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As you already know, the operations manager’s role is focused on four major areas of concern within the company: safety, efficiency, service, and quality. We addressed safety and quality in previous tutorials; now we will look at efficiency. First, let’s look at the difference between efficiency versus productivity. Productivity measures the rate of production, which we’ve addressed at length throughout the course. It can describe how much of a unit is produced or how much work is done by an individual, group, or entire organization. Efficiency measures production along with how many resources are needed to complete each task and the quality of the final outcome.
EXAMPLE
An operations manager at a home improvement company has two employees skilled at building windows and frames. Henry is able to complete five custom windows in an 8-hour workday, while Leo is able to complete seven windows in a day. It seems like Leo is not only more productive, but more efficient, because he produces more products in the same amount of time. However, if Leo’s work speed means there is more waste of materials, or if customers are more likely to complain about minor flaws, his efficiency might be lower, even with higher productivity.EXAMPLE
At a restaurant, Feng and Ron serve eight tables each during the busy lunch rush. However, Feng has been more productive because she served more parties in that time; she can politely encourage customers to vacate their tables as soon as they are done eating. She is also more efficient because she makes better use of the restaurant’s resources.Essentially, productivity focuses on the amount of work achieved, while efficiency focuses on achieving the same or better results with higher quality and fewer resources. Productivity focuses on quantity, while efficiency focuses on both quantity and quality. Both are of extreme importance to the operations manager. In most situations, a balance of both productivity and efficiency is necessary (Castrillon, 2023).
Operations managers have ways to measure both productivity and efficiency. Productivity is usually calculated by dividing input into outputs.
EXAMPLE
Leo completes seven windows in an 8-hour workday, so we can divide 8 hours by seven windows to come up with 1.14 hours per window. Henry completes five windows in 8 hours, for 1.6 hours per window. This is their productivity.In terms of personal productivity, the best strategy is effective time management. That is, workers need not work harder or faster but make better use of their time on task (Castillon, 2023). One method for time management is time blocking, which works well in an office setting. Blocking time means to allot time to different tasks.
EXAMPLE
Laura blocks out 1 hour each morning for responding to emails, then blocks out time on her calendar for the rest of the day for her different projects. This helps her focus on one project at a time. More importantly, it limits how much time she spends responding to email, since without a time limit, she tends to spend more time composing emails than is needed.It helps further if one blocks out time according to when they are most effective and can remove all distractions (or remove themself from the distractions) for those blocks of time that need the most focus and attention.
EXAMPLE
Laura is not a morning person, so she blocks out time in the morning for responding to emails, talking to colleagues, and tending to less demanding tasks. She is most effective later in the day, so she blocks out time for projects that require more concentration. If necessary, she leaves the office, so she is less likely to be interrupted or distracted.Now let’s look at efficiency. This requires a more complex system that measures not just units produced, but factors like waste and customer dissatisfaction. A manager can compute these by considering all costs that go into delivering a product or service.
IN CONTEXT
The office manager at the home improvement center tabulates all the costs associated with building windows and divides this total by the number of windows produced. This includes salary, materials, and any costs to fix or replace flawed work.
Total cost per window = ((hours x salary) + materials + reworking fees) / windows produced
Let’s see how the two workers compare. Leo works for 8 hours and makes $40 an hour. He uses $100 worth of materials per window. One window is discovered to have flaws, which costs $80 in reworking fees. The total cost per window is thus:
((8 x 40) + (100 x 7) + 80)/7 = $157.14 per window
Meanwhile, Henry works at a slower pace with five windows produced in 8 hours. His compensation is the same, at $40 an hour. He is more economical in his use of materials, using $90 of materials per window. None of his work is returned.
((8 x 40) + (90 x 5) + 0)/5 = $154 per window
As you can see, Henry’s slower pace is more efficient, as it saves on materials and, more importantly, leads to fewer errors that cost money to fix.
Measuring efficiency can also be measured against expected or maximum outputs, similar to the way we measured efficiency for manufacturing. In this case, efficiency is given as a percentage of a target or optimal efficiency. The goals are often shaped by study of historical data and of competing organizations in the same business.
IN CONTEXT
This formula is often used in the restaurant industry: the maximum efficiency is tables available x the number of parties dining at each table over a stretch of time.
Suppose a restaurant has a brisk lunch service. Each server tends to eight tables, and over the 3-hour lunch period, can expect up to four parties to be served. Their optimal capacity is thus 32 parties served. One of the expectations of the restaurant is to politely encourage diners to leave as soon as they have finished eating so that the restaurant can make the best use of the tables during their peak hours.
