BA 553 Course Review

1. BA 553 Course Review Assistance for student revision efforts

2. From session 1 What is BPM? • Process • The act of taking something through an established … set of procedures to convert it from one form to another, as a manufacturing or administrative procedure.1 • Business Process • At its most generic, any set of activities performed by a business that is initiated by an event, transforms information, materials or business commitments, and produces an output.2 • Business Process Management • Aligning processes with the organization's strategic goals, designing and implementing process architectures, establishing process measurement systems that align with organizational goals, and educating and organizing managers so that they will manage processes effectively.2 • A holistic management approach that promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology. Business process management attempts to improve processes continuously. It could therefore be described as a "process optimization process." 1 www.wikipedia.com website, January 2010. www.bptrends.com website, January 2008. BA 553: Business Process Management

3. Suppliers Inputs Constraints Outputs Who is the input coming from, or who do you see if it is defective? What is being delivered? Factors that restrict the way in which the transformation process can be undertaken New thing (everything that goes in must come out in some form) Equipment Equipment Environment Environment People People Methods Methods Product/scrap Materials From session 2 Complete Systems Diagram Customers Who is the output going to, or who will care if it is defective? Transformation process Enabling Mechanisms Facilitating individuals, groups, processes, and work environment factors that improve the efficiency and effectiveness of the transformation process and output value BA 553: Business Process Management

4. CEO Dept. 1 Dept. 2 Dept. 3 Dept. 4 From session 2 Functional Hierarchy vs. Product/Service Flow Can you explain this picture? Direction of Control Functional Hierarchy Direction of Process Flow BA 553: Business Process Management

5. From session 3 Strategies for Competing • Cost leadership This involves offering the product or service at the cheapest price. It can be accomplished by relying on economies of scale, controlling the supply chain, or increasing efficiency. Can you think of an example? • Differentiation This involves providing better or more desirable products and services. This enables the organization to obtain a higher price for the item. It can be accomplished by using more expensive materials, a unique design, or superior craftsmanship. What are other ways to differentiate your organization? Can you think of an example? • Niche specialization This involves focusing the marketing effort on specific buyers, specific market segments, or particular geographies. It can also involve offering only a subset of the industry’s products or services. Can you think of an example? BA 553: Business Process Management

6. From session 3 Aligning Strategy with Process Metrics This is a process for ensuring alignment among the organization’s performance measures, strategic plans, improvement projects, and budgets. • Establish the organization’s key goals • Establish KPIs associated with the organization’s key goals, and measure performance in these • Develop and deploy the enterprise strategy to the process level • Establish process measures (if not already existing) • Enterprise KPIs are then recalibrated and aligned with process-level metrics • Once the metrics are aligned at all levels, process improvement projects can be identified • Budget must be allocated aligned with the process improvements needed to achieve the strategic goals. This is why it is critical to align the budgeting process with the strategic planning process BA 553: Business Process Management

7. 5-year vision 1-year plan Plan President’s annual audit Deploy to departments Audit Execute Monthly diagnosis Detailed implementation From session 3 The Hoshin Planning System King, Bob, Hoshin Planning: The Developmental Approach, Methuen, MA: GOAL/QPC, 1989. BA 553: Business Process Management

8. From session 3 Examples of Performance Measures/KPIs Performance measures indicate the organization’s performance in areas that affect the continued existence of the company. Examples include: • Net income • Net income growth • Return on investment • Actual vs. estimated budget • Stock price increase • Market share • Sales volume • Percentage of satisfied customers • Annual inventory turnover • Total rework or scrap dollars • Labor cost per sales dollar • Direct vs. indirect labor dollars • Overtime cost per sales dollar BA 553: Business Process Management

9. From session 3 Understanding the Balanced Scorecard (BSC) • It is a management system that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results • Originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance • The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system • The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis www.balancedscorecard.orgwebsite, accessed 12 April 2010. BA 553: Business Process Management

