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The Telegram
  • Eric P. Bloom: The importance of process measurement

  •  There is an old IBM advertisement.  I don’t remember the exact year, but I believe it was about 15 years ago.  The premise of the advertisement was that a person runs into his boss’s office all excited that he saved the company a nickel (it may have been a dime, I don’t exactly ...
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    There is an old IBM advertisement.  I don’t remember the exact year, but I believe it was about 15 years ago.  The premise of the advertisement was that a person runs into his boss’s office all excited that he saved the company a nickel (it may have been a dime, I don’t exactly remember).  His boss then says “Big deal, so what if you saved the company 5 cents.”  The employee then answers back by saying “You don’t understand, I just saved a nickel a transaction on 5,000 transactions a day!”
    The above story was not only a fun advertisement for a product I can’t recall, but it also is an enormously powerful example of why you should properly measure the processes performed within your department. 
    When measuring the processes within your department, consider the following types of statistics.  Of course, not all of these measurements are applicable to all processes, but the list below should give you a good idea of the types of measurements that may be applicable to the work done within your department.
    - Number of times the task/process is performed per week.
    - How long the task/process takes to perform.
    - The average pay of the people performing the task.
    - The cost of materials and/or other costs incurred by task.
    - The value associated with each completed task/item.
    The measurements listed above allow you to calculate statistics such as the total time spent within your department on each process, the value and/or return on investment of the process to the company, and which processes within your department take the most time and/or cost the most money.  This last item is incredibly important because it helps you, as the manager, prioritize your time in regard to which processes should be streamlined.  For example, let’s say your department performs two types of tasks.  Process 1 takes three hours to complete, but if redesigned, the time could be reduced to two hours.  Process 2 takes on average forty-five minutes to perform, but the time could be reduced to forty minutes if the process was redesigned.  Which process do you improve first?  At first glance, you may say process 1.  That said, to answer the question correctly there are a few other items you need consider:
    - The number of times each process is performed per week.
    - The average pay grades of the people performing each process.
    - If one of the processes is a bottleneck causing issues within other departments.
    - The level of effort and expense needed to streamline each process.
    With the above information in hand, you can then statistically build a business case as to which process should be improved first.
    Page 2 of 2 - In addition to the obvious advantage that this type of analysis has for your company, this empirical evidence also has a big advantage for you personally.  This personal advantage is that you can precisely quantify to your manager the amount of time and money that your work is saving the company.  Think of it this way, which of the following two statements would you like to be able to say to your boss during your annual performance review?
    1. Over the past year I think I saved the company a lot of money improving some of our department processes.
    2. This year I saved the company $325,000 by streamlining two of my department’s processes.  The first process saved $200,000 in labor costs and the second process saved $125,000 in transaction costs.  Even better, looking forward over the next five years, this will be a savings to the company of $1,625,000.
    The primary difference between the two above statements is that the second one illustrates actual cost savings based on process measurements, rather than an off-the-cuff statement based on your gut feeling as a knowledgeable observer.
    The primary advice and takeaways from today’s column is to know that:
    - Properly measuring the processes performed within your department has many advantages for your company, your department, and you personally.
    - Process statistics can be used to prioritize process enhancements, calculate process value to the company, and numerically illustrate your personal value to the organization.
    Until next time, manage well, manage smart and continue to grow.
    Eric P. Bloom, based in Ashland, Mass., is the president and founder of Manager Mechanics LLC, a company specializing in information technology leadership development and the governing organization for the ITMLP and ITMLE certifications. He is also a nationally syndicated columnist, keynote speaker and author of the award-winning book “Manager Mechanics: Tips and Advice for First-Time Managers.” Contact him at eric@ManagerMechanics.com, follow him on Twitter at @EricPBloom, or visit www.ManagerMechanics.com.
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