Determine whether you already have reports that answer the questions. Over time, you may find that customizing reports to answer specific questions results in fewer overall reports. It shows how efficient you are at collecting credit sales. Plus 2 more steps to achieve operational efficiency: Study your KPI spreadsheets or other systems you use to track them and make sure goals are being met. Additional information is needed to assess whether they are doing well or whether action needs to be taken. Typically, these performance indicators relate to efficiency, quality or value. Improving operational efficiency begins with measuring it. Have they increased first contact resolution? Reports should be intuitive. Organizational effectiveness denotes the concept of how effectively an organization achieves the outcomes it intends to produce. Although we have plenty of data to use for trending, improving services, and promoting value, many IT organizations struggle to deliver the right mix of metrics and give the right reports to the right audience. So, the first step in being “the best” is to set a goal. Assuming that your categorization allows you to trend on those services or people, you can run a high-level trending report to see the number of tickets received from that business unit that are related to those services. And using a process control system will also help a lot. For example, if the primary metric is to manufacture the product faster, the business metric might be increased profit or reduced fixed costs. Measuring operational efficiency involves keeping track of a company’s inputs and outputs as performance indicators. Many manufacturers still operate preventative maintenance schedules. Measure productivity gains facilitated by IT. That boosts … Reducing operational costs means approaching maintenance in a new way. Required fields are marked *. Since operational efficiency is about the output to input ratio, it must be measured on both the input and output side. At the highest level, OR efficiency metrics and improvements can be put in 5 categories. Measuring Service Quality as Part of Performance Management, Spring Cleaning: Best Practices for the Daily Grind, Unified IT: Improving the Customer Experience by Moving Beyond the Customer Satisfaction Survey, Build a Service and Support Quality Program That Works. MOSs typically relate to readiness or operational availability and, hence, reliability, maintainability, and the item’s support structure. Let’s look at an IT example of an IT executive question: Is training before a rollout necessary? quantifiable value expressing the business performance in a shorter time-frame level For example, a report entitled, Severity 1 Incident Report is not going to have great significance to the business unless we explain it. To demonstrate the approach, let’s take one of the questions from the business unit managers list and walk through the necessary steps: Is IT helping my team to be more productive? The trend shows that the training was successful. Most likely, your business partners already have questions they’d like to have answered or information that they need to have to help them run or improve business processes in their respective areas. Once you recognize trends, take deeper dives into data to develop specific reports that clarify the trends or identify necessary action. Many calls were escalated to resolver teams (which increases the cost per contact and negatively impacts productivity for escalation tiers). The efficiency formula is a measure of the efficiency of processes and machines. A report showing before and after processing time would definitely quantify the value of IT service improvements! It is the sum of the parts measurement that is most critical to overall operational efficiency. The service desk saw fewer calls overall and had higher first contact resolution, which equates to fewer escalations. IT should not define business (value) reports without consulting business partners! They are used in different industries to track organizational processes, improve efficiency and help businesses to understand and reflect on the outcomes. Maximising capacity utilisation. Trending reports are a necessity. Quantify the amount of time IT has helped the business save. Use reports to provide factual information that drives the right actions and results. #HDIchat Recap: What's the Biggest Change in Your Support Center in the Last Year? One day, one of the product managers decides that they want, at all costs, to achieve operational efficiency in the process of manufacturing chrome shock absorbers. Even the most streamlined processes require employee input, and how well those employees perform impacts the success of the process. Hi Carol, maybe you need the help of a consultant. In many cases, facilities have the space for more customers but don't have enough power for them. How To Measure HR Effectiveness: Finding The HR KPIs That Matter The Most. • Service review meetings and improvement plans, Site specific business tasks that IT services have facilitated or improved, Quantify the amount of time IT has helped the business save, Measure productivity gains facilitated by IT, Show cost savings or an increase in profits or customer retention (at the organizational level), Demonstrate that IT is working efficiently and cost-effectively. Additionally, determine which metrics and reports