Counter-Productivity

Saturday, November 29, 2014

coffee_table_talk_PA_150_wht_6082The Webex icon bounced up and down on Bob’s task bar signalling that Leslie had just joined the weekly ISP coaching session.

<Leslie> Hi Bob. I have been so busy this week that I have not had time to consider a topic to explore.

<Bob> No problem Leslie, I have shelf full of topics we have not touched yet.  So shall we talk about counter-productivity?

<Leslie> Don’t you mean productivity … the fourth dimension of system improvement.

<Bob>They are related of course but we will approach the issue of productivity from a different angle. Rather like we did with safety. To improve safety we considered at the causes of un-safety and focussed our efforts there.

<Leslie> Ah yes, I see.  So to improve productivity we look at the causes of un-productivity … in other words counter-productive beliefs and behaviours that are manifest as system design flaws.

<Bob> Exactly. So remind me what the definition of a productivity metric is from your FISH course.

<Leslie> Productivity is the ratio of a stream metric and a stage metric.  Value-for-Money for example.

<Bob> Good.  So counter-productivity is also a ratio of a stream and a stage metric.

<Leslie> Um, I’m not sure I quite get that. Can you explain a bit more.

<Bob> OK. To explore deeper we need to be clear about how each metric relates to our intended outcome.  Remember in safety-by-design we count the number and severity of risks and harm because  as harm is going up then safety is going down.  So harm is an un-safety stream metric.

<Leslie> Ah! Yes I see.  So if we look at cycle-time, which is a stage metric; as cycle-time increases, the activity falls and productivity falls. So cycle-time is actually a counter-productivity metric.

<Bob>Excellent. You are getting the hang of the concept of counter-productivity.

<Leslie> And we need to be careful because productivity is a ratio so the numerator and denominator metrics work in opposite ways: increasing the magnitude of the numerator is equivalent to decreasing the magnitude of the denominator – the ratio increases.

<Bob> Indeed, there are many hazards with ratios as we have explored before. So let is consider a real and rather useful example.  Let us look at Little’s Law from the perspective of counter-productivity. Remind me of the definition of Little’s Law for a single step system.

<Leslie> Little’s Law is a mathematically proven law of flow physics which states that the average lead-time is the product of the average work-in-progress and the average cycle-time.

LT = WIP * CT

<Bob> Good and I am pleased to see that you have used cycle-time. We are considering a single stream, single stage, single step system.

<Leslie> Yes, I avoided using the unqualified term ‘activity’. I have learned that lesson the hard way too!

<Bob> So how do the terms in Little’s Law relate to streams, stages and systems?

<Leslie> Lead-time is a stream metric, cycle-time is a stage metric and work-in-progress is a …. h’mm. What it is? A stream metric or a stage metric?

<Bob>Or?

<Leslie>A system metric?  WIP is a system metric!

<Bob> Good. So now re-arrange Little’s Law as a productivity formula.

<Leslie> Work-in-Progress equals lead-time divided by cycle-time

WIP = LT / CT

<Bob> So is WIP a productivity or a counter-productivity metric?

<Leslie> H’mmm …. I will need to work this through logically and step-by-step. I do not trust my intuition on this flow stuff.

Increasing cycle-time is counter-productive because it implies activity is falling while costs are not.

But cycle-time is on the bottom of the ratio so it’s effect reverses.

So if lead-time stays the same and cycle-time increases then because it is on the bottom of the ratio that implies a more productive design. And at the same time work in progress must be falling. Urrgh! This is hurting my head.

<Bob> Good, keep going … you are nearly there.

<Leslie> So a falling WIP is a sign of increasing productivity.

<Bob> Good … and that implies?

<Leslie> WIP is a counter-productivity system metric!

<Bob> Well done. Your logic is flawless.

<Leslie> So that  is why we focus on WIP so much!  Whatever causes WIP to increase is counter-productive!

Ahhhh …. that makes complete sense.

Lo-WIP  designs are more productive than Hi-WIP designs.

<Bob> Bravo!  And translating this into financial metrics … it is because a big queue of waiting work incurs costs. Storage cost, maintenance cost, processing cost and so on. So WIP is a liability. It is not an asset!

<Leslie> But doesn’t that imply treating work-in-progress as an asset on the financial balance sheet is counter-productive?

<Bob> It does indeed.

<Leslie> Oh dear! That revelation is going to upset a lot of people in the accounting department!

<Bob> The painful reality is that  the Laws of Flow Physics are completely indifferent to what any of us believe or do not believe.

<Leslie> Wow!  I like this concept of counter-productivity … it really helps to expose some of our invalid assumptions that invisibly block improvement!

<Bob> So here is a question to ponder.  Is zero WIP desirable or even possible?

<Leslie> H’mmm.  I will have to think about that.  I know you would not have asked the question for no reason.