June 01, 2015
How to Measure Your Company’s Effectiveness
While some business owners and managers might debate the best way to measure a company"s effectiveness, when it comes to operations management, there are a few key metrics you can use to determine how well you are performing and develop a strategy that will keep your company on track - and hopefully ahead of the competition. We will discuss these metrics in today"s informative blog post.
Operations management has a rich history, filled with some surprising theories, philosophies, and methodologies that have been used to help increase and fine-tune the effectiveness of practically every operation throughout time. While each manager may differ in their approach, we find two metrics pivotal to measure performance: efficiency and effectiveness.
Effectiveness Metrics
Effectiveness and efficiency are really two broad metrics that can be broken down into several sub-metrics. For effectiveness, operations managers look at six points: price, quality, time, flexibility, availability, and ecological soundness.
To determine pricing, operations managers must look at several factors. While marketing may have the ultimate say, other aspects must be taken into consideration, including maintenance costs, cost of usage, any costs associated with upgrades, disposal fees, and, ultimately, the purchase price.
Quality relates to product specification and compliance to a set of standards that can be determined by a governing agency, engineer, or another body, depending upon the goods being produced.
Flexibility looks at how well a system or operation can adapt to any changes or outside influences that may occur. For example, if a business is in an area not known for severe weather when a storm does occur, a manager would want to see how well the system was able to perform in this situation. Is it flexible enough to handle a thunderstorm? A hurricane? Is production affected by this outside influence?
Other flexibility areas to consider include machine flexibility, operation flexibility, production flexibility, and even marketing flexibility (to name but a few).
Availability is all about how often a machine or operation is able to function. As a subset, this metric is also about the reliability of a given system. The more "reliable" a system is, the more "available" it becomes.
Finally, ecological soundness looks at the environmental and biological impact of a given system. Is it damaging to the local environment? How do you prevent or lessen this impact? What are the environmental risks associated with the system or operation - even if this impact only occurs during a breakdown or failure?
Efficiency Metrics
Efficiency metrics are a little less complicated than effectiveness metrics. Typically, efficiency metrics focus on productivity. How many units are able to be produced, what are the breaking points, how do you increase productivity, and so forth.
A computerized maintenance management system (CMMS) is a great tool to increase the effectiveness of both efficiency and effectiveness metrics, and can even be used in the reporting process. For example, by properly tracking preventative and proactive maintenance, you can ensure your equipment functions at peak performance, and, in turn, optimize your productivity.
This same, basic CMMS function lets you increase the availability (and reliability) of your equipment and overall system - another important key metric we discussed above.