Most owners can feel inefficiency before they can name it. Work takes longer than it should. Good people stay late correcting errors that should not have happened. Approvals sit in inboxes. A new software system went live, yet the side spreadsheets never went away. The financial statements show rising labor cost and a thinner margin, but they cannot show where the hours went.
An operational efficiency assessment answers that question with evidence. It examines how work actually moves through the business, puts a cost on each problem, and ranks the fixes.
Below: what a sound assessment examines, how it gathers evidence, what it tends to find, how to cost each finding, how findings become a plan, and what skipping one costs.
What the assessment examines
A sound assessment looks at the whole operation, not one department's complaints:
Process flow: the real sequence of steps from request to delivery to payment, including steps nobody wrote down.
Handoffs: every point where work passes between people, teams or systems. Delays and errors cluster here.
Rework: work done twice because it was wrong, incomplete or unclear the first time.
Approvals: how many sign-offs each decision needs, who gives them and how long they take.
Capacity versus demand: available staff hours compared with workload, by role, day and season.
Role design: whether people spend their time on the work their skills and pay are meant for.
Technology use: whether systems are used as designed or bypassed with spreadsheets, paper and double entry.
Controls: segregation of duties, approval limits and reconciliations that protect cash and data.
Measurement: whether the business tracks the few numbers that show operating health, and whether anyone acts on them.
How the evidence is gathered
Four methods, used together. Any one of them alone will mislead you.
Process mapping. Build a current-state map of each core process with the people who do the work. Dahl's Lean text describes a process map as a picture of each step, its owner, its expected timeline and its decision points.
Observation. Watch the work and time it. MGMA's operations text lists time observation among its core improvement tools because it gives objective feedback on how long each step takes. It catches workarounds that interviews miss.
Data review. Pull system data on volumes, cycle times, error and return rates, overtime and backlog. Write a data collection plan first. Dahl recommends that it state the data source, what will be collected, the timeframe and who is responsible.
Interviews. Talk with leaders, managers, front-line staff and, where possible, customers. Ask where work gets stuck and what gets redone. The people closest to the work often know where the waste is. They are rarely asked.
The findings that tend to surface
Lean groups waste into eight types, remembered by the acronym DOWNTIME. Dahl's text applies it to healthcare, but each type has a direct equivalent in a professional firm, a trade business or a nonprofit:
Defects: invoices reissued, orders re-entered, proposals corrected after the client spots the error.
Overproduction: reports nobody reads, and work started before anyone needs it.
Waiting: jobs idle while an approval, a part or a piece of information arrives.
Not using people's abilities: senior staff doing clerical work, and staff ideas that never reach a decision-maker.
Transportation: files, materials or requests moved between people and systems without adding value.
Inventory: work-in-progress backlogs, completed work not yet billed, excess or expired stock.
Motion: time spent hunting for documents, tools or the one person who knows the answer.
Excess processing: duplicate data entry, extra sign-offs, more detail than the customer needs.
Two more categories sit beside the wastes. Control gaps include one person handling cash from start to finish, approval limits that exist only on paper, and reconciliations that slip. Measurement gaps mean the business cannot see cycle time, error rates or capacity, so problems surface only as complaints or lost margin.
How to put a dollar figure on each problem
A finding without a cost is an opinion. Attach a conservative annual cost to each one, and show the math:
Lost labor: hours lost per week × loaded hourly rate × working weeks per year. The loaded rate is wages plus payroll taxes and benefits, divided by paid hours.
Rework: annual volume × error rate × cost to correct one error, including labor, materials, credits and shipping.
Delay: days of cycle-time delay × revenue or billings per day affected. Every day of billing lag holds a day of earned revenue out of your bank account.
Capacity: overtime premium paid, plus revenue turned away because the team could not take the work.
Customer-facing failures: refunds, warranty work, penalties and lost accounts.
The cost-of-quality model that Dahl cites from the American Society for Quality helps sort these. Internal failure costs arise from defects caught before the customer sees them, such as rework and scrap. External failure costs arise from defects the customer finds, such as returns, repairs, legal action and damage to reputation.
Record each cost as a baseline. Dahl also reproduces a financial-impact model from the federal Agency for Healthcare Research and Quality that compares an initial state with a result state and reports the net change. Use the same before-and-after discipline to prove later that a fix paid off.
From findings to a prioritized plan
A long list of findings is not a plan. Rank each one on an impact-and-effort grid, a tool that appears in the process improvement toolkit in MGMA's operations text. Score impact from the dollar figure plus any risk. Score effort from cost, staff time and disruption.
High impact, low effort: quick wins. Assign an owner and a due date now.
High impact, high effort: major projects. Charter one or two, with a budget and milestones.
Low impact, low effort: fill-ins. Schedule them as capacity allows.
Low impact, high effort: park them. Revisit at the next review.
Resist the urge to launch everything at once. Dahl advises choosing one problem as the first project and aiming for modest gains before full-scale change. Every item on the plan gets an owner, a metric, a baseline and a date.
What skipping an assessment costs
The cost is not one number. It is a set of mechanisms that keep running whether or not anyone measures them:
Recurring loss. Waste repeats. A problem that costs a few hours this week costs them again next week, and every week after.
Hiring to absorb waste. When the team is overloaded, the default fix is another hire. That turns a process problem into permanent fixed cost.
Growth that multiplies the problem. More volume through a broken process produces more errors, overtime and delay, not more margin.
Automating the mess. New software applied to an unmapped process makes the bad steps faster. MGMA's operations text recommends process mapping and time observation before deciding what to outsource or automate.
Decisions by anecdote. Without measures, the loudest complaint gets the resources, not the costliest problem.
What to do this quarter
Choose two or three core processes (owner, week 1). Start with those closest to revenue and cash, such as order-to-invoice.
Write the data collection plan (operations lead, week 2). Name sources, measures, timeframe and the person responsible.
Map, observe and interview (operations lead with front-line staff, weeks 3–6). Build current-state maps and time the key steps.
Cost each finding (finance lead, weeks 6–8). Apply the formulas above with conservative assumptions, and have finance sign off on the math.
Rank and assign (leadership team, week 9). Plot findings on the impact-and-effort grid, give each quick win an owner and a date, and charter one major project.
Re-measure (operations lead, end of quarter). Compare results with baseline and report the net change.
The bottom line
Inefficiency rarely appears as a line item. It hides inside labor cost, overtime, rework and slow cash. An assessment makes it visible, puts a dollar figure on it and turns it into a ranked plan with owners. Skipping one does not avoid the cost. It only leaves the cost unmeasured.
Ark Advisory Group's operations and process improvement work examines these areas and turns the findings into a costed, prioritized plan. Start with the free Operational Health Self-Assessment, then book a discovery call or call (908) 900-4607.
Sources: Owen J. Dahl, Humanizing Lean Leadership in Healthcare (MGMA, 2024); MGMA, Advanced Strategy for Medical Practice Leaders: Operations Management Edition (2024). These works were written for healthcare organizations; the principles cited here apply across industries. Cost formulas are illustrative and should be validated with your finance lead.
