Measuring and improving productivity in a job shop environment: the applicability of the ProMES methodology

Transcription

1 Eindhoven, August 2007 Measuring and improving productivity in a job shop environment: the applicability of the ProMES methodology By T. de Boer Student identity number in partial fulfilment of the requirements for the degree of Master of Science in Operations Management and Logistics Supervisors: Dr. ir. H.P.G. van Ooijen, TU/e, OPAC Dr. ir. P.A.M. Kleingeld, TU/e, HPM

2 TUE. Department Technology Management. Series Master Theses Operations Management and Logistics, nr.11 ARW 2007 OML / 11 Subject headings: Human performance, Production processes, productivity measurement, productivity improvement. T. de Boer 2

3 Preface The final project in the Master of Science program is the Master Thesis Project. The master thesis project is the final part of the Operations Management and Logistics (OML) master s degree program. The project consists of a research and design assignment to be independently carried out by the student. First, the student has to prepare himself for this project during the periods preliminarily to this actual Master Thesis Project. This period is called the Master Thesis Preparation. The assignment for this preparation is to conduct a literature study about the graduation topic and second, to write a research proposal. At the time of writing this report, the Master Thesis Preparation is finished. This report is the result of the graduation project conducted as a scientific research within the Technical University of Eindhoven. The Master Thesis Project is conducted in order of the Operations Planning Accounting and Control (OPAC) group of the department Technology Management. The first supervisor is dr. ir. H.P.G. van Ooijen and represents the OPAC research domain; production control in capital goods industry. The second supervisor is dr. ir. P.A.M. Kleingeld and represents the Human Performance Management group. I want to thank the people of Exerion Precision Technology for their cooperation and time for this research project. It was not always easy to make appointments in-between the normal working times, but when finally the conversations took place, they were very enthusiastic and willingly to cooperate. Second I want to thank my thesis mentor, dr. ir. H.P.G. van Ooijen. I am very grateful to him for the provided cooperation what led to a sufficient development and execution of the master thesis project. I also want to thank the second supervisor dr. ir. P.A.M. Kleingeld for the cooperation on this project. T. de Boer 3

4 Abstract This thesis describes a research about productivity measurement and improving in a production process situation called a job shop. A job shop is a system in which various machines manufacture various products. A typical job shop is defined by the number of jobs, the number of machines and the many different routings in which the jobs are processed and is commonly used to meet specific customer orders and there is great variety in the type of work done in the plant. This research tried to apply the performance measurement system called ProMES, which stands for Productivity Measurement and Enhancement System to a job shop situation. The main problems which showed up at applying a ProMES system to a job shop situation at unit level are the difficult decomposition of departmental productivity, the low controllability on productivity and the increasing risks at sub-optimization. The purpose of this paper is to describe the results of the literature study, discuss ideas for applying ProMES to a job shop situation, describe the possibilities within the research company and finally to present solutions and recommendations about how ProMES should be applied in a job shop production process. T. de Boer 4

5 Management abstract THE MASTER THESIS PROJECT The project is based on the following research objective: The objective of the Master Thesis Project will be to analyse the applicability of ProMES into a job shop setting; thus to study whether and in what way ProMES could help to improve productivity in a job shop production process. Four research questions are stated according to the research objective. The four research questions are formulated as following: 1. What are the characteristics of a job shop production process? 2. What are the characteristics of ProMES? 3. Can productivity be measured in a job shop situation? 4. How can ProMES be applied to a job shop situation? Question one and two are both discussed according to a literature study and question three and four are discussed according to both a practical analyses of the research company and analysis of the literature research results. A JOB SHOP PRODUCTION SYSTEM A job shop system is a classification of discrete production systems in which various machines manufacture various products and the manufacturing of a single product may require several successive process steps, each on another machine. In a job shop environment machines are ordered in groups, having the same functionality. Typical for a job shop system is that not every manufactured product requires the same process steps on the same machines in the same order. The production process of a single product is generally referred to as a job and a single process step required is referred to as an operation. A typical job shop is defined by the number of jobs, the number of machines and the many different routing in which the jobs are processed. According to Pritchard, Jones, Roth, Stuebing and Ekeberg (1989), productivity is a combination of both effectiveness and efficiency. Efficiency is an output to input ratio and effectiveness is the relationship of outputs to some standards or expectations. Thus efficiency is how well the organization uses its resources to produce its products or services. Effectiveness is how well the organization is reaching its goals. This study will define productivity as how well a system uses its resources to achieve its goals (Pritchard, 1992, p. 455). We studied scientific literature about current ways of measuring performance in job shops. We conclude the objective of both the measurement systems described in current scientific literature and the ProMES approach is to improve productivity, but the ProMES approach (which is used in this research) motivates people to change their working behaviour by themselves to improve productivity. THE PROMES METHODOLOGY The concern of the ProMES (Productivity Measurement and Enhancement System) approach is how to structure work so that people can and will want to behave in a way that will maximize their productivity (Pritchard, 1995). T. de Boer 5

6 The purpose for measuring productivity, according to the ProMES approach is used as a motivational tool. The objective is to improve productivity and the assumption is that if individuals change their behaviour appropriately, productivity will increase (Pritchard, 1990, pp. 10). Here it is assumed that the personnel have a great impact on productivity. They work more efficiently because their effort is more directly related to organizational objectives and they improve work strategies. The department constructs the system by defining their objectives, identifying productivity indicators for each objective, developing utility curves or contingencies for each indicator and specifying the overall and relative value to the organization of different performance levels on each indicator. The performance what subsequently is achieved is than fed back by means of a feedback report. Productivity enhancement is thus tried to achieve by setting difficult, but reachable goals and subsequently giving feedback on the performance on these goals. This will lead to changes in motivation which on his turn will lead to increased productivity of the employees. The ProMES system is based on three principles from the motivation literature; goal setting, feedback and reinforcement. The design of a ProMES system is characterized by a bottom-up design process, a bottom-up design process means that the system is developed by the lower level of the organization. ProMES has been successfully implemented in different organisations, departments and setting, but has only been implemented once in the situation of complex interdependencies between machines and teams such as a job shop production process (Huve, 2005). PRODUCTIVITY MEASUREMENT IN JOB SHOPS ProMES can in theory be developed and applied to different group sizes and at three levels (Pritchard 1990). The three levels that can be determined are individual level, group level and department level. Evaluating both job shop processes and the ProMES methodology with its requirements, we could identify four aspects (the between-group dependencies, shifting operators, varying orders, and the different interests of units) which are related to three main problems/difficulties for applying ProMES to a job shop: 1. Decomposition of departmental performance - Departmental performance can hardly be decomposed into the performance of independent units. 2. Low controllability - Groups can have a substantial, but not major influence on system performance. 3. Risks at sub-optimization - Job shops consists of multiple compositions of groups with different interests. Due to the theoretically stated problems and difficulties which show up at applying ProMES to a job shop, we do not know what the possibilities in a practical situation are. That s why we formulated several ideas for applying ProMES to a job shop. The ideas are set up from the point of view of the desired situation and it is also tried to solve the problems by these ideas. The main goal of the ProMES methodology is to improve the productivity of the employees in order to achieve the organisational objectives. For example; manufacture more and innovative products in a safe environment at low cost. The changes in productivity will at first be recognizable at departmental level. When productivity changes are recognized at departmental level, in for example; processing times, lateness and quality, we want to be able to determine which factors at unit level influenced these changes. T. de Boer 6

7 And the other way around, when changes are applied on unit level, we want to be able to determine to which changes that will lead in total departmental productivity. From this point of view, we formulated the first idea. The other three ideas are formulated to try to overcome the problems showed up at the preceding ideas. The ideas are tested according to the situation at the research company. The four ideas are: 1. Develop a ProMES system for the department, and measure each functional unit individually 2. Expand idea 1 with measures on departmental level 3. Develop a ProMES system for the department, and measure a group of functional units 4. Develop a ProMES system for the department, and measure on departmental level MAIN RESULTS OF THE PRACTICAL ANALYSIS The main results of analyzing the research company are: 1. It is possible to decompose the departmental productivity into single unit s productivity. This means that at the research company it is possible to develop a ProMES system at unit level 2. The chances at sub-optimization of the units are low at the research company 3. The problem of low control over the productivity of the employees due to interdependencies is minimal 4. The problem of getting enough historical experience to make any judgments about what is low or high output is not that difficult as found in literature 5. The problem of unreliable measures due to shifting and working with several shifts could be solved by enlarging the measurement period to average out the fluctuations in productivity per day or week. The outcome of the literature research and the analysis at the research company is that the desired situation can be created. Thus the conclusion is that the best idea is to develop the ProMES system at departmental level and information about productivity is measured and evaluated at unit level. RECOMMENDATIONS Along with the solution about the most optimal level of measurement (which is also possible in practice) we provide recommendations about how to apply and develop a ProMES system to a job shop, as outcome of this research. The main recommendations are as following: 1. The ProMES system has to be developed by determining common products and indicators for each unit, contingencies will be drawn for each unit, and the feedback report contains the overall departmental score and also shows the individual unit contribution to that score. 2. This general feedback report is then build-up out of the unit scores and represents the overall score of the department on each product and a total departmental productivity score. 3. Remove the interdependency relationships by; proper development of indicators, by detailed planning and scheduling processes and by the use of a central warehouse. 4. Rescale contingencies so each unit s productivity can be summed up. 5. The responsibilities, roles and activities have exactly to be appointed and applied to one of the functional units. 6. Develop an information system for; exchange of information, increase cooperation between units, generating and registering productivity and decreasing time and effort to maintain the system. 7. Decrease chances at sub-optimization between units and create a cooperative organization. T. de Boer 7

8 8. Enlarge the measurement period to average out the uncontrollable variation in productivity. 9. Restrict the responsibility to tasks that are completely controllable (e.g. do not cover all parts of the unit s tasks). THE DEVELOPED PROMES SYSTEM FOR A JOB SHOP To explain and clarify the outcomes of the research we developed a design of a ProMES system as it should be applied to the job shop production process of the research company. We worked out (a part of) the presented solutions and recommendations in this design. CONCLUSIONS By matching the theoretically developed statements with the results of the practical analysis, we were able to determine how the ProMES system has to be developed, and how it leads to increases in motivation and the highest gain in total productivity of the overall job shop floor, thus representing a successful measurement and enhancement system This research shows that the characteristics of both the job shop production process of the research company and the ProMES methodology can be matched so productivity can be measured and a ProMES system can properly be applied. We were able to do this because the situation of the research company did not lead to the difficulties and problems as were assumed in literature. Some of the theoretical stated assumptions (e.g. the complex interdependencies between units) were not valid at the research company, so it was possible to apply ProMES at unit level, in comparison with the study of Huve (2005). We also analyzed the research company along with scientific literature to define recommendations. These can generally be applied to other situations to help to increase the effectiveness and success of ProMES because these are not dependent on this specific situation. On the other hand, the design of the system is applicable to the research company because of the specific situation in which the study is conducted. Even though we have designed an effective and efficient ProMES system for the research company, and determined some important recommendations, people have to bear in mind that the implementation of a ProMES system is also dependent on other factors which are not considered in this research T. de Boer 8

