How to Set Performance Metrics for Process Optimization

February 19, 2025

Process optimization has become an important strategy to achieve business goals. Without an effective tool to measure optimization success, however, it’s hard to understand whether there is still a margin for improvement. This is where performance metrics come in.

They are measurable indicators that provide objective insights into how the process is performing.

In this article, we’re exploring the most important performance metrics for process optimization: what they are, why they’re important, and how to set performance metrics for your specific needs.

What are the Performance Metrics?

The performance metrics are Key Performance Indicators (KPIs) are used to track how a task, process, or strategy is performing within a business. These indicators needs to be:

Measurable: Customer appreciation can’t be a performance metric because… how do you measure customer appreciation? Instead, for example, the number of likes and positive comments on your social media posts is a good performance metric because you can measure them. And what you can measure you can compare with other data.
Objective: Indicator measures should result in the same data no matter who measures them. The level of appreciation for your new product is too subjective to be an indicator: two people measuring it could have different impressions and provide different measures.
Repeatable: A good performance metric should be something you can measure consistently over time. Metrics that cannot be tracked regularly or produce inconsistent results are unreliable for long-term optimization efforts.

The Importance of Performance Metrics in Process Optimization

In the business sector, processes are planned and repeatable workflows that fulfill a business goal. These processes could include a single task or multiple ones operating cohesively.

Optimizing business processes brings a lot of advantages:

It increases productivity because it increases the number of tasks processed in a unit of time.
It optimizes resources because an efficient process strictly utilizes the resources (human resources, hardware, computing power…) it needs.
It reduces costs because streamlined processes minimize waste and reduce inefficiencies.

Process metrics provide information on how processes are performing at each of their stages. Relying on them, you can make accurate decisions on how to improve your processes and obtain the most out of them. But what are the most important performance metrics for process optimization?

Type of Performance Metrics in Process Optimization

There are four major performance metric categories to track for process optimization. They are:

Financial metrics, that measure costs and revenue
Operation efficiency metrics, that measure process performance
Quality metrics, that measure output quality.
Time-related metrics, that measure speed in the form of the number of elements (for example, processed invoices) per unit of time.

Financial Metrics

The most important financial metrics in process optimization are:

Cost per Unit: It measures how much it costs to produce a single unit of output. By tracking this metric, businesses can identify areas where they might be overspending or using too many resources.
ROI: It measures the financial return generated from a single process. A low ROI indicated that the process needs further optimization or that the investment was not efficient. Here you can read more on how to optimize ROI in process automation.
TCO: It’s the Total Cost of Ownership, which measures the overall cost of a business process. It helps businesses understand the total financial impact of a process, and not only the initial expenses.

Operational Efficiency Metrics

Cycle Time: It measures the total time a process takes to be completed. Reducing cycle time improves and optimizes the process.
Throughput: It measures the amount of output a process produces in a specific period. A low throughput indicated that the process needs further optimization.
Utilization Rate: It measures how much each resource is utilized within a process. This is a very important metric to optimize resources. When a resource has a low utilization rate, it suggests that the resource is underused, which can lead to inefficiency or waste.

Quality Metrics

As we’ve mentioned, quality metrics measure the quality of the output. However, the quality still needs to be measured with objective and repeatable metrics. The most common quality metrics are:

Defect Rate: It measures how many outputs fail to meet the established quality standards. It is an objective way of measuring the quality of the output generated by a process. If this rate is low, it means that the process needs improvement.
FPY: First Pass Yield: It can be considered as the opposite of Defect Rate. It measures the number of process outputs that meet the quality standard.
NPS: Net Promoter Score, which measures customer satisfaction quantitatively. It does so by asking customers to express how likely they would recommend a product/service to someone else with a number from 1 to 5.

Time-related metrics

Lead Time: It measures how long it takes for a single process to be completed. Reducing lead time is a way of optimizing the process.
On-time Delivery Rate: It measures the number of outputs delivered in the planned timeframe. When the on-time delivery rate is low, the process needs to be modified: for example, you could allocate more resources for that process.