6000 in quantity and costs $9500 per unit. Now, you will have to determine the labor productivity for each type of car for every hour.

With the first car, you will divide the number of cars with the hours it took your employees to work on them. For example, there are 4000 cars and it took them 20,000 hours, meaning the result is 0.2 cars for every hour. On the other car set, the result is the same. When you want to know the labor productivity in terms of dollars, you will have to divide the products or the number of cars with its cost and the hours it took your employees and their rate. The answer here is $133.33 for every car while on the other, it will cost you $135.71. Therefore, you will notice that they have the same labor productivity but they differ in the dollars aspect. It helps to find a balance in the labor and the money factor to help your company prosper.

If you are interested in measures process, check this link to find out more about metrics process. Also, you can check other articles in BSC for HR category.

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