Brainstorming Ideas: Reduce the Units of Input Not Producing ICDs or 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.

1. RECOGNIZE EFFICIENCY
   When people understand that the company is measuring efficiency, they pay more attention to what is measured.
   1. Add evaluation of levels of efficiency. Simply measure efficiency without necessarily tying the measure to compensation.
      1. Warnings and advice Advisories>>
      2. Compare efficiency to outside benchmarks
         1. Supplier costs Examples>>
         2. Materials usage Examples>>
         3. Employee costs Examples>>
         4. Overall costs Examples>>
      3. Gather opinions of insiders on efficiency Examples>>
      4. Establish internal benchmarks of efficiency
         1. Supplier costs Examples>>
         2. Materials usage Examples>>
         3. Employee costs Examples>>
         4. Overall costs Examples>>
         5. Other Examples>>
      5. Create internal markets with transfer prices for cost functions Examples>>
   2. Pay according to varying levels of efficiency. Combine the measures of efficiency with the company’s compensation system.
      1. Warnings and advice Examples>>
      2. Pay for company performance
         1. On revenues Examples>>
         2. On profits Examples>>
         3. On returns Examples>>
         4. Other Examples>>
      3. Pay for specific group performance
         1. On revenues Examples>>
         2. On profits Examples>>
         3. On returns Examples>>
         4. Other Examples>>
      4. Pay for personal performance
         1. On employee cost containment Examples>>
         2. On employee revenue contribution Examples>>
         3. On employee profit contribution Examples>>
         4. On employee personal productivity Examples>>

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