Sunday, October 18, 2020

Conversion Ratio

This post was written for my three readers who are not conservatives and not-Loony-Left.

At some point in time in time the United States economy came off the rails. The temptation is to point at some scapegoat. "It's the damned Billionaires!!"

I want to point out a way of thinking about the phenomena that might be more intuitive than the typical language used by conservatives.

Conversion Ratio

Over the course of my career I worked in a half dozen plants in the automotive industry.

"Conversion Ratio" is one of the metrics (performance measures) used in the auto industry.

Simply put, the Conversion Ratio is the "Base Engineered Content" hours divided by the total number of hours worked inside the Plant's footprint.

The Base Engineered Content is the total amount of time required by employees to devoted to assembly of the vehicle.

For example, if an employee's task is to install hood-latches, the time content might read like

  1. Pick up torque-tool - 0.7 seconds
  2. Position latch-to-bracket - 1.2 seconds
  3. Insert screw in socket of torque-tool (3X) - 0.5
  4. Drive screw (3X) 0.7
  5. Re-holster torque-tool - 0.7 seconds
  6. Total - 6.2 seconds

The Base Engineered Content does not include the time spent by the employee walking to the parts rack to pick up the part or time spent replenishing bins. It does not include time to truck the basket of parts from the loading dock to the assembly point. It does not include time for the Union Steward or the Management supervisor. It does not include maintenance or housekeeping or repair or quality inspection. It does not include mandatory training or time spent documenting.

Conversion Ratio is a valuable metric because it is almost impossible to "game". You might think you are cheating if you bring in outside vendors to preform part-rework...but you have to include them in Conversion Ratio if they do the rework within the factory footprint. If they do it outside the factory, you have to count the time it takes to package and ship it off-property.

But what does that have to do with the US Economy?

Suppose you are a professional. For the sake of illustration, suppose you are a Social Worker in Child Protective Services.

What is your Conversion Ratio? What is the ratio of time spent with clients divided by the time spent on-the-clock?

I will even be generous. I will let you include part of the time you spend in documenting the session with the client. Not the part you are forced to document to "service" regulations. I will let you include the time you spend making the notes you will use to refresh your memory before the next session with that client. It is analogous to "Re-holster torque-tool"

If you have been practicing for an extended period of time, has your Conversion Ratio gotten better or worse? Are you spending less of your time "servicing regulations" or more of it?

This is when the practicing Social Worker says "Mr Eaton Rapids Joe, you don't know beans about Social Work. A Social Worker in Child Protective Services primarily works through the court system and agencies to execute their job."

But isn't that the point? If 95% of the Social Worker's time is spent working through courts and other agencies then they are servicing procedures and regulations rather than clients?

The conservative viewpoint is that such a large percentage of America's productive resources is sponged up by "procedures and regulations" that we are dying a slow death due to entropy and strangulation. There aren't enough resources left over to actually do anything for real people.

The good news is that if 95% of a professional's time is absorbed by non-value-added-tasks (abbreviated as B.S.) then paring that back to 90% doubles the Conversion Ratio and results in a measurable doubling of the real productivity.


  1. Great way to explain it Joe. And that is why I preferred to hire new employees from other lines of work who are successful rather than college grads who never had a real job where productivity was a primary consideration.. ---ken

  2. My last few years in the Air Force I ran a Civil Engineering Sheet Metal shop. My first job after I got out was Production Superintendent if an industrial Sheet Metal shop. I was totally unprepared for the focus on production. If a crew was down for the lack of a part-the company hemorrhaged money.

    1. OK, I'm back from mass(we're still having mass outside here in midland) As coyote ken says you have to have had a real job to appreciate productivity. When I started my child welfare career in the 80's I was surprised at how low productivity was and by the time i retired in 2013 it had gotten much worse. your 5% figure is probably not far off. I offended a number of my peers and superiors by suggesting the Department would be improved by putting an engineer in charge, at least they understood things like cause and effect and "value added". Productivity was measured by the number of visits or reports completed without regard to their usefulness.
      About half of the child welfare workers employed by Michigan were in Wayne county. There were several hundred of us. Foster care used to have to submit a particular report monthly to county headquarters, I don't remember what it was we were reporting but the workers would gather and submit their data to the supervisor who would combine the data and submit it to the section manager who would in turn submit it to the district manager and the 4 districts would submit it to county. One day at a meeting I found from the county director that she knew nothing about the report, it was simply filed and never looked at. I suggested eliminating the report and she seemed amendable to the idea but I got ripped into by most of the people above me. "We've always done it" seemed to be the major rational for continuing. Fear that someday someone might want/ need the info was second and my suggestion that we could then gather the data didn't fly.
      This brings to mind a story I heard in the Air Force. It may or may not be true... Back in the late 40's, Aircraft didn't have a lot of range so the military had a number of emergency airfields scattered about the Pacific ocean on small islands. Some of those airfields might only see a couple of planes a month and folks got very bored. Supposedly as a joke an air traffic controller started a "bird report" he would note how many birds he observed, in the same spirit of fun it was enlarged to include type of bird, direction of approach, how many landed etc. You can imagine how involved a number of bored folks could make the report. At some point someone thought it would be fun to send the report with regular reports to headquarters. Headquarters never said anything about the additional report. After a couple of months the air traffic controllers got bored with their "bird report" and stopped. several months later headquarters sent them a message demanding the overdue "bird reports".

    2. This comment has been removed by the author.

    3. If the island guys were being careful with species identification they were providing proof the emergency bases weren't driving the birds away or affecting their numbers.

    4. Rick t, this was late 40’s-early 50’s. It was done as a joke.

    5. True, but joke data if honestly gathered can be revealing...

  3. Time spent doing productive activity vs nonproductive activity is a major factor in economic success. Always has been, always will be.
    The problem for many of us is that paper pushing desk jockeying pencil necked geeks have taken over much of the 'regulatory' part of business. These are the people that don't actually want to work. They want a cushy high paid job sitting at a desk dreaming up bullshit to impose on others in order to justify having a pointless job. And there are literally MILLIONS of these useless drones doing this all day every day. The 'regulatory burden' has reached the point where it is becoming untenable. As an example take healthcare. A career where that 'regulatory burden' has reached the absurd. I am an imaging specialist. One of my many skills is the ability to perform CT scans on patients. 15 odd years ago it took me about 10 minutes to perform a routine scan of a patients abdomen. Half of that time was scanning, half was doing required documentation. Now....the time it takes to perform the exact same procedure is TWENTY MINUTES. The exam is IDENTICAL to what was done then but the utter and complete bullshit I must wade through to complete the exam has TRIPLED. And this phenomenon has spread throughout almost all of American business....with no end of the cancerous spread in sight. THAT is one of the major factors in what is killing the American economy.

  4. There are federal regulations concerning the "child welfare" industry that seriously complicate the job. They, in theory, direct that the job be done in a comprehensive manner that would foster better outcomes. If the state agencies and the courts don't do their bits in the federally prescribed manner the Feds withhold Title 4E funds. Title 4E funds can cover half of a states child welfare costs. Far be it from me to posit that dancing to the feds tune might increase the child welfare costs but several years ago we had to significantly increase staffing to satisfy federal requirements. I think child welfare is a classic example of intruding in peoples lives at a high cost for questionable benefit.


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