Performance measures are grouped into two main parts:
1. Productivity – Improved productivity reduces costs and can be measured by the number of hours a product takes to be produced. This is simply worked out as a ratio of outputs achieved divided by the number of inputs needed to achieve the outputs.
Productivity can be increased, over time, by decreasing input numbers but maintaining the same output level, increasing the outputs from the same quantity of inputs; increasing the rate of outputs faster than inputs; and decreasing the rate of inputs at a quicker rate than the outputs.
2. Utilisation – Key to ensuring that initial outlays, and subsequent operating costs are managed effectively is the utilisation of resources. Utilisation is measured using the ratio of output level achieved divided by the maximum possible output level. This ratio is generally expressed as a percentage.
Example:
Actual level of output achieved/Maximum possible output x 100%
Service and operational performance can both be identified through the use of KPIs. Managers should ensure that performance measures are balanced in order to provide a clear position on both productivity and utilisation levels of operations.