9 Table of content Preface... 3 Abstract... 4 Management abstract... 5 Table of content Introduction The master thesis project Motive of the research Overview of the Master thesis preparation Literature research Deliberations of the alternative PM systems Conclusion Definition of the final research objective and questions Research design and approach Narrow the scope of the project The job shop production system What is a job shop production system? Some concepts defined Interdependencies within work groups Difficulties for measuring and evaluating productivity in job shops Current methods of measuring productivity in job shops The ProMES methodology A description of the system Theory and basic principles of ProMES The NPI Theory The accepted control loop Requirements for developing and implementing ProMES The ProMES approach Past experiences with ProMES ProMES in manufacturing settings ProMES in service settings Differences between previous cases and a job shop case Advantages and disadvantage of the ProMES approach Conclusion Productivity measurement in job shop situations Discussion of the levels of measurement Factors influencing the success of ProMES The interdependencies between units Shifting operators between units The rapidly changing orders Different interests of the units The relational model Generating ideas for developing and applying ProMES Description of the research company Short description of the company Overview of the production process The four functional units Metal sheet cutting T. de Boer 9

10 6.3.2 Parts production Kitting Welding Automatic warehouse The job shop within the production department Current way of measuring at the production department The meaning of ProMES in the framework of the whole organization Assessing the research company on the applicability of ProMES Results of the practical analysis Method Comparing theory with practice Level of measurement The interdependencies between units Shifting operators between units The rapidly changing orders Different interest of the units Evaluation of the results Matching ProMES with a job shop When is ProMES applicable Determining the best idea Description of the system and recommendations Description of the system Recommendations Recommendations for reducing dependency relationships Recommendations to overcome the problem of low controllability Recommendation to reduce the chances at sub-optimization of units Developing ProMES for a job shop production process Conclusions and recommendations List of references T. de Boer 10

11 1. Introduction This report is the result of the graduation project conducted as a scientific research within the Technical University of Eindhoven. The topic of the graduation project is about performance measurements and improvements in a job shop production process. Improving organizational productivity has been an issue for some time and will continue to be important. All types of organizations need to be as productive as possible to optimally use their precious resources, to meet their customers needs and to stay competitive with similar organizations. There are two ways to improve productivity: one can change the technology or one can change how people work. The concern of the ProMES approach is the second: how to structure work so people can and will want to behave in a way that will maximize their productivity (Pritchard, 1995). The ProMES method has been developed and implemented very successful in many manufacturing and service settings (Pritchard, 1995), but has only been implemented once in the situation of complex interdependencies between machines and teams such as a job shop production process (Huve, 2005). This study showed that it very difficult to implement this performance measuring and improving system in a job shop situation, because this kind of production processes results in a highly complex order and material flow with lots of transitions between the different workshops. A main shortcoming of the ProMES method is that it is less applicable in situations of complex interdependencies between work teams (Pritchard, 1990). So it will be a difficult task to implement the ProMES approach in a complex production situation as a job shop. The fact that performance measurement and enhancement for this kind of complex production processes have only been described in literature by one study (Huve, 2005) gave rise to a research in this specific area. The objective of this Master Thesis Project is formulated as follows: The objective of the Master Thesis Project will be to analyse the applicability of ProMES into a job shop setting; thus to study whether and in what way ProMES could help to improve productivity in a job shop production process. The content of the report is as following. In chapter 2 we describe the motive of this research, present an overview of the results of the literature review, (which was preliminarily conducted to the master thesis project). The research objective and the questions and the boundaries of the research are also described in this chapter. In chapter 3 we determine the main characteristics of a job shop production process, discuss the problems about measuring productivity in job shops and present some methods about how productivity is currently been measured in job shops. The underlying theory, basic principles and the methodology of ProMES discussed in chapter 4. The past experiences of ProMES are also discussed in this chapter. The factors which influence the application of ProMES to a job shop and the generated ideas to deal with these factors are determined in chapter 5. Chapter 6 is a description of the research company. Chapter 7 determines if and how the ProMES system could be applied to the production situation of the research company by combining the results of both the literature and practical analyses. We develop solutions and recommendations about applying ProMES to a job shop in chapter 8. Chapter 9 provides a global design of the ProMES system applied to the productivity department of the research company, to explain and clarify how the solutions and recommendations have to be applied. This report ends with a conclusions and recommendations in chapter 10. T. de Boer 11

12 2. The master thesis project The motive of the Master thesis project is described in paragraph 2.1. The main results of the literature research conducted in order of the master thesis preparation are described in paragraph 2.2. The objective and the research questions are determined according to the results of the master thesis preparations and are described in paragraph 2.3. According to these research questions the design and approach of the research are shortly described in paragraph 2.4. Paragraph 2.5 discusses the scope of this research. 2.1 Motive of the research The initial paper used for this research is the master thesis report of Huve (2005). This report describes the development of ProMES for a company in the Netherlands which manufactures wooden furniture. The researcher studied the applicability of the ProMES methodology to the complex production process of the company, characterized as a job shop and how the system has to be developed and implemented within the production department of the company. After studying and analysing the report of Huve (2005) we concluded that the study did not lead to the most effective measurement and enhancement system; the system is developed at departmental level (highest), which leads to smaller chances in productivity than when applied on a lower level. The most important reasons to develop a system on a highest level were the complex relationships between work groups and the limited availability of production data. This system leads to minimum increases in people s motivation that changes their working behaviour, and will lead to less productivity improvement. We assume that it was the best solution possible in the situation of that company, but it could probably be different in other situations, where ProMES could be more effectively. The study of Huve (2005) gave interest to further research the area of performance measurements in a job shop production process by using the ProMES methodology. In the initial phase, we studied several performance measurement systems and classes of production processes to determine if the ProMES methodology is best the option to be applied to a job shop, and not another PM system. This research is conducted during the master thesis preparation period. An overview and the results of that study are described in paragraph Overview of the Master thesis preparation Literature research The literature research preliminarily conducted to this research was to study different classes of production processes and the most well known and often used performance measurement systems. The literature study concerned one specific part of an organisation; the production department. A production department is often a part of a large production organisation with other departments as; sales, purchase, production development, etc. The transformation process operated in the production department generally involves a sequence of steps called production operations. Each production operation is a process of changing the input into outputs while adding value to the entity, (Viswanadham and Narahari, 1992, p.31). This transformation process is also called manufacturing. Manufacturing is a broad term and includes many various types of production operations and products (Viswanadham and Narahari, 1992). The results of the literature study showed that four general configurations can be recognized based on the number of products and volume (Viswanadham and Narahari, 1992). T. de Boer 12

13 Another way to define the different production categories is to distinguish between capacity complexity and material complexity (Bertrand, Wortmann and Wijngaard, 1998). The results showed that four types of categories can be distinguished: - Job shops - A job shop consists of a number of functionally organized work centres and each job requires a number of operations in different work centres at many different routings (Silver, Pyke and Peterson, 1998). - Batch production - A process business which primarily schedules short production runs of products (Fransoo and Rutten, 1994, p.48). - Assembly lines - A manufacturing process in which interchangeable parts are added to a product in a sequential manner to create a finished product (Viswanadham and Narahari, 1992). - Continuous flow processes - Process manufacturing involves a continuous flow of raw materials through a series of sequential operations, where these operations transfer the raw materials into a final product (Viswanadham and Narahari, 1992). The next part of the literature study concerned the often used and most successful performance measurement systems. It turned out that many different theories, tools and frameworks are developed, which all have different goals and working methods for measuring performance. The performance measurement systems studied are: the Balanced scorecard, the Performance prism, SMART, ProMES and the Business excellence model Deliberations of the alternative PM systems The goal of the Business Score Card is providing strategic management information needs (Kaplan and Norton, 1992). The performance prism is a comprehensive measurement framework that addresses the key business issues (Neely, Adams and Crowe, 2001). The SMART approach combines elements of a control system with elements of strategic planning (Cross and Lynch, 1988). The main goal of ProMES is measurement and improvement of productivity (Pritchard et al., 1989). The business excellence index can be used to measure how well different areas of the organisations are performing (Kanji, 1998). The result of the literature research was that ProMES analyses performance on a lower level and directly improves productivity of the employees itself in comparison with the other PM systems. All other PM systems are considering the visions and strategy of the organisation, thus these systems seems to be effective at the organisational level, and ProMES seems effective at the plant level. The PM systems, except ProMES, are all intended to be applied on a higher level, for example for generating business strategies and increasing business growth and competitiveness. Thus it all serves a much broader business decision support system in comparison with the ProMES approach which serves to actually improve productivity on the plant. In comparison with the other systems, ProMES is really a practical approach which aims at improving productivity. Thus the advantage of ProMES is that it actually improves productivity. This broader aim also implies that the PM systems consider several aspects of performance measurement such as stakeholder satisfaction, management strategies, technologies, processes, market, financial, customer, etc, thus productivity improvement is not the main goal of these PM systems. In comparison, the main goal of ProMES is to gain improvements in productivity. Thus applying the ProMES system is much more relevant to improve productivity of (in this situation) a job shop department instead of applying other PM systems which considers much more (irrelevant) aspects and only slightly productivity. The main problems and difficulties as logistics, scheduling, strongly varying orders and demand and complex material routings showing up at managing and controlling a job shop system are indirectly tried to be solved or prevented by implementing a PM system. T. de Boer 13

14 The ProMES approach is the best alternative in comparison with the others, because it motivates people to improve their productivity which on his turn creates solutions and strategies to solve the problems on the plant. We conclude that the ProMES methodology is best suitable to be applied on operational level and to improve productivity of a job shop production department, and the other PM systems are more suitable when applied on an organizational level to improve business strategies. Thus we have chosen to study the applicability of the ProMES methodology to a job shop situation Conclusion The ProMES system has been successfully implemented many times, in different organisations and production situations (Pritchard, 1990), but has only been implemented once in the situation of complex interdependencies between machines and teams as in a job shop production process (Huve, 2005). Job shop production processes are characterised by a very complex environment due to the high product differentiation, different routings and low level of automation. ProMES seems to be the best potential (in comparison with the other PM systems) to improve productivity of a job shop production department. The situation at other companies might be different to the situation of the study of Huve (2005). The study of Huve (2005) gave interest to further study how a ProMES system can be matched with a job shop. So in the master thesis project we analyse if ProMES can be applied to a job shop situation and whether it can lead to productivity improvements in a job shop setting. It is very interesting to conduct a study about measuring and improving productivity in a job shop production process along with applying the ProMES methodology because: - ProMES has been developed for work teams and also for individual jobs; - ProMES is a bottom up approach, thus participated by employees; - ProMES main goal is to improve productivity; - ProMES has proven to be successful in practice. Accordingly, all PM systems showed to be accepted on the floor and all people can participate (Pritchard, 1995), but only by the use of ProMES, the employees really are involved in the whole process of setting up and maintaining the system, which will result in high acceptance and commitment. 2.3 Definition of the final research objective and questions The final research objective is formulated according to the results of the preliminary literature study. The objective of the master thesis project is as follows: The objective of the Master Thesis Project will be to analyse the applicability of ProMES to a job shop setting; thus to study whether and in what way ProMES could help to improve productivity in a job shop production process. There are four research questions defined according to the research objective. These are based on the possibilities of the student within the research domain of the University. The four major research questions are formulated as follows: T. de Boer 14

