TAILIEUCHUNG - PORTABLE MBA IN FINANCE AND ACCOUNTING CHAPTER 7

7 MEASURING PRODUCTIVITY. Michael F. van Breda. “Control is what we need. Cost control. And urgently,” said owner-manager Dana Jackson emphatically to her management team. “Just a glance at these reports tells me that our costs are going up faster than our revenues. We won’t survive much longer on that basis.” | 7 MEASURING PRODUCTIVITY Michael F. van Breda Control is what we need. Cost control. And urgently said owner-manager Dana Jackson emphatically to her management team. Just a glance at these reports tells me that our costs are going up faster than our revenues. We won t sur v ive much longer on that basis. Well we could try using cheaper inks and lower quality paper said Tom Dodge production manager of Jackson Printing half-facetiously. That s not the answer exclaimed marketing manager Ahmad Grande. We re hav ing a hard enough time as it is selling in this competitive market. If we start to produce an infer ior product our sales will tumble even further. Nobody is going to pay our prices and take cheaper quality. Ahmad s right said Dana. Our aim should not be to reduce costs so much as to control them. Remember that we have a goal to meet in this organization to produce the best-quality products that we can. If we don t keep our eyes on that goal we won t be effective as an organization. What I m really after is efficiency. I want to see us produce quality products as cheaply as possible but I don t want us to produce cheap products. We must improve productivity. To get the ball rolling I want Tom to draw up a set of standards for production. Our attorney has been explaining the new system they have installed in their office to control their bi llable hours. We could do something similar in our business. As eyes rolled Dana explained what their law firm had done. I was telling their senior partner about our concerns and he related to me his own 199 200 Understanding the Numbers conversation with one of his associates. She was expected to bill approximately 500 hours each quarter to clients. She had actually reported 570 hours which pleased him but she had only brought in 70 500 when he would have expected 85 500 based on her standard billing rate of 150 per billable hour. That was 15 000 below his expectations. She explained to him that on the Prescot case the .

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