If you cannot measure it, you cannot improve it – Lord Kelvin
As rightly pointed out by Lord Kelvin, measuring and keeping track of activities is absolutely necessary at every point of life, especially when it comes to business. There are certain processes in the business that will be repeated over the course of time. If these processes are slowed down, even for a few seconds, it will have a marginal effect on the output of your organization. Process performance metrics helps you identify and measure the success of your business processes. You need to decide your metrics beforehand in order to run processes fast, successfully, and smoothly.
Benefits of Process Performance Metrics
Transparency in processes
Process Performance Metrics will help you attain transparency in your business processes as you will have quantitative data available to see through your processes. This would help decrease the communication gaps between different levels of management.
Eg. When the top-level management is busy in determining strategies for business. They might not have time to manage the middle-level management at a deeper level. If process performance metrics are pre-set, then the company can transparently identify activities done by each employee.
Comparison is possible
It would give you a data point that will help you compare and make data-driven decisions regarding the performance of your business processes. You can analyze your processes and draw a comparison between your business output a month ago and now. This analysis would help you improve your processes.
Eg. There is a recruitment company that provides outsourcing services to the HR department of companies. The company might put x amount of resources in hiring one employee. This amount of resources can be compared with other recruitments. At one point, it would be the lowest, without hindering the quality of employees hired. This comparison helps you identify best practices.
Helps identify gaps
There are gaps hidden in the processes which often hide from the eyes of the business. Most of the time, even the employees who are part of these processes won’t know that they have a gap or scope of improvement in their process. When you attach metrics to your process, you will get an idea of these gaps and how to fill them.
Enable standardization of processes
When you have quantitative data available for your processes’ performance, you can derive a standard process. This would help you get the most out of each process of your business.
Eg – Let’s take an example of a chips manufacturer. If you can determine the minimum number of minutes it takes to make one packet of chips is 1 minute, you can standardize that process. Now if you see that it is recently taking 1.5 minutes to make a packet of chips, you know there are some gaps in your process.
Types of Process Performance Metrics
Return on Investment
Return on Investment is one of the most used process performance indicators around the world. You need to identify all the expenses incurred while completing a single process and the revenue that you generated from it.
Return on Investment = (Net Profit/cost of investment) x 100
You can bifurcate the revenue/net profit generated through your targeted process or at least round it up through approximation.
In order to increase the ROI, you need to either find a way to increase the revenue generated or find a way to decrease the expenses incurred.
Simply, if you are incurring a cost of 10 dollars per bag and you sell that bag at 20 dollars. Your ROI is 10 dollars. This cost of 10 dollars includes everything from the electricity bill of the factory to tax paid to the government. It is a part of cost accounting.
It is the amount of time taken by your business to finish a process from beginning to end. It includes all the time taken from starting of the idea to the output given.
The throughput time calculations depend on the model of the business.
For eg. – If you are managing a chips factory, the throughput time of making a bag of chips can be calculated. You can start tracking the time from choosing a potato, to cutting it and finally completing the packaging process.
Whereas if you work at a mobile phone service store, the throughput time can be calculated on one customer service provided. From signing the customer to an employee to get their query solved. All the time is calculated in the throughput time.
This process performance metrics is popular in a mass-production setting like factory or assembly lines. It is the percentage of good quality output out of the total output. Good quality standards are pre-determined according to the requirements of the business.
Note – there is no rule that businesses other than production can’t use it.
Extending the example of chips, we can understand this clearly. You can determine a set quality of the chips you make. And pass them through a check at the end. If the 90 out 100 chips are of your set quality, your quality is 90% of the time accurate and high. You can take conscious action like hiring more manpower or getting tougher quality checks to change this number.
For the service industry, the scale to measure quality can be customer satisfaction ratings. If an average review of 100 customers is 4/5 for your services, then the quality of your service is 90%. Determine your own quality score and make sure you stick to it.
It is calculated by taking a percentage of output generated by an employee and the number of resources assigned to the same. Productivity might be a subjective term but you can always calculate it in the number of units or time. If you are looking to increase your productivity within just a few minutes, check out some of these amazing productivity tools.
You can get creative while finding out the performance of your processes. You can just stop relying on these preset templates of process performance metrics and make your own customized one tailored-made for your business. Make sure you have at least one way of quantifying your processes to boost your business efficiency. Let us know if you have any doubts or queries regarding the same in the comment section below.