15 1. What are the characteristics of a job shop production process? 2. What are the characteristics of ProMES? 3. Can productivity be measured in a job shop situation? 4. How can ProMES be applied to a job shop situation? 2.4 Research design and approach According to the four research questions, a research design and approach is set up. The research can be divided up into four phases: Phase 1: Literature research - studying job shops and ProMES Phase 2: Generating ideas - solutions for measuring productivity Phase 3: Analysing practice assessing the research company Phase 4: Implementation - matching ProMES and job shops For gathering information about a job shop production process, generating ideas and testing solutions we have contacted a manufacturing company. The management of that company is willing to cooperate in the project. The name of the company is Exerion Precision Technology, located in Ulft, the Netherlands. Exerion designs and manufactures precision metal frames and mechanical parts for printing and medical equipment. A part of the production department situated at the research company can be characterized as a job shop production process. The complete description of the research design and approach can be found in appendix A. 2.5 Narrow the scope of the project In this part we will make some assumptions and determine some basic points of view. These are important for the study and especially for analyzing the research objective and questions. When considering other or more aspects, the research will be influenced so the solutions and recommendations at the end will not be appropriate for the specific research objective. But also the research is time, knowledge and skills constrained. The following assumptions and statements narrow the scope of this research: - Only the option of applying the ProMES system is evaluated, so no other performance measurements systems are discussed; - The research only concerns a job shop production process, so no other production configurations will be evaluated; - We will use one company as a research company concerned for this research, so conclusions will be drawn from only this company; - The system will be evaluated on the applicability to the production department, so no other departments of the company will be discussed; - We consider if and how the ProMES system could be applied to a job shop, so the system will not fully be developed and implemented. T. de Boer 15

16 3. The job shop production system This chapter discusses different facets of job shop systems. Paragraph 3.1 describes the method of manufacturing according to a job shop. Paragraph 3.2 defines different performance measures like productivity and efficiency, etc. to overcome misunderstanding or misinterpreting. In paragraph 3.3 is discussed which different dependency relationships exist between work groups, which are very important to understand at measuring productivity in job shops. The specific production structure of a job shop results in difficulties/problems what causes a job shop hard to be measured and evaluated on productivity what is described in 3.4. Finally an overview of current scientific literature about productivity and performance measures in job shops is provided in What is a job shop production system? We will shortly describe here what a job shop production system is; a more detailed description of a job shop system is described in appendix B. A job shop system is a classification of discrete production systems in which various machines manufacture various products and the manufacturing of a product requires several process steps, each on another machine. A typical job shop is defined by the number of jobs, the number of machines and the many different routing in which the jobs are processed. Job shops are characterized by the difficulty of planning and controlling due to the high complexity of scheduling jobs on the different machines. Viswanadham and Narahari (1992) state that job shops are commonplace in mechanical engineering, with low to medium volumes and with a wide range of products. 3.2 Some concepts defined The terms performance and productivity are two very important characteristics used in this research. These two, but also some other terms are often defined differently by many researchers. To overcome the problems of misunderstanding and misinterpreting these terms, we will give the exact definitions of these terms, as used in the current research. In the literature studied, authors often talked about the term productivity (improvement) instead of performance (improvement). Improving the productivity is referred in most of the papers interchangeable with improving performance, or some authors even confuse both terms. There has to be a clear distinction between both terms according to Sink, Tuttle and De Vries (1984), because they stated that productivity represents a critical component of performance and not a synonym for it. Productivity needs to be viewed as one of a group of performance criteria against which managers can assess, evaluate and base decisions regarding the organizational systems they are managing (Sink et al., 1984, p.265). Productivity represents a critical component of the performance definition. Productivity can be evaluated at the work group, function, division, plant or firm level. Performance is typically output such as number of pieces finished, but productivity is an output relative to inputs, or outputs relative to objectives or goals (Pritchard et al. 1989).According to Pritchard et al. (1989) productivity is a combination of both effectiveness and efficiency. Efficiency (also called productivity) is an output to input ratio (monthly manufacturing output divided by number of labour hours used) and effectiveness is the relationship of outputs to some standard or expectation (e.g. monthly output expressed as a percentage of the unit s goal). T. de Boer 16

17 Thus efficiency is how well the organization uses its resources to produce its products or services. Effectiveness is how well the organization is reaching its goals. This study will define productivity as how well a system uses its resources to achieve its goals (Pritchard, 1992, p. 455). This definition will be applied in this study to view productivity mostly from a behavioural perspective. As told above, productivity is a component of performance. According to Sink et al. (1984) the performance of an organizational system is comprised of seven criteria; effectiveness, efficiency, quality, productivity, quality of work life, innovation and profitability/budgetability. These terms will be explained below. Effectiveness - Doing the right things on time, and in the right manner, in terms of goals, objectives, activities, goods, products, services, etc, thus it focuses on what we should be doing and have done. output observed Effectiveness = output exp ected Efficiency - It focuses on the relationship between what we felt should have been consumed and what was actually consumed. input observed Efficiency = input expected Quality - The products and/or services have been performed conformance to the specifications. Productivity - It is the ratio of quantities of output to quantities of input resources; the ratio of quantity at the desired quality level to resources actually consumed. output observed Pr oductivity = input observed Quality of work life - This is the human beings affective response/reaction to working and living in organizational systems. Innovation - The creative process of adaptation of product, service, process, structure, etc. in response to internal as well as external pressures demands, changes, needs, etc. it is extremely hard to measure something that implies effective implementation of a creative new idea. Profitability/budgetability - A measure or set of measures that assess attributes of financial resource utilization. Figure 3.1: The seven criteria are causally related, source: Sink et al. (1984). T. de Boer 17

18 3.3 Interdependencies within work groups The team members of the various functionally units in a job shop situation are interdependent on each others task fulfilment. Team members are very dependent of the outputs of other team members, and the way the work flows between unit members. Work flows are the materials, objects, or clients that are sent or transported between people within organizational units, (Van de Ven and Ferry, 1980, p. 166). The amount of work flow indicates the degree of task interdependence between people in a unit. Task interdependence is the work connectedness of unit personnel or the extent to which people in a unit are dependent upon one another to perform their individual jobs, (Van de Ven and Ferry, 1980, p. 166). Tesluk, Mathieu, Zaccaro and Marks (1997) state that interventions aimed at improving team performance are likely more successful when they take into account the team s specific task functions and requirements. This is an important statement when considering the groups (functionally units) within a job shop. The group members are working closely together and exchange information to fulfill the group s tasks. At assessing the performance of the unit, we have to take into account that, additional to the performance of various individuals, the ultimate effectiveness of the team depends on wellcoordinated transitions between team members (Tesluk et al., 1997). According to the authors, critical team levers (the most important factors or work processes that underlie a particular team s performance) have to be defined for the measurement and diagnoses of team performance. Understanding the nature of the task performed by the team is critical for proper diagnoses of problems in team performance. If the critical levers for the team performance are not identified, measurement efforts may be targeted at the wrong level of analysis. For example, when team members are working independently of each other, one can decide to measure performance of each individual on their tasks and summing across individuals. Four basic work flow arrangements can be distinguished. Below we describe these four arrangements that are used to characterize the work of different types of team interdependencies (Tesluk et al., 1997, Van de Ven & Ferry, 1980). The four arrangements are graphically shown in figure 3.2. Figure 3.2: Taxonomy of team work processes. Source: Tesluk et al. (1997). Pooled interdependence - in pooled tasks, each individual contributes incrementally to overall task completion, and team performance and work does not flow between members of the team. Each individual s performance is a function of his or her efforts and does not depend directly on the performance of others. T. de Boer 18

19 Sequential interdependence - work moves from one member to another, and mostly in one direction. Work flows in a consistent unidirectional through each of the members. Reciprocal interdependence - interactions are more dynamic in nature and work flows back and forth between team members. Team performance is a function of more complex forms of coordination. Intensive - team members closely work together to diagnose, solve problems and collaborate in performing a task. The nature of the task is dynamic and complex. When the critical levers of team performance are identified (what to measure), the particular method of measuring has to be determined that is most appropriate for assessing team performance (how to measure). There are various methods of measuring team performance. A choice has to be made about the source of information (who provides the information of the team s performance) and the method(s) of measuring (how data on team performance are collected) (Tesluk et al., 1997). An important factor in team performance assessment is that the nature of the team s task and particular processes or aspects of performance that are being measured should play an important role in determining which particular method of measurement to use (Tesluk et al., 1997, p.210). The study describes some trends about the target of a human resource program by assessing different kinds of teams. We describe which specific motivational human resource program to use accordingly to the four different team characteristics. Motivational programs for pooled team should be designed to facilitate and reward the contributions of individuals (e.g. piece rate compensation). Motivational programs for teams operating in sequential task settings should emphasize individuals contribution but also focus on the exchange sequences between members. Motivational efforts for reciprocal teams should be directed to the team as a whole. Reward and feedback programs should be based less on individual contribution and more on team performance. Motivational programs for intensive designs should focus on team level processes and outcome by providing team-level feedback and incentives (Tesluk et al., 1997). 3.4 Difficulties for measuring and evaluating productivity in job shops The production structure within a job shop can be characterized as a functionally oriented structure with the functional units at where the products and parts are manufactured. The functional units characterize a layout in which machines and people handle similar operations and are grouped together in a workshop. The functional oriented layout is required because each of the production operations requires different operational means and skills. The different units within the functional production organization do represent its own task. The disadvantage of this kind of production processes is that this results in highly complex order and material flow with lots of transitions between the different workshops. Thus a job shop system represents a highly complex production environment with complex dependency relationships between the different units, so the units are strongly dependent of each other if it comes to exchange of information and products and changes of any kind. These dependencies can be seen as sequential dependency (work on the result of previous units) and reciprocal dependency (work flows back and forth between units). Examples of interdependencies relationships are: work on a part when another unit is finished with that, the quality of preceding work, speed of doing work is dependent on the speed of getting parts or material when needed, how efficiently the output is produced depends on how production scheduling has arranged the orders (Pritchard, 1990). T. de Boer 19

