When we are faced with the task of evaluating and improving a business, we have many metrics to choose from. We can ‘follow the money’ — study the spending: where does it go, how does it compare to previous periods or to competitors; we may look at market share or wallet share; we might measure revenue per employee or benchmark against the competition; or we might measure customer satisfaction or the customer experience.
But one of the most powerful measurements for helping to make breakthrough improvements is also one of the simplest: following where the time goes.
In fact, many agree that time is the most universal and most valuable component of work and work processes! Consider that by determining how much time it takes to complete a cycle of value (i.e., building a widget, closing the books, making a sale, completing a project, etc.) and how much of that is truly adding value, an organization captures information that provides a motivating vision and road map for making improvements.
Key areas to study are delays, over-processing, rework, transportation, and inspection; and using time as a measure to find and focus opportunities for improvement has three big advantages:
- time drives important business results
- time is universally applicable
- it is very simple to do — i.e., something anyone can do!
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:
- Identify the process to study and improve — where it starts and where it ends.
- 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.
- 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.
- 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.
- 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.