• Steps to Build the Business Case for Automation
• STEP 1: Defining the value automation can deliver
• STEP 2: Exploring and prioritising automation opportunities
• STEP 3: Applying metrics to automation projects
  • What metrics matter for automation projects?
  • Financial metrics
    • Return on investment (ROI)
    • Payback period
    • Net cash flow
    • Net present value (NPV)
  • Performance metrics
    • Time Savings
    • Cost Savings
    • Reduction in Error Rates
    • Uptime and Reliability
    • Employee Productivity and Redeployment
    • Customer Experience and Customer Satisfaction
    • Scalability of a Project
    • Compliance and Auditability
    • User Adoption and Satisfaction Rates
    • Automation Coverage
  • For best effect, use a mix of quantitative and qualitative metrics
• In Summary

In this article, the third in our Back to Basics of Automation, we look at how to apply metrics to automation projects pick up the next steps in building a business case for automation. 

To business decision makers automation projects are just like any other project. They want to know what’s in it for the business? What benefit does automation of a particular workflow, process or division bring and whether those are in line with corporate strategy. Will it make the business more profitable, more resilient/ Will it help improve customer experience and service quality? Will it improve the profitability or cash flows? And most importantly, how much will the automation cost?

The team or individual responsible for developing a business case for automation, whether at a process, division or overall business level, needs to rely on reliable data, projections based on solid, clear assumptions as well as on qualitative considerations to justify automation. 

Take these steps to build a winning case for automation within your business. 

• Step 1: Defining the value automation can deliver
• Step 2: Exploring automation opportunities and prioritising projects
• Step 3: Applying metrics to automation projects
• Step 4: How to deal with risks & challenges in automation projects
• Step 5: Making a timeline for implementation with relevant milestones

We discussed defining the value of automation in great detail in Back to Basics: Why Do Companies Automate Their Operations?

Even a cursory look around your business will show that there are many automation opportunities, in every function, process and business unit.The big question at this stage is how to pick which automation opportunities to work on first. 

In Exploring and Prioritising Automation Opportunities (Back to Basics Part 2) we looked at how to choose automation projects and what factors need to be looked at in prioritising them. Using the criteria outlined in the article will help you find projects that take the least time, effort and investment to deliver more than proportionate results and success. This ensures that you can use them to persuade stakeholders, from directors, top leadership and all teams that automation delivers positive results.

Now to the next step in building your automation business case.  

Metrics for automation projects need to cover both quantitative and qualitative aspects. Quantitative metrics include financial metrics as well as performance metrics that can be helpful to quantify the benefits from automation. 

Financial metrics are a key element of an automation business case. Business leaders would be interested in knowing the financial metrics of automation such as return on investment (ROI), payback period, net cash flow or net present value (NPV). 

ROI quantifies the financial value of a project relative to its cost. ROI is critical for evaluating the overall success and justification of a project. ROI percentage is expressed as the ratio of net cash flow divided by the initial investment required. That is,

(Gains from an automation project - Cost of automation) / Cost of Automation.

Usually measured in years, it is the time needed to recover the costs of the automation project.

Check out Payback Period: Definition, Formula, and Calculation for details. 

Net cash flow is the sum of all negative and positive cash flows over the lifespan of a project. 

Check out Net Cash: What It Is and How It’s Calculated and net cash flow from Investopedia for details. 

NPV is calculated by deducting the initial investment of a project from its expected future cash flows.

Read Net Present Value (NPV): What It Means and Steps to Calculate It for details.

Performance metrics of an automation project are also important. In fact, it is the potential for improving the key performance indicators (KPIs) of any process or function that make it worthwhile to explore the cost benefits and financial considerations. 

Before embarking on automation projects, it is necessary to determine what metrics are or should be essential to measure the impact of and demonstrate the value of automation. Metrics also ensure continuous improvements will occur, instead of process stagnation.

Performance or operational metrics can be divided into numerous categories, including what’s listed here. There may be other metrics that are relevant for you depending on your business and industry. Performance metrics can include both quantitative and qualitative ones. 

Efficiency, cost, quality, and user experience are some of the critically important metrics for measuring the success of automation projects. 

Time savings are a direct indication of how effectively automation has increased operational efficiency. The best measure is to compare time taken for task completion before and after automation. The percentage reduction in time spent on repetitive tasks is also a good indicator.

Cost savings or the reduction in costs due to automation—whether they are labour and material costs or other expenses—is a prime driver of automation projects. IIt is easy to understand and has a direct impact on the project ROI. Shouldn’t they be under financial metrics? 

Yes, but cost savings can often be expressed in terms of reduction in hours worked or the drop in manual processing costs or reduction in error correction costs and penalties, as relevant. 

This is a measurement of the extent to which errors or defects in a process can be reduced after automation. Automating processes with high error rates make sense because, depending on the process, reducing errors can help improve quality, enhance accuracy, and save costs associated with error correction.

Examples:

• Data entry errors
• Stock outs leading to loss of sales
• Double invoicing
• Missed payments, and even tax that result in penalties due to human error. 

