Productivity is a measure of the efficiency of production, expressed as the ratio of output to inputs used. Performance is defined as the accomplishment of a given task measured against preset standards of achievement, such as accuracy, completeness, cost and speed.
In the wider context of performance management, productivity is measured against productivity KPIs. In their simplest form, productivity KPIs, such as # Units per man-hour, stand at the basis of both modern and older performance evaluation systems. However, it is only but natural that we ask ourselves the following question: How much productivity is there left to both measure and reflect on performance?
In her book, The Measurement Nightmare: How the Theory of Constraints Can Resolve Conflicting Strategies, Policies, and Measures (1999), Debra Smith talks to her readers about a real-life situation, based on one of the most common productivity KPIs in use: # Units per man-hour. And it all starts with defining the KPI. According to her, # Units per man-hour is a “summary of standard costing’s use of standard labor hours and standard labor rates, resulting in labor variance analysis and decisions designed to improve.”
“There is not one productivity indicator that does not reflect on performance. And there is not one neglected faction of performance that does not impact productivity in one way or the other.”
From here on, Debra Smith describes this particular situation in which, on an intuitive basis, some executive manager from a manufacturing company decides to increase # Units per man-hour by cutting labor costs with highly automated machines. So, instead of six loom operators, four were assigned to tend to one loom per shift.
And the effect was as expected…at first. # Units per man-hour had increased at the loom. However, because of the downtime of the looms which now increased, the total output of the looms had decreased.
Due to a lack of attending operators, the downtime of the machines escalated up to a point where it impaired all subsequent processes. When that happened, all downstream processes began to suffer from starvation. % On-time delivery of products declined, $ Labor costs went up due to # Overtime and, instead of going up, $ Net profit went down.
Debra Smith’s account of the negative side effects one productivity measure can propagate, when taken out of the context of performance, stand to show that there is more to productivity in performance than counting outputs per unit of input. And this is more visible when dealing with the most popular dimension, which is labor productivity.
In the context of performance management, labor productivity can be translated through individual KPIs. When dealing with employee performance, individual productivity KPIs become part of a more complex performance evaluation system. The overall individual performance index simulates an average between the score of the individual performance scorecard, the individual competencies score, and the employee behaviors score.
Where do KPIs fit into this equation? Productivity KPIs are mindfully incorporated into the individual performance scorecard, to best reflect the quantitative aspects of employee performance. And this is where everything gets tricky and we start asking ourselves: How much of one employee’s performance should be measured in terms of quantity?
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Let’s take, for example, the automotive industry. With automotive manufacturing, productivity is a key performance indicator that measures the total production volume of the actual manpower, while taking into consideration the effective days officially scheduled for each automobile.
The core performance indicator of the automotive industry is # Hours per unit or # HPU, and it reveals the number of hours required to build a car. However, at its basis, this # HPU cannot be measured outside # Available manpower, # Effective working time, and # Individual production volume. Let’s add % Absenteeism rate to this reasoning.
When dealing with target production volumes it is important that the plant works at its full throttle to achieve those targets. Given this requirement, % Absenteeism rates should not be overlooked, as they have a major impact on the # Effective working time, which here on, impacts the # Production volume, and, ultimately, the # HPU.
However quantifiable, % Absenteeism rates also reflect on less quantifiable variables. This further takes us to the issue of % Employee engagement: a roughly quantifiable, uncontrollable driver of not only productivity but of performance as well.
So, how much productivity is there left, to both measure and reflect on performance? A great deal. And maybe the best way to look at it is by envisioning this revolving cartwheel…this continuous circle, which turns productivity into performance and vice versa.
All things considered, there is not one productivity indicator that does not reflect on performance. And there is not one neglected faction of performance that does not impact the former in one way or the other.
For more articles on productivity improvement, click here.
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Editor’s Note: This article has been updated as of September 18, 2024.
Airlines are progressively pushing for enhanced operational effectiveness and performance. In today’s market, airlines must constantly change and strengthen their performance to remain competitive and satisfy their passengers’ expectations. Due to liberalization and growing global competition, meeting consumer demands is no longer enough to keep passengers loyal to an airline. On-time performance (OTP) has been seen as an advantage, particularly among airlines targeting business travelers, according to the data and aviation analytics solutions provider Cirium.
Optimizing operations is recognized as a profit driver since it reduces costs and allows the introduction of service differentiators, which increase revenue. Airlines concentrated on maximizing revenue in a high-growth climate before the pandemic. They focus on operational efficiency to save money and navigate an unpredictable environment. Aviation is considered one of the most dynamic industries; thus, an appropriate assessment and performance measurement system should be in place.
