Process Measurement, Metrics and Performance Management
Scope
How performance is defined, measured and managed, including the quantitative relations exam questions use.
Core rules
- Four performance dimensions: time, cost, quality, flexibility. Every metric should map to one and to a goal.
- Time metrics: cycle time (end to end), processing or touch time, waiting time, lead time, on-time delivery. Quality: first-time-right, defect rate, rework, complaints. Cost: cost per instance, resource utilisation. Flexibility: variants supported, change lead time.
- Little's Law: average WIP = throughput x average cycle time. Rearranged, it predicts the WIP needed for a target cycle time.
- Metric vs KPI: a metric is a measurement; a KPI is tied to a target and used for decisions. Leading indicators predict, lagging indicators report.
- Measurement governance: define formula, data source, owner, frequency, target and thresholds; baseline before targeting; guard against gaming and against measuring only what the system happens to record.
Worked example
An invoice team receives 200 invoices per working day and 600 invoices are open on average. Little's Law gives cycle time = WIP / throughput = 600 / 200 = 3 working days. To reach a 2-day cycle time at constant throughput, WIP must fall to 400, which points at batching and release policy rather than at working faster.
Traps that cost marks
Reporting processing time as cycle time. Assuming utilisation near 100% is healthy, when queueing theory says waiting explodes non-linearly. Averaging across variants with very different flows.