In Process Redesign/Optimization Efforts, VCVE : I Metrics are the Key to Success
Process redesign efforts can be daunting. Organizations have many lines of business and functional departments, myriad business applications and complex workflows that have evolved over the years, all of which are frequently only partially documented. However, by examining a few key metrics, organizations can streamline re-engineering analysis and quickly identify areas with the potential to deliver maximum impact.
In my years in an array of operational capacities, the name of the game has always been efficiency and effectiveness. Whether the focus is on workflow redesign or on the implementation of new technologies, the desired outcomes remain the same: reduce cycle times, increase production, eliminate waste, improve compliance and quality, increase customer satisfaction and design processes for enhanced employee engagement. Ideally, operational improvement initiatives deliver value in multiple areas simultaneously.
While process definition/understanding is fundamental, it is also time-consuming, especially in the context of technology implementations designed to automate tasks previously executed by humans (e.g. Robotic Process Automation or RPA). Fortunately, most organizations already have some process documentation in place, which can frequently serve as a sufficient starting point. So, rather than spending extensive hours documenting processes at the detailed levels, my first step is frequently to review operational metrics, as these often provide the inputs necessary to identify where improvements will deliver the best returns.
Processes across organizations vary significantly, but most can be fundamentally organized into sub-processes and tasks (later efforts expand to owners, participants, systems, input, outputs, dependencies, etc.). I generally define sub-processes as sequences of tasks that, at their aggregate, can be distinctly measured and are commonly performed by a single person or department. For example, in the context of financial services, a loan process is typically made up of a few primary sub-processes:
- Loan Application
- Application Review
- Eligibility (Background Checks and Reports)
- Determination of Rates
- Offer Creation (Documentation)
- Customer Commitment
Typically, each of these sub-processes is executed by distinct people or groups and represents a key stage or milestone throughout the overall process.
Gathering a catalog of key processes and sub-processes to this level of specificity allows for an evaluation to calculate estimated Return On Investment. This helps prioritize redesign and optimization efforts. Once you have reached this point, the next step is critical – measuring the effectiveness and efficiency of the sub-processes themselves. As you might imagine, organizations measure operational performance in a variety of ways, but experience across industries points to five key measurement categories that provide tremendous insight: Volume, Conversion, Velocity, Effort and, ultimately, Impact (VCVE : I).
- Volume – Most basically, volume is a measure of how many transactions are going through each sub-process. Understanding this helps prioritize redesign activity. Obviously, low volume sub-processes frequently fall lower on the priority list.
- Conversion – This measure reflects how successful an organization is at moving transactions through each sub-process. Generally, the goal in most organizations is to move transactions from one process to the next through to the final sub-process, which is frequently when revenue is recognized. In the loan application process above, success in the Eligibility sub-process means that the applicant is eligible, and the organization can move one step closer to closing a loan. High conversion rates in each sub-process directly translate into higher revenue levels. Identifying areas where transactions fall out of the overall process and don’t turn into closed loans represent opportunities to redesign sub-processes and help push a larger quantity of transactions toward the end stage.
- Velocity – Similar to conversion rates, measuring how long transactions sit in each sub-process is essential to decreasing the overall time to revenue. If a financial organization can streamline the Application Review, Eligibility, Determination or Rates and Offer Creation sub-processes, they stand a better chance of improving customer satisfaction and securing the Customer Commitment. Conversely, organizations that take inordinate time in these stages risk losing customers to other institutions.
- Effort – This is a category that should be examined from two perspectives:
- Internal Effort – While volume, conversion and velocity measures can all be improved with the simple investment of more human labor, this is obviously not cost effective. It is also essential to examine the internal effort required to complete transactions within each sub-process. Measurements of this effort can identify potential areas of tremendous organizational cost savings.
- Customer Effort – Similarly, without digressing too far into the larger topic of Customer Experience (CX), organizations must also take an outside-in view of processes, for while new designs may make sense internally, they may also create unreasonable burdens for end users. Be sure that process design is conducted from the customer point of view and that measurement mechanisms are in place to ensure that point of view is valid.
- Impact – This key measure translates the value or impact of VCVE changes into revenue and profitability context. As an example, there may be some initiatives that improve Volume and others that improve Conversion Rates. Organizations must understand the corresponding impact in financial terms in order to properly prioritize implementations and their associated investments.
So, while process definition is essential, be sure that you don’t go too deep without first understanding these five key measurements. These measures will help you prioritize where you spend your time optimizing and also help justify investments that deliver efficiencies and effectiveness.