Aligning Enterprise Measures, Plans, and Budgets

Coordinating enterprise performance metrics and strategic plans with resource allocation

Much of the material in this presentation was drawn from the following source:

• Allio, M. (2006), “Metrics that matter: seven guidelines for better performance measurement”, Handbook of Business Strategy, Vol. 7 Issue 1, pp. 255-263.

• Harmon, Paul (2007), Managing the Process-Centric Organization, presentation, BPMTrends.

Enterprise BPM Methodology

“Managing the Process-Centric Organization”, presentation by Paul Harmon.

BA 553: Business Process Management 2

Build Process Management

Capability

Session 5Session 5 Sessions 8 & 10

Session 5

Session 8 Session 8

Session 10

Sess. 4

BA 553: Business Process Management

BA 563: Process Improvement

Aligning Strategy with Process Metrics

This is a process for ensuring alignment among the organization’s performance measures, strategic plans, improvement projects, and budgets. The items in blue were covered previously.

BA 553: Business Process Management 3

1. Establish the organization’s key goals

2a. Develop and deploy the enterprise strategy to the process level

2b. Establish KPIs associated with the organization’s key goals, and measure performance in these

3. Establish process measures (if not already existing)

4. Recalibrate enterprise KPIs and align them with process-level metrics

5. Once the metrics are aligned at all levels, identify process improvement projects

6. Allocate budget aligned with the process improvements needed to achieve the strategic goals. This requires that the budgeting process be scheduled after the strategic planning process

5. Identify Process Improvement Projects

Once KPIs and strategic plans are developed, the next step is selecting improvement projects that will help achieve these goals and targets

BA 553: Business Process Management 4

A starting point is the value chain, which can help identify process areas where change is likely to lead to improved KPIs

Once that area 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

How can we identify the most useful improvement projects?

Identifying Processes That Impact KPIs

BA 553: Business Process Management 5

From Last Session:Estimate Impact of Projects on KPIsBSC Category and Item

Objective Measure Current Target Initiative/ Project

Impacts KPI

Financial

Warranty costs Decrease warranty costs

Repair cost, $

$20M $15M (-$5M)

Impr. quality of incoming parts

$3M

(Same as above) (same) (same) (same) (same) Train field personnel

$2M

Customer

Customer satisfaction rating

Impr. reliability of shipments

On-time shipments %

80% 95% (+15%)

Impr. inventory processes

5%

(Same as above) (same) (same) (same) (same) Impr. shipping processes

10%

Internal Process

Production rate Reduce rework

Rework, % 7% 3% (-4%)

Impr. quality of incoming parts

2%

(Same as above) (same) (same) (same) (same) Impr. mfg. processes

2%

Learning/Growth

etc.

BA 553: Business Process Management 6

6. Allocate Budget Aligned with Strategy

BA 553: Business Process Management 7

BA 553: Business Process Management 8

Traditional Budget Allocation Approach

In traditional organizations, budget is allocated based upon last year’s budget

This is like driving a vehicle while only looking in the rear-view mirror

BA 553: Business Process Management 9

Improved Budget Allocation Approach

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

Management assesses industry, market, company performance - then clarifies the firm’s vision

Management team formulates specific strategies needed to propel the firm towards its vision

Strategy dictates resource allocation priorities: the budget reflects the strategy

Managers implement and measure strategic performance, then realign strategies; the process repeats, as needed

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 10

Aligning Other Resources with Processes

A well-structured process architecture gives you a way of tracking the alignment of a variety of corporate resources

By documenting the resources on the process architecture, you can identify where your resources are being spent, and possibly where they’re being inefficiently used

Different organizations will stress different types of alignment – this depends on the organization’s goals:

The US Government is largely focused on IT alignment

Many companies are heavily focused on identifying common processes to reduce the number of ERP applications they need to maintain

BA 553: Business Process Management 11

Items to Consider When Aligning BPM

Alignment of corporate strategies and goals with BPM

Alignment with specific process strategies Alignment with stakeholder needs and KPIs

Alignment of other processes with BPM

Management processes Support processes Repeated standard processes

Alignment of policies and rules with BPM

Which processes implement which policies? Which processes rely on which business rules?

BA 553: Business Process Management 12

Items to Consider When Aligning BPM

Alignment of IT resources (e.g. with an Enterprise Architecture) with BPM

Which software applications are used by which processes? Which databases are used by which processes?

Alignment of HR resources with BPM

Which job descriptions are used by which processes? Which training courses support which processes? Which hiring practices will support process management?

Alignment of standards such as Sarbanes-Oxley (SOx), ISO 9000, and various risk management standards with BPM

BA 553: Business Process Management 13