I enjoyed this discussion very much ... and I would like to turn your attention to the book by Lawrence Putnam and Ware Myers, "Five Core Metrics", Dorset House Publishing, New York, 2003. In this book the authors discuss the effect of size and time on the process productivity as well as the relationship among the five core metrics (size, time, staff, defects - and productivity) ...
 
Regards,
 
Boris





 

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To: cmmi_process_improvement@yahoogroups.com
From: sindelmel@...
Date: Tue, 9 Jan 2007 08:37:10 -0800
Subject: Re: [CMMi Process Improvement] Productivity

Pat,

 

"And if you can construct one such model per customer per month, and I can assist 4 clients with a simpler, albeit academically less perfect approach, we could figure out which one of us is more productive once we apply the concepts of sales, inventory and plant to our consulting practices..."

 

From the point of consultant productivity, in general, you will be.

 

Insisting that productivity measures are connected to the key business objectives may often be more challenging but rarely so prohibitive.

 

Regards,

Melih

Patrick OToole <PACT.otoole@att.net> wrote:

 

Melih,

 

OK, so while you're trying to figure out how to apply the concepts of sales, inventory and plant in a meaningful way to tech writers, I'll simply encourage them to use pages written per week as their initial productivity metric, defects per page as their initial defect metric, and customer satisfaction surveys as their means of gathering objective customer-perceived quality.metrics.

 

And if you can construct one such model per customer per month, and I can assist 4 clients with a simpler, albeit academically less perfect approach, we could figure out which one of us is more productive once we apply the concepts of sales, inventory and plant to our consulting practices...

 

Regards,

 

Pat

 

 

 

 

----- Original Message -----

From: Melih Sindel

To: cmmi_process_improvement@yahoogroups.com

Sent: Sunday, January 07, 2007 2:45 PM

Subject: Re: [CMMi Process Improvement] Productivity

Pat,

In my understanding, the purposes behind productivity measurements are to determine how efficiently resources are being utilized and to detect ways to improve operating performance.

The definition of both the surrogate and direct measures depends on the entity, the segment it is in, consumer base it deals with, market factors and the business cycle, and its era. Everything else being the same, these measures would be different if the entity was in say pre-industrial age versus information age.

For example, one of the four commonly accepted productivity ratios, Team Productivity, relates performance measures to the mission shared by team members. The team members may (should) be the members of a board, top management, or a group of manual or knowledge workers. The mission may or may not include quality or value depending on its era and its perceived needs.

The power has been shifting away from the producers towards the consumers as we move further into information age.  Markets have been increasingly governed by the consumers (benefits provided to the consumer minus the price) rather than producers (benefits provided to the producer minus the cost).

I do not believe that we should be restricted to the narrow definition of productivity embraced by manufacturers of homogeneous commodities in the industrial age.

Another way to look at it is as follows:

Productivity = output / input

or

Productivity = sum of outputs / sum of inputs

or

Productivity = sum of weighted outputs / sum of weighted inputs

Here is an example of a productivity model from a classical text book where outputs are

§         Sales,

§         Inventory change,

§         Plant (value added internally to the organization)

and inputs are

§         Labor

§         Material

§         Services

§         Depreciation

§         Investment

Using a weighted approach

productivity = W1xSales + W2xInventory + W3xPlant / (sum of weighted inputs)

Suppose entity decided that W3 >> W1xW2

Then Productivity ~ Plant / Inputs

The entity’s judgment as to whether W3 >> W1xW2 will not violate the definition of productivity.

My suggestion that Productivity = Value / Inputs (~ is implied) is derived similarly:

Productivity = (W4xValue + all other weighted outputs) / (all weighted inputs)

such that W4 is much larger than the combination of other weights.

There are two questions about this suggestion.

1) Is it appropriate to consider and include Value (its surrogate or direct measures) as an output element?

Yes. It is an entity decision

2) Is it appropriate to reduce the productivity equation to this form by assigning such a large weight to the Value element?

Yes. It is an entity decision

As to how to measure value as an output element please refer to my previous email.

It is too brief but then it still is a beautiful day to be explored in California.

Regards,

Melih

Patrick OToole <PACT.otoole@att.net> wrote:

 

Melih,

 

I totally agree with the sentiment expressed in your response, but I'm not sure that it shed much light on the question of "productivity."  That is, it's a nice theoretical discussion, but I'm having trouble gleaning a practical course of action from it.

