Operational efficiency isn’t a hard topic to understand, but it is nuanced. Techniques that may work for one company may not work for another, even if they are in the same industry. The key to success is developing the correct KPI’s, the kinds of KPI’s that will help you know whether you are getting better (more efficient), or if you have room for improvement.
The first thing to do is select the right KPI’s for the different divisions of your company. For instance, your manufacturing division will have different operational efficiency KPI’s than your marketing or HR team.
However, how do you measure the efficiency of your human resources department? Or your marketing department? If you launch an extensive marketing campaign, how do you measure its effectiveness? How do those dovetail into the KPI’s and goals of your company? This is where the “rubber meets the road” of business metrics. After all, it is the overall success and efficiency of your company that matters, not the KPI’s of one section of your company.
Different Metrics For Operational Efficiency
Here are four examples of KPI’s you can use to see how your departments are working. There are other aspects you can measure, and these are only a small selection of examples.
Manufacturing efficiency is measuring the amount of product your production line produces over a specific amount of time. You could count the amount of product produced, or the time it takes to produce a set amount of product..
Revenue per employee is calculating the ratio of revenue against the number of employees. This metric is really useful if you can compare it to your competitors.
Calculate the energy efficiency of your buildings, not just the production line but administrative, storage, and shipping facilities as well. Improving energy efficiency is a simple way to cut expenses.
You can measure the efficiency of your marketing by the number of customers attracted by a marketing campaign. It can also be measured by your Google ranking, the number of visits to your sites, conversions, or any other metric you consider essential.
Whatever your KPI’s are, they must be measurable and quantifiable. After you have measured your input into your business, you have to measure the output. Decide what you will measure and compare your output to your input.
Once you have the metrics, you can compare them to previous years, against your competitors, or use them as an initial benchmark to compare future statistics.
Improving your operational efficiency is based on measurable KPI’s. However, you have to measure both the input and output so you can see how everything is working. Equal Parts Consulting is a big believer in developing specific, descriptive and measurable KPI’s. We understand how measuring operational efficiency gives you a window into the effectiveness of your operations.
If you are looking to increase your efficiency, we invite you to contact us to learn how we can help you create real change in your company’s processes that lead to better market share.