10. From session 3 Integrating BSC and Hoshin Planning Hoshin PlanningBalanced Scorecard 2. Create destination statement (vision of the future state) 3. Develop strategy map (strategic objectives and their relationships) 6. Develop balanced scorecard 9. Report on progress regularly 10. Update destination statement, strategy map, or scorecard 1. Develop 5-year vision (developed by top manag-ement, input provided by all managers) 4. Establish integrated 1-year plan 5. Deployment to departments, identify measures & targets 7. Execution of the plan 8. Audits (monthly and yearly) BA 553: Business Process Management

11. From session 4 Value Chains • The value chain categorizes the generic value-adding activities of an organization • The value-chain concept has been extended beyond individual firms. It can apply to whole supply chains and distribution networks • Identifying value chain processes enables process improvement efforts to be focused on the processes that could potentially add the most value to the customer • The goal of identifying and improving the value chain is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin • The firm's profit margin then depends on its effectiveness in performing these activities efficiently. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation http://en.wikipedia.org/wiki/Value_chain, accessed on 16 March 2010. http://www.netmba.com/strategy/value-chain/, accessed on 16 March 2010. BA 553: Business Process Management

12. From session 4 Value Chain: Graphic View • These activities are typically shown in a graphic format first developed by Michael Porter, the person who first wrote about value chains: Support Activities Primary Activities Porter, M. (1985), Competitive Advantage: Creating and Sustaining Superior Performance (Free Press: New York). BA 553: Business Process Management

13. Providing Clearances Planning Outages Doing Daily Maint. Doing Outage Maintenance Creating Work Orders Managing the Workforce Operating Plant Ordering Parts Storing or Disposing of Scrap Managing Contractors From session 5 Downstream Processes of Outage Maintenance Equipment available Equipment working Actual schedule Actual budget Actual work completed Paperwork done Planned schedule Planned budget Planned work scope Outage W/O’s W/O’s with status of equipment to be fixed Manpower availability Used parts Materials/ Parts Level of satisfac-tion with contractor Amount of contractor work complete Contractors and their work scope BA 553: Business Process Management

14. Internal to the organization Customers Suppliers A Process Network View of the Organization BA 553: Business Process Management

15. From session 5 PMI’s Project Management Process Network Initiating Controlling Executing Closing Planning BA 553: Business Process Management

16. From session 5 What is organizational culture? • Culture is a consistent and supported pattern of behaviors which are acquired and transmitted by symbols and actions • It is embodied in the institutions, environment and artifacts held to be important by the corporation • Major characteristics of culture: • It has historical roots within the corporation • It includes ideas, patterns and values • It is selective and exclusive in nature, it is learned, it is based upon symbols and supported by symbolic actions • It guides behavior, and yet it is a product of behavior (self-perpetuating) BA 553: Business Process Management

17. From session 5 Traditional vs. Teamwork Culture Command and Control CultureTeamwork/Learning Culture Risk adverse Risk taking Closed-minded Open-minded Don’t mess with success Achievement motivation Past oriented Anticipative / future oriented Self focus Group focus Direct authority Influence Hierarchical Flat Acquiescence to authority Empowerment Unilateral decisions Consensus Restricted information Free information Compartmentalized Holistic Short term Long term Rules / procedures emphasis People emphasis BA 553: Business Process Management

18. From session 5 Items that Influence Culture Primary • What leaders pay attention to, measure, get emotional about, or ignore are important to others, and become the expected norm • Leader’s reaction to critical incidents • Myths, legends about important events and people • Deliberate role modeling, coaching, teaching • Criteria for allocation of rewards and status • Criteria for recruitment, selection, promotion and excommunication Secondary • Organizational structures and systems embed culture. These are also controlled by the leadership • Design of physical spaces, etc. • Formal statement of work BA 553: Business Process Management

19. From session 5 A Process-Oriented Culture • What does it look like? • An emphasis on process as opposed to hierarchies, a process-oriented way of thinking • A cross-functional culture focused on the customer rather than the boss • An emphasis on teamwork and personal accountability • Measures aligned with processes rather than simply outcomes • Why develop a process culture? • Aligns employees around delivering value to customers • How can a process live up to its potential if the company measures performance as it has always done and rewards people for focusing on narrow, functional goals?1 1 Hammer, M. (2007), “The Process Audit”, Harvard Business Review, Vol. 85 Issue 4, pp. 111-123. BA 563: Business Process Management