Consider using a comparison of actual error rates in manual processes against those of automated processes. 

These metrics measure the stability and reliability of an automation process by capturing how often that process is available and functioning according to expectation. Examples:

• Percentage uptime of automated systems
• Measuring downtime, especially where it is high and deserves critical attention, is a good idea.
• Number of system interruptions or process failures

Processes with high reliability and uptimes are an indication that the automation is dependable with minimal disruptions to operations.

These metrics track changes in productivity and the way employees are reallocated to higher-value tasks post automation.

Examples include:

• Increase in productivity metrics for employees
• Savings on overtime worked
• Number of hours redirected to strategic or creative tasks

Ideally, automation of a process frees employees from repetitive tasks and allows them to focus on work that adds more value to skill building, career development and to the organisation.

These measure how automation has impacted customer satisfaction and experience. These are key metrics for all customer-facing processes. 

Automation should improve customer experience by reducing wait times, reducing queues, improving consistency of service, and enhancing the overall interaction. Satisfied customers can also become your best ambassadors. 

Examples include: 

• Customer satisfaction scores.
• Net Promoter Score (NPS) measures the likelihood of customers recommending a company's products and services to others.
• Reduction in response time to customer queries
• Drop in customer complaints that required repeat complaints.
• Number of customer complaints that needed escalation

Scalability evaluates how easy it is for an automated process to handle higher volumes. Scalability is key enabler of sustainable, long-term success of automation. Scalable solutions are able to grow and expand to meet growing business demands. 

Examples include:

• Volume of transactions processed as system load increases
• Number of users supported
• Automation of labour demand planning for a manufacturing operation may be able to expand to cover the workforce planning of the entire business.  
• Automation of a single department’s invoice processing with a robotic process automation (RPA) system may later be expanded to handle company-wide invoice processing.
• An automation project for a distribution centre may be designed to scale to multiple centres across the country and globally, through integrating additional data sources and operations.

• Compliance and Auditability

  Automation can make it easier to track adherence to both regulatory and internal compliance standards, with variances and discrepancies being highlighted as routine checks vs. a manual system where only random issues will be highlighted due to random manual checking.

  • The number of compliance violations before and after automation
  • Availability of an audit trail
  • Frequency of internal audits.

• The whole idea of automating processes, especially for compliance and standards is to support compliance by reducing human error and availability of audit trails.

  User Adoption and Satisfaction Rates

  These could apply to both employees and customers. They measure how well employees or customers are adapting to the automations and their levels of satisfaction with them. If more and more employees and customers are using an automated feature, and are satisfied with it, the more effective it is as an automation project. 

  Examples include:

  • Number of employees and customers actively using the automated processes
  • Employee or customer satisfaction scores
  • Feedback on the automation tools

• A more specific example would be how useful customers find an AI supported web chat on the business websites. Measuring how many (or percentage of) customer chats failed to resolve the issues, were dropped by customers prior to resolution and the number of chats that required customers to still contact the business through the Call Centres following a chat. 

  High user adoption and satisfaction indicate that the automation is well-designed and supports user needs effectively.

  Automation Coverage

  This gives you an indication of the extent of automation of a process or tasks, compared to the total. It shows the progress of automation initiatives while highlighting remaining areas of opportunity.  

  Automation coverage may be expressed in various ways. For example, you can say an X percentage of a workflow has been automated or a Y number of manual steps in a workflow have been eliminated. 

  For best effect, use a mix of quantitative and qualitative metrics

  We can use a mix of quantitative and qualitative metrics to measure the success and effectiveness and the value delivered by automation initiatives. Quantitative metrics include financial metrics as well as others relating to time saved, productivity and performance improvements. Qualitative impacts can be measured with metrics including customer or employee satisfaction, user adoption rates and error reduction. 

  Tracking the right metrics can give a holistic view of how successful an automation project has been. They help ensure that improvements continue, and that strategic goals of the business have been met. These goals could include improving efficiency, reducing report cycle times, enhancing quality of products, services or customer experience, reduction of costs, better resource use and time savings. 

  Each business needs to decide what specific goals they want to achieve through automation initiatives. Similarly, each business must decide on what metrics are useful for measuring success. 

  In Summary

  In this article, our third in the series on Back  to Basics of Automation we discussed how to apply metrics to your automation projects. We looked at both financial and performance metrics, and the need to pay attention to a mix of quantitative and qualitative aspects of automation. 

  If you successfully and effectively select the optimal mix of metrics for a project, you will be in a position to convince decision makers about the effectiveness on the current or proposed project. At the same time, collecting data for it and presenting it effectively will help you build a case for future automation projects. This enhances your ability to persuade both top leadership and employees that automation projects you propose will deliver positive results. 

  In our next articles in the Automation Back to Basics series, we will discuss how to deal with obstacles, risks & challenges in automation projects and what mitigative measures you can use to deal with them effectively. 

  Remember to read the other articles in this series on Back to Basics of Automation:

  Back to Basics Part 1: Back to Basics: Why Do Companies Automate Their Operations?

  Back to Basics Part 2: Exploring and Prioritising Automation Opportunities.