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Best Practices in BPM Governance Paul Harmon

IQPC BPM – May 2005 www.bptrends.com 1

© 2005, Business Process Trends www.bptrends.com 1

Best Practices in the Governance of

Business Process Management

Paul Harmon

Executive EditorBusiness Process Trends


The Gradual Revolution in Management Thinking

• In the aftermath of the Industrial Revolution managers followed Adam Smith, Henry Ford, and Frederick Taylor subdivided tasks toachieve productivity

• In the Seventies computers were used to reinforce departmental or functional specialization

• Starting in the Eighties, with Michael Porter, Edwards Deming, and Geary Rummler, the tide began to reverse and managers began to think in terms of value chains and processes

• In the Nineties IT gurus joined in with Business Process Reengineering, Workflow, and, more recently BPM Systems and executives like Jack Welch promoted Six Sigma

• Today we are witnessing a shift from management based on departments to management based on processes. For most companies its just begun, but its steadily gaining traction




Process Integration in Nineties

SalesDepartment

ExecutiveManagement

Horizonally Integrated Business Process

That Delivers A Specfic Product to a Targeted Group ofCustomers

StrategyCommittee


Today: Horizontal & Vertical Alignment

SalesDepartment

ExecutiveManagement

StrategyCommittee

VerticallyIntegrated

Measures,Managers, and

Resources

Employees & IT Applications andInfrastructure

Horizonally IntegratedProcesses

From Suppliers to Customers




Process Management and Organization Management

• BPM as a Management Philosophy– Senior Executives– KPIs

• BPM as a Way of Organizing the Company– Middle Managers– Reporting Relationships– BPM Architecture and Dashboards

• The Management of Specific Processes– Supervisors– Improving Specific Processes– Managing the Employees Executing the Processes


Three Levels of Governance

• Executives – Organization Performance & Responsiveness

• Line and Process Managers – Value Chain/Process Performance and Priorities for Improvement

• Process Supervisors – Efficient & Effective Organization of Subprocesses and Activities




Some Management Concerns

Specific Process

Value Chain

Plans & Goals

Process Automatedby IT Systems

Process Performedby Employees

Physical Plant and Hardware Used.

StrategyLevel

Business ProcessLevel

ImplementationLevel

ProcessManagement and

Measurement

Senior Management - Better Overview of What's Happening - Better Way to Plan for Change - Better Way to Assign Responsibilities

Middle Management (Including IT Mangers) - Better Overview of What's Happening - Better Way to Plan for Change - Clearer Priorities - Better Way to Assign Responsibilities

Supervisors and Change Specialists - Clearer Priorities - Better Understanding of Task - Better Way of Measuring Results


An Aside: Processes Come in Different Sizes

Value Chain

Business Process Business Process Business Process

ProcessProcess Process

Sub-Process Sub-ProcessSub-Process

Sub-Sub-Process

Activity Activity

Sub-Sub-Process

ArchitectureSCOR Framework

Process Redesign ProjectsBusiness Rule Projects

Six Sigma ProjectsIT Automation Projects

SAP Process Models




Michael Porter’s Value Chain

New ProductDevelopment Operations Distribution Marketing

and SalesService

Procurement

Technology Development

Human Resource Management

Corporate ManagementM

arginSu

ppor

t Pro

cess

esC

ore

Busi

ness

Pro

cess

es

Finance and Accounting

From Michael Porter, Competitive Advantage, Harvard, 1985


Unisys Corp. Functions and Value Chains

UnisysSenior

Management

Marketing FinanceSales ServiceManufacturingNew ProductDevelopment

Strategy Committee

Value Chain: Systems Integration

Value Chain: Outsourcing

Value Chain: Network Services

Value Chain: Core Services

Value Chain: Enterprise Server Technology

Other Value Chains




Defining a Business Process Architecture

• The key tool for process management• A high-level overview of the value chains and key

processes that make up the organization• An alignment of strategic goals, value chains and key

processes• A clear-cut way to monitor the performance of the

value chains and processes (KPIs)

• A BP Architecture is NOT an IT EA Architecture


The Process Management Alignment ProcessOngoing BusinessStrategic Process

BusinessModel

Managem entPlan

Perform anceMeasures

Business Process Architecture

CEO

Value Chain

SubProcess

Activities

Process

SubProcess

SubSubProcess

Activities

Organizational AlignmentSee that m odels, m easures and m anagem ent plans are

aligned with those abov e and below

ProcessHierarchy

ManagementHierarchy

LineManagers

MiddleManagers

Supervisors

Bus Process Bus Process

Process




Available Business Process Frameworks

• BP Frameworks are often called Operation Reference (OR) Frameworks

• A BP or OR Framework is a template for a BP Architecture

• The Supply Chain Council’s SCOR Framework• The TeleManagement Forum’s eTOM/NGOSS

