21st Congress of International Council of the Aeronautical Sciences, Melbourne, Australia, 13-18 September, 1998
Paper ICAS-98-6.1.1

ON THE ADVERSE CONSEQUENCES OF COST-PERFORMANCE METRICS USURPING THE ROLE OF GOALS THEY WERE SUPPOSED TO SUPPORT

Hart-Smith L. J.
Douglas Product Division, Boeing, U.S.A.

Keywords: cost-performance metrics

This paper shows how many of today's zealously applied cost-saving techniques have been counterproductive, when assessed at a higher level. The separate minimization of individual costs is shown to usually inevitably prevent the overall minimization of total costs, whenever the individual costs interact with other costs. Any goals defined at a lower level than for an entire organization are actually constraints, which can only rarely achieve anything better than a sUb-optimum solution. What is needed, instead, are more scientific metrics that relate the performance of an individual, or department, to the common goals, explaining why it is necessary that some individual costs should not be minimized. Specific examples are included to show how and why many contemporary management techniques that are successful under some circumstances have failed to deliver what they promised under others. Hope for the future is provided by identification of those distinguishing characteristics that have enabled some recent programs to succeed when others have failed. The paper also contains examples, at the technical level, of ideas that can save cost, or have already done so.

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