The average party size is calculated at three persons, and the average money spent per person is $25. The optimal efficiency is thus the optimal capacity x the money each party spends on food and drink:
8 tables x 4 parties x 3 people per party x $25 per person = $2,400
Feng is very good at politely encouraging parties to leave when they are done eating and achieves maximum capacity at 32 parties (8 tables x 4 parties). Ron is less effective, as he doesn’t like to seem “pushy.” He has 24 total parties (8 tables x 3 parties).
Feng’s end receipts are $2,160, or 90% of total efficiency.
Ron's end receipts are also $2,160, or 90% of total efficiency.
How is this possible? The difference is that Feng’s brisk manner leads to fewer customers sticking around for another round of beverages or dessert, while Ron is sure to visit a table that is still occupied and suggest these items. So, the restaurant manager can quickly see that both servers are doing well (considering 80% to be a reasonable goal on an average day) despite their different approaches to the task.
However, the manager might find ways to increase the restaurant’s efficiency without pressuring either Feng or Ron to change. For example, she can assign Feng to the tables closest to the door, where customers who just want a quick bite are likely to sit, and assign Ron to the booths, which draw people who want to take their time. This allows both servers to play to their strengths and ensures all diners have the experience they want.
As you can see, measuring efficiency depends on the situation. In some cases, the total cost per unit can be easily calculated, while in other cases, efficiency might be measured as a percentage toward an optimal goal. The role of an operations manager in measuring efficiency is knowing what to measure and how to measure it and applying what they’ve learned from this data to lower costs, increase revenue, or improve the product or service.
There are many opportunities in operations management to specialize in efficiency. Some organizations hire efficiency managers, whose role is to improve operational processes and systems to enhance productivity and reduce costs. As we saw in the examples above, the initial task of an efficiency manager is to determine how to measure efficiency, deciding the KPIs that best align with organizational goals and best reflect on the people, methods, or machines that are being measured. The efficiency manager then collects and analyzes data and ultimately makes recommendations on how efficiency can be achieved. This may be higher production, higher quality, or less waste. Efficiency managers use tools like Lean, Six Sigma and Kaizen to both measure efficiency and make improvements to the process.
Experts in efficiency also sometimes work as external consultants who visit organizations to assess efficiency and make recommendations. External consultants can bring an objective point of view to the analysis and benefit organizations that cannot afford a full-time efficiency manager. In movies and television shows, such consultants are often portrayed as “figuring out who to fire” in times of layoffs. However, efficiency consultants take a broader view and may simply make recommendations about organizational structure or methods.
Quantity surveyors are often seen in the construction industry. The role of this position is to provide detailed cost estimates and budgets for a project. Quantity surveyors will look at project requirements, specifications, drawings, and blueprints to estimate the cost of a project. In this role, they also monitor the project expenditures and track the project budget. The skills needed for this role include expert knowledge on contracts; costs, including building materials and labor; predicting potential financial risks of a project; and mitigating risks through constant adjustments to the budget.
Some organizations have process managers that work alongside the operations management team. This role specifically analyzes processes and identifies inefficiencies, bottlenecks, and areas of improvement within an organization.
Gordon’s operations manager, Maria, acts as a process manager, looking at each stage of the assembly process and designing new processes and methods to optimize performance. She collects data on each stage of the process to quickly recognize any variance, such as a slowdown in one stage that might disrupt overall production if not quickly resolved.
One month, she sees much variability in the painting and finishing phase of the process, which is the final step of the fabrication, followed by quality assurance. She investigates and discovers that efficiency is impacted by inconsistencies in the materials, which sometimes require more mixing before the team can begin painting and finishing bicycles. She switches to a different supplier and the process improves.
In another month, she discovers disruptions in the final product's packaging, which is due to behavioral issues. Because the final phase is done by part-timers, many of them young, there is a higher degree of workers being off task as they chat. By redesigning the final process to have more physical distance between workers, she cuts down these distractions.
The process manager, like the efficiency manager, implements methods like Lean, Six Sigma, and TQM to drive continuous improvement in the organization. Because many companies do not have specific process managers or efficiency managers, process management is an important skill for all operations managers.
As we addressed at the beginning of this tutorial, operations managers have four major areas of concern within the company: safety, efficiency, service, and quality. We have now addressed safety, efficiency, and quality; next, we will look at service.
Source: This tutorial has been adapted from Saylor Academy and NSCC “Operations Management”. Access for free at https://pressbooks.nscc.ca/operationsmanagement2/. License: Creative Commons Attribution 4.0 International.
REFERENCES
Castrillon, C. (2023, December 20). Efficiency vs. productivity at work: How to balance both. Forbes. www.forbes.com/sites/carolinecastrillon/2023/12/20/efficiency-vs-productivity-at-work-how-to-increase-both/