Framework• Hewlett Packard’s Framework Suite• The VCOR Initiative


SCOR MODEL: Level 1

SupplyChain

DeliverMakeSource

Plan

Return




The Level 1 SCOR Notation

S1 M1 D1 S1

S1 D1 S1M1 D1

Key OtherRM Suppliers

EuropeanRM Supplier

RMSuppliers ALPHA

AlphaRegional

WarehouseCustomer

DR1 SR1 DR1 SR1

SR3DR3

P1

P2

P3

P4

P1

P2

P3

P4

P1

P2 P4

S2 M2

DR1

D2

SR1

S2


SCOR’s Level 1 ScorecardPerformance

Attribute Performance Attribute Definition Level 1 Metric

Supply Chain DeliveryReliability

The performance of the supply chain indelivering: the correct product, to the correctplace, at the correct time, in the correctcondition and packaging, in the correctquantity, with the correct documentation, tothe correct customer.

Delivery Performance

Fill Rates

Perfect Order Fulfillment

Supply ChainResponsiveness

The velocity at which a supply chain providesproducts to the customer. Order Fulfillment Lead Times

Supply ChainFlexibility

The agility of a supply chain in responding tomarketplace changes to gain or maintaincompetitive advantage.

Supply Chain Response Time

Production Flexibility

Supply Chain Costs The costs associated with operating thesupply chain.

Cost of Goods Sold

Total Supply Chain ManagementCosts

Value-Added Productivity

Warranty / Returns ProcessingCosts

Supply Chain AssetManagementEfficiency

The effectiveness of an organization inmanaging assets to support demandsatisfaction. This includes the managementof all assets: fixed and working capital.

Cash-to-Cash Cycle Time

Inventory Days of Supply

Asset Turns

Cus

tom

er F

acin

g A

ttrib

utes

Inte

rnal

Fac

ing

Attr

ibut

es




SCOR Benchmarks Provide Instant ROI

50%

$30M Revenue

$30M Indirect Cost

35 days

97 days

0%

63%

Supply Chain SCORcard Industry Benchmarks

Overview Metrics SCOR Level 1 Metrics Actual Parity Advantage Superior Value from Improvements

Delivery Performanceto Commit Date 85% 90% 95%

Fill Rates 94% 96% 98%

EXTE

RN

AL

Supply ChainReliability

Perfect OrderFulfillment 80% 85% 90%

Order FulfillmentLead Times 7 days 5 days 3 days

Flexibility

Responsiveness

Production Flexibility 30 days 25 days 20 days

Total SCMManagement Cost 19% 13% 8% 3%

INTE

RN

AL

Cost Warranty Cost NA NA NA NA NA

Value Added EmployeeProductivity NA $156K $306K $460K NA

Inventory Days ofSupply 119 days 55 days 38 days 22 days NA

Assets Cash-to-Cash CycleTime 196 days 80 days 46 days 28 days

Net Asset Turns(Working Capital) 2.2 turns 8 turns 12 turns 19 turns NA

Supply ChainResponse Time 82 days 55 days 13 days

45 days

$7 M Capital Charge

Key enabler to cost andasset improvements

$30M Revenue









Basic BP Management Model

Plan & OrganizeProcess

Set goals and expectiationsEstablish plans and budgetProvide resources & staffImplement process

Monitor & ControlProcess

Monitor processReinforce successDiagnose deviationsTake necessary correctiveactions

