Our previous post shared several reasons as to why the measurement of time is an effective way to identify and eliminate waste.

This approach has consistently proven successful in our work, and some specific examples include:

• A finance department used this method to reduce reporting cycle time by over 50% by identifying and eliminating the causes of rework.
• An organization reduced setup times by measuring the time and addressing the causes of the non-value-adding delays.
• A sales force measured their total time to value-adding time by identifying huge chunks of non-value adding time which they were able to convert to more sales calls.
• A retirement community studied total housekeeping time relative to value adding time and reduced costs by over 30%.
• A financial services company studied the total time versus value-adding time for processing time-sensitive transactions and succeeded in simultaneously eliminating both overtime and late
  penalties.

Once you’ve decided that managing time is an ideal way to reduce costs and increase customer (internal and external) satisfaction, you might try using the following five steps for effective measurement:

1. 1. Identify the process to study and improve: where it starts and where it ends.
   2. Confirm with the customer (internal or external) the key element of value the process yields. Sometimes this is obvious, but in some cases not so much. An accurate understanding of what the customer considers of real value is key to any improvement effort.
   3. Determine how long the process actually takes today. This number— in minutes, hours, days, or weeks, whichever is best suited to the process — is the TOTAL component of the ratio we will calculate in step 5. Some questions often arise at this step:
      • Should we collect “person hours” or elapsed time? Measure elapsed time. If you study and improve elapsed time, you increase customer satisfaction and quality as well as costs. Person hours spent on the work almost always decline when an organization focuses on elapsed time.
      • How precise do we need to be? It is valuable to get good data about the total time elapsed from start to finish, if only through a modest sample. Of course, there will be
        variation — and the variation can be quite substantial for some processes. Keep the raw data, and calculate the average TOTAL.
   4.  Determine which steps actually add value and how much time is spent on those. For a step to be considered to add value, it must:
      • Be directly related to what the customer values and would pay for (if they knew what we were doing)
      • Actually change something of value — the product, database, approval status, whatever, (inspecting something or moving something does not actually change the thing, so does not ‘add value’)
      • Do so for the first and only time. Fixing or reworking something does NOT add value, because it compensates for not being done completely or correctly the first time.
        Often these steps must be done today, because they compensate for an imperfection somewhere in the process. Correcting those imperfections is what will yield the improvements.

      What if we disagree about what is truly adding value? When categorizing work, aim to be as rigorous as possible about applying the criteria for value-added. If you mis-classify a non-value step as adding value, you will lose out on the opportunity to study and possibly eliminate all or part of it. But it is not a fatal mistake; you can always circle back. Once a group has eliminated a first round of waste, they are able to scrutinize what is left more rigorously and find a whole new round of opportunities that may well exceed the first round.

      How precise must we be about the amount of time the specific steps take? Knowledgeable approximations of the individual components that consume time are usually sufficient to
      produce really great improvements.

   5. Study the differences between the total time and the value adding time to identify and eliminate the root causes. Then calculate again. To calculate the ratio: if total time today is 55 hours and value adding time is 2 ½ hours, then the ratio would be either:
      • Total-to-Value: 55 divided by 2.5 = 22, which means that the organization spends 22
        hours for every 1 hour of value add, or
      • Value-To-Total: 2.5 divided by 55 = 4.5%, which means that 4.5% of total elapsed time
        is actually spent adding value.

      It doesn’t matter which you use, as long as you are consistent.