20. From session 5 How to Achieve a Process-Oriented Culture • The focus on processes must be pervasive, permeating all aspects of the organization, including: • Strategy: plans for achieving many of the organization’s strategic objectives rely on the implementation of process changes • Information systems: information systems help cross-functional processes work smoothly rather than simply support departments • Roles and responsibilities: managers oversee processes instead of activities and develop people rather than supervise them, and employees work in self-directed process teams • Decision-making: decisions are made by front line personnel (and managers provide the support and information needed to accomplish this) • Training: training for employees is process-based • Reward and recognition systems: reward systems are focused on processes as well as outcomes • Information systems will be discussed further in session 12, and roles and responsibilities will be discussed further in session 8 Hammer, M. (2007), “The Process Audit”, Harvard Business Review, Vol. 85 Issue 4, pp. 111-123. BA 563: Business Process Management

21. From session 5 Culture Transformation Process Establish a shared vision of the “to be” character Foster behaviors and actions consistent with desired character Influence attitudes Establish norms and values that align with “to be” character Culture BA 553: Business Process Management

22. From session 5 Example of Culture Shifts Created on Process Improvement Projects This slide and the next document actual changes from surveys completed by front-line workers on two separate projects undertaken by the professor. BA 553: Business Process Management

23. From session 6 What is a Process-Centric Organization? • One in which senior executives rely heavily on process concepts and techniques to manage the organization • One in which senior executives rely heavily on process performance measures • The key is the interest and commitment on the part of corporate executives to the use of process concepts • It’s an evolving concept: some organizations are completely organized around their business processes but most Process-Centric organizations have a mix of functional and process structures BA 553: Business Process Management

24. From session 6 Organizational Structure • As explained in session 4 related to functional management and project management, this does not have to be an “either-or” decision • Matrix management is an approach that enables a focus on function AND a focus on process • Who owns the resources? • Who owns the budget? • Is there a dedicated group of process managers? Project Management Institute’s classification of the 5 organizational types BA 553: Business Process Management

25. From session 6 Coordinating the Management of Processes BA 553: Business Process Management

26. From session 6 Why standardize processes? • Reduces costs: • Lowers salary costs due to collaboration between units (employees can fill in for each other) • Lowers overhead costs due to sharing documentation and training materials across company • Reduces materials costs (ordering larger quantities of standard parts and materials provides purchasing leverage: buyers benefit from suppliers economies-of-scale) • Increases quality: • Reduces variability in product / service quality, as all employees perform the process in a similar manner • Improves product / service quality through the use of continuous improvement and sharing of best practices • Reduces cycle time: • Reduces rework and inefficiency - less work at business unit level as processes are developed once instead of ten times • Improves organizational management: • Facilitates early identification and proactive management of risks • Improves accuracy of estimates • Provides a stronger foundation for any organizational restructuring, as processes are similar across similar job functions • Facilitates various organizational reviews (e.g., SOX reviews) • Increases organizational flexibility, as resources such as people and assets can be reassigned according to market requirements • Enables implementation of process control methods (collecting similar metrics and reporting on them) BA 553: Business Process Management

27. From session 6 Steps in Process Standardization 1. Clarify the purpose of the standardization effort (e.g., reduce product cost, increase product quality, improve product cycle time) 2. Identify which aspects of the process need to be standardized to achieve the stated purpose 3. Document a single version of the process 4. Use impact analysis to identify consequences for the organization, e.g., equipment or paperwork changes required 5. Identify and document any training needs based upon standardized process design 6. Develop a plan for implementing the standardized process 7. Train employees in the new process 8. Roll out the new processes to the various regions 9. Identify decision authority for future modifications to the standardized process design BA 553: Business Process Management