20 Due to these dependencies between units, the departmental performance can hardly be decomposed into the performance of independent units. So the main question here is: At which of the three levels (individual, group or department) it is best to measure and evaluate productivity so the most successful measurement system will be developed? Another problem which shows up point due to the interdependencies between the units is that the control over the unit s productivity decreases when units are individually being measured and evaluated. It is a problem because each individual unit has to be able to influence their unit s output when a performance measurement system is applied at unit level. Thus one of the most important decisions is the decision about the level at which the measurement system is developed. When measured on individual or group level it will take much time and effort the develop and maintain the measurement system because a system has to be developed for each unit or individual, but will have more impact on productivity than when measuring on department level what will take less time and effort to develop and maintain. Providing feedback to each individual or a small group of people will lead to higher changes in motivation and productivity because then people can easily recognize there individual (or unit) contribution. This is difficult to recognize when a large group is provided with feedback about the overall productivity performed by the whole group. Thus the less people are covered in one measurement system, the more effective it is, but the more the development time will increase. A main characteristic of a job shop production system is that a lot of various products are manufactured. Because of the varying products, the processing times will also vary. The manufacturing lead time is mainly defined by the waiting times in front of the work centres and the processing times at the machines. Due to the strong varying routings and occupation times, the number of orders arriving at the units strongly varies per time unit (day or week). So when is chosen to measure the number of produced parts in a period, it will be difficult to define a standard or desired level of production and also it will be difficult to compare the performed productivity between periods. This is because each order has different processing times and thus a different total lead time in comparison with other orders. For example a work group maximized its productivity a specific day and produced three parts, and the next day it also maximized its productivity and produced ten parts. The effectiveness was equal at both days, but the number of parts was unequal, which is caused by the differences in jobs. What can be done is to use the actual number of hours worked relative to the standard working hours. When one determines the time it takes to fulfil a task, the actual time it took to fulfil that task can then compared with that standard processing time. In this way, the productivity of both days can be compared fairly, because for example the three parts were calculated to be processed in eight hours and also the ten parts were calculated to be processed in eight hours. Other productivity factors, as for example quality, amount of waste material, etc, are also influenced by the various orders. A problem, because of the vast changing orders, is the fact that it is difficult to control the output (productivity) of the operators, units and department over time and as told above, each individual unit has to be able to influence their unit s output when a performance measurement system is applied at unit level. The incoming orders do vary in amount, design, urgency and processing time, which result in a very complex material flow control. It is very hard to define how the different orders will be distributed among the machines in next periods. Machine utilization and variation of the orders will generally lead to long waiting times for orders on the floor. A difficulty is the production speed of a work centre is dependent of another unit. In fact, the amount of work to be done by a unit varies a lot per period. An example is that the orders for a specific period requires much more capacity of unit 1 and less capacity of unit 2, whereas orders in the next period can be vice versa. Thus there are continuously changing bottlenecks in the production department. T. de Boer 20

21 This unknown distribution and machine utilization leads to a difficult determination of productivity standards and goals for the coming periods and the control on productivity over time. In a job shop production environment, it is usual (when demand is high at a specific functional unit) to shift one or more employees from a less demanding unit to a high demanding unit. We assume that these persons are less familiar with the handlings and operations at that unit than the fixed employees, so the result is that the scores on the performance indicators (e.g. speed and quality) will not be as high as normal for that unit. The productivity and thus the scores on the performance indicators of a specific functional unit are not representative anymore for the actually possible achievable performance of that unit by shifting employees. The functional units cannot fully control the output of their unit over time when persons are transferred to an unfamiliar functional unit when capacity requirements are high. This has to be considered when a performance measurement system is developed at individual or unit level. A difficulty at measuring productivity and subsequently comparing the results with previous productivity achievements or norms is that people do not have the full control over some factors such as machine breakdown and lateness of delivered raw material. The measurement system may not be valid, because it is difficult to take the factors which can not be influenced into account. The probability of individualistic behaviour among units increases when the individual unit productivity is measured, because the achievements of each of the units will be compared with each other. The goals for the units will become independent when the unit productivity is measured. Van Vijfeijken, Kleingeld, Schmidt, Kleinbeck, Pritchard and Algera (2002) state that goal interdependence reflects the way in which goal attainment of an individual (a unit in this situation) is influenced by goal attainment of other. Goal interdependence can vary from (highly) negative to (highly) positive. Neutral goal interdependence means that achieving the pre-defined goals by one group does not influence the attainment of the same goal by the others. Contrarily to the neutral interdependency, the case of positive goal interdependency, the attainment of one s goal is positively influenced by the attainment of goals by others. And in the case of negative goal interdependency, the attainment of one s goal is negatively influenced by the attainment of goals by others (Van Vijfeijken et al., 2002). We assume that the goal interdependency is neutral in our situation. Van Vijfeijken et al. (2002) state that groups performing a highly interdependent task performed significantly worse when confronted with an individual goal compared to a group goal, a group plus an individual goal, or no specific goal. Neutral goal interdependency leads to individualistic behavior of the units because under a individual goal condition the group members direct all their action and attention to the attainment of the individual goal. Individualistic behavior can lead to sub-optimization because little energy will be used to develop cooperation strategies (Van Vijfeijken et al., 2002) and sub-optimization can on his turn lead to competition between units. Competition means that units try to increase productivity what can be of disadvantage of other units An example of sub-optimization is that a unit decides to increase the batch sizes with subsequently less set ups what implies a decrease in total processing time. The speed of production will increase at this specific unit, but leads to a decrease in production speed at the succeeding unit, because now they have to wait before all parts are delivered. A second example is the decision of a unit to slightly change the design of a part to increase the production speed, but resulting in an increase of processing time of the succeeding unit. The production speed of one specific unit increases, but the overall processing time will decrease. T. de Boer 21

22 As conclusion we can state that it is difficult to measure group productivity at a valid and reliable way in a job shop situation. The main reasons are the interdependencies within and between units, the changing skills of the employees due to shifting, the low controllability ad the risks at suboptimization. The insecure and vast changing environment makes it difficult to apply a system on each of the three possible levels. 3.5 Current methods of measuring productivity in job shops In this part, we will give an overview of current scientific literature about the area of productivity measurements in job shop production processes. The first conclusion we can state here is that very little work is conducted in this area of research, because very few scientific papers about productivity measurements in job shops could be found. The majority of the research in the area of performance measurement in job shops has used time based performance measures to evaluate the system (Rohleder and Scudder, 1993). The often used measures are lateness, tardiness, flow time, percent tardy. Managers consider these kinds of performance measures because of the view that time is money according to the authors. Recent research in scheduling and performance measurement in job shops used the profit measure; Net Present Value (NPV) which is the present value of net cash flows (Rohleder and Scudder, 1993). In the study of Bertrand (1983), productivity is measured by the mean and the standard deviation of the lateness of the jobs. The lateness of the job is defined as the delivery time minus the due date of that job. In the study of Lee and Posner (1997) two productivity measures are used; cycle time and makespan which are closely related. The makespan is a measure according to the time it takes to complete all jobs. According to Viswanadham and Narahari (1992), the following performance measures are often used: manufacturing lead time, work-in-process, throughput time, machine utilization, capacity, flexibility, performability and quality. According to them, job shop characteristics are; large setup times, large WIP inventory, large manufacturing lead time, high machine utilization and high quality. Only one paper describes the use of the ProMES approach for measuring and improving the productivity of a job shop (Huve, 2005). This paper describes the development of ProMES for the production department of a Dutch company. The study resulted in a system developed on a high level (departmental). It was not possible to develop the system on group level mainly due to the complex mutual dependencies between the working units and the limited availability of production data. The difference between methods of measuring productivity in job shops as described by current scientific literature and the ProMES approach is that the ProMES approach, which aims at the human aspects, uses goals and feedback (to group and/or individuals) as a motivational tool, so people themselves can change their working behaviour to improve productivity. We conclude the objective of both the measurement systems described in current scientific literature and the ProMES approach is to improve productivity, but the difference is that the ProMES approach (which is used in this research) motivates people to change their working behaviour by themselves to improve productivity. It is about letting people work more efficiently and effectively to increase the productivity of a department or organization. T. de Boer 22

23 4. The ProMES methodology This chapter describes the underlying theory, basic principles and the methodology of ProMES. The generally description of the ProMES system is given in 4.1. When the system is generally described, we explain the underlying theory of the measurement system in 4.2. The requirements for a successfully and accepted implementation of the system are described in paragraph 4.3. The ProMES system has to be developed and implemented according to four succeeding phases which are described in 4.4. The past experiences with implementations of the ProMES system in different companies and departments are discussed in 4.5. In paragraph 4.6 we provide the advantages and disadvantages of the measurement system. The chapter ends with a short conclusion in paragraph A description of the system All types of organizations need to be as productive as possible to best use their expensive resources, to meet their customers needs and to stay competitive with similar organizations. There are two ways to improve productivity: you can change the technology or you can change how people work. The concern of the ProMES approach is the second: how to structure work so that people can and will want to behave in a way that will maximize their productivity (Pritchard, 1995). Enhancing productivity has been seen as important for our quality of life, our economy, and our competitive position in the world marketplace, (Pritchard, Jones, Roth, Stuebing and Ekeber, 1988, pp. 337). ProMES has its theoretical foundations within a theory of behaviour in organizations. The idea behind ProMES can be seen in figure 4.1. Organizational objectives Productivity measurement system Feedback system Increased productivity Meeting organizational objectives Figure 4.1: The basic ProMES approach, source: Pritchard (1990). ProMES is an intervention that relies on feedback to let personnel know their levels of performance; this knowledge then serves as a tool that leads to more efficient and effective ways of performing tasks (Pritchard, 1990). The system is developed and accepted by both employees and management, and provides an overall index of productivity. An organizational unit constructs the system by defining their objectives, identifying productivity indicators for each objective, and developing utility curves or contingencies for each indicator, specifying the overall and relative value to the organization of different performance levels on each indicator. The performance what subsequently is achieved is than feedback by means of a feedback report. Productivity enhancement is thus tried to be achieved by setting difficult, but reachable goals and subsequently giving feedback on the performance on these goals. This will lead to changes in motivation which on his turn will lead to increased productivity of the employees. The goal of the ProMES method is to measure and improve productivity. The application of the system begins with clear statements or organizational objectives. Productivity can be generally defined as the degree in which a system uses its means to reach its goals (Pritchard 1992). T. de Boer 23

24 ProMES can be used as a measurement and enhancement system for individuals, groups and departments as well. The system urges people to work smarter, not (necessarily) harder. There are generally three characteristics of ProMES at which it can be distinguished from other performance measurement systems. The first is the fact that ProMES is developed by a so called bottom-up approach; the participation of employees in the design of the system plays a major role. The second is that the employees are actually participating in the development of the system to increase the acceptation and willingness to cooperate. The third characteristic is that meetings are held by the employees and management for development of the system and agreement about the goals. 4.2 Theory and basic principles of ProMES The literature on performance appraisal distinguishes three basic approaches managers can use to tell their employees to working a performance sessions: tell and sell, tell and listen and problem solving (Algera, Kleingeld and Van Tuijl, 2002). The tell and sell style is a one-way approach; the manager presents his assessment of the performance achieved and explains what he wants to see in the future. In the tell and listen style, the manager not only presents his opinion, but also listens to the opinions of his employees. The problem solving style gives employees plenty of opportunity for active participation in developing ideas for improving performance in the future. This approach is the most appropriate one for the ProMES sessions (Algera, et al., 2002) The NPI Theory The conceptual foundation behind ProMES is the theory of work behavior developed by Naylor, Pritchard and Ilgen in 1980, also called the NPI theory (Pritchard, Holling, Lammers and Clark, 2002). ProMES maximizes motivation and thereby performance that comes from this NPI theory. We will now explain this NPI theory. Motivation in NPI is seen as a resource allocation process where the resource is a person s time and energy. This time and energy is allocated across possible actions or tasks (Pritchard et al., 2002, p.4). The NPI motivational process is shown in figure 4.2. Figure 4.2: The basic NPI Theory, source: Pritchard et al. (2002). The process is a motivational sequence or chain composed of the following elements: acts, products, evaluations, outcomes, and need satisfaction. People anticipate the amount of need satisfaction that will occur when outcomes are received (motivation). Acts, products, evaluations, outcomes and need satisfaction are combined into motivational force which is defined as the degree to which a person believes that changes in the amount of personal resources in the form of time and energy (effort), devoted to different acts (tasks) over time, will result in a change in anticipated need satisfaction (Pritchard et al., 2002, p. 5). NPI views motivation as a process, each stage of the process must function well for the outcome of the process (motivation) to be high, thus to maximize motivation, each component of the theory must be maximized (Pritchard et al., 2002). Figure 4.3 adds contingencies, which indicates, for example, the amount of a product produced is to some degree contingent on the effort devoted to the acts that generate it. T. de Boer 24

