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Operations Management Framework
Insert New Resource/Profit Model
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C H A P T E R
1
6
Workforce
LEARNING OBJECTIVES
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Describe how the workforce contributes to profitability.
Explain how expectations for employees are increasing.
Explain the impact the workforce has on value.
Use the customer experience grid to describe the relationship between
customers and employees.
Describe why teams have become more important.
Explain a structure for team processes.
Describe the impacts of contingent workers.
Describe why workforce productivity is important.
Demonstrate how standard times are created.
Make the necessary calculations to perform a work sampling study.
Describe how learning rates can affect worker productivity.
Calculate the amount of time a task will take, given a specified learning
rate.
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Introduction: Using the Workforce as a Key
to Competitive Success
•
Why is the workforce viewed as the most valuable asset?
- Businesses increasingly depend on information and technology
• Competition for workers who have related skills is fierce
- As products become more like commodities, competition based on
price or quality becomes harder.
• Market dominance shifts to the most innovative company, and ideas come
from people
- Competition is, to a great extent, based on service-oriented value
attributes.
• Employees who can interact effectively with customers are sought after
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Employee/Customer Interaction, Value, and
Profitability
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•
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Price and quality differentials disappear when customers have more
information and access to more options through the Internet.
Service-related attributes remain
- How fast can I get it?
- How helpful were the people I talked to?
- How pleasant was the interaction?
Managers are often afraid of letting employees talk to customers... but that’s
what customers want.
- Knowledgeable, committed employees may be one of the most
important competitive advantages remaining
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The Employee Contribution to Value
Attributes
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Cost
Style/Fashion
Quality
Ethical Issues
Response Time
Technology
Dependability of Delivery
Flexibility
Convenience
Personalization
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The Employee Contribution to Value
Attributes
•
Cost
- Increased workforce productivity lowers costs per unit
- The best ideas for preventing waste and improving quality are often
found at the lowest levels of the workforce
•
Quality, response time, and dependability of delivery
- Need a ‘quality mentality’ among employees. Quality can’t be
achieved through systems alone, it is cultural
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The Employee Contribution to Value
Attributes
•
Convenience, style/fashion, and ethical issues
- Workforce carries out tasks necessary to provide convenience
- When competing on style/fashion, having a workforce that
understands the product and uses the product is helpful
- When competing on ethical issues, the workforce must be committed
to those issues and be able to effectively communicate the company’s
position
•
Technology, flexibility, and personalization
- Specific employee skills are required to enhance these attributes
- Flexibility and personalization often achieved through technological
applications (created by skilled workers)
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Employee Interaction with Customers: A
Prerequisite to Good Service
•
Skills, knowledge, personality, and attitude all play a part in employee
interaction with customers.
•
The service-profit chain creates a logical link between employee satisfaction
and profitability.
Exhibit 16.1 Service-Profit Chain
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Employee Interaction with Customers: A
Prerequisite to Good Service
•
Outcome and process
combine to result in
customer satisfaction of
the overall experience.
•
Quantity and quality of
employee interaction offer
opportunity for
differentiation.
Exhibit 16.2 Customer Experience Grid with Customer Interaction Dimension
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The Most Important Employee Contribution
to Value: Sound Decisions
•
Give workers at lower levels the authority to make decisions in areas they
are familiar with.
- Leads to increased interaction with customers
•
Employees who work day-to-day with processes are often most qualified to
help improve them.
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Increasing the Contribution of Employees
through Teams
•
•
Use of project and improvement teams is on the increase.
- Reengineering efforts frequently accomplished by project teams
- Total quality management and lean systems both rely heavily on
well-trained worker teams
Developing a team requires more than throwing workers together and giving
them a task to do.
- Members must know how to make decisions in a team
Exhibit 16.3 Project Team Capabilities
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Increasing the Contribution of Employees
through Teams – Why Use Teams?
•
Teams bring different perspectives and types of knowledge to a project.
- Individuals can’t effectively do projects with broad requirements
- Teams can be very creative because of the differing perspectives
•
The duration of projects is reduced.
