This paper describes a simple model of a manufacturing firm in which a successful productivity improvement program is implemented. This model is an attempt to generalize an earlier theory developed to explain one company's paradoxical experience with Total Quality Management (Kofman, Repenning and Sterman, 1994). The model describes a dynamic hypothesis concerning the firm's financial performance. In this model the Half-life Equation suggested by Schneiderman (Schneiderman 1988) is used to determine the maximum rate of improvement. The spread of skills and commitment is modeled as a diffusion process, and the allocation of resources to support that commitment is represented as a dynamic adjustment process with a multi-dimensional utility function and fixed resources constraint. This formulation, with the assumption of locally rational decision rules, results in differential rates of improvement in the capacity and demand generating areas of the firm. This differential, when coupled with traditional accounting, pricing, and human resource policies, can create unanticipated side effects that result in sub-standard performance or failure of the program.

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Date created

• 1994

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• Document

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• Processing documentation available at: https://wiki.albany.edu/display/SCA/Processing+Ingested+Digital+Files

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• Creative Commons BY-NC-ND Attribution-NonCommercial-NoDerivs 4.0 International

  
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fe35db792b573af835d96e6eba4759cd

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c060552994c1527f70693734935660f1

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System Dynamic Society Records

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• This collection is part of the University Archives