Expectations,Plans & Resources

Results

Data AboutResults

Goals/Measures

Job Functions of a Manager Responsible for a Process

Inputs

Changes in Goals and Plans

Feedback

ProcessExecuted

Process Measures


Aligning Managers and Measures

SOURCEPROCESS

S2 SourceMTO Products

S2.2 Recieve Product

MeasureProcess

Monitor &Plan &

ReportingRelationship

MeasureProcess

Monitor &ControlProcess

Manager Responsible for Process

Plan &OrganizeProcess




MeasureProcess







Coordinating the Management of Processes

CEO

Executive Committee

ProcessManagementTeam

DeliveryDepartment

ManufacturingDepartment

SalesDepartment

Customer

Process ArchitectureCommittee

Sales Supervisor Manf.Supervisor

DeliverySupervisor

Widget Value Chain

SalesProcess

DeliveryProcess

ManufacturingProcess

VPDelivery

VPManufacturing

VPSales

SVP WidgetProcess

WidgetProcess


A Specific Example of BPM Management

Pamela GarretsonDirector, Business Excellence

Boeing Airlift and Tanker Programs




The Boeing Airlift and Tanker Organization

CommercialAirplanes

SharedServices

PhantomWorks

IntegratedDefenseSystems

The Boeing Company

HQ in Long Beach, CA

Airlift andTanker

Programs

BoeingCapital

Corporation

Connexionby

Boeing

AirTraffic

Management

Air ForceSystems

C-17 Program 767 Tankers Program

C-17 Program Advanced A&T


The Boeing A&T Enterprise Process Model




As one process level is defined, the next lower level is identified

Level 1 Process 6.02

Level 2 Process 6.02.03

Level 0 Process 6.0

Levels of ProcessesLevels of Processes

Aircraft and Missiles - Southern California (A&M-Aircraft and Missiles - Southern California (A&M-SoCalSoCal))

Enterprise Process ModelEnterprise Process Model

1.0 Enterprise Management1.0 Enterprise Management1.0 Enterprise Management

8.0 Support & Services8.0 Support & Services8.0 Support & Services

1.05 Provide Communications

1 .06 Manage Customer Satisfaction Approach and Deploym ent

1.03 Learn and Im plement Improvements

1.04 Strengthen the Team

8.01 Provide Human Resource S ervices8 .02 Provide Security and Fire Protection Services8 .03 Provide General S ervices8 .04 Provide Safe ty, Hea lth, & E nvironm ental

Services

8.07 Perfo rm Accounting8.08 Perfo rm Financial Services8.09 Prov ide Integrated Information Systems

Solutions8.10 Prov ide Flight Operations S ervices

8.05 Manage Facilities & E quipment8.06 Provide Legal S ervices

4.01 Integra te Productwith SystemRequirements

4.02 Plan and Contro lProductDevelopment

4.03 ProvideConcurrentDefinition

4.04 Verify Validate /Product Definition

4.0IntegrateProduct

Definition

4.04.0IntegrateIntegrateProductProduct

DefinitionDefinition

3.0Program

Planning &Control

3.03.0ProgramProgram

Planning &Planning &ControlControl

2.0Acquire

Business

2.02.0AcquireAcquire

BusinessBusiness

2.01 DevelopOpportunity/Pop-Up Opportunity

2.02 Develop WinStrategy

2.03 Execute Campaign2.04 Docum ent Offering2.05 Keep It Sold

3.01 (UNASS IGNED)3.02 (UNASS IGNED)3.03 Manage Transfer of

Work (out)

3.04 Administer Contracts3.05 Manage Change3.06 Manage Risk3.07 Manage Cost and

Schedule3.08 Manage Material

Requirements3.09 Manage Inventory3.10 Manage Government

Property

7.0Post

DeliverySupport

7.07.0PostPost

DeliveryDeliverySupportSupport

6.0Production

6.06.0ProductionProduction

5.0Supplier

Management

5.05.0SupplierSupplier

ManagementManagement

5.01 Select Source5 .02 Issue Orders5 .03 Manage Supplie r

Perform ance

5 .04 Assure SupplierQuality

6 .01 (UNASSIG NED)6 .02 Fabrica te Tools6 .03 Assem ble

Product

6 .04 Provide FODControl

6 .05 Assure ProductQuality

6 .06 (UNASSIG NED)6 .07 Certify Factory

Floor Processes

7.01 P rovide TechnicalP ublica tions

7.02 P erform Spares SalesS ervices

7.03 P erform ProductTraining S upport

7.04 P erform Field S ervices7.05 P erform Repair

S ervices7.06 P erform Maintenance

and ModificationsS ervices

7.07 Manage Support & TestE quipment

7.08 P erform AssetManagem ent Services

1.01 Plan and Integrate P erform ance

1.02 Manage Procedural Docum entation

Sherry W ilson (562) 593-1339(atpm) Revised Ju ly 18, 2002http://am s-socal.web.boeing.com/dbbg/epm/epm .html

(UNASSIGNED) = A process is now performed within another process or is no longer performed at al l.

1.07 Perform Self Governance

and so on…

• 6.01 ______

• 6.02 ______

• 6.03 ______

• 6.04 ______

• 6.05 ______

• 6.02.01 ______

• 6.02.02 ______

• 6.02.03 ______

• 6.02.04 ______

• 6.02.05 ______


Process Owners: What Do They Do?