 

Are you suggesting that an organization CANNOT measure productivity until it has adopted the philosophy expressed in your first few paragraphs and uses value mapping?  And I'm still struggling with your original proposition that:

Productivity = Value / Input.

 

Let's say I'm a Swiss watch maker back in the 1950's.  I produce high quality watches that sell for a lot of money.  Value is high, input is relatively low, so productivity comes out relatively high, right? 

 

Now fast-forward to the present.  Few people buy Swiss watches anymore because, among other things, technology has obsoleted much of the "value" produced by the craftsman.  If my Swiss watch company continues to churn out just as many Swiss watches as it used to, did my productivity plummet because the value of my product diminished through market forces?

 

I would contend that my productivity stayed the same, but my revenue sure isn't doing too well (but my inventory level keeps rising!) 

 

I'm still having trouble with the idea of mixing in the value proposition with productivity measures.  I believe we are better served to separate the concepts.  Productivity is what it is.  In this case, it would be the number of Swiss watches produced per 1000 hours of craftsman time, or the number of Swiss watches produced per month, or some other <amount of stuff / amount of effort or time>.

 

We should supplement our measurement suite with OTHER measures that would give productivity some context - but I really don't think we're well-served to try to mix multiple dimensions into a single metric. 

 

In my vernacular, a synonym for productivity would be "throughput."

 

Regards,

 

Pat

 

 

 

----- Original Message -----

From: Melih Sindel

To: cmmi_process_improvement@yahoogroups.com

Sent: Saturday, January 06, 2007 6:25 PM

Subject: Re: [CMMi Process Improvement] Productivity

Here is an answer that may be characterized (perhaps rightfully so) as long and evasive:

The entity culture should decide what should be the inputs, when and what value should be attained through the output. I remember a paper being discussed whether solutions should be generated from within or imposed from outside. I do not remember what this group’s consensus was. My vote is for internally generated solutions. In a utopian world, external facilitators would always be a great assistance.

Firstly, I would agree with Henry Ford:

 “The greatest waste in business is doing the wrong things well” 

These “things” could be vision and mission expressed as projects and processes, hence the notion of Portfolio Management of Projects and Processes should become an everyday practice rather than a rarity in entity cultures. Any entity culture that does not go beyond chit chat on this matter does not need to worry about the productivity. Market and/or God will drive their productivity, to somewhere…

Secondly, entities should try to do the right things in the right way. This begs entity culture appreciate and exercise Systems Engineering and Project Management practices.

In the absence of these, productivity again will be collectively in the mercy of other entities. After all, the bottom line is who delivers the most value for the least cost, and the levels of collective performance in a segment.

Value mapping (recently emerged as balanced score card, strategy maps) could be easily employed if the mega-habits mentioned in the previous paragraphs are already absorbed into the culture. And to the extent it is absorbed.

Entity's mission and vision (the dirty two) should progressively decompose into systems/programs/processes or Subsystems/projects/procedures.

These eventually decomposing into components or functions at a level entity is comfortable with.

In this picture, one will know what percentage of which vision and which key business objectives will be attained through which program, project, system component, process or function.  Any method will do, but a version of Earned value management (EVM) or a version of Agile programming practices such as SCRUM can take over.

Given a time period (again assuming above mega-habits are effectively built into the entity culture) the entity can monitor its value/input progress.

Perhaps no need to mention but it will be good for the entity sanity if the top management has sufficient integrity to freeze its key business objectives for a well defined period or otherwise should take the responsibility for suboptimal value generation. This implies value definition, therefore the requirements and functional definition of productivity should appropriately vary from one company level to another.

I would like to spare you from further discussion of this matter (may be rightfully seen as diversion) by not getting into the topic of sleek MBA’s without proper experience giving wrong decisions and to the topic of toilers who faithfully and efficiently implement those decisions and end up being fired etc.

Happy 2007 to you all.

Melih

Patrick OToole <PACT.otoole@att.net> wrote:

 

Melih,

 

And what might the units of measure be for "value" and "input?"  Can you provide a more concrete example of what you mean?

 

Regards,

 

Pat

 

----- Original Message -----

From: Melih Sindel

To: cmmi_process_improvement@yahoogroups.com

Sent: Friday, January 05, 2007 11:34 AM

Subject: RE: [CMMi Process Improvement] Productivity

Productivity = Value / Input

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