Reduce the Units of Input Not Producing Output
Reduce units of Input (I) available but not producing Intermediate Cost Drivers (ICDs). This action makes Input levels more directly variable with the quantity of the ICD by reducing the amount of the available Input that is wasted or idle. For example, an employee (I) might produce one subassembly (ICD) per day. During that day, the employee spends a total of one hour waiting for parts for the subassembly. If the Company could eliminate that one lost hour of the employee's work day by providing parts in a more timely manner, the Company could reduce the number of employees (I) needed to produce the same subassembly (ICD) by 1/8th.
A. Assist Input in increasing ICDs.
Recognize efficiency. When people understand that the company is measuring efficiency, they pay more attention to what is measured.
Pay according to varying levels of efficiency: Pay for company performance:
On revenues
| No. | Industry SIC | Year | Notes |
| 1 | 4833 | 1989 | NBC to change its compensation to affiliated stations: will tie pay directly to performance and how much audience they attract. Total compensation, however, expected to remain the same. |
| 2 | 6300 | 2004 | For compensation, Progressive uses a base salary plus a gain sharing program. The gain sharing program is a profit sharing approach tied to growth and profitability numbers. Every employee in the company, including the CEO and the most recently hired receptionist, participates. The target pay-out is a function of both premium growth and combined ratio, but the company insists on profitable underwriting. |
<<Return to Reduce Input Not Producing Output