25 Figure 4.3: The NPI Theory with contingencies added, source: Pritchard et al. (2002). Figure 4.4 graphically shows the connection between NPI and ProMES. The ProMES objectives and indicators (which will be discussed in paragraph 4.4) are the operationalization of the NPI products. ProMES contingencies are the operationalization of NPI product-to-evaluation contingencies (the person s perceived relationship between the amount of the product and the expected level of the evaluation as a result of this level of product). Feedback indicates how much of each product was done, and how good that amount was. Figure 4.4: ProMES components and NPI, source: Pritchard et al. (2002). ProMES can produce improvements in productivity by increasing motivation, because between the development of the system, receiving feedback and using feedback to make improvements there are direct connection between ProMES components and the NPI motivational chain (Pritchard et al., 2002). ProMES is designed to affect all the variables influencing the motivational process simultaneous, what leads to large changes in productivity The accepted control loop According to van Tuijl (1997) ProMES can be interpreted as a method for the development of control loops for self-management, called accepted control loops. But ProMES does not automatically lead to accepted control loops, this depends on the way in which the development process is completed and the characteristics of the control loop designed. The idea behind the accepted control loop for self management is that in essence motivation stems from people s own choices. By using the ProMES method, a group can develop a system so the productivity of the employees can be measured. The control loop occurs when the measured productivity is compared with the goals that are determined and is fed back to the group. The feedback tells to what extent these concrete goals are being realized. Then, these goals are transformed into new more difficult goals. In this way reduction of discrepancy leads to the production of discrepancy (van Tuijl, 1997). The accepted control loop for self management is shown in figure 4.5. T. de Boer 25

26 Figure 4.5: The accepted control loop, source van Tuijl (1997). The lower half is the input-transformation-output model, in which the responsibilities of a group are presented (goods or services). The degree to which these responsibilities are realized (feedback) is passed on to a regulatory mechanism (upper half), which compares the feedback with the target goals. The goals are transformed into new and more difficult goals if the goals are met or surpassed (discrepancy production). Then the process of discrepancy reduction begins, where people put in time and effort to reach the goals. Results from the area of motivation research state that feedback and goal setting have a strong effect on individuals and teams. Van Tuijl (1997) states that people motivate themselves by formulating goals that lead to a situation of imbalance (discrepancy production), and then put in time and energy which are necessary to reach the goals (discrepancy reduction). According to van Tuijl (1997), the reactions to the ProMES method can be; acceptance, compliance or rejection. Acceptance means that the accepted control loop is complete. When the initial goal is satisfied, the group or individual sets a new, more difficult goal and is striving to reach that new goal. At compliance, the control loop is not complete; the individual or group does not make effort to reach a higher goal when the initial goal is reached thus the group only tries to hold on to that initial goal. Rejection means that the people do not make any use of the system and the feedback method and there is no effort towards reaching goals. When the ProMES method leads to an accepted control loop, it can lead to an increase of the organizational effectiveness. The first reason for this is that employees get a better understanding of their roles and responsibilities during development of the system. The second reason for productivity improvement during development is that people already get informal feedback about their performance. Productivity improvement after implementation of the system can be explained through the use of feedback reports. The already improved productivity at this moment can even be more increased by the use of incentives such as intrinsic and extrinsic rewards. According to van Tuijl (1997) three conditions have to be present so employees are encouraged to achieve the goals of the organizations: goals, feedback and endorsement. Goals have to be functionally related to the goals of the organization. Employees want feedback because they are interested in the degree to which these goals are achieved. They will adjust their work when the goals are not fully achieved and may set higher goals when goals have been attained. The third condition represents the degree in which the organization appreciates the performance. These three conditions have to meet some requirements to be effective (van Tuijl, 1997): - goals have to be specific, difficult, but attainable; - feedback has to be specific; - endorsement has to be consistently related to the goal achievement. T. de Boer 26

27 4.3 Requirements for developing and implementing ProMES Time, effort, and acceptance are required to make sure that the ProMES method will be a valid and reliable measuring system in an organization. The chances at acceptance and at a successful implementation and development increases when (some of) the following conditions are satisfied (Pritchard, 1990): - dominant attitude in the department on the necessity of improvement of performance; - all people involved endorsing the importance of productivity improvement; - the personnel subsystems being viewed as critical for success; - minimum level of trust between management and the work force; - be sure that management really wants to invest in the system, e.g. by providing resources; - willingness to measure performance and to be measured; - visible commitment of management; - in case of lacking skills, provide training before and during development; - no not invented here culture; - check whether the system is compatible with other organizational control systems, e.g. reward systems. The conditions mentioned above concern the human aspects preliminary to the development of the system. The criteria mentioned below are required to the ProMES system itself, to increase the chances at a successful measuring and enhancing system (Van Tuijl, 1997): - The system has to be able to represent one single score for the total performance of the group or department. - The system has to be able to show how the total score is build up from the sub-scores, which represents the productivity of the different activities. - The responsibilities have to be represented by the system and the system has to show these responsibilities at a valid way. - The system has to be flexible, what means that the system can response and adapt to the changes in circumstances and policies of the organization. - The system has to be accepted both by employees and by management. 4.4 The ProMES approach The design of a ProMES system is characterized by a bottom-up design process, leading to four elements of the system (Algera and van Tuijl, 2004). A bottom-up design process means that the system is developed by the lower level of the organization; the employees participate in designing the system instead of the management (top down approach). A detailed description of each of the four elements of the system can be found in appendix C. The four elements of the system are: 1. key result area (called products): a limited number of result areas that are essential for performance (e.g. quality, costs, safety, etc); 2. performance indicators: one or more indicators that reflect the performance in the related key result area; 3. contingencies: utility functions that express the relation between a score at a specific performance indicator and the value for the organization (effectiveness); 4. feedback report: a report that gives regular feedback on performance and effectiveness. T. de Boer 27

28 4.5 Past experiences with ProMES ProMES is successfully implemented in many different industries, companies and departments. Some of these studies will be discussed in this paragraph. Over the last twenty years, a large database of ProMES projects has been developed (Pritchard et al., 2002). Most of the data are at the group or unit level. The sample of jobs is diverse, including photocopier repair technicians, university professors, police officers, and circuit board manufacturers. The types of organizations are diverse, ranging from the military to educational settings. In general, ProMES has proven to be a very successful methodology. Pritchard (1995) describes studies about development and implementation of the ProMES system. He distinguishes between implementation in manufacturing settings and service settings. We first discuss some examples of the manufacturing studies and end discussing the service settings ProMES in manufacturing settings ProMES is implemented in an electronic computer components assembly plant for the aerospace industry in the US. The unit in which ProMES is developed consisted out of five members and the activities performed by that unit included inspection of end products, correcting problems, apply coatings and final inspection. The researchers were successful in using the ProMES approach in an organization engaged in team-based manufacturing. The exact gain in effectiveness is not known because only anecdotal data could be used at the company. The next company in which ProMES is implemented is Vandra Corrugated Fibreboard. It is a medium sized firm that produces corrugated packaging for a large variety of customers. The development group included a group of employees operated a die cut machine that produces various kinds of corrugated board boxes and consisted of four people. The production process is simple and straightforward. Two years after implementation of the system, is has resulted in an effectiveness increase of 37% as a percentage of the maximum scores, thus the ProMES system was successfully implemented. Another study describes the development and implementation of ProMES in a factory for the production of safety devices for electric control systems. The research setting was one of the manufacturing centres of the production department and was characterized by a high degree of automation. The group (five people) assembled circuit breakers in a flexible assembly centre, with main activities as maintenance, (un-)loading parts, tool change and control. The conclusion was that ProMES could successfully be developed in an advanced manufacturing system, because the effectiveness of the experimental group doubled. The fourth study described in the textbook (Pritchard, 1995) was about implementing ProMES in a manufacturing department of a small corporation in an outdoor sports industry in the US. The measurement system was implemented in the manufacturing department, where raw materials were purchased, cut and sewed, and where inspection and packaging took place. The effectiveness at the department improved with 15%, which was determined by dividing the actual improvement by the maximum possible improvement. The final study about ProMES in a manufacturing setting was about a manufacturing facility in the US. The development group consisted of fourteen people and was working in a chemical processing assembly line. The group blends, compacts, and granulates powdered chemicals together. The study gave an indication that ProMES can successfully be implemented even in a private sector organization that is already performing well, because there was a 24% gain in overall effectiveness. T. de Boer 28

29 4.5.2 ProMES in service settings The developer of the ProMES system, Pritchard et al., 1988, developed the system with the help of field studies at five organizational units at an Air Force base in the US. One was the maintenance section (repairing electronic equipment) and the other four sections made up the material storage and distribution branch. The number of people involved in the project ranged from 29 to 35 and from 47 to 54 respectively. The outcome of the study was that ProMES appears to be a very effective way of measuring productivity: the system is successful in aggregating productivity measures across units, feedback has a strong effect (productivity increase of 77%) on productivity and goal setting and incentives (total productivity increase of 79%) increased productivity over feedback. ProMES is implemented in a branch of a service division of a multinational computer systems organization. The service groups are responsible for the maintenance and repair of the computer systems where the ProMES system resulted in a 25% increase of productivity. ProMES is also developed and implemented in a field service department of technicians servicing photocopiers at client offices (Kleingeld, Van Tuijl and Algera, 2004). They tested which of the two methods (participation vs. tell-and-sell) resulted in the highest increase in performance. The participation method resulted in higher performance increases. ProMES is also implemented at a major US university for evaluating the teaching effectiveness of professors. Receiving feedback about the scores of the instructors from ProMES caused a productivity increase of about 86%. Other studies described by Pritchard (1995) are about the development of ProMES at a large Dutch bank and in units of a small oil trading company (clerical support and sales). The final study described was about an organization of commercial painters. The activities performed by the work organization were painting (buildings etc.), installing glass, heat insulation and handling administration Differences between previous cases and a job shop case The manufacturing settings in which ProMES is implemented up till now can be generalized as a straight line production process at which a group of employees work together on one product. The studies mainly involved only one group of employees at which ProMES is developed. No big problems showed up by developing the ProMES system in these situations. In table 4.1 we give an overview of the main differences between the situations in which ProMES has successfully been implemented and the situation of a job shop. We highlight the factors which make it difficult to implement a ProMES system. As can be seen, difficulties arise at a job shop (sign X) in comparison with the flow line and assembly line (sign O). Factors Job shop Flow line Assembly Scheduling X O O Flexibility X O O Varying routings X O O Varying capacity X O O Level of automation X O O Number of work groups X O O Table 4.1: Differences between job shops and other production configurations We can conclude that the ProMES has been successfully implemented in different organisations and production situations, but has only been implemented once in a situation of complex interdependencies between machines and teams such as a job shop production process (Huve, 2005). T. de Boer 29

