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November 12, 2013

10% 20% 30% What's a "Good" Process Improvement?

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I'm often asked by clientswhat levels of improvement they can expect from my work. Clients are fascinated by pinning a percentage on each process so that they can show this to senior managers and say "We've saved 30% of the total cost of the process!"

But let's clarify a few things here...

Firstly - what time are we measuring? Is it elapsed time or actual effort time:

  • Elapsed time refers to the total time from start to finish of the process from the customers point of view.
  • Effort time means the actual amount of time your staff take to do work in the process

A classic example is that it may take 2 minutes for your staff to write an email (effort time), but if the email sits in an inbox for 2 hours that is adding to the time of the overall process (elapsed time).

Both types of timings are important depending on the goal - elapsed time has a greater customer impact ("OMG! Why is it taking so long!") whereas effort time is a more telling diagnostic for efficiency. Of course a reduction in effort time also decreases elapsed time - and it is still possible to have a process which is efficient in terms of effort time but a laggard in elapsed time (watch out for those sneaky ones). My tip is to measure both for whatever process you look at.

So what is a "good" level of improvement? Well it's not quite that simple. A 0.5% elimination of effort time can be a fantastic improvement - it all depends upon one very crucial ingredient: volume.

A small improvement upon high volume can result in huge savings - take the example of a company that receives millions of calls to it's contact centre - shaving even seconds off a call can be a huge cost saver. Converesly, if you can save 75% of effort time off a process that is only conducted 200 times a year, the costs of implementing the process change may outweigh the benefits.

So to answer the question, there's no such thing as "good" percentage improvement in terms of effort time - it has to be measured along with volume. But to quash the fires of curiosity I've achieved effort time reductions on processes up to 75%, but commonly from 30-70%. If we look at elapsed time, a percentage reduction on its own can be a useful measure - but again transaction volume should be taken into account as part of the cost / benefit analysis.

Cheers,

TPN

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Good note Craig,
... it is also common question in our projects ... the less client knows about processes the more often he asks the question :). The second thing is, like You told, when we set up the metrics for the first time it is hard to say about % improvement.

Have a good day

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