“What is the industry standard of good flow efficiency?”, great question!

Rather than just giving you an answer straight away, first, we need to spend some time going through the ins and outs of calculating flow efficiency and the outcomes that come with it.

Following the industry standards is a great approach to setting goals and thresholds, however, first, you need to make sure that your approach to measuring flow efficiency compiles to the industry standards as well.

So, let’s start with the basics. What is flow efficiency?

What is Flow Efficiency?

Simply put, as your work items are flowing through your process, they are in one of two states – they are either actively being worked on or they are not actively being worked on. Flow efficiency of a work item is the ratio of the active time that it’s being worked on against the total time that it took to get this work item done.

Formula for accurate flow efficiency calculation

If the flow efficiency of a work item is 10%, this means that for 90% of the time it has just been stuck in your workflow, either blocked or waiting to be pulled to the next process state. For 90% of the time, no one was actually working on it.

Flow efficiency is used to measure the performance of your process. As a tool, the flow efficiency metric itself is extremely helpful for understanding the delay in your delivery system.

Now, let’s look into the prerequisites to accurately measure your flow efficiency.

The 3 Fundamentals to an Accurate Flow Efficiency Calculation

Even though it seems like a simple concept, accurately measuring flow efficiency is not a trivial task. To come up with a reliable number, there are three points you have to check off. Let’s go through each of them.

1. Enable a Kanban Pull System

The first step to measuring flow efficiency is enabling the concept of a Kanban pull system. The process states in your delivery workflow should be split into In Progress and Done (queue) states.

Once the work in an In Progress state is completed, it is moved to the queue state signaling to the next state that it is ready to proceed. When people finish what they’ve started, they pull work from the queue states.

Apart from having the system design in place, you also need explicit process policies that define when an item should move forward to the next step in the process. The rules have to be clearly defined to ensure consistent outcomes and so allow you to measure flow efficiency accurately.

2. Manage Blockers Effectively

Furthermore, you need an established approach to managing blocked work effectively.

When a work item in an In Progress state on your board gets blocked, this time is also considered as inactive time and when you’re making your flow efficiency calculation, it needs to be taken into account.

Again, you need process policies that outline what blocked work means, how you mark work items as blocked, what you should do when an item gets blocked, and so on. These rules have to be explicit so that everyone knows what needs to happen in this scenario.

This approach not only enables you to track flow efficiency accurately but also provides a transparent decision-making framework for how the team should handle different cases, without requiring your constant involvement. It creates alignment between everyone involved and sets the foundation for further process improvement.

3. Keep Your Board up to Date

Last but definitely not least, you need to make sure that the cards move through the board as the work moves through the workflow. Your board should represent reality and it should be updated in real-time.

To preserve the consistency of your management practices (and thus the outcomes associated with them), the team must follow the process policies.

Everyone needs to be aligned around the understanding that the board is a powerful communication mechanism and should be perceived as the single source of truth.

At the moment your cards no longer represent the actual state the work is currently in or if the work item is blocked and not marked as such, you will have already compromised the accuracy of your flow efficiency.

Only once you’ve checked off all the above can you say that you use a reliable approach to measuring flow efficiency.

The industry standard says that anything between 15% and 40% flow efficiency is good. Flow efficiency above 40% is considered exceptional.

Keep in mind that the flow efficiency % always includes non-working time. Weekends, holidays, leaves, all these days off should be included when performing the calculation.

One of the main benefits of tracking flow efficiency is that you can define a threshold upon which to focus your improvement efforts.

As a rule of thumb, if your flow efficiency is below 40%, to improve your delivery times you will need to focus on reducing the waiting time in your system. If it is above 40% and you’re still not happy with your delivery performance, you’d probably have to expand your system design, either upstream or downstream, to gain a better understanding of how that active time is actually spent.

How to Use Flow Efficiency to Trigger Opportunities for Improvement

Use the Flow Efficiency chart to measure your average flow efficiency and see how the trends move over time. To specify which states on your board you consider to be inactive, select them on the right sidebar.

A word of caution here! What I often see is teams trying to make delivery predictions by estimating the effort of their work. This approach is particularly risky in a low flow efficiency environment.

In a low flow efficiency delivery system, your active time (effort time) will represent a very small % of your total delivery time. If this is the case, keeping the focus on evaluating the active time in the workflow will land you in some hot water.

Using the low flow efficiency % to emphasize that estimating your work using hours (or story points) is not a reliable approach for making delivery commitments is a very powerful strategy.

You should put your efforts into identifying the items with the lowest flow efficiency (those on the left side of the chart) and analyzing them accordingly. Any item with a flow efficiency lower than 15% is a good candidate for examination.

Reveal the reasons behind the delays and take action accordingly. Is the fact that you are managing a highly specialized team slowing you down as the work is waiting for the subject matter expert to become available? Or are you constantly being blocked by a third-party dependency? Perhaps your quality assurance specialists can’t handle the workload at the pace your developers produce it?

Whatever the reason is, the best way to improve the efficiency of your flow is to dig down to the root cause of your delays and act accordingly.

Keep track of how the trends build over time and use flow efficiency to identify the weak spots in your management practices, as this strategy will immediately trigger opportunities for improvement. As long as you keep your approach to measuring it consistent, you’ll be in a good place.

If your delivery system doesn’t produce the results you are hoping for and you’d like to explore the proven roadmap to optimize your workflows for predictability, I’d be thrilled to welcome you to our Sustainable Predictability program!

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