30 4.6 Advantages and disadvantage of the ProMES approach In most cases ProMES has been developed for groups of employees and also for individual jobs (bank and university employees). The main advantage of the ProMES method is that the complexity and uncertainty of collaborative relations is made clear and a common frame of reference is developed so that communication about what is happening is greatly simplified and improved, (Van Tuijl, 1997, pp. 353). The most important advantages according to Pritchard, Lawrence, Goode and Jensen (1990) are: 1. The ability to provide a single index of productivity as well as sub-indices 2. The system is valid (complete and accurate system), because several components are involved in a valid system 3. Flexibility, it can respond to changes in organization s priorities 4. The ability to aggregate across units 5. Acceptance of organizational personnel 6. Positive motivational properties. ProMES measures and improves productivity by increasing the amount and quality of the feedback, positive feedback, and enables employees to see the results of their efforts. 7. Role clarification. By proceeding through the first three steps of the system (product, indicators and contingencies), employees are helped to more clearly understand their roles, which on his turn has a positive motivational effect 8. The ability to provide a considerable amount of information about the work to be done. It guides employees by indicating which activities they should be doing and their importance. The major risks and disadvantages of the system will now be discussed. It is essential that the department is working in such a way as to maximize the objectives of the broader organization. By the use of a bottom up approach (such as ProMES) it is difficult to insure that this consistency between the group s products and the overall organizational objectives exists. For example if higher management is not clear on their goals, it will be difficult for them to assess whether the group s products are consistent with these broader goals. Another situation is where management itself is not comfortable with the typical ProMES bottom up approach. They may not have trust in the lower level groups when these people have to develop the measuring system, or they may want to implement some changes in the business strategy and want to use the top down approach to communicate these changes. This suggests that in some situations a top-down approach can be a valuable addition to the standard ProMES approach. But on the other hand, a too much top down approach may limit the acceptance of the system by the employees, so participation is an essential element of the design process. By the use of ProMES, the employees really are involved in the whole process of setting up and maintaining the system, which will result in high acceptance and commitment (Pritchard, 1995). Thus to increase the acceptance of the system by the employees a bottom up approach, as used by ProMES, is required. An alternative of both approaches is the tell-and-sell approach (Kleingeld, et al., 2004). In this study, the tell-and-sell approach was used for the implementation of ProMES. The tell-and-sell style can lead to acceptance because then it is told that other employees are developing the indicators and do have the control over these indicators. The tell-and-sell approach turned out to be slightly less successful than the participative method, because there is no personal involvement in developing and controlling the indicators by those to whom the system is told and sold, but it may satisfy in some specific situations. T. de Boer 30

31 Another aspect which has to be taken into account is that the system will probably not survive when the system is not compatible with other control systems (Kleingeld, et al, 2004). Another problem is the time span needed for development of the system. It takes a lot of meetings of the design team what will result in development duration of about 6 to 18 months, what may lead to that design team members lose interest (Pritchard, 1995). A main characteristic of the system that can be taken as a disadvantage is that the system of ProMES only provides outcome feedback, and does not provide suggestions how to change task strategies, cooperation and exchange of information to improve productivity. 4.7 Conclusion ProMES has been successfully developed for different organisations, departments and settings, as described in this chapter. The system is applied to different types of industries, the technologies varied greatly and included personal service, high and low technology manufacturing in individual, team and assembly line settings, technical repair and professional service. Also the jobs themselves varied greatly. The conclusion is that the ProMES system is applied to situations which differ from the job shop situation (except the study of Huve, 2005). Because the job shop is a different production process with its specific difficulties/problems as mentioned in chapter 3, we will determine how the ProMES system and the production process can be matched, so the system leads to reliable measures and to effective improvements in productivity. T. de Boer 31

32 5. Productivity measurement in job shop situations In this chapter we provide ideas and solutions how to develop a ProMES system for a job shop situation. In paragraph 5.1, we discuss the level at which ProMES could be applied. The level of measurement is dependent on job shop specific factors which influence the success of the ProMES system. We explain why these factors are negatively influencing the implementation and maintenance of a ProMES system and put that into a model in paragraph 5.2. Ideas and solutions for these stated difficulties are generated in paragraph 5.3. General, these ideas are concerning the level (individual, group or departmental) at which it is most optimal to measure productivity and give feedback to. 5.1 Discussion of the levels of measurement ProMES can in theory be developed and applied to different group sizes and at three levels (Pritchard 1990). The three levels that can be determined are: 1. Individual level 2. Group level 3. Department level At distinguishing the levels to which the system has to be applied, two factors have to be analyzed (Pritchard, 1990): - The kind of work and company - The consideration between the effect of the feedback and the ease with which the system is developed and maintained In general, feedback about individual performance is more effective than feedback about performance of a group of people. Providing feedback to each individual or a small group of people will lead to higher changes in motivation and productivity because then people can easily recognize there individual contribution, which is difficult to recognize when a large group is fed back at once. The difficulty here is that is takes a lot of time to generate detailed information and data of each person individually. Thus the trade off is between the level of measurement and the time and effort of generating feedback, to make the performance measurement system efficient. Another problem is that it is not always possible to separate the activities and productivity of an individual from the activities and productivity of a group. Generally in a job shop, the individuals within a unit are commonly responsible for the same tasks and have the same activities to perform, so it is probably not needed to separate the activities and productivity of each individual within a unit. Also the within-group task independencies are high, so it is not preferable to measure on individual level. Individuals are performing as an intensive team and according to Tesluk et al. (1997), motivational programs for these kind of teams should focus on team level processes and outcomes. A ProMES system at individual level can only be applied when each individual employee is responsible for a specific operation or task and the within-group task independencies are low. Generally this is not the case in a job shop situation. Because a group of employees are responsible for a similar operation(s); common products, performance indicators, contingencies and a feedback report can be developed. For example, all employees who are situated at the saw unit perform about the same activities (sawing parts on the machines) and are as a group responsible for the output of that unit. T. de Boer 32

33 In general, the rule is to give feedback to the smallest possible group in which the internal dependency relationships are stronger than the extern dependency relationships. Results of previous studies (Pritchard, 1990) showed that it is most effective to give feedback to a group of five to thirty people. Thus concluding, due to the intensive characteristics of the group (tasks interdependency within the group is high) and due to the difficulties of applying ProMES to each individual employee of each unit, we leave out this option for the remainder of the research and we state that in a job shop situation ProMES can only be developed and applied at two different levels: 1. A ProMES system for each functional unit (which can also be a one-person group); 2. A ProMES system for the whole production department. When measured at group level it will take more time and effort the develop and maintain the measurement system because a system has to be developed for each unit, but will have more impact on productivity than when measuring on department level what will take less time and effort to develop and maintain. It is difficult to recognize the unit contribution when a large group is provided with feedback about the overall productivity performed by the whole group. Applying on group level and on departmental level has both its advantages and disadvantages. It is clear that applying on departmental level will be easiest, but is the least effective option. Up till now we can not make a valid choice about which of the both levels is possible and the most effective in a job shop. To be able to make a valid choice about the most optimal level of measurement, we will discuss the problems/difficulties which will show up at applying a ProMES system to a job shop process in the next paragraph. 5.2 Factors influencing the success of ProMES A main shortcoming of the ProMES method is that it is less applicable in situations with complex interdependencies between groups. So it will be a difficult task to implement the ProMES system in a complex production situation as a job shop at unit level. When productivity of units is measured, it automatically leads to comparisons between these units, what leads to individualistic behaviour and increases the risks of sub-optimization (and competition). Another aspect what could lead to problems at implementing the system at unit level is that the operators do not have the complete control over there productivity. Showing these examples indicated that some typical job shop characteristics are influencing the success of the ProMES system The interdependencies between units A job shop system represents a highly complex production environment with complex dependency relationships between the different units, so the units are strongly dependent of each other if it comes to exchange of information and products and changes of any kind. These dependencies can be seen as sequential dependency (work on the result of previous units) and reciprocal dependency (work flows back and forth between units). Examples of interdependencies are: work on a part when another unit is finished with that, the quality of preceding work, speed of doing work is dependent on the speed of getting parts or material when needed, how efficiently the output is produced depends on how production scheduling has arranged the orders (Pritchard, 1990). For this kind of relationships, interventions aiming at improving performance should be focusing on the contribution of the units and also focus on the exchange sequences between units and on departmental performance as a whole (Tesluk et al., 1997). T. de Boer 33

34 When measuring and evaluating on unit level, the individual unit contribution has to be visualized. This is needed for obtaining detailed production data of each unit. But the problem is that due to the dependencies between units, the departmental performance can hardly be decomposed into the performance of independent units. The requirement of the ProMES methodology is that the activities and tasks of the employees have to be controllable so the group has the ability to influence the score on the indicator. Thus another problem for the development of a ProMES system at unit level is that due to the interdependencies between units, the activities and output of each single unit can not be fully controlled by each unit itself. The productivity of the employees is influenced by some factors which they can not control. These uncontrollable factors have to be ruled out or have to be taken into account by implementing a measurement system. Factors influencing the controllability on the productivity of the operators are for example; machine breakdowns, changes in production planning and quality of raw material. When a ProMES system is developed for each functional unit, all roles, activities and responsibilities within the production department of the company must exactly be appointed and applied to one of the functional units. Then no misunderstandings will exist about who is responsible for which operation. This means that the units only have to work on those specific operations at all times to be able to carefully measure their score on the performance indicators. On this turn, it implies that other units may not (want to) work on the operations of another units because this can have a negative influence on their productivity. This process leads to an increase of productivity of that unit, but a decrease of the overall productivity of the department. A practical difficulty is that is takes a lot of time and effort to develop a ProMES system for each individual functional unit. Because then for each unit; products, performance indicators, contingencies, the method of measuring and the relative importance for the company have to be determined several times. With other words, each of the four development steps of the ProMES system has to go through several times for each functional unit. But also the time required for measuring the productivity each period at each single unit is much higher in comparison with measuring on departmental level. This increase in development and maintenance time will decrease the effectiveness of the application of the measurement system and will lower the trust of the employees to the system. The alternative is to develop a system for the whole production department with common products, performance indicators, contingencies and one feedback report and measures take place departmental level. According to the problems described above does it seem that a system for the whole production department will be a better option, because among other things; the interdependencies will not be removed, cooperation stay intact, it is less time demanding and roles and activities do not have to be exactly appointed to a specific unit. The cooperation between the different functional units will stay intact when a common system for the whole production department is developed. Thus the employees will share the same feeling of strong commitment to achieve a high as possible productivity for the whole department because everyone is responsible for the overall result. A major disadvantage of developing and applying a ProMES system to the whole production department is that the feedback report represents a general feedback for all units in common. When information about the performance is fed back to the whole department, it is difficult to recognize what the individual contribution was to the total performance. An additional drawback of applying the system to the whole department is that some units will perform less work when their unit productivity is not confirmed. This will lead to a decrease in total productivity and an unfair situation because some units have to compensate for the less performing units. T. de Boer 34