28. From session 7 Why to Measure (Specific Purpose) • The goal for the improvement effort must be established prior to selecting metrics • If the intent is to improve process efficiency (productivity), the following types of measures might be collected: • Time-related metrics (cycle time, delays, on-time delivery, etc.) • Cost-related measures (total cost, procurement cost, etc.) • Utilization of people or equipment • If the intent is to improve process effectiveness (quality), the following types of measures might be collected: • Quality of incoming parts • Customer satisfaction • Measures of product defects (such as number of returns, cost of post-production customer service, etc.) BA 553: Business Process Management

29. Inputs Outputs M M M M 1 2 3 4 From session 7 What to Measure: Where in the Process You will want to collect output measures to show improvement to the entire process, but you also want to collect in-process measures to show how the changes you made to parts of the process are improving the process outputs Work Process Sub-process A Sub-process B Sub-process C Input measures (collected from the customer for the inputs - you) In-process measures (collected from customers internal to the process) Output measures (collected from customers in next process, or externally) BA 553: Business Process Management

30. From session 7 Linking In-Process Measures to Process Output Measures • It’s important to link your in-process measures to process output measures to show the results of your improvements • However, you must establish process output measures in such a way that not too many items will influence your measure: otherwise, your process improvements may not show up • For example, if you improved the production process and then measured cost per unit built, you might not see the effect of your improvement, because the cost of raw materials or supplier parts could have risen • It would be better to measure the reduction in rework, or the number of parts coming off the line per day per worker BA 553: Business Process Management

31. From session 7 Example: Linking Process Measures to KPIs Power Plant Core Processes Run the units Equipment working Maintenance costs Work orders signed off Power Work orders Perform daily maintenance Manage the budget Parts Expenses Equip. history Input measures Number of parts of various types in warehouse Correct min/max for parts in material management system In-process measures Wait time for parts Number of times parts not available when needed Process output measures Performance measures Forced outage rate Availability O&M budget • Equipment working • Amount of equipment fixed • Work orders signed off • Number of work orders signed off • Maintenance costs • Cost of expedited parts • O/T costs BA 553: Business Process Management

32. From session 7 Example: Linking Process Measures to KPIs BA 553: Business Process Management

33. From session 8 Identify Process Improvement Projects How can we identify the most useful improvement projects? • Once KPIs and strategic plans are developed, the next step is selecting improvement projects that will help achieve these goals and targets • A starting point is the value chain, which can help identify process areas where change is likely to lead to improved KPIs • Once that part of the value chain is located, use the process architecture to narrow down the list of processes that need to be improved • The alignment of the process and performance metrics can help confirm the specific process(es) that contain the metrics that will most impact the KPIs and targets where improvement is desirable BA 553: Business Process Management

34. From session 8 Aligning Strategy, Measures, and Processes • In order to get where you want to go and achieve the organization’s goals, you need to be looking ahead • The budget needed to accomplish the goals should be allocated according to the new direction for this year, not based upon what was done last year BA 553: Business Process Management

35. From session 8 What Other Resources Need to be Aligned? • In addition to the annual budget, there are other resources that need to be aligned properly in the organization • These include: • Personnel • Support processes • Infrastructure • Policies • IT resources • Job descriptions • Training BA 553: Business Process Management

36. From session 8 How to Develop a Process Enterprise • There are many different models available for developing a high performance process enterprise • However, their basic components are usually the same: • Align strategy with processes • Develop a process-oriented culture • Establish a process or BPM community of practice (COP) • Assign process roles and responsibilities in the organization • Create a BPM Group or Center of Excellence • Develop infrastructure that is process-oriented • information systems support the efficiency and effectiveness of cross-functional processes (rather than just departments) • reward and recognition systems focused on processes as well as outcomes BA 553: Business Process Management

37. From session 8 Establish a BPM Community of Practice • A COP is a voluntary group that meets regularly to share knowledge and advice on a specific topic, related to items such as: • Tools, templates and models • Methodologies • Case studies • Lessons learned • If senior management are supportive of a COP, employees will usually be able to meet during work hours (billable time) • A BPM COP usually consists of employees at various levels who are (or expect to be) working on process efforts of various types • The BPM COP helps to ensure process efforts across the organization are better integrated, as participants become aware of each other’s efforts BA 553: Business Process Management

