Calculating Productivity 101:

Before we talk about the proper methods of determining “true” productivity

rates, otherwise known as cycle times, lets first look at and highlight a few
improper methods of setting productivity rates.

Productivity rates can not be determined or set by any of the following

methods. If you truly believe any of the following methods can be utilized for
determining productivity rates you may want to seriously consider looking for
a new job or new profession to work in. The reason being is sooner, rather
then later, you will be beat out, put out of business, by your competitors who
understand the proper Lean methods of determining correct, accurate, and
reliable methods of determining productivity rates (cycle times).

The following are improper methods or illusions on determining or setting

productivity rates:

1. We typically can produce this amount of product in a given time.

While that might work to give you some idea of what is actually produced in
a specific amount of time it has absolutely nothing to do with what type of
productivity numbers your process is actually capable of. You may, typically,
produce 100 pieces in an hour and therefore believe that achieving 100
pieces an hour is equal to 100% productivity but that could not be further
from the truth. You have no idea of how much waste is in the process, and
there is waste rather you admit it or not, and that waste, if removed and
eliminated, could lead you towards the ability to produce 160 pieces an hour.

2. Today we have an order to make 800 pieces in an 8 hour shift.

While some of you may not believe this, believe this, this is how some people
try to determine their productivity rate for the day. That is to say with this
example a manager or supervisor may have an illusion that in order to have
100% productivity for the day their workers must produce 100 pieces an
hour. They may have some idea of what is capable due to past history but
that past history may have, or most likely has, no real foundation. The next
day they may have an order for 1600 pieces of the same product and then
will turn around, and again have an illusion, that in order to achieve 100%
productivity their workers must now produce 200 pieces an hour for an 8
hour shift. Its amazing yes, but it’s more prominent then you think.

3. We have other work sites, or areas within our business, that have
proven this productivity rate.

Unless two or more sites, or businesses, or whatever are cloned to be exact

replicas of each other down to having the same tooling, machines,
placements of parts or inventory, walking distance, driving distance (forklifts
etc.), number of employees performing the tasks, same number of identical
task, etc to within an inch or so its an illusion to think you can use some
other site or business to base your productivity numbers on. It’s not going to
happen and I can guarantee you that.

4. We have calculated these productivity numbers based on past

performance or carefully reviewed process techniques.

If someone is calculating productivity numbers behind a closed door, office,

desk, or wherever based on what ever data they wish to use they are again
having an illusion on what is actually capable when it comes to productivity.

5. These productivity numbers are based on what our operating

budget is, or were budgeted in, etc.

This one is truly one of the saddest examples I have ever come across for
setting productivity rates or numbers. I don’t care what someone may have
or may have not budgeted for. If they are truly going to try and budget in
productivity rates they are in for a very rude awaking. I say that because you
have those who believe if they wish really hard the productivity fairy will visit
them and sprinkle all the workers with the magical fairy dust to insure the
incorrectly budgeted productivity numbers are met one way or the other. I
may not be the brightest but neither am I stupid. I know business and how it
works and if someone is coming up with a budget, to be competitive, they
are not going to budget, for say 100 pieces an hour, and “hope” to achieve it.
They will not budget for 100 pieces an hour if they know they can achieve
120 pieces because they would be shooting themselves in the foot and losing
business. Using Lean tools you will know what is and is not possible and
never have to “hope” for the best. You will be able to budget on facts, not
fantasies.

6. We have time studies from the past that were proven in the past
to be accurate.

This one is not too bad because at least it’s based off something tangible and
its much better then any of the other 5 which are complete illusions and
practiced in the real world by real businesses and organizations. However,
the problem here is just what exactly was included in the time study? How
old are these studies? Has anything, anything at all, changed, such as layout,
tooling, machines, processes, procedures, walking distance, etc? Just what
did the time study include? Did it include every aspect of all tasks needed?
Does it have a buffer of time built in to deal with quality issues, process
issues, machine issues, etc? If so then you might as well chuck out the
productivity numbers based on a time study done years ago or even months
ago, even if ONLY one thing changed in the process. If there is any type of
“buffer” built into the time study to allow for any type of issue it’s a bogus
number that means absolutely nothing.
7. Employee (A) can produce/make/move 20 pieces an hour so all
employees should be able to do so as well.

