“Without the assistance of
a good software system...
the corporate real estate
executive is almost
powerless.”
to others researched. This is what most companies have known
as benchmarking.
Metrics allow an organization to understand its operational
performance relative to external benchmarks (such as the industry average and top performers) and to assess its own internal
progress over time. To ensure comparability, metrics should be
normalized (i.e., put on a common unit basis) to reduce issues of
operational scale.
Although metrics are useful, it is important to also look at the
facts behind the numbers. For instance, simply knowing that cost
per full-time employee (FTE) is higher than the industry average
will not help an organization improve its performance. Instead, it
is important to analyze the data to discover what factors within an
organization (e.g., management practices, systems, and organizational structure) are responsible for performance gaps, and then
identify key practices for improvement.
Benchmarking Performance
Key performance indicators (KPIs) are the metrics deemed essential to understanding operational health. Measuring performance
allows an organization to objectively determine what is working
and what is not. In addition, by identifying successes, managers can
reward and learn from best practices.
Many times, key employees are being compensated based on
their business unit’s P & L performance. However, and unfortunately, many times there is no software system in place to gauge
what is driving that performance. Retail operators generally will
have a point of sale (POS) system to see what is driving sales, but
many industrial, quasi-retail, and office users do not use software to
analyze key employee performance.
When targets are set using validated, normalized data, measurement will support a means to determine operational improvement.
Of course, it is critical to tie process improvement to measures that
matter to an organization. In doing so, measures can provide:
1. Feedback to guide change;
2. Assessment and baseline information;
3. A compelling business case;
4. A diagnostic tool to identify areas for improvement
and set priorities; and,
5. A basis for communication (using a consistent
definition).
Most measurement occurs at the process level, where the transformation from input (resources applied) to output (goods and services) takes place. The four main categories of metrics to assess
performance at the process level are:
1. Cost effectiveness (e.g., $6.22 per invoice);
2. Staff productivity (e.g., 93 invoices processed per
FTE);
3. Process efficiency (e.g., 11. 2 percent error rate); and,
4. Cycle time (e.g., processing time of 3. 8 days).
Cost Effectiveness
Cost effectiveness measures tell how well companies manage
cost. Normalized data usually includes cost per unit, cost as a
percentage of revenue, cost as a percentage of total budgets,
and actual costs versus budgeted costs. Supporting indicators
include cost components as a percentage of total and disaggre-gated cost per unit. Examples of measures follow:
1. Customer service/call centers
• Cost per call (or cost per minute)
• Cost per reported complaint
2. Finance and accounting
• Cost per invoice
• Cost per remittance
3. Human resources
• Cost per recruit
• Benefits administration cost per employee
Process Efficiency
Process efficiency gives insight into how well procedures and
systems are supporting the operation.KPIs usually include error
rate and forecast accuracy rate. Supporting indicators can focus
on factors that influence process efficiency such as system
downtime rate and the degree of process automation. Examples
of measures follow:
1. Customer service/call centers
• First-call resolution rate
• Total resolution rate
2. Error exception rate
• Payroll processing error rate
• Invoice processing rate
3. Human resources
• Turnover rate
• Ratio of acceptance to hires
• Ratio of acceptance to offers
Cycle Time
Cycle-time measurements deal with the duration required to
complete a task. They are almost always expressed in units of
time and include processing time and time to resolve customer
inquiries. Supporting indicators can focus on factors that influence cycle time, such as the frequency of system breakdowns.
Examples of measures follow:
1. Customer service/call centers
• Average time to answer
• Average time to resolve complaint
2. Finance and accounting
• Average time to process an invoice
• Days sales outstanding
3. Real Estate
• Average time to market
• Internal response times
• Legal review
The four measurement categories represent a “family of mea-
sures” framework. This framework provides a comprehensive
view of the business process. For example, measures can be
developed to assess performance in all aspects of customer ser-
vice, including cost management per call, quality of service, and
labor costs.
