Useful Performance Measures & Metrics – How To Measure Efficiency & Effectiveness

The words “efficiency” and “effectiveness” are used a lot regarding organization performance.  But I see little guidance on types of efficiency and effectiveness measures to use. Below are suggested measures to consider; and also how they can best be used.

The specific types of measures used by an organization may vary depending on its operations, goals and objectives.  Ideally, these measures should be linked to an organization’s quantifiable objectives and performance standards. 

Efficiency.  This measure should be viewed in terms of how an organization uses its resources, such as available funding and staff, to achieve organization objectives.  Is it applying these resources in such a way as to maximize their contribution to organization outputs, i.e., the services it provides?

Efficiency measures include:

  • Per unit costs:  A measure of per unit cost reveals how many resources are consumed in producing a unit of service. 
  • Cycle time:  Measures the amount of time it takes for a process to be completed.
  • Response time:  Measures the amount of time it takes to respond to a request for service.  Again, it is a key measure of customer satisfaction, as it indicates how much “waiting or queue-time” customers wait for a service response. 
  • Backlog:  Measures the amount of work in queue, waiting to be processed.  Backlog is a tricky measure, as it can be defined several ways.  One way is to measure total work in queue waiting to be processed.  Another way is to measure backlog as the amount of work not processed within a required or targeted time frame. 
  • Per unit full-time equivalents (FTE’s):  Measures how many employees are required to fulfill a unit of work. 
  • Staffing ratios:  Another way of looking at staffing is computing a ratio of staffing to a particular function or in comparison to the total organization. 
  • Per unit equipment utilization:  Measures the efficient use of equipment. 

Effectiveness:  This measure should be viewed in terms of the extent to which the service provided meets the objectives and/or expectations of the organization and/or a customer.

Effectiveness measures include:

  • Coverage:  The number of customers you serve. 
  • Accomplishment:  Measures the overall outcome or achievement of a program.
  • Quality:  The proportion of service provided without error.
    • The proportion of services provided without a complaint or the ratio of complaints to total services provided.
    • The proportion of service produced at a specified standard.
    • The proportion of services provided with compliments from customers.
    • The number of staff hours of training conducted per year.
    • Staff turnover.
  •  Satisfaction:  Customer satisfaction as measured by a predefined survey.

Using Efficiency And Effectiveness Measures

Here are some ways to use the measures and they types of questions they raise, such as:

  • What is the trend?
    • Is our efficiency and effectiveness improving?  If not, why not, and what can we do to improve efficiency and effectiveness?
  • Are the ratio’s good or bad, compared to our efforts and circumstances?
  • Are our ratios becoming better or worse?
  • Is this what we expected?
  • If there is no substantial change year to year, is this good or bad?
    • Why has there been no change, or improvement, in efficiency or effectiveness?
  • How do we compare to other organizations in general, to similar organizations?
  • How can we make better use of our resources?  What can we do to better leverage our technology, financial and staff resources?
    • What changes could we implement to increase their leverage?

Also see this article.  Performance Measures – Guidelines For Developing And Using Them.  http://www.advancingyourorganization.com/?p=1596 

I appreciate your interest in this article.

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Michael VanBruaene.  How can I help you? How can we collaborate? See the services I provide and other organization and personal development tools and articles on my website at www.AdvancingYourOrganization.com.

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