• Responsible for:• Implementing the steps of PBM• Documenting the process• Ensuring process performance• Ensuring both internal and external customer involvement• Involving suppliers of incoming processes• Improving the process

• For certain processes, may manage the process jointly with the Government Customer

• Must ensure associated procedures are current and are adhered to




ImplementImprovementsImplement

ImprovementsSet

GoalsSet

Goals

Return to Step 3

Six to Ten Manageable

Steps

Metrics from Customer’s Perspective

How YouAre Doing

Predictable Performance

Where You Are Going and Why

How and Why You Will Get There

Get There!

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7

Definethe

Process

Definethe

Process

EstablishMetrics

EstablishMetrics Determine

PerformanceDetermine

PerformanceAnalyze ProcessStability

Analyze ProcessStability

Analyze and Plan

Improvements

Analyze and Plan

Improvements

Process Owners Use PBM Seven-Step MethodologyProcess Owners Use PBM Seven-Step Methodology

Process-Based Management (PBM) is a management approach that defines an organization as a collection of processes focused on customer satisfaction and waste reduction by defining measures, stabilizing and improving processes

DEFINE MEASURE IMPROVE


Quality

Timeliness

Efficiency

Cycle Time

Concurrence Concurrence Concurrence

MinimumAcceptableLevel (MAL)

Annual / Multi-Year

Goals Benchmark

WeightingFactor

(Must Have At Least One “1”)

Metric DefinitionMetric Category

Process Measurement

Process Owner’s Name Process Customer’s Name(s) Process Specialist’s Name

Process Title Process No.Creation DateRevision Date

Next-higher level process

Quality Metric Definition (list company/organization/source benchmarked [if applicable])

Timeliness Metric Definition (list company/organization/source benchmarked [if applicable])

Efficiency Metric Definition (list company/organization/source benchmarked [if applicable])

Cycle Time Metric Definition (list company/organization/source benchmarked [if applicable])

MAL

MAL

MAL

MAL

Goals

Goals

Goals

Goals

BenchmarkWeight

Weight

Weight

Weight

(Must have concurrence on file for all process changes. Use second page if necessary for additional metric definitions and/or signatures.)

Process Title: Process No.:Creation Date:Revision Date:

Next-Higher-Level Process:

PROCESS PERFORMANCE AGREEMENTIntegrated Defense Systems (IDS) – Long Beach

MD-1773-01 (4 OCT 2002) REVISED

T

Q

E

CT

Benchmark

Benchmark

Benchmark

Quality

Timeliness

Efficiency

Cycle Time

Concurrence Concurrence Concurrence

MinimumAcceptableLevel (MAL)

Annual / Multi-Year

Goals Benchmark

WeightingFactor

(Must Have At Least One “1”)

Metric DefinitionMetric Category

Process Measurement

Process Owner’s Name Process Customer’s Name(s) Process Specialist’s Name

Process Title Process No.Creation DateRevision Date

Next-higher level process

Quality Metric Definition (list company/organization/source benchmarked [if applicable])

Timeliness Metric Definition (list company/organization/source benchmarked [if applicable])

Efficiency Metric Definition (list company/organization/source benchmarked [if applicable])

Cycle Time Metric Definition (list company/organization/source benchmarked [if applicable])

MAL

MAL

MAL

MAL

Goals

Goals

Goals

Goals

BenchmarkWeight

Weight

Weight

Weight

(Must have concurrence on file for all process changes. Use second page if necessary for additional metric definitions and/or signatures.)

Process Title: Process No.:Creation Date:Revision Date:


PROCESS PERFORMANCE AGREEMENTIntegrated Defense Systems (IDS) – Long Beach

MD-1773-01 (4 OCT 2002) REVISED

T

Q

E

CT

Benchmark

Benchmark

Benchmark

Process Objective:

Process TasksBeginning Boundary Task:

Ending Boundary Task:

Inputs

Suppliers Customers

Process Requirement Sources: Process Owner:

Process Customer(s):

Process Specialist:Information

Systems

Outputs

(Must have concurrence on file for all process changes. Use second page if necessary.)

Negotiate and Award Purchase Order

Supplier Management 5.0

Establish a contract with a supplier, including compliant documentation and provide clearrequirements to the supplier.