- Teams split tasks up among members
•
Teams promote “buy-in”
- When a team has worked on a proposed change, they have a sense of
ownership towards it
- Individuals have to sell their proposals and overcome the natural
resistance people have to ideas that aren’t their own
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Increasing the Contribution of Employees through
Teams – Appropriate Uses for Teams
•
Teams are useful for implementing change.
•
Innovation
- A dramatic change that comes from a new idea.
•
Continuous improvement
- A process of always seeking ways to improve existing processes and
tasks.
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Increasing the Contribution of Employees through
Teams – Structure for Team Processes
•
Stage 1” Project Identification
- Assignment of project to a team
- Development of a goals statement
- Description of benefits of project
- Identification of stakeholders
•
Stage 2: Current Situation Analysis
- Analysis of current situation
- Problem-solving: Determination of cause
of problem
- Process-improvement: Identification of
non-value-adding activities
Exhibit 16.4 Project Life Cycle
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Increasing the Contribution of Employees through
Teams – Structure for Team Processes
•
Stage 3: Action Plans
- Creation of a plan for action
- Identification of possible changes
- Selection of changes to implement
- Justification of selection through analysis
of data
•
Stage 4: Implementing Change
- Obtaining support or buy-in
- Implementation of the changes
- Measurement and evaluation of results
Exhibit 16.4 Project Life Cycle
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Increasing the Contribution of Employees through
Teams – Team Decision-Making Tools
•
Many tools for aiding in project team tasks have their roots in traditional
quality tools.
Exhibit 16.5 Traditional Quality Tools
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Increasing the Contribution of Employees through
Teams – Team Decision-Making Tools
•
Some likely uses of decision-making tools:
- Stage 1, identifying exactly what the team is to do:
• Pareto charts give a sense of which item to address first
• Control charts might indicate a process being out of control
• Check sheets might indicate too many instances of a particular undesirable
event
- Stage 2, understanding the current situation:
• Analysis of run charts, Pareto charts, scatter diagrams, and histograms might
lead to suggestions for possible causes
• Cause and effect chart can aid in moving from possible to root causes
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Increasing the Contribution of Employees through
Teams – Team Decision-Making Tools
•
Some likely uses of decision-making tools:
- Stage 3, the development of a solution:
• Selecting the appropriate changes might involve run charts, scatter diagrams,
and flow charts
- Stage 4, development of buy-in and evaluation:
• Implementing ongoing use of control charts
• The same tools used to identify the problem would be used again to provide a
“before and after” view
•
In addition to quality tools, there are techniques for building team consensus.
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Increased Need for Workforce Flexibility
•
Cross-training – Training employees to do a variety of jobs.
- Increase contribution to the organization
- Employees find their work more interesting
- Employees have a larger perspective on the business and a larger sense
of contribution to company’s goals
•
Contingent workers – Temporary workers employed by an agency and
contracted to work for another firm.
- Includes employees of all abilities and salary levels
- Adds flexibility, enabling firms to deal with seasonal demand
fluctuations or implementation of short-lived projects
- Potential cost to product and service quality
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Who’s in Charge?
•
Early process design
decisions determine where
decision-making power lies.
Exhibit 16.6 Advantages and Disadvantages of different Dominating Forces in
Business Interactions
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The New Working Environment
•
Businesses must be more networked
- Respond to customer needs
- Use the increasing amount of information available about what
customers want.
•
Empowering employees is popular…
- … but employees must be given the training necessary to make
decisions.
•
Increasing diversity in customer base, and in workforce.
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Workforce Productivity Improvement
•
Like productivity for any other asset, workforce productivity exists as a ratio of
outputs to inputs.
•
Improving productivity does not necessarily require forcing employees to work
harder.
- Lack of productivity is often a result of the systems in which employees
work, not a lack of ambition.
•
Productivity measures of individual resources are local. They can conflict with
other measures and with the goals of the organization.
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Workforce Productivity Improvement – Productivity
Measurement and Improvement Tools
•
For some jobs, a standard is needed to provide a basis for training and
evaluation.
