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Efficiency, Productivity and Performance

Efficiency and productivity are the ways in which you improve your profit margins—by reducing unit costs.

In the public sector it is about finding ways of doing more with less.

The direct purpose of improving efficiency and productivity is to reduce the expenditure you make on producing or delivering each unit of your product or service.

Performance is much bigger and more inclusive: in the business sector it is about improving all the factors that increase your profits—factors that reduce expenditure, increase income, and result in more output per unit input.

In the public sector it is about how you maximise the quality, scope and timeliness (waiting times) of your service delivery while minimising the inputs that are required.  Ultimately, performance is about maximising the amount of output energy from a system.

There are several tried and tested ways of improving your organisation’s efficiency and productivity. They all involve change:

  • Business process re-engineering (BPR)
  • Lean production (manufacturing)
  • Six Sigma
  • Total Quality Management (TQM)

Business process re-engineering: BPR also known as Business Process Redesign, Business Transformation or Business Process Change Management, is about reengineering tasks that are handed off from one functional unit to the next into a smooth process that integrates all functions. Re-engineering theory is responsible for the thinking behind, Enterprise Resource Planning, Supply Chain Management, Knowledge Management Systems, and Customer Relationship Management systems.

Shortly after it was introduced as a concept, BPR quickly gained a bad reputation because it became a way of justifying layoffs. What it gained in cost efficiencies had to be weighed against the adverse impact it had on organisational cultures. BPR focused on efficiency and technology and disregarded people. It created resistance to change; it exaggerated expectations; and, it alienated workforces.

However, let’s not throw the baby out with the bathwater. The benefits of BPR should not be underestimated—reduced time and effort involved in handoffs, centralised data, reduced delays, etc. It is now well understood that business process re-engineering is not something that should be undertaken on its own. To be effective, business process re-engineering needs to fit within a framework of Whole System Change—a process of transformation that focuses on making performance improvements while preserving or enhancing the integrity of a culture.  

Lean Production: Lean production or manufacturing is a generic process management philosophy invented by Toyota. The object of lean production is to eliminate the expenditure of all resources that do not create end value for the customer. It is about eliminating anything that could be regarded as wasteful of time, money or other resources. The basic philosophy of lean is to improve efficiency by optimising flow—it focuses on preserving value while reducing work and waste. Historically, lean production, is a more refined version of previous efforts to improve efficiency such as time and motion studies.

Six Sigma: This is a business management strategy originally developed by Motorola in the USA in 1981, which builds on the concept of Total Quality Management. Nowadays, even though it has its critics, it enjoys world-wide popularity as a means of improving the quality of products by identifying and removing the causes of defects, and minimising the variability of manufacturing and business processes. The process has a defined sequence of steps, with its own culture and terminology. A six sigma process is one in which 99.99966 percent of products are free of defects. A one sigma process has only 31 percent of products free of defects.

Total Quality Management: TQM is a management concept coined by W. Edwards Deming. Deming was an American statistician and consultant best known for his work in enhancing the quality of products in Japan. The focus of TQM is on reducing errors. The main difference between TQM and Six Sigma is that TQM tries to improve quality by ensuring conformance to internal requirements, while Six Sigma focuses on improving quality by reducing the number of defects.


 

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