A goal-focused attitude towards improving operational performance will lead you to better profits, happier clients, and engaged employees - here's how.
Just as elite athletes track their performance to improve it by tweaking their technique, organizations need to measure their operational performance to achieve their business objectives and drive profit.
Tracking and improving business operational performance is a continual process that begins with setting goals, gathering data, and then measuring it against set benchmarks.
It also involves reviewing your daily operations and process workflows, studying turnover, and monitoring how satisfied your employees are, as well as reflecting on client satisfaction.
Now, admittedly, all this can be a lot to take in one go. But this is where this guide comes in — taking you through what operational performance is, how to measure it, and how to improve it.
Before we dig in though, one note of advice: operational performance is different for each business depending on its size and maturity level. So take our tips below as a customizable blueprint, and personalize it to your unique business goals, size, and industry.
Operational performance is a measure of how well a business is performing in its day-to-day, core activities.
Optimal operational performance is the best guarantee of profit, customer satisfaction, and employee engagement — all on the back of streamlined internal processes and operational efficiency.
Put simply: the primary objective of operational performance is making sure you achieve your business goals.
Now, of course, your business goals are unique, depending on where you are in your journey, your business size, and your industry — and it’s why the objectives of your operational performance are unique as well.
For instance, a new professional services firm successfully introducing their service to a niche target audience merits different performance objectives compared to an established firm that serves the same market.
A more established business, for example, might be focused on revenue growth, improving employee engagement, launching a new product in the market, and so on.
Generally speaking though, operational performance revolves around these broad objectives that are essential to most businesses, if not all:
Before you can improve your operational efficiency, you’ll want to measure the state it is in.
This involves tracking and measuring specific Key Performance Indicators (KPIs) essential to your business. Let’s break it down:
Rather than chasing a fistful of metrics, start with selecting a few important ones which most relevant to your business.
This ensures too much data doesn’t confuse your analysis, killing performance evaluation in its infancy.
Another thing to bear in mind here: the metrics you select entirely depend on your business objectives and industry.
A retail business, for example, would want to measure metrics like equipment uptime, inventory, and supply chain. But these metrics would mean nothing in another industry, say, marketing.
So take the time to sit with your business objectives for a bit. Then, select metrics that will best measure your organizational goals and objectives.
A few metrics to get you started on the right footing:
Learn more: Running an agency? Here are the key metrics you should be tracking ➡️
This step will take longer than the previous one — especially if you don’t already use software to track business operational performance data.
To begin with, know that you’ll need to gather both qualitative and quantitative data.
For collating qualitative data, consider using surveys and interviews to measure metrics like employee engagement and client satisfaction.
For other metrics, gather quantitative data using the software you have implemented in your organization.
For instance, measure the utilization rate using your resource management tool.
Let’s say you use Runn to plan, track, and measure your projects and resources. In this case, you’ll find vital utilization metrics in your capacity report:
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Once you’ve gathered all your data, benchmark it against your goals or industry standards.
For instance, let’s say you run a marketing agency and one of the metrics you’re measuring is profit. In this case, compare your numbers against the yearly profit that other agencies in your field drive.
If you aren’t new to the business and have been fairly hitting industry-standard profits, consider benchmarking your numbers against your goals.
In either case, keep things realistic and consider essential performance context before jumping to any conclusions.
This final step is crucial for successful performance measurement. It’s also key to improving operational performance.
So what should you be doing here? Objectively evaluate how your data stacks up against the set benchmark.
Determine where you’re winning, what areas need improvement, and where you’re lacking.
Say, your Monthly Recurring Revenue (MRR) is lower than your industry standard. Or employee turnover is high. Use this data to guide your business strategy moving forward.
In short, by the end of this exercise, you should have a list of priorities to focus on.
From automating manual work to offering employees training and development opportunities, there’s a lot that you can do to meet your operational performance objectives.
Here’s a lowdown of proven tactics to increase your performance:
We wrapped up the section on evaluating your business efficiency specifying you need a list of priorities to focus on.