measure efficiency, identify improvements, or show results. They do not need to shine, they have to be efficient in carrying loads and last a long time on our rather rough roads. • Do IT investments positively impact business productivity or the customer experience? We often hear firms stating that they simply want to be “the best” company in their industry. This takes an extra three seconds to click on post and another three seconds before returning to the screen to enter a new order (IF people always remember to click “post” right away). One way to do this is to define what your target market is and which nee… Reading the trends, making improvements, and becoming more efficient helps IT to be less reactive and positions it to make a real difference for the business. Key topics • Common challenges • 10 steps toward operational efficiency • Key performance indicators • Bottom line rewards Leverage Ratios Leverage Ratios A leverage ratio indicates the level of debt incurred by a business entity against several other accounts in its balance sheet, income statement, or cash flow statement. In this case, you can measure operational efficiency based on the number of customers acquired versus the cost per customer. Either the structure doesn’t work, the terminology isn’t understood, or the report is not using the right data. Operational performance metrics are measures that we need to evaluate the efficiency of an entire production process. It can be measured using metrics such as revenue per kwh. Quite often, company management is measuring primarily on the input side, e.g., the unit production cost or the man hours required to produce one unit. … Efficiency at work can only be achieved through the efficient exchange of information in real time and a lot of teamwork, integration and collaboration. Net Profit 3. For example, consider an IT department that supports POS systems in a fast-food restaurant chain. This will ensure that operational (efficiency and quality) reports–those that show how efficiently and effectively IT is running–are not given to the business (unless requested) but used internally to improve IT operations. For this, look for opportunities for improvement, such as wastage that you can avoid, delays you can eliminate, or other problems. Why the last week of every month? Look no further than the HDI 2017 Conference & Expo! • What value does the expenditure on IT deliver? Here are some examples of questions your business partners and IT executives may be asking: • Does IT support the achievement of business objectives? If you have to explain your report to someone, you are not getting the message across. Find out which processes in your business most contribute to meeting this customer desire Here is another example. Combined physician and staff availability data from the staffing application, Average number of patient check-ins for that location between 12 p.m. and 3 p.m. from the patient registration system, Average time per patient seen from the electronic medical record, Patient seen by nurse to patient seen by MD, They process 40 orders/hour * 5 registers *18 hours = 3600 orders/day, 6 seconds wasted/order * 3600 orders/day = 21,600 seconds (360 minutes or 6 hours) wasted/day  item. This allows manufacturers to be proactive, rather than re… After many studies, time and money employed, they begin to produce this piece with an effectiveness and operational efficiency the envy of any German or Japanese plant. How can OR leaders measure these metrics? Once you collect the questions, you can begin looking at your current metrics and reports. There are two ways to measure this. Debt Asset Ratio How Efficient is Your Operation? A predictive maintenance programme – servicing machines based on need-based early stage notifications – is much more efficient than a Fixed Time Maintenance (FTM) Preventative Programme. • Are we successfully improving business productivity? In fact, even if goals are being met, it is always interesting to try to make processes more and more efficient. In the case of heavy trucks, you can measure by sampling if they resist a certain impact. The latter approach uses the value of outputs and cost of inputs. In other words, ask; don’t assume. Trending showed a high volume of calls to the service desk after the last rollouts (trended across three rollouts that had similar average numbers of calls—which answers the first question—yes, it is necessary). There’s just one problem: no one wants chrome shock absorbers on heavy trucks …. Just showing whether it was available or not doesn’t provide enough information. Gross Profit Margin 2. • Is IT helping my team to be more productive? • Do we effectively measure and reward individual and team performance? Rae Ann holds several ITIL and HDI certifications and is a faculty trainer for HDI ITIL and Support Center certification courses. Although these examples are situational, the same approach works for any type of questions you are trying to answer. IT can take this a step further to help to identify bottlenecks by providing report break downs by the type of wait time: IT could then overlay the patient experience reports with network status during those same timeframes (and across different locations) to begin to assess the root cause and analyze further. How to Measure and Improve Operational Efficiency Operational efficiency is calculated by dividing output (revenue, sales, cold calls, inbound leads, etc) by input (resources, man-hours, licenses, etc). Plots of land, types of soil, and varieties of plants were deemed more productive if they had greater product yield. Once you know what the business or IT partner wants to know, look at your current reports and metrics to see if they answer the question. But what operating room efficiency metrics should you look at? If it wasn’t, was it due to routine maintenance or an outage? Why between those hours? It’s time to choose good performance indicators, the so-called KPIs. You can also measure how many shock absorbers are produced per day to meet the demand, or whether you are wasting material. So how do you calculate operator efficiency in the factory? Show cost savings or an increase in profits or … This combination of reports allows the business/organization to assess current business processes and IT can assess the IT services themselves, then work together to improve the service, performance, or business process. To calculate operator efficiency you will be needed standard minutes (SAM) of the garment and operations your operator is making. Efficiency isn’t just about reducing costs; other business objectives, including service quality, still have to be achieved in order to keep existing customers and revenue. There are efficiency ratios used to measure production or financial efficiency, or a combination of both. A good KPI should be easy to measure, make sense to those who are evaluated by it when carrying out the process and have a direct impact on generating value for the customer. This webinar will focus on how organizations can operate with agility in today’s uncertain environment. Reversing your approach starts with the questions (before considering the data): Keep in mind that any questions regarding business goals, needs, or questions should come from the business, not IT. Want to achieve operational efficiency in your business without making mistakes like this? Make sure the data is accurate and double-check the results by running different reports and looking at situations from many angles (e.g., customer satisfaction, quality, etc.). Revenue Per Employee A basic business input is the labor of employees. By starting with questions (and getting them from your business and IT partners), you can deliver the right information to the right people. It is calculated by dividing net credit sales by the average gross receivable. Reports should show that we are succeeding or identify areas for improvement. Document Control - The ability to find necessary documents as easily as possible is a crucial part of operational efficiency. • Does IT deliver on its service level commitments? Keep in mind that some answers or stories may require collecting data from different tools or modules and combining them into one report. As explained by Mankins in the Harvard Business Review, efficiency is a matter of producing the same output with less input. Instead, IT should generate a report (or multiple reports) from different data sources: The report would correlate these data points to calculate average turnaround time, which should provide insight into the cause of the bottleneck and allow the business to develop potential solutions. How much time does it take to complete business tasks? Another example could be an availability report for a service. Let’s consider the service availability report. Being transparent and showing improvements helps to build better relationships with the business. What critical services do you provide, and how does it impact business? The ROA looks at how the business is using shareholder assets to earn returns. However, if we multiply six seconds by every order on every register, there is a lot of wasted time. Operational efficiency is a powerful metric that is used to assess the efficiency of profit earned instead of operational costs. Additionally, it is important to include what matters to the business. These reports are usually written from an IT perspective and show how efficiently we are operating. Complete regular and extensive operational audits . steps operations can take to identify change indicators and ensure operational efficiency today and in the future. The goal of any operational effectiveness program is to improve business processes and, ultimately, the customer experience. It is important to have operational efficiency in all of them. How to achieve operational efficiency in processes? • Are IT costs being managed effectively? Essentially, operating efficiency is the output to input ratio. A phrase from Peter Drucker perfectly illustrates the mistake made by this product manager: “There is nothing as useless as doing with great efficiency something that should not be done“. Net Profit Margin 4. As a general rule, IT should be able to: Site specific business tasks that IT services have facilitated or improved. Regardless of the industry or business drivers (reputation, cost reduction, profit, etc. Operational efficiency is a measure of how much costs are incurred during a given economic or financial activity, where lower costs equals greater efficiency. Ultimately, efficiency can be measured in time, money, or both. Before I dive into what I’ll be defining as “productivity”, it’s worth noting that the term is applied to a vast array of different circumstances, each with its own nuance in meaning.First appearing