Maybe, maybe not, no two employees will ever work at the same speed,
some will be faster, and some will be slower. Lean implemented properly will
greatly reduce the variation form one employee to another but it will never
make all employees equal when it comes to “output”. However, without the
proper Time Observations completed, along with Standard Work, you would
be completely fooling yourself if you really think you can set a productivity
number based on your fastest employee. Is the fastest employee following
each and every step of the process? Are they following all the quality and
safety guidelines? The vast majority of the time, in a non Lean work
environment, your fastest employee will be bypassing some, or many quality
and/or safety guidelines and perhaps skipping steps in the process all
together. Fast times or big numbers mean nothing if the task isn’t completed
correctly and completely with no quality issues and no safety violations.

8. We are going to raise the productivity numbers to what we would

like them to be.

While we are talking about improper methods and illusions this is the best
illusion yet. This is an absolutely truthful example I have recently come
across. Here is the scenario, you have a business that has a specific
productivity rate which states an employee should be capable of producing
25 parts per hour. This rate may have been set years ago and many things
have changed since then but the productivity rate has not. Therefore,
currently the productivity rate is bogus, means nothing, because there is no
data, no time observations, studies, to support it. For the most part the 25
parts per hour is not currently being met. Management is unwilling to do
anything to document reality to see why the current rate is not attainable.
Their solution is to discipline employees who do not make the rate. This
encourages employees to bypass quality and safety procedures. Now, with
out lifting a finger, or letting one brain cell fire off in logical thought, they
decide to raise the rate by 8% to 27 parts per hour. When asked “what
changed in order to make this new rate attainable?” the answer is “nothing,
they better make it or they will get disciplined”. Brilliant, absolutely brilliant,
and you wonder why some companies are going out of business…

While there are more examples I could write about, and yes these are real
examples and not something I just made up, I think the preceding eight
examples are enough to open many eyes.

People wonder why jobs are going overseas or across the border. While the
above examples are not the only reason for jobs going away they do play a
huge part in that loud sucking sound you hear.

Another sad byproduct of the above examples used by many businesses is

the stress it puts on employees to get things done, one way or the other. The
above practices put most of, if not all of, the responsibility of producing
products on the employees, to figure out a way to get it done, to make it
happen. It is managements responsibility to “figure out” how to get it done
and make it happen but all to often management gets the free pass and
rather then accepting responsibility, the responsibility their pay is based on,
they simply throw it over the fence and when things don’t happen it’s the
employees, or process, or procedure, or whatever that is responsible for
things not getting done.

Lean is all about team building and employee ownership, to name a few, but
most importantly, putting the responsibility right back where it belongs, to
those getting paid for it, which is management.

The only way to know what your business, organization, process etc is
capable of is to know what is “really” going on. You MUST know the reality of
the situation and the only way to know the reality of the situation is to
document it, you MUST document reality.

Prior to determining what your productivity rate (cycle time) is you should
first draw out what the Current State is. Value Stream Mapping is the tool
used for drawing out your Current State and Future State. We will get more
into that in the respected articles addressing them.

One aspect of data needed for your Current State, and Future State, is Time
Observations (in the past referred to as time studies) Lean refers to them as
Time Observations because that is exactly what you will be doing. You will be
observing the process and timing the process.

The following is just a brief explanation of Time Observations, why they are
important to be completed correctly, and how they will show you the truth,
the reality of what productivity capability you currently have. For more
detailed information please see the article titled Time Observations.

Without getting deep into the details, Time Observations are just that, you
observe the process and time ALL the task associated with that particular
process. If your process has 20 steps from the very beginning to the very
end then every single one of the 20 steps is timed.

For example, let’s use a simple 8 step process that might be used in a service
for changing oil or working on your vehicle.
1. Operator picks up work order to determine which customer vehicle is
next.
2. Operator retrieves customer’s vehicle and drives into bay.
3. Operator drives customer’s vehicle onto lift.
4. Operator get’s out of vehicle.
5. Operator positions fingers on lift for supporting vehicle.
6. Operator energizes the lift to lift the vehicle.
7. Operator waits as vehicle is lifted to proper height.
 8. Operator places proper safety devices under lift to prevent it from
falling.
Every one of those steps above would be timed and you would want to time
at least 10 cycles of those steps. That is to say that for 10 vehicles, where
the above would take place, you would time each of those steps.