This tactic is its complementary part: take the list of priorities to fruition by spending time creating action plans to meet your priorities.
So say your utilization is below average. Your data evaluation shows that employees aren’t working at their maximum capacity, and you have several folks on the bench (waiting for work to be assigned) at a time.
So your focus chart lists improving utilization as one of your to-dos. But this note alone won’t get you anywhere.
As a next step and a time-tested way to improve your operational efficiency, make a plan addressing ‘how’ you’ll achieve this realistically. The more you break down your action steps in this plan, the higher your odds of accomplishing it.
By this point, you’ll have clear goals (backed by data from your evaluation of your operational performance) and action plans to meet these goals.
What you need next is realistic timelines. These ensure you have the needed push to work on the goals.
However, note that the keyword here is ‘realistic.’ That is: make sure you factor in things like your current employee workload, customer expectations, business priorities, etc. as you set your timeline.
If you find yourself struggling to meet your timelines, take the time to sit with your team to reflect on the reasons behind it, then reset timelines. This works wonders over giving up on the goal altogether.
While data can tell you something’s not right, it can’t tell you ‘why’ it’s not. So another tip to unlock optimal operational performance here is to map your processes, technically called process modeling.
You can use any process mapping tool to create a map outlining how specific projects are completed in your organization.
Keep in mind: you’ll need a separate map for different processes. Plus, the more granular you get, the better your odds of finding process inefficiencies will be.
This step will also take extensive collaboration with relevant project stakeholders. So if you’re mapping out how task assignment works with the tech team, you’ll want to work closely with the department head and manager to accurately map the process.
Once you’re done with all the mapping, identify points of friction, duplicate steps causing inefficiency, and factors contributing to increased project risks.
Now ask yourself: what is something we can do to get rid of the bottlenecks and streamline our processes?
The right tools reduce manual work, automate and streamline processes, help save time, and generally improve process efficiency.
Going back to our example of improving utilization, a resource management software like Runn can help with this in several ways.
For one, it gives you insights into employee availability, assisting you in reviewing who is loaded with work and who has space to take on more work.
Two, it gives you a skill inventory, showing each employee’s day rate, interests, experience, seniority level, and skills. Using it, you can easily allocate projects to people with the right skillset (not just availability). The right project/task-employee fit not only helps improve utilization rate but also employee productivity.
Three, Runn gives you a utilization report with a record of your employees’ utilization. In turn, this reduces work on you — you wouldn’t need to manually track them (this also helps with the next tactic to improve operational performance).
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Create systems to measure your performance on the set goals every quarter or so.
Again, you’ll need to measure both qualitative and quantitative data here.
For goals like reducing employee turnover, create a rating system or survey employees every month to learn how engaged they’ve felt in their work.
For other resource-related goals, automate data collection. You can do this by using your resource management software. Simply identify your reporting period, and what you want to track, then track performance using reports.
Runn, for example, tracks people-related metrics to help you understand how individuals contribute to projects. For instance, you can track billable hours, non-billable hours, time off hours, contracted capacity, billable utilization, and more.
The ideal software for continual improvement:
One example of technology that can elevate your business efficiency is a resource management software. It assists in many ways — for example, improving employee engagement, better planning and managing projects, increasing resource allocation effectiveness, and more.
By automating reporting, such software can also help free up your time for focusing on strategic, value-driven activities.
Here’s more on why you need a resource management software, its benefits, and more ➡️
In short, optimizing operational performance is crucial to achieving business goals, driving profits, and increasing customer and employee satisfaction.
But measuring operational performance isn’t a one-and-done task. It takes regular data evaluation and continual improvement so you can identify process bottlenecks, reduce project risks, and streamline processes.
You'll want to implement the right tools for process management, tracking, and centralizing data for better decision-making and sustained business growth.
If you want to learn more about levelling up the resource management side of your operations, we've got a ton of materials for you to dive into (and you can always book a call with us to see what Runn could do for your organization).