The decisions made by airlines regarding their fleet of aircraft, the number of seats on each aircraft or the well-handled luggage, the routes they fly, the customer segments they prioritize, and the interest in protecting the environment have a significant impact on how well they perform. The quality of airline services and passenger satisfaction boosts overall customer loyalty.
All of these aspects may be evaluated using performance metrics, which provide airlines with useful information for enhancing their operations. Information Design, an aviation technology company, reveals in an article from 2020 the main operational aspects in aviation that are measured with KPIs (see Figure 1).
Qatar Airways’ performance
Qatar Airways is categorized under the elite group of airlines in the world with a five-star rating and a recipient of the “Best Airline Award” and “Best Business Class” awards in July 2021, based on an annual airline customer satisfaction survey from transport rating organization platformSkytrax.
Qatar Airways, owned by the Government of Qatar, became the first global airline to achieve the prestigious 5-Star COVID-19 Airline Safety Rating, which includes a thorough examination of procedural efficiency checks and safety standards at all stages of the passenger journey.
The Qatar Airways Annual Report 2021-2022 showed that the airline never stopped flying throughout the pandemic and is still making upgrades and expanding its services. As a result, the share of Revenue Passenger Kilometers increased by 3.1% from 2019 to 2021, from 4.4% to 7.5%.
The report indicates that the revenue and other income of the company almost doubled in 2021-2022 compared to 2020-2021, reaching a value of 52.305 QAR million. A lot of areas in the company improved, including the number of aircraft (from 250 to 257), the number of employees (from 36.707 to 41.026), and the number of available seats (from 93.385 to 159.947 million). Meanwhile, the number of passengers carried more than tripled (from 5.8 million to 18.5 million). In addition, the number of routes expanded, with six destinations in Australia, Africa, and Asia reaching to transport 4.89% of global international passenger traffic in April 2021.
For the best management of its KPIs, QAS developed its Integrated Operations Center (IOC), which is responsible for preserving schedule integrity and ensuring that all flights operate safely and securely. Travel restrictions have changed continuously over the past year as a result of governments adding and removing criteria in response to the pandemic.
For IOC, managing these adjustments evolved into a standard procedure. Through investments in technology, the center will continue its mission of forecasting and managing disruption. In addition, the center will also upgrade its operations system and strengthen its flight planning software this year. The IOC has established additional Safety Management System-based procedures in the form of internal Safety Risk Assessments in compliance with industry standards and corporate safety policies. Therefore, the IOC management team is better able to quickly adapt to vulnerability factors in the operational environment.
The most important achievements that QAS managed to accomplish in 2021 were serving more than 20 million passengers per year, handling approximately 179.000 flights in 2021, and delivering an on-time performance rate of 99.51%. In the same period, the organization handled more than 17 million pieces of baggage, proving an extremely low mishandling rate of 0.08 per 1000 passengers. These indisputable results made the difference, and QAS Group announced in a press release that it recorded the highest profit in the global airline industry for 2021-2022. Its passenger revenue increased by 210% over the last year, and the number of passengers carried grew by 218&, maintaining its leading position in the industry.
To align with the United Nations’ Sustainable Development Goals (SGD), QAS developed a corporate sustainability strategy monitored by environmental KPIs. It puts the best standards in environmental protection, noise, and air quality into practice by declaring its commitment to becoming the first net-zero carbon emission airline by 2050. The company’s website shows the interest of QAS in measuring the performance of environmental sustainability, assessing it in fields such as climate and energy, waste and water, noise, air, and wildlife protection.
The airline industry is a domain of continuous innovation and improvement. The pandemic wasn’t the single challenge to overcome because airlines have to face everyday issues like the global economic environment, internal infrastructure, technological advancements, passenger satisfaction, climate change, and fuel efficiency. Measuring performance can help airlines to reduce these negative impacts by identifying their strengths and weaknesses and opportunities for improvement.
For an organization to achieve and sustain outstanding results that meet or exceed the expectations of its stakeholders, it is necessary to define an inspiring purpose, create an aspirational vision, develop a strategy centered on creating sustainable value, and build a winning culture.
Direction setting prepares the way forward for the organization, but it needs to execute its strategy effectively and efficiently. The organization must
know who the stakeholders are in its ecosystem and engage fully with those that are key to its success;
create sustainable value;
drive the levels of performance necessary for success today and, at the same time, drive the necessary improvement and transformation once it becomes successful in the future.
