You might be familiar with the quote, “If you can’t measure it, you can’t improve it,” attributed to Peter Drucker. However, this concept was taken out of context by W. Edwards Deming in his book “The New Economics.” According to the American statistician, it is impossible to assume that you can’t manage a project if you can’t measure it.
Every business leader acknowledges the importance of metrics and data, which is crucial when it comes to improving the efficiency of your organization. However, even though there is no single way to measure everything, businesses still need to make decisions regarding certain aspects of their operations. Getting more units produced, revenue, labor, and cost for less is the goal of every business leader.
According to BPTrends, there are nine ways to measure a process to improve its efficiency. This article will help you identify the areas where your organization can improve.
The three main types of process efficiency are process effectiveness, process efficiency, and supplier effectiveness. Process effectiveness refers to the performance of the process against the customer’s requirements. Supplier effectiveness is focused on the performance of the supplier. Work-in-process inventory is a measure of the outputs and inputs of the various activities of the supplier.
The Product Cost measures the cost of producing a product. Resource productivity measures how efficiently the process can make a unit of output versus the number of resources it consumes. The time required to deliver a product is measured by the Process Cycle Time. Process alignment is a measure of the level of matching between the demands of the customer and the process outputs. Finally, process compliance is a measure of adherence to third-party standards such as ISO or SOX.
A production operation’s efficiency can be measured by the number of units it produces over a specific period, such as days or weeks. This can be done on various manufacturing equipment or a production line.
Various financial metrics can measure a marketing campaign’s cost per outcome. These can be used to compare the marketing efforts’ effectiveness with the company’s goals.
The marketing cost per acquisition measures the cost of acquiring a new customer. The price per contact computes the cost of performing a call center conversion. The ROI of a marketing campaign is measured by the cost per piece of mail or email.
Net Profit Margins
The profitability of a business is measured by the gross profit minus the cost of sales divided by the total sales. Generally speaking, a high net profit margin is considered good business efficiency. However, this can vary depending on the industry and the company’s size. According to a study by New York University, the average net profit margin for US businesses is 7.71%. Large corporations typically have much lower margins.