Before we talk specifically about the types of Process Performance Metrics, let me mention that there is a fundamental difference between Strategic Process Performance Metrics and Process Performance Metrics, let’s see:
Types of Process Performance Metrics
Process Performance Metrics, also called KPI’s (Key Performance Indicators) focuses on how the task is being performed by measuring performance and if individual goals are being achieved.
This indicator should be measured by a ratio (generally represented by a number) which portrays the progress of the process as a whole or in part.
Strategic Process Performance Metrics serve to show if the organization is achieving the objectives set by senior management, so-called strategic goals. A widely used tool to assist in determining these goals is the Balanced Scorecard.
Types of Process Performance Metrics
- Efficiency Indicators
- Effectiveness Indicators
- Capacity Indicators
- Productivity Indicators
- Quality Indicators
- Profitability Indicators
- Competitiveness Indicators
- Value Indicators
We will detail each of them so that you understand them better:
Efficiency Indicators vs. Effectiveness Indicators
Effectiveness is the relationship between the expected results and the obtained results: the best way to do that is = achieve the expected results.
Efficiency is the relationship between the results achieved, and the resources used = making things the best way using the least amount of resources.
We can say that efficiency is to be effective using a minimum of resources. Focusing on the process and resources applied to, for example, reduce costs. Effectiveness already focuses on the product and the obtained results and can bring benefits, through higher profits.
Capacity Indicators: The ratio between the amount that can be produced and the time for this to occur. For example, the automaker X is capable of producing 200 cars per month.
Productivity Indicators: The ratio between the outputs generated by a job and the resources used to do it. Example: A worker can install 20 m2 of flooring in an hour. Another can install only 17 m2 of flooring in an hour. Therefore, he is less productive than the first. See also How do you increase productivity at work? Check out 5 valuable tips.
Quality Indicators: The relationship between total output (total produced) and the outputs suitable and appropriate for use, i.e., without faults or deformities. Example: 980 pieces suitable for every 1,000 produced (98% compliance).
Profitability Indicators: The percentage relationship between profit and total sales. Example: a company that sold US$200,000.00 of goods and calculated a US$20,000.00 profit. So profitability is 10%.
Return on Investment (ROI) Indicators: The percentage relationship between the profit and the investment made in the company. Example: the same company from the previous example invested US$500,000.00, with a US$20,000.00 profit. The yield was 4%.
Competitiveness Indicators: A company’s relationship with the competition. Market share can be used for this.
Effectiveness Indicators: Effectiveness is the combination of efficacy with efficiency.
Value Indicator: The relationship between the perceived value when you get something (a product, for example) and the amount spent to obtain it.
Learn more: Understand in detail how to cut costs in your business, find it here.
Why use Process Performance Metrics?
- They provide the information that the manager needs for each stage of the process
- They provide greater accuracy in managerial decision making
- They aim to bring more efficiency and effectiveness to processes
- They bring speed, a better understanding, and transparency to disclosing results
- Process Performance Metrics become the measure of a company’s excellence
- They allow the creation of a dashboard with all the information available in a panoramic way
View more: Business Process best practices, here.
General concepts of Process Performance Metrics
Indices: the number that depicts the performance earned in a process by the Process Performance Metrics
Goals: are the values to be aimed for in a predetermined period, using the Process Performance Metrics
Tolerance: If you doesn’t reach the goal, there is a limit of tolerance that will show how serious the result is. Values outside this tolerance range indicate that the conduct of the process is critical and some action should be taken.
The importance of using Process Performance Metrics
Process Performance Metrics are used to monitor the activities of the company. I.e. track and follow the progress of the business, collect relevant information and make it available in an accessible way so that managers can study it and make the right decisions.
It brings efficiency and efficacy to the processes and thereby creates positive results for the company.
Therefore, Process Performance Metrics are critical for the management of a BPM process.
They bring to light the necessary information so that you can analyze the processes to improve them continuously to achieve strategic business objectives.
Management Dashboards and Process Performance Metrics
A Management Dashboard is a visual, easy-to-understand presentation that shows key performance indicators, or KPIs, that an organization defines to assess whether its operation is on track to achieve its business goals. See on the video below how it works.
I like the way Performance metric was explained. Very detail and informative.
Thank you very much Alicia
its easy to understand the Performance metric concept by your explanation
really good. thanks for the information
thanks,now i understand it better than before and it helped with my studies
Good insights into performance management and the application of BSC
Absolutely clear communication here. Thanks for the explanation.
Thank you so much for your comment.