35 5.2.2 Shifting operators between units Often in job shop production processes operators are shifted between various functionally units. Operators are shifted to a high demanding unit when the demand at their unit is low. The problem is that the scores on the indicators will be influenced because changing the number of operators and also the skills of the operators influences the outcome of that specific unit. The achieved productivity is then not representative anymore for the possible achievable productivity of that unit. The fact that operators are shifted between units influences the possibilities to apply ProMES at unit level. The result of the varying unit output is that it is difficult to decompose the departmental productivity into single unit productivity, thus it would be a problem when the system is applied at unit level. The output of the units will depend on the personnel working at a specific unit. This implies that the personnel of the functional units can not fully control the output of the unit when the amount and skills of the personnel is constantly being changed. Thus shifting operators between the functionally units, which happens often in a job shop, decreases the ability to influence the outputs and productivity of the functional units The rapidly changing orders As described in chapter 4, at development phase 3 of the ProMES system, contingencies have to be established. The contingencies show the amount of an indicator, ranging from worst feasible level to best feasible level of productivity that could be scored on an indicator and also the effectiveness value which represent what the achieved productivity (score on indicator) means for the whole organization. A job shop production situation is characterized as a vast changing production environment as described in paragraph 3.4. Thus in job shops, historical production data is not always present due to much varying demand and nature of the orders each period, which changes the possibilities of the units per period. And historical production data is just what is needed to define the standards (worst and best feasible performance levels) which are required by determining the contingencies. The unstable and unpredictable situation which is typical for a job shop is caused by some various reasons. The first reason is that at job shops many different products and parts (and of few amounts) are manufactured. Thus various orders and tasks have to be processed by the functional units per period. Each order has its specific design and requirements, which leads to different achievements in productivity over a specific period of time. Thus it is hard to obtain historical experiences to make any judgments as to what is low or high output due to the large variations in orders. The output varies each period, depending on the nature and the demand of the work. This negatively influences the control the operators have on the output of their units. The more the orders are varying, the more variations in output, what implies decreasing control on unit s productivity Different interests of the units When ProMES is developed for each functional unit within the production department each having its own (different) products, performance indicators and contingencies; the dependencies between groups will partly be removed. Unit goals will become independently of the goals of other unit when the productivity of the units are measured and evaluated separately from the rest. Due this independent goal relationship; the interest of each unit will differ from the interest of other units. Van Vijfeijken et al. (2002), state that goal interdependence reflects the way in which goal attainment of an individual (a unit in this situation) is influenced by goal attainment of others. In our situation, the goal interdependency is neutral (Van Vijfeijken et al., 2002). T. de Boer 35

36 Neutral goal interdependency leads to individualistic behavior of the units, what on his turn can lead to sub-optimization because little energy will be used to develop cooperation strategies (Van Vijfeijken et al., 2002). Sub-optimization could lead to competition between units what will lead to decreased coordination and productivity. Sub-optimization means that a functional unit on its own does perform well, but the performance of the whole production department will likely not increase. Units try to score high on their own products and performance indicators when ProMES is implemented for each functional unit, but this can have negative influences on the other functional units and the score on their indicators. It is stated by Van Vijfeijken et al. (2002) that in this situation, the development of cooperation strategies can be stimulated by setting common goals which create positive goal interdependence, and individual unit goals, because this combination resulted in the highest productivity improvements. Thus by setting both goals for the units and joint goals for the whole department, the units also try to reach these common goals along with their own specific goals, so sub-optimization can be overcome. Productivity achieved by one unit can have less meaning to the overall company than another unit. Thus the contingencies have to be adjusted by concerning the relative importance of each functional unit. A solution to this problem is a method called scaling, developed by Pritchard et al. (1990). Scaling means that the contingencies developed for each unit have to be rescaled to the relative importance of the units. The relative importance of each unit can be used when taking the individual conditions at each unit into account. If it is possible to convert the contingencies to the relative importance of each unit, we are able to combine the unit s measures into a single measure for the whole department. Factors that influence the productivity of the functional units are for example the number of tasks the unit is performing, the nature of the work, number of machines and operators and the production speed of machines and people. But the scaling strategy is developed in the early phase of ProMES and the view of Pritchard has been changed over time (Pritchard, 1995). Pritchard believes that the strategy will not optimally work because not all the responsibilities of a department are contained into the measurement system. An example is the responsibility to manage the coordination between different functional units. A solution according to Pritchard (1995) might be to measure both on unit level and on departmental level. The scaling strategy can still be used as we attended to do; the productivity measures of each of the units can be combined and give an index of the average total productivity of the units (thus how the units are doing as a group). But a comment we can place is that when one optimally wants to make use of the scaling strategy, should also take the responsibilities for the department as a whole into account The relational model When we summarize the problems described above into a model; each of the described factors is commonly related to three main factors. These three main factors are on their turn indirectly influencing the success of a ProMES system for a job shop. These factors are negatively related to the success and can be identified as: 1. Decomposition of departmental performance - Departmental performance can hardly be decomposed into the performance of independent units. 2. Low controllability - Groups can have a substantial, but not major influence on unit performance. 3. Risks at sub-optimization - Job shops consists of multiple compositions of groups with different interests. T. de Boer 36

37 These three factors are influenced by other related factors. We can define four factors which are directly related to the three main factors and which are indirectly related to success; the betweengroup dependencies, shifting operators, varying orders and the different interests of units. The degree to which the success of the system decreases depends on how strong the influences of these factors and relationships are at a specific job shop situation. The relationships between the factors can be made clear in a model, which is presented in figure 5.1. The relationships are represented by the arrows between the eight factors. Figure 5.1: Relationships between factors influencing success of ProMES. Decomposition is required when a system is applied on unit level. The interdependencies between the functional units are negatively influencing the degree to which the departmental productivity can be decomposed into single unit productivity. The interdependencies do also negatively influence the control over the productivity, which is one of the most important requirements of ProMES. Shifting operators between units negatively influences the ability to decompose departmental productivity and the control over productivity. The many different orders that have to be processed, which is typical for a job shop, are related to the control over productivity. Risks at sub-optimization increase because the goals for each unit will become independent of each other when the units are individually being measured. The three main factors are all related to the success of the implementation of a ProMES system. The stronger these problems are, the lower the chances at a successful implementation. Up till now, we have described the difficulties and problems for applying ProMES which are specific for a job shop situation. The developers of the ProMES methodology have determined requirements for a successful development and maintainability of the ProMES system. The job shop situation leads to these difficulties/problems because the specific characteristics and conditions of a job shop can probably not satisfy these requirements. Application of ProMES to a job shop can lead to problems because the situation can probably not satisfy the following requirements (Van Tuijl, 1997): T. de Boer 37

38 - the system is able to represent one single score for the total departmental productivity; - the system is able to show how the total score is build up from sub-scores; - the responsibilities have to represented by the unit and show these responsibilities at a valid way. The facts discussed above require us to create a situation in which the total departmental productivity is decomposed into single unit productivity, so one is able to individually recognize and measure the productivity of each single unit. Thus one of the most important trade-offs is the level at which productivity is measured and at which information is feed back (unit or departmental). Additional requirements are stated for the development of products, indicators and contingencies which are probably difficult to satisfy by the job shop situation (Van Tuijl, 1997): - employees have to be in control so they are able to influence their productivity; - stable work environment and conditions for reliable determination of the contingencies. In this paragraph we have explained why it is hard to satisfy these requirements when ProMES have to be applied to a job shop. Due to these problems, we do not know what the possibilities of applying ProMES to a job shop are at this moment and how strong the relationships of the model are. In the next paragraph we formulate some ideas to solve the problems stated above. And in the next chapters we try to find out if the causal relationships as presented in figure 5.1 are valid for the research company. 5.3 Generating ideas for developing and applying ProMES One of the research questions of this research was; How to define productivity in a job shop situation and how can it be measured? Productivity can be defined and measured as described by Pritchard (1990), thus we do not only determine the definition of productivity of a job shop, but we will combine that with the determination of the level to which it is best to develop and apply ProMES. At generating ideas for applying ProMES and measure the productivity we concentrate on what level (unit or departmental or a combination) it is best to measure productivity instead of defining productivity. In other words; the question; What is productivity in a job shop? will be answered in combination with the determination of the level at which it is best to develop and apply ProMES. The objective of this idea generating phase is to come up with a solution about the level at which it is best to development of a ProMES system. The ideas are determined according to the possibilities within a job shop, and the trade off between the development time and time to maintain the system and the highest possible improvement of overall productivity. We want to create a situation where it is possible to recognize the changes (increase or decrease in productivity) at departmental level by knowing which factors at unit level caused these changes. The main goal of the ProMES methodology is to improve the productivity of the employees so to achieve the organisational objectives. For example; manufacture more and innovative products in a safe environment at low cost. The changes in productivity will at first be recognizable at departmental level. When productivity changes are recognized at departmental level, in for example; processing times, lateness and quality, we want to be able to determine which factors at unit level influenced these changes, see figure 5.1. And the other way around, when changes applied on unit level, we want to be able to determine to which changes that will lead in total departmental productivity. T. de Boer 38

39 Figure 5.1: Relationships between unit and departmental level We want to visualize and measure the productivity at each unit to gain improvements in total departmental productivity, but we do have to bear in mind what the possibilities and difficulties for such a system are. At this moment we do know what the difficulties in theory are, but we do not know what the possibilities in practice are. The situation described above is the most optimal situation and is the objective of the idea generating phase, but again, we do not know what the possibilities in practice are. That is why we generate ideas by considering the difficulties of a job shop and possibilities of the ProMES system. We first determine the idea which creates the situation as described above, this would then be the idea what leads to the most optimal situation. After explaining this first idea, we will determine if there are any difficulties or disadvantages implied, which are then tried to be solved by introducing a new idea. After analysing a job shop system at the research company we can determine which of the ideas are possible and is the best option for the development of the ProMES system, but this will be discussed in chapter 7 and 8. IDEA 1 The objective is that we want to be able to know to which changes in total departmental productivity it leads when changes are applied on unit level. Thus we have to apply ProMES to the smallest possible group in a job shop, to determine which and/or who influenced the changes in productivity at departmental level. An additional advantage is that a performance measurement system is most effective when the achieved performance is fed back to a small group of people. The production department characterized as a job shop can be split up into different functional units. This is the smallest group of people that can be measured and evaluated (we already left out the option of a system for each individual person). The first idea is to develop a ProMES system for the department, and measures takes place at each individual functional unit, as graphically shown in figure 5.2. Department Measure Unit Measure Unit Measure Unit Measure Unit Feedback Figure 5.2: Idea 1 The same products, indicators and contingencies are determined for all the units, because then it is possible to compare and sum up the unit scores and to obtain scores representing the overall productivity of the department. T. de Boer 39

