Useful Resources
A Partners in Performance newletter describing the use of Driver Tree Analysis to focus improvement effort.
Driver Tree Analysis
Too often companies waste their improvement effort by focussing it in the wrong place. Improvement resources are scarce, and need to be directed at the highest-leverage areas of the business.
Driver Tree analysis is an excellent tool for generating understanding of the key levers that impact business performance. A Driver tree is a map that identifies and links the key variables that drive revenues and costs. Once mapped, the impact of each driver on the business’ earnings can be established.
Driver Trees are an incredibly versatile tool. They are valuable for:
- Educating the workforce and management team on how the business runs,
- Stimulating improvement ideas,
- Prioritising improvement effort,
- Cascading business targets,
- Developing budgets,
- Conducting root cause analysis, and
- Conducting sensitivity analysis, for example to evaluate the impact of changes in input costs on earnings.
You can see some practical examples of the use of Driver Trees by looking at the Case Studies.
The creation of an accurate and useful driver tree can be a complex and time-consuming task. The aim should not be to create one huge tree which represents every detail of the business. If the tree becomes too complex, much of its benefit will be lost. It is important to control the level of detail, only delving down on branches that represent large costs and revenues.
When developing and using Driver Trees, it is important to understand the process constraints and bottlenecks, otherwise nonsensical results can be obtained. It is often useful to combine Driver Tree Analysis with Benchmarking & Capability Analysis.
Here is an example of a basic Driver Tree.
