A cornerstone in business operations is on Key Performance Indicators (KPIs), which address up to 40 areas of operations across a range of operations often depending on the type, size and complexity of the operation.
One top KPI is Process Performance Indicators, or PPIs, which have relevance for all business operations. Through “process mining,” PPIs target where improvements can be made by examining data generated by the current processes used in a business operation.
“Measurement is the first step that leads to control and eventually to improvement,” James Harrington, former Chairman of ASQ and CEO of Harrington Associates, said. “If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.”
PPIs can help identify where processes are hurting outputs in two areas:
Unrealistic expectations. The operations process was incorrectly modeled, for example, with deadlines that can’t be met .
Employee performance. The person involved in the process is inefficient, leading to performance issues.
PPI metrics are different from reports and analytics, which usually rely on data generated by the user as a task begins. The data that PPIs provide help lead to improvements in existing processes, while reports and analytics assist in making overall business decisions.
In consulting with businesses to improve their operation processes, Boost Midwest uses these top five PPIs:
1. Effectiveness. This measures the relationship between expected results and actual results through process mining that:
Captures the length of time a process takes.
Totals the costs to complete a process, including employee time.
Quantifies quality by comparing the percentage of below-par output to the total output.
The effectiveness ratio is determined by comparing the actual results to the expected results within the framework of your business process management model. (If your organization lacks a BPM, strongly consider implementing this discipline, where a company takes a step back and looks at all processes in total and individually.)
2. Efficiency. This measures waste by calculating the difference between the process results and the resources used for that process. In simple terms, the closer the ratio of outputs to inputs approaches 100 percent, the higher the efficiency of the process. Depending on the type of operations, data from any or all of these processes would be captured through process mining:
Manufacturing cycle time, or how long it takes to produce a given product or service.
Changeover times, or how long it takes to switch one product line to a different one.
On-time delivery, or the percentage of time a product is delivered to the customer in the agreed-upon timeframe.
3. Cost effectiveness. This compares the relative costs of achieving an outcome using different processes or elements of processes. Cost effectiveness is not the same as cost benefit, which measures the outcome in monetary terms. To capture this data:
Decide and define the outcome.
Measure the outcome using different processes.
Determine the cost of each activity, including planning and implementation time.
Divide the cost by the outcome for each process method.
4. Throughput time. This PPI measures the total time it takes for a given process each step of the way, from start to finish. This data captures a company's rate of production or the speed at which something is processed and helps determine overall effectiveness and efficiency of the process.
5. Quality. Product or service quality measures how closely quality standards are met for:
The company’s quality assessment.
For manufacturing, this metric is calculated as ratio of nonconforming units to total unit output. In consulting, the number of accepted versus rejected proposals could be used. For service-based operations, contracts that require modifications or re-signing before work begins may be measured against those that do not.
Implementing process mining to improve your business operations is how business operations can be streamlined for outcomes that retain quality but run at top efficiency, effectiveness and cost. At Boost Midwest, we know how narrow margins can be for business sustainability and use the top process performance indicators as a tool for better operations practices.