Operational Performance Analysis

Operational effectiveness and strategy are both essential to superior performance."

Operational Performance Analysis Operational Performance Analysis

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Table of contents

    - Michael Porter

    Although effectiveness and strategy are important for achieving great operational performance, it is also important to analyse operational performance. Why? To understand how organisations can improve their objectives and strategy to achieve even more efficient operational performance. Organisations can do this by looking at operational data, analysing it and drawing actionable insights.

    Analyzing Operational Performance

    Operational analysis is a method of assessing the present performance of an operational investment and gauging the performance in contrast to a recognized set of costs, agendas, and performance parameters. It is also related to obtaining information from a working system that is being used to assess the performance and to create forecasts about the forthcoming operations of the system.

    Analysing operational performance is important for changing management data gathered from a project into useful information. This information can then be used for making management decisions and informing future actions. It is essential to constantly review the operational performance in order to find ways for improvements, to see if the team is on track, predict future expected outcomes and make plans as a result of the analysis.

    The analysis can be regarded as a learning process and particularly a good operational analysis will assist the business to:

    • Evaluate how the projects are performing concerning the project outcomes accomplished and the resources provided.

    • Evaluate the capability of the project to reach its goals in the planned budgets

    • Examine if the major risks have changed and if they are handled efficiently.

    • Classify issues and opportunities in financing activities of the project

    • Evaluate if human capacity is developed as needed

    A good analysis process has specific attributes, as it:

    • Integrates operational certainties of the front line with the priority of the leadership.
    • Takes maximum advantage of internal experts and external perspectives
    • Presents a way to have an objective evaluation of the gap in the environment and the typical description of ‘what good seems like.

    There are five crucial success factors for analyzing operational performance. They are as follows:

    1. Verify the top-level metrics of performance
    2. Make use of a template that explains the various levels of performance for different functions
    3. Involve the organization from the beginning
    4. Prioritization of opportunities
    5. Define an execution method

    Operational analysis tools

    Some of the operational analysis tools are as follows:

    • Process flow diagram

    Operational analysis tools, Process flow diagram, StudySmarterProcess-flow diagram, Pixabay.com

    This diagram is commonly used for continuous improvement. It shows everything happening in a process, and it should be finished before starting the improvement process. This preliminary diagram is essential in order to understand what is done in reality and it provides a document that can be used for communicating the process changes.

    • Histograms

    Operational analysis tools, Histogram, StudySmarterHistogram, Pixabay.com

    A histogram is a simple method for displaying diagrams. It shows the frequency of various measurements and displays their distribution.

    • Pareto charts

    Operational analysis tools, Pareto chart, StudySmarterPareto chart, Flaticon.com

    A Pareto chart is a bar and a line graph, in which separate values are displayed in descending order with the help of bars and the cumulative total with the help of the line. This chart immediately identifies the important events that might be the cause of the problems.

    Data analysis and performance operational metrics

    In the current competitive market, every business is in search of an advantage over its rivals. Teams are moving more rapidly than they ever did, projects are increasingly becoming more complicated, and customers expect to receive more products at low prices. All these factors add up for the managers who are trying to find ways to analyse data, track and enhance their performance. This point is where metrics­, particularly operational metrics have their role. Companies must assess their successes and identify areas that need improvement.

    What are operational metrics?

    Operational metrics are the main performance indicators that let the company see a project’s present stage in real-time or in more detail by the hour/day/week/month. This is crucial as these operational metrics provide a closer look at whether any team or system is moving forward on the right track and let the company take immediate actions. This will lead to the prevention of smaller problems before they get out of control. Operational metrics support in managing people and processes in order to achieve the full potential of all the teams. Some of the metrics are as follows:

    Cost per click

    The need to develop particular metrics and trace their effectiveness shows valuable outcomes for a marketing campaign. With a comparison of various campaigns in the cost per click section of the strategy, it will be easy to identify the one that was the least costly and go deeper in order to know the details.

    Rate of absenteeism of the employees

    This is an essential metric as it focuses on the key workforce actions to be taken to develop a successful human resource strategy i.e., the number of sick employees, missing work, or skipping, which can portray the effect this may have in the long run.

