Total Organizational Effectiveness (TOE)

We repeatedly prove to our new clients that they utilize only 30%-40% of their productive capacity.  Prior to our data led analysis, they typically estimate their effectiveness at around twice that level.  Why?

Some capacity losses are obscured within functional structures and misconceived as being local performance measures, unrelated to enterprise capacity utilization.

We understand that capacity is effectively discarded when: 

  • output is sold at prices resulting in a unit loss;

  • ‘utilization’ is assessed in relation to lazy operating standards (efficiency, availability and quality);

  • inventory values are ‘written off’ or ‘written down’ to the equivalent of a unit loss after capacity is ‘utilized’.

  • Idle Capacity 35%
  • Unavailable Capacity (schedule but inoperable) 20%
  • Inefficient Capacity (slow running against ideal standard) 10%
  • Defective Capacity (producing defective output) 10%
  • Uneconomic Capacity (sold or valued at a unit loss) 25%
Total Organizational Effectiveness (TOE)

Management often focus only on the obvious means of discarding capacity. Typically, operational functions are held responsible. However, effective analysis reveals that obvious means facilitate only 20-40% of capacity losses. 

The obvious means of discarding capacity include idle and unavailable production assets, together with obvious quality defects.

Also obvious are the simple variances between actual and ‘standard’ production outcomes. Less obviously, the standards employed to determine that capacity has been utilized often don’t reflect true asset capabilities.

We establish the measures of hidden losses and merge them with obvious losses to produce an enterprise measure of cross functional capacity utilization called ‘Total Organizational Effectiveness’. 

 

Total Organizational Effectiveness (TOE)

We repeatedly prove to our new clients that they utilize only 30%-40% of their productive capacity.  Prior to our data led analysis, they typically estimate their effectiveness at around twice that level.  Why?

Some capacity losses are obscured within functional structures and misconceived as being local performance measures, unrelated to enterprise capacity utilization.

We understand that capacity is effectively discarded when: 

  • output is sold at prices resulting in a unit loss;

  • ‘utilization’ is assessed in relation to lazy operating standards (efficiency, availability and quality);

  • inventory values are ‘written off’ or ‘written down’ to the equivalent of a unit loss after capacity is ‘utilized’.

  • Idle Capacity 35%
  • Unavailable Capacity (schedule but inoperable) 20%
  • Inefficient Capacity (slow running against ideal standard) 10%
  • Defective Capacity (producing defective output) 10%
  • Uneconomic Capacity (sold or valued at a unit loss) 25%

Management often focus only on the obvious means of discarding capacity. Typically, operational functions are held responsible. However, effective analysis reveals that obvious means facilitate only 20-40% of capacity losses. 

The obvious means of discarding capacity include idle and unavailable production assets, together with obvious quality defects.

Also obvious are the simple variances between actual and ‘standard’ production outcomes. Less obviously, the standards employed to determine that capacity has been utilized often don’t reflect true asset capabilities.

We establish the measures of hidden losses and merge them with obvious losses to produce an enterprise measure of cross functional capacity utilization called ‘Total Organizational Effectiveness’. 

 

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