Business Process Measurement

There is a general perception that manufacturing processes can be measured and hence controlled and improved, and it is difficult or even impossible to identify the process measures for other business processes. Difficult! May be yes, because one is not used to think in terms of quantifiable process measures of effectiveness and efficiency, in areas other than manufacturing. Ever heard finance or HR executives talking about effectiveness and efficiency of the work carried out by them in quantifiable terms? But, impossible, it is not. It is only a matter of identifying what value gets added in the process and what is perceived as important for the customer of the process. With some creativity the process measures can be identified which would reflect the efficiency of the work done, quality of the output and satisfaction of the customer of the process.

Measures of efficiency & effectiveness

Efficiency measures are those which track the resources consumed in getting a unit of work done. Resources may mean materials, men or simply time consumed. Efficiency measures often have a direct impact the cost performance of the organization. Irrespective of whether this cost efficiency is finally passed on to the customers or not, it is an internally focussed measure.

Effectiveness measures are process measures from an external (customers’) perspective. How effective was your work for your customer? How closely it met customers’ requirements?

For example, if the activity is to prepare cheques based on vouchers, then number of cheques prepared per day could be an efficiency measure and percentage of correct cheques received by outsiders can be an effectiveness measure.

Continuous & discrete nature of process measures

Process measures can also be categorised as continuous and discrete. Continuous measures are those which can be measured on an infinitely divisible scale of continuum. This kind of measures is easily identifiable in a manufacturing process in terms of weight, temperature, pressure, flow etc. but not so commonly in other business processes.

Measures which do not fit in the criteria described above are called discrete measures, examples for which could be number of items, rating on artificial scales etc. For convenience sake some times continuous measurements are converted to discrete measures. For example, average time taken to resolve a customer complaint (a continuous measure) can also be measured as number of complaints resolved (or more importantly, not resolved) with in the prescribed time.

The main advantage with discrete measures is that intangible factors such as satisfaction levels can be measured. It is expensive to obtain a discrete measure as more samples would be required and also they tend to hide important information if proper care is not taken, like with number of products passing the conformance test. With single minded focus on measuring (counting) number of products, there is a chance of missing out on important information regarding margin by which products are failing the confirmance. Measurement of deviation from the acceptable level of quality can provide important cue for improvements. And so wherever possible, the thrust must be on capturing continuous measurement and convert the same into discrete measures for any comparison or analysis.

Lead & lag indicators

The process measures can also be classified as lead indicator (useful for predicting the results) and lag indicator (result measures). Lead indicators are process measures which enable us to anticipate the outcome of the process. Lag indicators or result measures are those which measure the attributes of the outcome of a process.

The aspect of lead and lag indicators of process is significant from the point of view that the proper design of measures can enable in predicting and also controlling the final outcome of the process. For example, assuming that compliance to customer order is one of the major factors in building customer loyalty then percentage compliance to orders can be a lead indicator in retaining the customers.

Identifying process measures demands process experience and creativity. It is absolutely essential to decide on the most critical things to be measured – purpose of measurement should be clear or focus on important things will be lost in the ocean of measures. The measures should be judiciously selected to focus on efficiency and effectiveness of a process. Sustained rigour on enhancing the measurement systems will ensure valid information regarding continuous and discrete measures. And a strong cause and effect relation ship between lead and lag indicators will lead to achievement of results with proper control on the process.

Ideally measures not only enable efficient conduct of the process but also help in identification of areas for process improvements.