5.02

01/03/0101/10/03

• Purchase Requisition (PR)• Select Source 5.01

• Select Source 5.01

• Purchase Order• Manage Supplier Performance 5.03

• TA-QA-039• 1.8.2.6• TA-QA-111

Name of Process Owner

Name of Process Customer(s)

Name of Process Specialist (if applicable)

MAIN, TPS, EDI, UDFC TRACKING SYS

.01 Evaluate Purchase Requisition

.02 Issue Undefinitized Purchase Order

.03 Receive and evaluate proposal from Supplier and Develop Negotiation Plan.04 Solicit & Evaluate Bids from Suppliers & Select Supplier.05 Negotiate Contract Requirements with Supplier.06 Develop Procurement File to Requirements.

• Manage Supplier Performance 5.03

Receive Purchase Requisition

Issue Purchase Order

Process Title: Process No.:


Creation Date:Revision Date:

MD-1771-01 (06 JUN 2002) REVISED

PROCESS DEFINITIONIntegrated Defense Systems (IDS) – Long Beach

Process Objective:

Process TasksBeginning Boundary Task:

Ending Boundary Task:

Inputs

Suppliers Customers

Process Requirement Sources: Process Owner:

Process Customer(s):

Process Specialist:Information

Systems

Outputs

(Must have concurrence on file for all process changes. Use second page if necessary.)

Negotiate and Award Purchase Order

Supplier Management 5.0

Establish a contract with a supplier, including compliant documentation and provide clearrequirements to the supplier.

5.02

01/03/0101/10/03

• Purchase Requisition (PR)• Select Source 5.01

• Select Source 5.01

• Purchase Order• Manage Supplier Performance 5.03

• TA-QA-039• 1.8.2.6• TA-QA-111

Name of Process Owner

Name of Process Customer(s)

Name of Process Specialist (if applicable)

MAIN, TPS, EDI, UDFC TRACKING SYS

.01 Evaluate Purchase Requisition

.02 Issue Undefinitized Purchase Order

.03 Receive and evaluate proposal from Supplier and Develop Negotiation Plan.04 Solicit & Evaluate Bids from Suppliers & Select Supplier.05 Negotiate Contract Requirements with Supplier.06 Develop Procurement File to Requirements.

• Manage Supplier Performance 5.03

Receive Purchase Requisition

Issue Purchase Order

Process Title: Process No.:


Creation Date:Revision Date:

MD-1771-01 (06 JUN 2002) REVISED

PROCESS DEFINITIONIntegrated Defense Systems (IDS) – Long Beach

Key to PBM: Process Owners Document and Define Processes, with Customer Agreement




Process Owners Define the Process in a Flow ChartProcess Owners Define the Process in a Flow Chart

W hoResponsib le

O rganization or Ind ividuals

Input O utput

P R O C E S S FLO W C H AR TP R O C E S S FLO W C H AR T

M D -7148 (02 JU L 2004 ) R E V IS E D

E S T. T IM E

M ajo r Tasks for:P rocess O w ner:

P rocess N um ber:C reation D ate:R evis ion D ate :

LE G E N DInpu t/O utputInpu t/O utput TaskTask a C onnecto r R R ecordD ec isionD ec ision C ontro l

P o in t

TO TA L T IM E

App lies To:5 .02

N egotia te and A w ard P urchase O rder<Process O wner N am e H ere>

<B us. U nit/P rogram N am e H ere>

PurchaseR equisition

Supp lierP roposal

TechnicalE va luation

C ost/PriceAnalysis

R eceivePurchase

R equis it io n

E va lua tePurc hase

R equisition

Proc ure me ntC om petitive?

IssueU nde fin it ized

Purchase O rder

R eceive andE va lua te

Prop osa l fromSupp lie r and

D evelopN ego tia tion

P lan

So lic it andE valua te B ids

fro m S upp lie rsand Se lec t S upp lie r

N ego tia teC ontrac t

R equire m entsw ith S upp lie r

N ego tia tion P lanA deq ua te ?

Procu re m e ntFile C o m plian t?

