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Overall Labour Effectiveness (OLE): The key to unlocking workforce potential

October 30, 2023 | Organisational Effectiveness

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At a Glance

  • Overall Labour Effectiveness (OLE) is a key performance indicator (KPI) that organisations can use to measure the overall labour productivity of their workforce.
  • OLE is a good tool to measure and improve workforce productivity, especially in light of the growing trend of “quiet quitting.”
  • Any modification to the factors within the OLE equation can have a significant impact on profitability.

When measuring organisational effectiveness, most manufacturers recognise the critical role that minimising machine downtime plays in increasing profits. When your machines are idle, it results in financial losses. However, while many companies routinely measure the productivity of their machines using the Overall Equipment Effectiveness (OEE) metric, few apply the same concept to their workforce.   

Overall Labour Effectiveness (OLE) is a key performance indicator (KPI) that organisations can use to measure the overall labour productivity of their workforce, particularly where output is dependent on manual labour.  

The formula for calculating OLE has three key components: 

Why measure Overall Labour Effectiveness?  

The phenomenon of “quiet quitting” is a trend that exploded in 2022, sparked by a viral TikTok video. The concept is not about quitting, but an approach where employees do the bare minimum in their jobs without making the effort to go the extra mile, ignoring the hustle culture mentality. 

Those who have subscribed to the quiet quitting approach are known as quiet quitters and generally these employees are unmotivated and disengaged. These disengaged employees cost the global economy US$8.8 trillion, or 9% of global Gross Domestic Product (GDP), according to a 2022 report.  

In this context, OLE serves as a good tool to provide a comprehensive view of direct and indirect labour, enabling companies to effectively strategize for productivity and profitability improvements. By consistently monitoring and acting on OLE metrics, organisations can optimise their current operations and create a culture of continuous improvement, in line with the principles of Lean and Six Sigma methodologies.  

Any modification to the factors within the OLE equation can have significant impacts on profitability. For example, prioritising quality can affect the speed of production line, potentially affecting output performance. OLE exposes the interrelationships between these factors so managers need to keep all three in balance.   

Mechanisms for optimising OLE 

There are three fundamental factors that affect OLE. Companies struggling with suboptimal OLE should concentrate on improving the specific factor responsible for lowering their score, while being mindful of the potential negative impact on the other elements. 

1. Improve utilisation through better planning 

Utilisation refers to the percentage of time employees spend on productive tasks that contribute to the organisation’s goals. This can be improved by creating accurate production schedules that take into account all the necessary resources, particularly effective task allocation based on workload and demand fluctuations; and implementing scheduling systems that can adapt to real-time needs to accommodate variations in workload to ensure that the right people are available when needed.

2. Improve efficiency through better methods and supervision

Efficiency improvements can be achieved by implementing standard operating procedures (SOPs) that define the best way to perform and complete each task, providing leadership training for supervisors to improve their team management skills, leading to improved task coordination, and introducing tools to assist in task management and performance tracking, streamlining work processes and enabling data-driven decision making.

3. Improve quality through better quality management

Sometimes referred to as yield, quality refers to the percentage of output that meets customer specifications. This can be improved by conducting regular internal and external quality audits to identify weaknesses in the production or service delivery process so that corrective action can be taken, and by implementing automated quality control systems to maintain consistency and reliability in quality standards, thereby reducing the margin for error.

Spotlight on automotive spare parts manufacturer  

The manufacturing industry is experiencing an increasingly fierce competition, including an automotive spare parts manufacturer based in Asia. Faced with intense pressure to stay ahead, the company engaged Renoir Consulting to develop practical solutions to help it reduce overall operating costs and maintain its competitive edge.  

Our consultants carried out a comprehensive analysis and identified key areas for improvement, including:  

  • Labour and staff productivity 
  • Machinery and equipment utilisation 
  • Indirect-direct workforce ratio 
  • Rework and waste reduction  

All systems and non-project areas were integrated into a series of balanced scorecards. We focused on system performance audits. By subjecting the manufacturer’s systems to rigorous assessment and providing targeted training, Renoir aimed to catalyse transformational change.  

The revamped systems introduced regular checks and reviews of personnel at every level of the organisation’s structure. This enabled the root causes of inefficiency to be identified and addressed, facilitating continuous improvement.  

During the project, we also introduced the planned movement of operators to different departments, based on anticipated production volumes. As a result of these interventions, the manufacturer achieved a 20% increase in productivity, with a further 15% improvement the following year.  

Other achievements included an 18% increase in volume throughput, a 5% reduction in purchasing costs, and a 30% reduction in machine downtime. One of the key drivers of success was the focus on an OLE aspect where the project was resource efficient.   

This case study demonstrated the advantage of OLE over OEE in comprehensively capturing the facets of operational efficiency beyond just equipment or volume output. By using OLE as a guiding metric, the manufacturer was able to target workforce training, balance the ratio of indirect to direct labour, and optimise labour allocation based on expected production volumes.  

Increase your organisation’s competitiveness and agility with experts 

Terms like OLE and OEE may sound foreign, or even confusing. But they are just the tip of the iceberg when it comes to achieving greater organisational effectiveness. For many companies, changing the way a business operates by introducing OLE and OEE can be a daunting task. This is because of all the past precedents that exist – the interpersonal relationships, expectations, roles, career paths, and more.  

Renoir can bring a fresh perspective and a tailored approach to deliver measurable organisational and revenue outcomes. With over 25 years of experience of taking projects through to full adoption using our behavioural and cultural change methodologies, we introduce and implement measures that will continue to deliver value long after the project is complete.  

Want to improve your OLE and OEE with our tailored solutions?

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