38. From session 8 Examples of Process Roles in the Business* • Strategic roles: responsible for providing direction • BPM Sponsor/Champion • BPM Steering Committee Member • Operational roles: responsible for process documentation and performance • Process Coordinator/Manager • Process Owner • Process Analyst/Modeler * Note: process roles and their titles vary among different BPM models – these are just examples Carolan-Brozy, S. (2005), Living Process Management: Process Management Maturity Assessments, Siemens. BA 553: Business Process Management

39. From session 8 Process Roles in the Organization BA 553: Business Process Management

40. From session 8 Create a BPM Center of Excellence (COE) • A Center of Excellence is a work group responsible for the overall BPM effort for the organization • It is similar to a functional group, in that it has a senior manager and employees focused on a specific discipline (in this case, BPM) • The BPM COE is responsible for activities such as: • Governance • Ensuring BPM efforts are aligned with strategic plans • Integrating process change efforts • Assessing BPM maturity/capability and closing needed gaps • Knowledge development and retention • Developing and providing training in BPM methods and tools • Hiring and managing BPM professionals • Documentation • Maintaining the process architecture (network) • Collecting and documenting process metrics BA 563: Business Process Management

41. From session 8 What Does a BPM COE Do? BPM Group Core Processes Assemble information on existing processes Document new processes Identify processes needing improvement Conduct strategic planning effort Collect daily / monthly data on process performance Hire/promote new managers within the business Develop job descriptions for process role s Identify requirements for BPM professionals External demands for process documentation and measures Maintain up-to-date process architecture Work with strategy group to estimate implications of changes Undertake BPM projects Report on corporate process performance Identify problems and recommend solutions Develop plans to address process maturity gaps Manage process owners’ BPM scorecards and evaluations Train new managers in BPM Acquire BPM tools Manage BPM projects Prepare reports for Sarbanes-Oxley and ISO 9000 documentation A. Create & maintain the enterprise business process architecture, maintain proc. inventory/repository B. Identify, integrate, prioritize, and scope BPM projects, and manage process change resources C. Help create, maintain& manage the business process performance system, assess maturity D. Help create and support the process manager/owner system and provide training E. Recruit, train, and manage BPM COE professionals, standardize on BPM methods and tools F. Manage risk / standards / compliance reporting and documentation Note: items in red have been covered previously, items in blue are in this class session, green is in future sessions. Harmon, Paul (2007), Managing the Process-Centric Organization, presentation, BPMTrends. BA 563: Business Process Management

42. Steps in Establishing a BPM COE • Attain executive sponsorship • Define goals and success criteria • Define governance structure • Establish BPM framework, tools, and standards • Set up the BPM library/repository and process architecture • Define BPM COE approach for managing process change • Develop inventory of documented processes • Prioritize process selection based on strategic objectives • Start executing BPM projects Company publication (2010), Process Center of Excellence, white paper, Progress | Savvion. BA 563: Business Process Management

43. From session 8 Integrate BPM Projects • In most organizations undertaking process documentation or process change efforts, the high-level enterprise process network and process inventory have not been established • In these situations, it is common that the various process efforts will involve some overlap • This results in inefficiency and potential conflicts, as parts of a larger process may be undergoing changes by multiple groups within the organization • In order to achieve the full potential of the investment in process change, it is critical that the organization first identify and document the existing process efforts and any overlaps among them - an example is shown on the next two slides • Once overlaps or conflicts are identified and analyzed, some efforts may need to be redirected or stopped - this will need to be discussed with the team members involved • The next step is to ensure the integration of future process efforts by aligning them with the process inventory and the organization’s strategy BA 563: Business Process Management