When we get into more detail about Time Observations I will use some
examples from manufacturing or warehousing because they will be easier to
relate to but the above, for the time being, makes it simpler to visualize.

The reason for timing at least 10 cycles is to determine how much variation
each step has. The fact of the matter is every step WILL have variation. As
you get better at Lean you will be able to greatly reduce variation.

I can tell you from experience that most businesses would already have a
Time Observation (time study) completed for the above example. I can also
tell you, unless their using Lean tools, it would most likely be wrong. Why?
Simple, someone would have either determined it from behind a desk or
used an ideal setting or a lab setting, if you will. There would have been no
distractions, no order to look at to determine what vehicle is needed since
most likely there was only one test vehicle, and it may have been a straight
shot onto the lift. In other words it would not have been conducted in the
real world, in reality. Worst yet, and most likely closer to the truth, is it would
have been based on what other areas, sites, businesses are “averaging”.

Averaging or taking data based on another area, site, or business is one of

the most unprofessional means to set productivity because it is based on
fiction, wishful thinking, hoping for the best.

If you were to time the above 8 steps you might find that it takes 10 – 15
minutes or 600 – 900 seconds. All Time Observations are always stated in
seconds. Again, we will get into more detail of that later.

I am willing to bet if there were a “time study” floating around used by a

business for the above 8 steps it would have stated that those 8 steps would
take less time. Let’s say that a business was using a typical incorrect “time
study” that stated it took no longer then 7 minutes (420 seconds). What
would be the issues?

First, and the most important issue, is the business would be losing money.
They would be charging a customer based on the fact that it should only take
420 seconds (wishful thinking) for those 8 steps compared to say 600
seconds (reality). Let’s say you had a big business that serviced 100 vehicles
a day. If that were true you would be losing (600 seconds – 420 seconds =
180 seconds per vehicle). That might not sound like much but follow me
through on this:
100 vehicles * 180 seconds = 18,000 (300 minutes or 5 hours per day). If
the business was charging say $25 an hour that would be $125 a day. Let’s
go on to further say that the business operates 5 days a week, with an
average of 100 vehicles a day. That now climbs to $625 a week. If the
business is typically open 48 weeks out of the year it is now $30,000 lost due
to NOT knowing “REALITY”, what it really takes to complete a task compared
to “we believe it should take this long”. I don’t know about you but I could
sure use an extra $30,000 a year someone is willing to throw out the
window.

Now obviously the answer is not to take that cost of $30,000 a year lost and
somehow charge it back to the customer. That would be foolish because that
would most likely send your customer down the street to your competitor.

The answer is to look at the reality you documented and determine where
and how you will eliminate as much waste as you can to not only recoup the
$30,000 lost but to lower the cost to your customer to beat out your
competitor.

The other HUGE issue that using incorrect time studies, or productivity
numbers causes is it forces quality issues and undue stress in the worker/s.
Why is that you ask? Because if no one knows the “reality” of how long it
“really” takes they expect the worker, or supervisor, to figure out a way to
“make it happen”. When you force a worker or supervisor into correcting
MANAGEMENT’S issues there is NO other choice other then bypass quality
standards and sometimes safety standards as well. If you don’t believe that
happens you need to wake up and say hello to reality.

Do employees do it purposely? I would tell you the majority of the time NO.
But, ask yourself this, if you felt getting the job done in the “time allotted”
meant getting a paycheck compared to no paycheck what would you do?
Myself, in that situation, it would be “when in doubt, ship it out”. If you
“truly” want quality and safety you had better wake up and determine what
the reality of your situation is before it’s too late.

No, I am not a disgruntled employee who hates management because I am

in management. I know good professional management compared to
management that has little clue as to what management should really be
doing.

Here is a clue, management IS responsible for making things happen and

happen correctly with quality and safety in mind. It is NOT up to the
employee to figure out a way to make it happen and it’s NOT up to the
supervisor to figure out a way to make it happen. If that is your management
style or philosophy then prepare yourself for quality issues, safety issues,
and job loss because I guarantee you your job will be loss as your
competitors management teams figure it out and knock you out of business.
If you don’t think Lean is for you, or don’t feel it’s needed then here is one
important piece of advice:

Research your competitors, look them up on the web, or by what ever

means, and see if they are Lean or implementing Lean in their business. If
they are then time is ticking away and the more time ticks away the closer
you are to being without a job, good luck...