Process efficiency and effectiveness are two key aspects of process modeling, but what do they mean and how can you measure them? In this article, you will learn how to define and compare these concepts, and what tools and methods you can use to assess and improve your process performance.
Efficiency is the ratio of outputs to inputs, or how well a process uses its resources to achieve its goals. Effectiveness is the degree to which a process meets its intended outcomes, or how well a process satisfies its customers or stakeholders. A process can be efficient but not effective, or vice versa, or both, or neither. For example, a process that produces a high-quality product with minimal waste is efficient and effective, while a process that produces a low-quality product with high waste is inefficient and ineffective.
Efficiency and effectiveness are two important criteria relative to process assessment but using them alone will not provide a holistic view that supports continuous improvement. When assessing the effectiveness and efficiency of processes, you must take a holistic view to get an accurate view of strengths and gaps to be addressed. There are multiple dimensions driven by factors such as process purpose, function, industry supported, quality, volume, and satisfaction.
GREAT start for defining efficiency and effectiveness. I would like to offer some call center examples. Excited to see the offered definition for effectiveness aligns to intended outcomes and not outputs. Effectiveness measures would include First Call Resolution, Average Call Abandonment Rate, Customer Satisfaction Survey. For efficiency, I like the definition of process resource utilization. The ratio of output to inputs is an approach but has some challenges: if used, might be better to measure this relative to plan. For the call center, some efficiency measures might include: Average Speed of Answer, Average Handle Time, BISOP time (associate's Bottom in Seat On the Phone), Operational Availability of platforms.
Two points to make for mainstream manufacturing process (by this I mean FMCG, pharma, chemicals, consumer electronics): 1. Measure zero based efficiency, comparing how long something should take in a perfect versus actual. The gap is your total lost time. Then go look for the losses. Don't look for losses, add them up and throw them into the OEE equation, it's very likely you will miss a chunk including speed loss and post bottleneck waste and your OEE will be over-reported. Remember output is a function of speed and time so anything you can do to solve speed constraints whilst improving quality and waste is good. 2. Do exactly the same for raw material yield. Less than a third of the companies try to do it. Half don't do it at all
To measure process efficiency and effectiveness, you need to identify and collect relevant process metrics, or quantitative indicators of performance. Process metrics can be classified into four categories: time, cost, quality, and customer satisfaction. Time metrics measure how long a process takes to complete, such as cycle time, lead time, or throughput. Cost metrics measure how much a process consumes or generates in terms of money, such as operating expenses, revenue, or profit. Quality metrics measure how well a process meets the standards or specifications of its outputs, such as defect rate, error rate, or yield. Customer satisfaction metrics measure how satisfied the customers or stakeholders are with the process or its outputs, such as satisfaction score, retention rate, or loyalty.
Examining a process from these four perspectives is a more holistic approach, but it is important that drivers of each category and the levers that influence overall results are also reviewed. It's also important to understand benchmark metrics if they are available for comparing your process metrics with those of your peers and competitors.
To compare process efficiency and effectiveness, you need to use process benchmarking, or the method of evaluating your process against a standard or a best practice. Process benchmarking can be internal or external, depending on whether you compare your process to another process within your organization or to a process outside your organization. Process benchmarking can help you identify gaps, strengths, weaknesses, and opportunities for improvement in your process. To conduct process benchmarking, you need to follow these steps: define the scope and objectives of the benchmarking project, select the benchmarking partner or source, collect and analyze the data, identify and prioritize the improvement actions, and implement and monitor the changes.
Benchmarking should take place at two levels: industry/function and internal. As an example, if your internal processes are effective and efficient per your internal benchmarks but you're performing 20% below your competitors per industry benchmarks, this is a strong indicator that there is more you should do to optimize your process.
Bechmarking is ok, what if all your processes or those of your competitors are not reaching their potential. I advocate a zero based mass balance (to give material yield) and efficiency (use of time) A point to make here - folks often fetishise we must be at 85% to be world class, because that's what the book says. That will be loss-making in a paper plant. World class for a high complexity, short run API packaging area might be 40%. Depends entirely on what you are measuring. What is important is that your metrics don't hide opportunity.
To improve process efficiency and effectiveness, you need to use process improvement, or the method of modifying or redesigning your process to achieve better results. Process improvement can be incremental or radical, depending on whether you make small changes or large changes to your process. Process improvement can use various tools and techniques, such as flowcharts, diagrams, charts, graphs, models, simulations, surveys, interviews, observations, brainstorming, root cause analysis, value stream mapping, lean, six sigma, kaizen, or agile. To implement process improvement, you need to follow these steps: define the problem or opportunity, measure the current performance, analyze the root causes, design and test the solution, implement and control the solution, and evaluate and sustain the results.
This speaks well to the methodology, but it would be more valuable if it also addressed leading solutions that companies implement to enable process improvement. As an example, in the IT Service Management space, ServiceNow has been a go-to solution for workflow and automation for many years. That solution has expanded to address many other functions within a company that could drive ROI and overall value to a business.
Radical deep science, CAPEX-free constraint breaking requires an approach that goes beyond traditional DMAIC, let's call it DMAIC+. PM me if of interest...
"Measuring process efficiency is like taking your startup’s pulse—if it’s weak, you’re in trouble." Here’s how I keep the heartbeat strong: 1. Set Clear Metrics: Define what success looks like for each process. 2. Time Tracking: Measure how long tasks take to identify bottlenecks. 3. Quality Checks: Ensure the output meets a high standard without rework. 4. Feedback Loops: Use team and customer feedback to gauge effectiveness. 5. Regular Reviews: Continuously evaluate and adjust processes to improve. It’s not just about doing things right; it’s about doing the right things efficiently.
Process monitoring is an ongoing function that companies need to have in place, as process improvement is an iterative process. Staying on top of this function ensures continuous improvement and enables industry-leading performance if done well.