When stakeholders that are the most important to the organization, such as key stakeholders, and are independent of the specific groups have been identified, it is likely that there is a degree of similarity in applying the following principles when engaging key stakeholders.
An outstanding organization:
identifies the specific types and categories within each of its key stakeholder groups;
uses its understanding of the key stakeholders’ needs and expectations to achieve continuous engagement;
involves key stakeholders in deploying its strategy and creating sustainable value;
recognizes the contributions the key stakeholders make;
builds, maintains, and further develops the relationship with key stakeholders based on transparency, accountability, ethical behavior, and trust;
works with its key stakeholders to develop a common understanding and focus on how, through co-development, it can contribute to and draw inspiration from the United Nations Sustainable Development Goals and Global Compact ambitions; and
actively gathers the perceptions of its key stakeholders rather than wait for them to make contact.
Build Relationships and Ensure Support for Creating Sustainable Value
Partners and suppliers are the external parties that the organization chooses to work with to fulfill its purpose, achieve the vision, deliver the strategy, and reach shared objectives that benefit both parties.
In practice, we find that an outstanding organization:
understands the stakeholder model for its key partners and suppliers, with a clear segmentation based on the organization’s purpose, vision, and strategy;
ensures its partners and suppliers act in line with the organization’s strategy and that mutual transparency, integrity, and accountability in the relationship is established and maintained;
builds a trusting relationship with its key partners and suppliers to support the creation of sustainable value;
works proactively with its key partners and suppliers to leverage the culture, expertise, and know-how of both parties and achieve mutual benefit.
Partners are considered operant resources that should also act on operand resources to co-produce value with customers and the firm to ensure the best results are delivered to customers.
It’s a matter of value creation, which considers partners part of the core competencies. We should focus on choosing them and how they interact on the value chain to help improve the results in customer satisfaction and customer involvement.
Choosing the Right Partner
It’s a matter of interest. This is how Benoit Hanssen, the chief technical officer of Hutchison CP Telecommunication Indonesia, described one of the ways of choosing the right partner.
He said that as long as business goals match the partner’s business goals, everyone can ensure that they have chosen the right partner for a long-term relationship with a win-win strategy.
Moreover, choosing the right partner adds another competitive advantage to businesses. This occurs by depending on them to be part of the business and learn how to deal with customers and by increasing their participation in the value co-creation.
Open relationships in terms of communication and exchange of data is another factor in choosing the right partner.
They have to ensure a smooth exchange of information with the firm for a long-term relationship that will bring benefits to both entities. This is accompanied by removing the boundaries between firms and their partners. Vargo and lusch stated that partners should agree on having an open relationship from the beginning while firms have to ensure fair treatment for all their partners. They also added that firms’ partners should understand the environment they will work in, the cultural boundaries, and the cultural development; all of these are considered important factors that partners should contribute to understanding them and acting with the firm according to them.
Attractive costs and full attention to the risk of offers delivered to the market are other factors when choosing the right partner. Partners should work closely with the firm to convey their solutions to the firm within the budget offered and make sure that the solutions offered can effectively add value to the firm and help improve their business. This is done by having partners who focus on developing their businesses research and study the market and the business they are partnering with. This way, they can develop solutions that can continuously help their partner (the firm) solve their problems, improve their presence in the market, and develop benefits among other competitors.
Improving the existence in the market and increasing the resources available to have additional knowledge about the market needs and perform strongly among other competitors are reasons for choosing the right partner. This directs us to more factors that play a major role in choosing business partners: a partner that has good knowledge about the market and customer needs and can add value to the firm through resources and capabilities.
Moreover, when firms try to offer more services or products to the market that are considered new for the firm in terms of capabilities and resources available, it may not be enough to proceed with such an option. Even when firms enter new markets, there are reasons to dig deeper in other firms’ strategies and potentials. It is important to look for partnerships with advanced capabilities and resources that are not just focused on the present time but are ready for technological developments and to produce outstanding output.
On the other hand, a partner’s reputation in the market is crucial. It gives the firm an advantage before its competitors because customers, suppliers, and even other partners will consider competitiveness as a reason to consider the firm.
In addition to reputation, previous achievements that are related to the quality of solutions offered by firms are also important. It will reduce the amount of pressure when monitoring partners’ outputs, especially when they offer services that are difficult to monitor.
Moreover, managerial capabilities should be taken into consideration when choosing a partner since it can play a major role in helping the firm learn more from this partner and facilitate the exchange of skills and experience.
Qatar Airways’ performance
