All you need to know about the Process Performance Metrics
After defining a new Business Process, how can we measure if the daily work is performed as the process definition?
Then we need Performance Metrics or Performance Indicators. The purpose of measuring Performance Metrics is to control whether the Process is executed successfully and meet the goal of the process. If the Business Process Performance is not good, a follow-up gap analysis can be performed for improvement.
Which Performance Characteristics are meaningful to measure?
A Process is aimed at achieving a goal or purpose. Therefore the Performance Metrics will be all about the achievement of the Process’s goal or purpose. There are several classical Performance Characteristics:
Effectiveness – it indicates whether the goal of the Process has been achieved .
Efficiency – it indicates whether the purpose of the Process has been achieved with the minimum resource (time, money).
Quality – it indicates whether the purpose of the Process has been achieved by meeting the quality criteria.
Timeliness – it indicates whether the purpose of the Process has been achieved in time.
Next to these, some industry-related characteristics can be used. For example, for the Offshore Engineering industry, Safety is an essential core value. So there must be a Performance Metric reflecting the Safety characteristic.
What are the basic attributes for a Process Performance Metric?
In order to define a Performance Metric structurally and consistently, let us first define the basic attributes which a Process Performance Metric should have:
- Performance Characteristic
- Measurement Method
- Input for the Metric Measurement
- Output Registration
- Acceptance Value Criteria
- Target Value
How to define the Performance Metric for a Business Process?
The definition of a Business Process normally consists of the following elements:
- the goal of the Process
- sequential Stages and the purpose of each Stage
- different Activities within each Stage and the purpose of each Activity
- inputs and outputs of each Stage
For example, the Package Dispatching Process of a web hand-crafts shop “Hand Made” is like this:
The goal of this Process is to send the ordered goods within 24 hours after receiving the Order.
The purpose of Stage 1 is to check the completeness and validity of the Order information: article name, quantity, payment information, client name, billing address, delivery address.
The purpose of Stage 2 is to prepare the package with the specified order.
The purpose of Stage 3 is to arrange the shipping within 24h after receiving the order.
The Process Performance Metrics can be defined either for the whole Process or for each Stage, and even for an Activity. Each Performance Metric represents one or multiple Performance Characteristics.
Continue using the example of the “Hand Made” process; a Performance Metric Example is defined below to show how to define the Performance Metrics on Process and Stage level following the attributes mentioned above:
Example 1 Performance Metric 1 – Effectiveness of the Process
- ID: M1
- Name: Effectiveness of the Process
- Definition: this Metric indicates whether the ordered goods is shipped out within 24 hours after receiving the Order.
- Performance Characteristic: Effectiveness, Timeliness.
- Measurement Method: Calculate the difference between the shipping time and the order time.
- Input for the Metric Measurement: shipping time, order time.
- Measurement Output Registration: Order Management System.
- Acceptance Value Criteria: < 24h.
- Target Value: <22h.
Example 2 Performance Metric 2 – Effectiveness of Stage 1
- ID: M2
- Name: Effectiveness of Stage 1
- Definition: this Metric indicates whether the received order contains complete and valid information: article name, quantity, payment information, client name, billing address, delivery address.
- Performance Characteristic: Effectiveness
- Measurement Method: If the completeness and the validity have been checked, rate 2. If only either completeness and validity is checked, rate 1. If none of them is checked, rate 0.
- Input for the Metric Measurement: Order information
- Measurement Output Registration: Order Management System
- Acceptance Value Criteria: 2.
- Target Value: 2.
How to determine the most important Performance Metrics to measure and monitor?
Since the Performance Metrics can be defined for different characteristics and different levels (Process, Stage, Activity), the total number of Performance Metrics could be huge. It is not realistic to measure and monitor all the possible Performance Metrics. Therefore the Process Owner needs to determine the Key Performance Metrics for the process based on the Business Goal. The Business Goal decides which characteristic of the Performance Metric should be measured. For example, the Business Goal of the Package Dispatching Process is Reduce the total Process time. Then the characteristic Efficiency should be certainly measured. Since the total time is divided into activity level, the performance metrics need to be defined till activity level.
What to do with the measured Performance Metrics?
As mentioned at the beginning, the purpose of measuring the Performance Metrics is to control whether the Process is executed successfully and meet the goal of the process. As part of the Performance Metric Definition, Target and Acceptance Value has been defined. If the Performance Metric does not meet the Target or Acceptance Value, it indicates that the process execution or even the process definition needs to be improved.
So the follow-up for the measured Performance Metrics would be gap analysis finding out what is the cause of the mismatch and what needs to be improved. The Performance Metrics should be regularly measured and improved continuously in case the result does not reflect the Process Performance explicitly. Following the TOGAF’s Enterprise Architecture Framework, the solution for solving the identified process performance gap will be evaluated, implemented and governed.
In a word, in order to achieve the Business Goal of a Process, define the Performance Metrics, measure them regularly, improve the Process Performance and Performance Metrics continuously!