Productivity Is Not Efficiency

But it is one of the critical few measures that reflects the leanness of a process

Mon, 04/29/2013 - 11:16

The seminal book on lean, The Machine That Changed the World (Free Press, reprint 2007), spent many words, tables, and figures on the subject of productivity—as well as, of course, quality. Why?

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Productivity is one of the critical few measures that reflects the “leanness” of a process, value stream, or enterprise. It captures how effectively an organization uses its resources, and it’s usually a meaningful way to compare performance over time and between entities.

Productivity is the ratio between the outputs of goods or services and the inputs applied for the purpose of that output. There are two typical applications of this ratio: single-factor productivity, and multifactor productivity. Labor is often the single factor and is referred to as labor productivity. Another popular single factor is machine productivity.

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Comments

Submitted by Rajohnson on Wed, 05/01/2013 - 10:00

Wonderful title!

Productivity is certainly NOT efficiency.  Efficiency requires a standard, whereas productivity is simply a metric.

Companies that have the "look and feel" of "Lean" tend to gravitate towards productivity and the expectation is the productivity keeps increasing.  The rationale is that this is "continuous improvement" and "lean", (to steal a phrase) yadda, yadda, yadda.  This is extremely dangerous thinking and potentially harmful to a company.  Continually improving productivity without end easily leads to overproduction.

Companies that have the "heart and soul" of "lean" tend to gravitate towards efficiency.  Efficiency requires a standard, an ideal state level of output that is achievable when everything is functioning perfect.  the opportunity to improve is thereby governed by the ideal state the efficiency dictates.

To continue along the "heart and soul" path, customer expectations dictate the ideal state.  Our customers tell us when they want what they want and how much they are willing to pay.  Couple these together with the required profit to run the business and “ideal efficiency” becomes defined.  To achieve this goal, we enter the world of TAKT and flow and where necessary kanban, etc. TAKT helps define the ideal pace, flow defines that tasks, kanban buffers us to areas where flow is too difficult at a given time/technology level.  The interworking of these define the ideal state and measure efficiency to the ideal prevents the opportunity to overproduce that is prevalent with productivity.

As a company looks to define itself as “lean” I propose they understand if they want the “look and feel” or “heart and soul”,  each one of these will certainly guide a company down different paths.

This is an interesting article, Mark, and I think we should do everything we can to discuss productivity. It's defined in a number of ways, as you point out, and sometimes the definitions are not well thought through.

My one question is: If productivity is in units per hour, does that really measure leanness? The reason I ask is that I can see a scenario where that metric could drive overproduction and inventory. Units per hour should be driven by Takt time, so wouldn't we  need to adjust to try to get something like 100% of Takt?

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