Bottleneck Buster
Day 5 – Measuring Performance
Measuring Performance
We know how long your process took before and now that you’ve implemented the improved solution it’s time to repeat that measurement so you can get a better idea on the impact you’ve had at your firm from eliminating this bottleneck.
Repeat the time measurement exercise from before and compare your new results with how long the process took before. How much time did you save?
Calculating ROI
Time savings is just as valuable as financial savings so let’s see an example of how to calculate it for your firm.
We’ll first need a key piece of data for our calculations and that is the average cost per hour of the work your team does. What is the average cost to your firm on a per employee per hour basis?
For example, add the cost of your team’s average salary and benefits together then divide that number by 2000 hours. We consider 2000 hours worked in a year because we’re factoring in at least 2 week of vacation per year.
Let’s see an example to make it easier to understand
Dollars and Sense
To make our calculations easier to understand, I’m going to use a cost of $100/hr for each of your team members.
Let’s also assume that by implementing our improved solution, we’ve saved each member of your 10 person team 5 hours per week or 1 hour per person per day. That adds up to 50 hours per week saved collectively (10 people x 5 hours saved per week per person)
To calculate time saved per year multiple the weekly number by 50 weeks (instead of 52, again factoring in vacation). Now we get 2,500 hours saved per year (50 hours per week x 50 weeks per year)
The last step is to calculate the financial savings. Take the hours saved per year and multiply it by your hourly rate and we get $250,000 in saving each year (2,500 hours x $100/hr)
By eliminating this bottleneck your firm saved 2,500 hours per year and $250K! That’s not just this year, but year after year while this process is still active. Well done!
Next Steps
Tomorrow I’m going to walk you through how we’ll use these results to map out the steps towards building a better solution to eliminate this bottleneck.
Care to share?
Thank you for participating in my course Bottleneck Buster. If you feel someone else might get value from the course as well, please feel free to share with them by sending an invite to them by email using the box below.