    The average time between failures

    This is an important operational metric for the software development department. It is measured as the mean time between fixing failures of the product. It is a significant metric to measure the reliability of the product. The higher the time between failures, the greater is the reliability of the product.

    Average time for repairing

    The average time for repairing is the meantime it may take the company to repair its system. This operational metric comprises the repair time and the testing time that might take for getting the project to fully function again. These metrics can be useful to keep the team moving fast and in an efficient manner.

    Average time to respond

    This metric is the average time it may take in recovering from a failure and is measured from the point when the issue was first notified. This metric may particularly be beneficial when it comes to security concerning the product or the customer’s information. It is valuable to measure the response time and the success of the team to react to any possible threats.

    Data analysis and performance operational metrics, Flowchart of operational metrics, StudySmarterFlowchart of Operational Metrics, StudySmarter

    Use of data in decision making and planning

    Handling the operations of an organisation needs the management of extensive resources such as human, financial and physical and to use them as efficiently as possible in order to accomplish the objectives of the organisation. Hence, it is required to develop methods to determine the efficiency of resource utilization. Organisations use data to help them in decision-making. So as to get the highest use of available resources, it may be essential that from time-to-time resources are diverted from/to a project in order to obtain the maximum advantage.

    Data types

    Decision making

    Participation data

    The data collected from customers or members will help managers to decide if not so popular programs and events should be stopped and allocate those resources to activities that may be highly popular.

    Physical resource data

    The data collected on the utilisation of physical resources will help the manager to decide if there is any need to upgrade, renovate, repair, and improve the resources like equipment and machinery, and facilities.

    Quality data

    It is highly significant for managers to know the customer satisfaction levels so that decisions are made to improve or even change products/services accordingly. Lower than the desired level would mean employing extra resources or redeploying resources to another activity.

    Human resource data

    This data will facilitate the decision of the manager if there is enough number and capability of workers to execute operational plans. Data should be stored for the qualifications, skills, and knowledge and their everyday work contribution as well.

    The table above shows how different forms of data help in decision-making.

    Operational Performance Analysis - Key takeaways

    • Operational analysis is a method of assessing the present performance of an operational investment and gauging the performance in contrast to a recognized set of costs, agendas, and performance parameters.

    • Analyzing operational performance is important for changing management data gathered from a project into useful information.

    • It is essential to constantly review the operational performance in order to find ways for improvements, to see if the team is on track, predict future expected outcomes and make plans as a result of the analysis.

    • Some of the operational analysis tools are Process flow diagrams, Histograms, and Pareto charts.

    • Operational metrics are the main performance indicators that let the company see a project’s present stage in real-time or in more detail by the hour/day/week/month.

    • Some of the operational metrics include cost per click, rate of absenteeism of employees, the average time between failures, the average time to respond, the average time to repair, etc.

    • Some of the different types of data that help in decision-making include participation data, HR data, quality data, and physical resource data.

    Frequently Asked Questions about Operational Performance Analysis

    What are the 5 key performance indicators? 

    The 5 key performance indicators are:
    Cost per click, rate of absenteeism, the average time to repair, the average time to respond, and the average time between failures.

    Why is operational analysis important? 

    Operational analysis is important for performance evaluation, capability evaluation, risk examination, identifying opportunities and threats, and human capacity evaluation. 

    How do you evaluate operational performance? 

    Operational performance can be evaluated by tracking a project's performance and capability to reach its goals in the planned budget. Human capacities and issues and opportunities are also assessed in the process. 

    Why is operation performance measured?

    Operation performance is measured to find ways for improvements, check if the project is on track, and predict future results. 

    Test your knowledge with multiple choice flashcards

    Operational analysis is a method of assessing the present performance of an operational investment and gauging the performance in contrast to a recognized set of costs, agendas, and performance parameters.

    Operational metrics are the main performance indicators that let the company see a project’s present stage in real-time or in more detail by the hour/day/week/month.

    Integration of operational certainties of the front line with the priority of the leadership is an attribute of a good analysis. 

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