- A time standard is the expected time needed to complete a task
- Time standards are frequently used in manufacturing environments
(Repetitive tasks with little variability)
•
Common approaches to creating standards:
- Stopwatch time studies
- Predetermined motion times
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Workforce Productivity Improvement – Productivity
Measurement and Improvement Tools
•
In stopwatch time studies, employees are observed and timed as they do a task.
- The average of the times of the observations, for one employee, is the
observed time
- The observed time is adjusted by a performance rating, to take into
account whether the worker was faster or slower than normal
- The adjusted time is known as the normal time, which is how long a
typical worker would take to complete a task
- Normal time is adjusted to incorporate allowances (restroom breaks,
rest periods...) to arrive at the standard time
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Workforce Productivity Improvement – Productivity
Measurement and Improvement Tools
•
Example 16.1:
- A manager is trying to create a performance standard for reviewing
claims at an insurance company
- An employee was found to have an observed time of 34 seconds. The
manager judged him to be 10% faster than normal. Allowances are
required to be 15%. Find the standard time
•
•
Normal time = 34 x 1.1 = 37.4 seconds (adjustment by 10%)
Standard time = 37.4 x 1.15 = 43.01 seconds
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Workforce Productivity Improvement – Productivity
Measurement and Improvement Tools
•
Predetermined motion times are the times required to complete small aspects
of tasks.
- Times are collected from a large number of observations, from film
footage
- Jobs are broken down into very small motions
- The times for a set of motions can be summed to find a standard time
for a job – even of that job has never been performed
•
Work sampling is a process of recording what a worker is doing to determine
how employee time is spent.
- Used more often for white collar jobs where productivity is not a result
of how fast you work but how you spend your working time
- The results can be the impetus for job redesign
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Workforce Productivity Improvement – Productivity
Measurement and Improvement Tools
•
Example 16.2:
- 200 random observations of an office manager were taken, with the
following results:
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Scheduling claims adjuster duties
21
Office personnel duties
14
Assisting with staff duties
36
Performing stopwatch time studies
44
One-on-one meetings with staff
10
Full staff meeting
8
Social chatting
13
On the phone
54
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Workforce Productivity Improvement – Productivity
Measurement and Improvement Tools
•
Example 16.2:
- The results are converted to the following percentages:
McGraw-Hill/Irwin
Scheduling claims adjuster duties
10.5%
Office personnel duties
7%
Assisting with staff duties
18%
Performing stopwatch time studies
22%
One-on-one meetings with staff
5%
Full staff meeting
4%
Social chatting
6.5%
On the phone
27%
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Workforce Productivity Improvement – Learning
Curves
•
A learning curve shows the reduction in time it takes to complete a task as the
number of times it has been completed increases.
- Individuals, groups, and organizations all have learning curves
•
The learning rate is the amount of improvement obtained as a task is repeated.
- The gain expressed by the learning rate is achieved every time the
number of repetitions doubles.
- The learning rate is almost always a prediction. There are always errors
in predictions, and errors in estimating the learning rate can have a
tremendous impact on the projected time
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Workforce Productivity Improvement – Learning
Curves
•
If an individual completed a task for the first time in 4 hours and his learning
rate was expected to be 90%, we would observe the following pattern:
Exhibit 16.7 Learning Curve Pattern
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Workforce Productivity Improvement – Learning
Curves
•
A lower percentage means faster learning. 85% vs. 97% learning curves:
Exhibit 16.8 85 percent learning curve
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Exhibit 16.9 97 percent learning curve
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Workforce Productivity Improvement – Learning
Curves
•
The equation for the learning curve is
Tn = T1nr
Where
Tn = time in hours to produce nth unit
T1 = time in hours to produce the first unit
n = number of the unit of interest
r = log l/log 2 where l is the expected learning rate
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Workforce Productivity Improvement – Learning
Curves
•
Example 16.3:
- A producer of machined components wants to determine the time it will
take to produce the 300th unit on a new machine. The time for the first
unit is 1.75 hours and the learning rate is 96%
•
•
Tn = T1nr
T300 = 1.75(300)log 0.96/log 2
= 1.75(300)-0.0589
= 1.75(300)0.0589
= 1.2506 hours
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