Operational effectiveness

From CEOpedia | Management online
Operational effectiveness
See also


Operational effectiveness means to achieve goals with minimal use of reasources. Therefore, definition of strategic goals is made in efficient way as well. In other words, it is delivering products or services cost-effectively without decasing the quality of results - the maximum productivity level is reached[1].

Operational effectiveness levels

The operational effectiveness might be measured on two levels and it is recommended to access them in direction from micro to macro[2]:

  • micro for example the machine, an employee, the workstation, tasks on the shop floor,
  • macro for example whole enterprise or an organisation, an industry or national level.

Moreover, the operational effectiveness might be seen at three company's management levels:

  • strategic - long term planning (financial planning, strategic business planning, marketing planning),
  • tactical - weekly or monthly basis to reach strategic goals (productivity, demand, relationships with suppliers, capacity planning, resources planning, production planning, material planning),
  • operational - daily schedules (ordering, purchasing, operations and control in shop floor, scheduling of deliveries).

Analyses of effectiveness

A start point in analysing the operational effectiveness might be answering below questions[3]:

  • How effective is the company in using inputs to create outputs?
  • Is the company using right combination of inputs producing the right combination of outputs at current price point?
  • How the company will react to increase of prices?
  • How effective is the company in transerring established process into daily practice?
  • Has the company improved the production capacity over time?
  • How is the company rated versus competitors?

A. B. Badiru proposes below measurements of the operational effectiveness:

  1. Absolute operational effectiveness (AOE) calculated by dividing actual output by ideal output,
  2. Relative operational effectiveness (ROE) calculated by dividing actual output by the best observed output (historical data use is necessary),
  3. Productivity calculated by dividing output by input,
  4. Efficiency calculated by dividing productivity by best-practice productivity.

Examples of improving operational effectiveness

Santa R. and others point how important it is to have proper support from system side to set, measure, maintain, control and improve the operational effectiveness by[4]:

  • decreasing operational costs,
  • decreasing number of errors,
  • increasing flexibility,
  • increasing reliability,
  • improve quality,
  • other measurements of costs, quality, dependability, flexibility and speed.

Author: Dominika Zaich

Footnotes

  1. Badiru A. B. (2013), p.17-18
  2. Badiru A. B. (2013), p.18
  3. Badiru A. B. (2013), p.18
  4. Santa R., Ferrer M., Hyland, P. (2006)

References