Tom Cagley recently articulated the concerns of measuring productivity through outputs, and he next turns his attention to inputs. In a post at his blog, he outlines three major considerations regarding inputs. The goal as always is to arrive at a more precise and meaningful understanding of productivity.
Decision for Inputs
- Deciding which inputs lead to an output that is important
- Which components of overhead should be part of productivity calculations
- Sourcing refers to purchasing work and/or components for a product from an outside vendor
The total value chain for a business is inevitably huge, and even in one area like software development, the potential outputs to measure can be myriad. Deciding which outputs matter to your immediate situation will in turn decide which inputs matter. Cagley recommends performing value chain mapping to more clearly see how given resources or materials contribute to final outputs. When a process has been drawn up for explaining how value is created, then it becomes much easier to make modifications to individual parts of the value chain.
For the second consideration, overhead is viewed as “costs and effort that can’t be easily traced to an output.” In software development often only explicit labor and costs get measured, and flat overhead gets uniformly applied to projects, neither of which produces accurate results. Cagley provides an example, asking us to think about how a troubled project demands more resources than a smoothly-operated one:
More input for the same amount of output yields lower productivity. Allocation is an easy process but it is regressive. Allocation impacts the projects that are least reliant on non-direct labor and cost more than projects that are more reliant. In the scenario where one project implemented an application that leveraged an internal server farm used by several applications while another leveraged the cloud for processing, allocating the server costs across all projects even if they did not use the servers would distort capital productivity.
Regarding the final consideration, when aspects of software design are outsourced, then all that can be measured are the aspects that stay in-house. For instance, since measuring labor productivity can now only be measured in part, then the business may want to focus on increasing efficiencies in areas where more data is still available, such as regarding raw materials productivity.
Grasping the relationship between inputs and outputs is the foundation for squeezing more efficiency out of your business. You can view the original post here: https://tcagley.wordpress.com/2016/04/12/metrics-the-complexities-of-productivity-inputs/