44. From session 8 Integrating Enterprise-Wide Improvements • While non-BPM company projects may have a primary purpose of changing systems or infrastructure, they are also likely to result in process changes • For example, installing a new IT system or software will often change the processes of end users, including their performance • The resulting process changes need to be documented as the new way of doing things, and put into the process library • It is therefore critical to ensure that, if the Project Management Office and the BPM Center of Excellence do not fall under the same management structure, there is at least a requirement for regular integration between the groups to ensure there is no conflict or overlap in their activities • It is useful if the governance bodies of the two groups have common members • This integration is made much easier if all of the change efforts for the year are identified as part of the organization’s strategic planning effort • In cases where they are identified later in the year due to changing circumstances, they must be aligned with the existing strategy BA 563: Business Process Management

45. From session 9 Examples of Commonly Used BPM Standards • Kaplan and Norton’s Balanced Scorecard (BSC) and all related spin offs/ modifications • Framework used to document, categorize and align financial and non-financial enterprise performance metrics with strategy and process initiatives • Supply Chain Council’s SCOR framework (and the DCOR/CCOR variations, collectively known as SCOR+) • Used to document and evaluate multi-company supply chain processes, including benchmarking assessments • VRM and eTOM are similar to SCOR+ (eTOM is specifically designed for the telecom industry) • EFQM (European version of the US Malcolm Baldrige Award) • Used for overall assessment of organizational quality, not just a BPM tool • SEI’s CMMI • FEAF: used by the US government, usually (but not always) as an IT standard BA 553: Business Process Management

46. From session 9 Governance: What, Why, When, How • What is governance? • Governance is derived from a Greek word which means “to steer” • System of policies, rules, and controls • Provides models and methods for direction, coordination, and control of the organization • Why is BPM governance important? • When is BPM governance needed? • When in the BPM lifecycle to implement governance • Governance during phases of process change • How is BPM governance implemented? • Governance critical success factors • Governance frameworks BA 553: Business Process Management

47. From session 9 Why is BPM governance important? BA 553: Business Process Management

48. From session 9 How is BPM governance implemented? • Select a BPM governance framework • Assess the organization’s current process capability or maturity • Determine the level of management structure that is appropriate for the organization’s culture • Determine the level of centralization that is appropriate for the organization’s culture • Identify the level of resources (people and budget) the organization can dedicate to BPM at this time • Decide on a governance framework based upon the above items • Establish a BPM growth model, if the current BPM approach is not at the desired level BA 553: Business Process Management

49. From session 10 Process Health or Maturity:Signs of a Healthy Process 1. Adoption – A process that no one uses is a process that is clearly not working. Granted, many processes don’t need to be referred to on a regular basis but adoption is about adhering to the defined business process without deviation. 2. Clarity – An ambiguous process is a potential sign that the process has not been well thought out. This will hamper productivity and the successful completion of the activity. 3. Collaboration – Healthy communication leads to a healthy process. Multiple memos may seem like a sign of an immature process, but in actuality, it shows evolution, interest, and commitment to improve. 4. Ownership Participation – Having process owners take responsibility means accepting accountability for the outcome of the process. Without that commitment, there is little assurance that the process will achieve its intended goals. 5. SME Participation – Having the right people contributing their knowledge to the process design or improvement is critical to organizational performance. Having ongoing contribution by the most experienced guarantees staying on track. 6. Best Practice Adoption –Take advantage of lessons learned by countless others. 7. Updated and Valid Metrics – A truly valuable process is one that can be measured. One could argue that a process that directly influences leading/lagging indicators defines the success of your business. 8. Continual Improvement – A process is never complete. There will always be a better way to do something. Failure to capture new ideas, changes in business, and evolving roles will lead to process that loses relevance. Nimbus (2007), 10 Signs of a Healthy Process, internal document provided to clients. BA 553: Business Process Management

50. From session 10 Variations of BPM Assessments Many areas can be measured with process assessments: • Individual employee process competency • used to help identify gaps in knowledge, and to select candidates for process jobs within the organization • Process health or maturity • used to measure the effectiveness of a selected process • Organizational process capability • used to measure the process capability of the enterprise as a whole BA 553: Business Process Management