3 Tips on Measuring Your Business Process Performance

If you want to improve a part of your business, you would measure the current situation, take counter-measures to improve it and measure again to see if you made significant improvements. Right?

When I start a business process improvement project (Lean or Six Sigma) we start with the team defining the metric: what are we going to measure to see improved performance?

Here are 3 tips to help you choose your metric:

1. Frequency

Choose a metric that you can measure with high frequency, at least on a weekly base or
even daily. This will give you the possibility to react quickly when taking counter-measures. This way you can improve the process faster.

I had once a project on reducing employee illness rate. Because the reporting system generated data only on the monthly base, our team chose sick time per day (in hours) because this data was available daily.

If we would have stick to the monthly data, we had needed to wait at least 5-8 month to collect data on the improved performance.

2. Accuracy

You want accurate data otherwise you have no clue whether the data showing improvements is due to your team effort or it is only better by chance.

There are some statistical tests within Six Sigma that you can take to investigate the accuracy of your measurement system. The approach should not only apply to measurements by instruments (weight, density, length, dimensions, etc.) but also in any other situations.

In most cases, you can take a more straight-forward approach by checking out the following:

  • How many people collect data? The less is better.
  • How data is collected? Automated reporting preferred above manually.
  • Is there a written procedure on data collection? If yes, it is easier to train others and observe if procedure is followed.

3.    Output instead of input

Recently I had a project on improving the efficiency of purchasing activities of the Material department. The perceived problem was that they spent too much time on operational activities (placing purchase orders, following up shipments, reminding suppliers about due dates, checking invoices) instead of tactical and strategic activities (like selecting preferred suppliers, contracting, simplifying purchasing and invoicing activities).

We decided to measure how working time was spent concerning the purchasing activities of the people. They found it difficult to measure, often forgot to register, made many ‘guesstimates’. As a result, our baseline data showed the opposite situation than what was expected: limited time spent on operational activities. The metric was not the right one and the data not accurate.

Instead of measuring input (time spent on activities) we could better measure output, like number of invoices, number of suppliers or lead-time of purchasing transactions. These are output parameters that should drop significantly when purchasing is better organised.

Measuring the right parameter on the right way, with the right frequency helps you improve your business performance. Get your Black Belt in business process excellence.

Beat the average.

Yours,

Peter

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