in use in the early 19th century, “productivity” was originally a very focused around agriculture. Measure of Suitability (MOS) Measure of an item’s ability to be supported in its intended operational environment. The reports can also help IT to be more proactive, which also provides value to the business! Below is a sampling of different types of efficiency, quality, and value reports. What does IT need to know in order to improve services and run efficiently and effectively? As a general rule, IT should be able to: If your reports are not currently providing this type of information, you may need to reverse your approach to developing reports. Rae Ann Bruno is the President of Business Solutions Training, an organization focused on training and consulting in various areas of ITIL, Knowledge-Centered Support (KCS), service desk improvement, internal marketing, metrics, and ITIL process improvement. The following are 10 tips for using network technology to help your business increase operational efficiency, reduce costs, improve customer satisfaction, and stay ahead of the competition. The basic formula is a ratio of output to input expressed as a percentage: ... A definition of operational efficiency with examples. Looking at the volume across the past three to six months, you should see some trends that will allow you to assess productivity impacts. Operational efficiency is the output a business from each unit of input. • Are targeted inter-company IT strategies being achieved? You would need to measure fuel costs and maintenance costs. IT makes a change so that the order automatically posts and the screen refreshes automatically. We recommend focusing on these four key things as a jumping off point: 1. However, if the report title is Revenue Impacting Incidents, the importance is clear to the business without explanation! Finding the most current variation of … This automation saves four seconds per order, which gives the restaurant back four hours of processing (or taking more orders) per day . Examples of this include automation accuracy, quality indexes and customer satisfaction. • Is training before a rollout necessary? Based on the business partners’ questions, IT can provide useful business (effectiveness or value) reports–those that are tied to business processes, goals, and impact–that allow the business to make better decisions and recognize the value of IT services. Operational effectiveness comes down to all the work that gets executed to provide a customer with what the business promises to provide. If yes, is it successful? You can make reports say anything you want, but contradictions will surface and reality will be uncovered! Generally, a higher turnover is related to more favorable cash flow. Follow Rae Ann on Twitter @raeannbruno and connect with her on LinkedIn. Often, you have the data, but haven’t combined different metrics to tell the story. The ‘technical’ way to measure operational efficiency is to calculate the ratio of output gained to the input expended. perfectly illustrates the mistake made by this product manager: Achieving operational efficiency step by step, Efficiency at work can only be achieved through the efficient exchange of information in real time and a lot of, Find out which processes in your business most contribute to meeting this customer desire. • Are IT services delivered at a competitive cost? Measuring Improvement in Operational Efficiency Internal and external communities can improve how organizations communicate and collaborate. Operational efficiency – it’s not just about cost cutting by Matthew Burrows . As you can see, the key elements of efficiency measurement lie in a warehouse manager’s ability to look at a variety of indicators to see how they function together best. How can I improve operational efficiency in a college. Developing the right reports goes beyond completing a task for your performance objectives. Operational efficiency. The office administrators are complaining that patient wait times are too long after lunch and want to know why. Imagine a company that produces shock absorbers for heavy trucks. In a month, a drilling machine takes inputs such as labor, electricity, materials and depreciation on the machine itself that cost 50,000 dollars. What trends are we seeing that we should explore further? How many clicks are needed to tackle various business processes (this would require observation and usability testing to establish the baseline)? Efficiency can be improved by installing energy efficient computing equipment and cooling systems. For example, let’s consider an IT group that supports a doctor’s office. The operations manager then looks for work (even if it‘s not needed now) to keep the resource busy. Too often, reports are made up of the easy-to-collect metrics or show a single metric instead of telling a story and providing useful information that drives action or shows business value. But it is very difficult to control absolutely everything! It is critical to use collaborative systems to discover through the help of some key employees what customers really want, what their real needs are, and how to add value to your company’s products and services. Value is defined and measured by the business, not IT. Then measure it again, analyze it and improve it until you get the operational efficiency you want! 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