OLR (Operational Leverage Ratio)

D10 - Operational Leverage

Definition

The single number indicating whether an operation is becoming more or less efficient at scale, calculated as the ratio of operational cost growth rate to revenue growth rate over a trailing 12-month period.

A value below 1.0 means operations are scaling efficiently. A value above 1.0 means costs are growing faster than revenue.

The OLR makes the vague concept of "operational efficiency" into a specific, trackable number with a clear directional target. Most operations leaders can describe whether they feel efficient. Very few can calculate whether they actually are.

Indicators

• You have never calculated your OLR.
• Your operational costs and revenue are tracked separately with no ratio computed between them.
• Your trailing 12-month OLR has never been included in a board or leadership presentation as a tracked metric with a target direction.

Quick Win

• Use the OLR Calculator linked below to calculate your current OLR.

Assess

• Take the HQ Score Assessment

Apply

• The OLR Calculator
• The Operational Capacity Forecast Model

Related

• Operational Leverage
• Capacity Constraint
• EBITDA Quality