40 One general feedback report must be set up which represents the total departmental scores on the indicators which are build up out of the scores of each single unit. This leads to decreasing chances at sub-optimization because employees are forced to maximize the overall departmental score. The first idea for measuring productivity and developing a ProMES system is: Idea 1: Develop a ProMES system for the department, and measure each functional unit individually We will now analyse if difficulties show up at each of four development phases of ProMES. The idea causes no problems at the first phase; key result areas (products) can be defined because products stem from the organizational objectives and goals. Products which can be determined for example are production speed and machine utilization. No problems will occur at development phase 2; developing indicators. An indicator is a measure of how well the unit is generating the product in question. Indicators for the two given products above can be for example the number of products processed and the time the machines were on divided by the time the machines were off. In phase 3 where low and high productivity must be determined is not dependent on the level of measuring, so no specific problem caused by this idea. Phase 4, where the actual productivity has to be measured and recorded in a feedback report can hardly be performed due to this idea. Each kind of output per unit has to be made visible and measurable what will be difficult due to the interdependencies between the units. And as told before in this chapter, measuring on unit level involves some other disadvantages such as; scores will not represent the actually possible achievable performance due to shifting employees, it takes much time to develop and maintain the system, the cooperation between the units is partly removed which can lead to a decrease of overall productivity. IDEA 2 Due to the described problems above we now come up with an idea which takes out some of these problems. Generally, the next idea is to measure both at unit and departmental level, thus by setting unit goals with additionally some departmental goals. This will decrease the chances at sub-optimization, it will increase the cooperation between the units and the relationships between the units stay intact. The design team has to analyze which productivity aspects can not or are hard to separate into unit s productivity, and choose to measure these aspects at departmental level. Products to be set up at unit level can be for example; the number of products produced, quality and machine utilization and on departmental level for example; lateness of delivery and total energy use. Products, indicators and contingencies have to be set up for both the units and the production department when this idea is implemented. Goals have to be set on unit level because this mostly motivates people to work more efficiently and information can be fed back to each individual unit and also goals have to be set on departmental level to take away the difficulties described above. This second idea is graphically shown in figure 5.3. Measure Measure Unit Measure Unit Department Measure Unit Measure Unit Feedback Figure 5.3: Idea 2 T. de Boer 40

41 The idea is thus to maintain the first idea and expand that idea with some measures on departmental level. The second idea for measuring productivity and developing a ProMES system is: Idea 2: Expand idea 1 with measures on departmental level Development phase 1 of the ProMES system (identifying products) will not cause any problems. The difference now is only that on both levels (unit and department) products have to be defined. The same counts for phase 2 and 3; no problems will show up after implementing this second idea, it will only take more time to determine and set up the indicators and contingencies at both levels. The difference this idea makes in comparison with idea 1 is that fewer problems will show up at the measurement and feedback phase (phase 4). This is because now some productivity aspects which can not be decomposed into unit s productivity will be measured on departmental level. So it is not required anymore to visualize and measure all the productivity aspects at each single unit. A comment here is that it may not be possible to visualize and measure any kind of productivity at each single unit, what implies that this idea is not an improvement over the first idea. When this idea is applied to the ProMES system, it will require much more development time, because products, indicators and contingencies must be defined on both unit level and departmental level. Also the maintenance time will increase drastically because productivity has to be measured and fed back on both levels. It might be still the case that productivity cannot be measured at unit level because none of the productivity aspects can be separated and ascribed to single units. The problem of shifting employees remains so unit scores will not represent the actually possible achievable performance. IDEA 3 Due to the problems showing up at both ideas described above, it turns out that it would be better to measure on a higher level. The improvement is that measuring on higher level leads to better cooperation between the units and the interdependencies between the units will not be removed. A disadvantage of measuring on a level which is too high is that the individual unit contribution can not be recognized anymore what leads to fewer changes in motivation and productivity. It might be possible to combine units which are closely cooperating and to measure and apply feedback to as a whole group. According to Pritchard (1990) a group is formed with the criterion that the smallest possible combination is formed in which the intern dependency relationships are stronger than the extern dependency relationships. Thus we want to keep the measurement group as small as possible (most effective), but the measurement level has to be increased. Thus we first propose the idea to form a cluster of units, instead of developing a system at departmental level. Other advantages in comparison with idea 2 are the decrease in measurement time and the most important relationships will stay intact. Forming a cluster of functional units is only possible when that specific set of units are very closely cooperating and having together the responsibilities for manufacturing specific parts. Thus they are together performing tasks and operations which results in a common measurable outcome. Often in job shops operators are transferred between the units when demand is low on one unit and high on another, and because the have the skills to operate other machines. The thought behind this third idea is thus that due to closely cooperation between some units and shifting of operators, a group of units can be combined and be taken as one group. An example is to combine a saw unit with the milling unit, because they are tightly joint together, have a narrow cooperation, and the operators perform activities on both units. The idea is thus to develop a ProMES system for the department, and measure a group of functional units. The third idea is graphically shown in figure 5.4. T. de Boer 41

42 Department Measure Unit Measure Unit Feedback Unit Unit Figure 5.4: Idea 3 The same products and indicators have to be set up for the groups, and then the group scores can be summed up as one score representing the score of the whole department. The general feedback report is built up out of the group scores which are summed up to the total department productivity. The third idea for measuring productivity and developing a ProMES system is: Idea 3: Develop a ProMES system for the department, and measure a group of functional units Considering the four development phase of ProMES, we can state that the first phase will not cause any problems; products can still be defined for the units. This idea does not change anything on the performability of development phases 2 and 3 in comparison with the previous ideas; indicators and contingencies can be set up without influences of this third idea. Still problems might show up at development phase 4 where the actual scores on the indicators have to be measured and fed back to the floor. We can state that this third idea is an improvement in comparison to idea 1 and 2 concerning the problem of recognizing and measuring the productivity of each single unit, only if there is a situation of closely cooperating units. A disadvantage of this idea is that the motivational efficiency decreases, because feedback is given to a larger group of people. A drawback of this third idea is that we do not know if it is possible to form a group of units. Other problems which emerge are the same as emerged at idea 1 and 2; scores do not represent the possible achievable performance (changing production environment), it still takes much time to develop and maintain the system and maybe it is till not possible to remove all the relationships between the units even though groups are formed. IDEA 4 Due to the remaining problems of this third idea, we will enlarge the measurement level to department level. The improvements in comparison with the previous ideas is that it is not needed to separate the production department into smaller groups, so relationships and cooperation will stay intact and eventually increases, development and maintenance time drastically decreases (measure only at departmental level), sub-optimization and shifting of employees do not cause problems any more. So the next idea provided (see figure 5.5), is to develop one measurement system by which the overall productivity of the department is measured and fed back. The idea is thus to develop and implement one ProMES system, with common products, indicators and one feedback report. The fourth idea for measuring productivity and developing a ProMES system is: Idea 4: Develop a ProMES system for the department, and measure on departmental level T. de Boer 42

43 Measure Department Unit Unit Feedback Unit Unit Figure 5.5: Idea 4 When the ProMES system is applied according to this idea, no problems will occur at the four development phases; products, indicators, contingencies can all be defined and it is easy to measure the productivity of the whole department at the end of the final production step, and a feedback report can be set up easily. The departmental score on each of the indicators is fed back as a whole to the department. But even this fourth idea implies some problems when implemented into the company; a major disadvantage of this fourth idea is that it is the least effective idea (less motivation thus small changes in productivity) because the measurement group is probably too large. The disadvantage is that people or units cannot recognize their individual contributions when the scores are fed back to the whole group, because they are not enough motivated to improve their productivity. Also, it can not be assumed that each employee and unit works as hard and do one s best as another to maximize his or her productivity, because he or she does not have the intention (not enough motivated) or the possibilities to do that. The problem is thus that the total overall productivity can not fairly be seen as the sum of productivity of all units because units do not always (try to) maximize their productivity. After describing the succeeding ideas it turned out to be that each idea does not overcome all the problems. Thus maybe the first idea will still be best performable, because the other ideas do also encounter important problems. The advantages and disadvantage we mentioned at the four described ideas are concerning a job shop situation which is the worst case scenario, thus the situation with the most difficult interdependencies, complex material flow, low control on productivity, etc. The advantages and disadvantage of each of the provided ideas are summarized in table 5.1. The conclusion is that at this moment we can not make a grounded and reliable judgment about which of the ideas is best possible. First we have to analyze the production department of the research company before evaluating the four ideas. We will analyse the practical possibilities of a ProMES system according to the research company in chapter 7 and the best idea is determined in chapter 8. T. de Boer 43

44 Ideas Advantages Disadvantages Idea 1 - This is the most optimal situation. Thus - Hard to measure each unit individually one is able to know which changes to - Much development and maintenance time apply on unit level, to recognize the - Fact of shifting employees desired changes in productivity on - Chances at sub-optimization departmental level. - Cooperation between units might be Idea 2 - The most important relationships stay intact - Better cooperation between units - Decreasing chances at sub-optimization Idea 3 - Better cooperation between units - Interdependencies between units are only partly removed - Decreasing measurement time - Shifting employees is no problem Idea 4 - No separation of units - Cooperation and relationships stay intact - Shifting employees is no problem - Development and maintenance time drastically decreases - No sub-optimization Table 5.1: Advantages and disadvantages of the generated ideas removed - Still not possible to measure each unit individually - Much development and maintenance time - Fact of shifting employees - Less motivational - Still some chances at sub-optimization - Difficult to combine specific units - Least motivational idea, thus small changes in productivity is expected - No fair measurement system T. de Boer 44

45 6. Description of the research company The theory described in previous chapters will be tested in the practical situation of the research company; Exerion Precision Technology, Ulft, the Netherlands. Also the ideas presented in chapter 5 will be checked and tested according to the situation at that company. Paragraph 6.1 shortly describes the company. In paragraph 6.2 we give a general overview of the production process. The production department can generally be divided up to four work centers, which are described in 6.3. The part of the production department which can be characterized as a job shop system is described in 6.4. The question; Does and how does the company measure the productivity of the production department? is answered in paragraph 6.5. In paragraph 6.6 is explained what the implementation of the ProMES system means for the remaining departments of the research company. 6.1 Short description of the company Exerion precision technology designs and manufactures metal chassis and mechanical parts for printing and medical equipment and the demand is stable and predictable. It operates three production facilities in Czech Republic, the Netherlands and Malaysia. The market can be characterized as a business to business one. There are working around 250 employees in the production facilities in the Netherlands, Czech Republic and Malaysia. The project is concentrating on the production facility in Ulft (Netherlands). The product assortment can be defined as low volume and high variety. The acceptance of ordering is according to a yearly agreement at which the customers provide Exerion with a forecast of their requirements. The actual demand is realized by means of call-offs or single orders. The major part of the demanded volume is rather stable from week to week. Exerion jointly designs new products for its customers. 6.2 Overview of the production process The project will be concentrated on the parts production department of the company, where a large number of parts and operations are to be managed, and where most of the metal parts are manufactured for later assembly at the welding lines. This department can best be characterized as a job shop. At the production department, the process can generally be divided into four steps; metal-sheet cutting, parts production, kitting and welding. All products manufactured by the production department do not necessarily require each of these steps, and are often processed through varying routings. After welding, the frames may be sent to an external supplier for surface treatment, to module building (where additional components are affixed to them) or directly to the customer. The general production process is sketched in figure 6.1. Figure 6.1: The general production process at Exerion The general production process will now be described. The main raw material consists of metal sheets which are first cut into smaller flat parts and holes are punched into these part. These parts are then further processed (bending and/or clinching) depending on the specific customer order. T. de Boer 45