THE TIMES 100 / THE BEST PERFORMING COMPANIES IN AMERICA : THE HUMAN FACTOR : Productivity Remains Key Concern for Firms : It’s hard to measure but, most agree, companies need more of it.
From health care to transportation, employee productivity and efficiency are on the minds of California companies struggling to succeed in a tough economic climate.
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“You have to be much more aware of operating efficiencies now,” said Alan R. Hoops, president and chief executive of PacifiCare Health Systems Inc., a Cypress-based health maintenance organization that has faced growing corporate and government pressure to reduce medical costs.
But measuring productivity is an inexact science that leaves even veteran economists confused. “These things are enormously tricky,” said Frank Wycoff, a professor of economics at Pomona College and a specialist in work force productivity.
The Times 100 measures company productivity as a ratio of revenue to total employees. As a result, a company’s productivity can be changed dramatically by cutting its work force--as many firms have done. Productivity can also jump when revenue rises faster than payroll.
However, the measure fails to reflect the use of equipment and machinery, and it assumes that all workers--despite differences in jobs, skills and ability--are equally productive. It is also difficult to use the figures to compare different companies--even those within the same industry--because so many factors influence productivity.
Despite problems in measurement, productivity remains a major concern at many California companies.
At Santa Monica-based FirstFed Financial Corp., keeping productivity high means being hard-nosed about new hiring, says Jackie Kitaka, senior vice president and director of human resources. The savings and loan saw productivity grow to $640,000 per employee in 1993 from $531,000 the previous year, according to data compiled by Star Services, a San Francisco-based business research firm.
“It’s very difficult for people to arbitrarily ask for additional staff,” even to replace a departing employee, Kitaka said. When a position becomes vacant at one of the company’s 25 savings branches or eight loan offices, Kitaka’s departments analyzes such things as customer waiting time or loan volume to see if a replacement is warranted.
“If volume is down on the loans side, we wouldn’t automatically hire another underwriter,” Kitaka said.
Technology has played a major role in boosting worker productivity at Orange-based Bergen Brunswig Corp., the nation’s second-largest distributor of pharmaceuticals and health care products to hospitals and drugstores.
Faced with growing competition and flat prices, Bergen Brunswig--which generated about $1.6 million in revenue per employee, according to The Times 100 rankings--has turned to automation to fill an estimated 90% of customer orders, company spokeswoman Karen Wiley said.
For example, employees ride motorized carts called “data mobiles” that are guided by electronic signals to quickly locate products in the company’s large warehouses. After the product is loaded onto the data mobile, the cart automatically tells the employee whether or not the quantity matches the customer’s order.
“You will see more and more of it,” Wiley said.
At some companies, workers themselves came up with simple ideas to increase productivity. A team of employees at Varian Associates, a Palo Alto electronics firm, studied ways to cut the average of six weeks it took to install radiotherapy machines at hospitals, which use the equipment to treat cancer patients. The result: Installation was cut by more than 3 1/2 days.
One time-saving trick was to replace the foam packing pellets used to protect equipment during shipping with a different type of insulation. Workers used to spend about 30 minutes cleaning up the pellets after the shipping crates were opened, company spokesman Bill Bucy said.
These and other factors allowed Varian, which employs 7,800 people, to boost productivity from $157,000 per employee in 1992 to $172,000 last year.
PacifiCare’s revenue has more than tripled since 1990, to more than $3 billion. Productivity grew to $925,000 per employee in 1993 from $837,000 the prior year.
But efforts to curb spiraling health care costs have limited PacifiCare to annual price increases of between 2% and 4% since 1990, said CEO Hoops. “Operating efficiency in the health care field is becoming more of a critical factor than it has ever been,” he said.
PacifiCare is monitoring its computerized customer service files to identify and resolve common mistakes that annoy patients and reduce efficiency.
Most Productive Employees
Top companies in each industry ranked by revenue per employee. Industry/Company: Revenue/Employee($000s)
Aerospace & Defense Northrop Corp.: 175 Varian Associates: 172 Datron-Transco: 169 1993/92 group avg.: 143.0/136
Banking FirstFed Financial: 640 Golden West Financial: 532 First Republic Bancorp: 522 1993/92 group avg.: 259.2/253
Computer Products Merisel Inc.: 1,591 Amplicon Inc.: 1,146 Anthem Electronics: 958 1993/92 group avg.: 222.8/183
Computer Services VeriFone Inc.: 148 Terminal Data: 105 Computer Sciences Corp.: 86 1993/92 group avg.: 90.7/96.4
Computer Software Kenfil Inc.: 1,468 Platinum Software: 1,285 McAfee Associates: 543 1993/92 group avg.: 189.2/213
Consumer Products Armor All Products: 1,364 Galoob (Lewis) Toys: 577 Callaway Golf: 367 1993/92 group avg.: 243.0/328
Drugs & Pharmaceuticals Bergen Brunswig Corp.: 1,641 Herbalife International: 727 Amgen Inc.: 448 1993/92 group avg.: 161.0/212
Energy Chevron Corp.: 675 Atlantic Richfield: 641 Berry Petroleum: 538 1993/92 group avg.: 442.5/459
Financial Services Conversion Industries: 1,618 The Foothill Group: 593 Condor Services: 547 1993/92 group avg.: 314.5/246
Food & Beverage Vestro Foods Inc.: 606 Tejon Ranch: 414 Smart & Final Inc.: 316 1993/92 group avg.: 184.7/110
Health Services Maxicare Health Plans: 997 Pacificare Health Sys.: 925 Wellpoint Health Net.: 907 1993/92 group avg.: 96.0/101
Insurance Sunamerica: 899 Capital Guaranty Corp.: 853 Insurance Group Inves.: 841 1993/92 group avg.: 594.3/583
Real Estate Kaufman & Broad Home: 1,314 Catellus Development: 1,022 J.M. Peters Co.: 923 1993/92 group avg.: 972.1/390
Retail Image Entertainment: 939 McKesson Corp.: 939 Good Guys Inc.: 208 1993/92 group avg.: 170.1/196
Services On Assignment: 552 Kasler Holding Co.: 420 Mail Boxes Etc.: 316 1993/92 group avg.: 120.7/219
Transportation Services American President Co.: 489 PLM International: 316 P S Group Inc.: 173 1993/92 group avg.: 207.2/180
Utilities IDB Communications: 914 Magma Power: 691 SCE Corp.: 467 1993/92 group avg.: 289.5/258
Source: STAR Services.