D evelopProcu re m e nt F ileto R equire m ents

IssueD efin it ized

Purc hase O rder

a

a

b

b

3 .08.04 R elease Purchase R equisitions and W ork O rders

Supp liers

Program E ngineer

C ost Ana lyst

B uyer

Procurem ent M anagem ent

Procurem ent A dvisor

PurchaseO rder

P rocurem en tFile

Y

N Y

NYN

R

<O rig in D a te H ere><R evis ion Da te H ere>


ProcessPerformance

Meet or ExceedCustomer

Expectations

AttainSuperiorBusinessResults

QualityQuality

EfficiencyEfficiency

TimelinessTimeliness

CycleCycle--TimeTime

Measure of conformance or non-conformance (defects) to requirements or expected performance

Measure of success in meeting a customer commitment

Measure of output that a process produces in relation to costs

Measure of time between a customer request and delivery of the product or service to the customer

RequirementsRequirements Key Performance CategoriesKey Performance Categories

Process Owners Use Metric Categories to Establish Measures




The Same Metrics Are Used at All Levels

Shared DataExecutiveLeadershipExecutive

Leadership

LeadershipLeadership

TeamsTeams

Customers

Suppliers

Quality Timeliness

Efficiency Cycle Time


Process Owners Use Metrics to Measure a ProcessProcess Owners Use Metrics to Measure a Process

Good Good100

90

80

70

60

50

40

30

20

10

Quality (1X)

100

90

80

70

60

50

40

30

20

10

Efficiency (1X)

Process Performance Assessment

Assessment Assessment

Per

cent

Com

plia

nt O

rder

s

Com

plet

ed It

ems

per M

an-h

our

02 03 J F M A M J J A S O N DND ND 1 2 2 2 2 2

03 J F M A M J J A S O N D02ND ND 2 2 2 2 1 1

1.5 2.0 2.0 2.0 1.5 1.502 03 J F M A M J J A S O N DND ND




Airlift and Tanker Programs’ Quality Journey: Results FocusAirlift and Tanker Programs’ Quality Journey: Results Focus

PerformanceFactorPerformanceFactor

7

6

5

4

3

2

1

0

Mal

colm

Bal

drig

e R

ange

RONA

KEYKEY

Milestones

Systems

Awards

DeliveryWaivers

COQRework/Repair $

Span Time

Schedule

CPAR

5X 7.5X 17X

‘92 ‘93 ‘94 ‘95 ‘96

58% 67% 100% 92%

120Aircraft

Decision

LargestMulti-yearcontract

Collier CalQED

‘97

100%

FlexSustainment

Daedalian

‘98

C32/C40

100%

Baldrige

80 50 17 12 8

4.3% 2.9% 2.5% 2.2% 1.9%4.0M 2.5M 1.8M 1.4M 866K

100

4.2%5.0M

442 Days 380 Days 374 Days 349 Days 286 Days

+10 Days +25 Days +40 Days +20 Days +60 Days

58%2.31.6 2.9 3.3 3.4 4.11.7 4.2

100%

1.4%

6

268 Days

+100 Days

‘99

707K

15 C-17add-on

+60 appropriation

18X

4.1100%

1.4%

10

223 Days

+204 Days

‘00

644K

UKORDER

31X

* Days ahead of schedule to USAF decreased due to a insertion of four UK planes into 2001 schedule

4.2100%

1.1%

15

208 Days

+107 Days*

‘01

535K

UK1-4Deliveries

50X+

IW Finalist


A BP Group and a BP Process

• Most companies that are serious have a business process group to coordinate their efforts and provide special training and mentoring

• Many companies conclude that process change is its own kind of process and develop and document

The Process Change Processin the same way they do other processes.




Kaplan and Norton’s Balanced ScorecardECI's Balanced Business Scorecard

Customer Perspective

Financial Perspective Internal Business Perspective

Innovation & Learning Perspective

Goals

Survive

Succeed

Prosper

Measures

Cash flow

Quarterly sales growth & operatingincome by division

Increased market share and ROE

Goals

Technologycapability

Manufacturingexperience

Designproductivity

New productintroduction

Measures

Manufacturing geometry vs.competition

Cycle time, Unit cost, Yield

Silicon efficiency, Engineeringefficiency

Actual introduction schedule vs. plan

Goals

Technologyleadership

Manufacturinglearning

Product focus

Time to market

Measures

Time to develop next generation

Process time to maturity

Percent of products that equal 80%sales

New product interdiction vs.competition

Goals

New products

Response supply

Preferred supplier

Customerpartnership

Measures

Percent of sales from new products,Percent of sales from proprietaryproducts

On-time delivery (defined by customer)

Share of key accounts' purchases,Ranking by key accounts

Number of cooperative engineeringefforts


Extending It Further

Improve Shareholder Value

Revenue Growth Strategy Productivity Strategy

share price return on capital employed

Build the Franchise Increase Value toCustomers

Improve Cost Structure Improve Use ofAssets

Operational Excellence

Cutomer Intimacy

Product Leadership

Build FranchiseThrough Innovations

Increase CustomerValue Through

Customer ManagementProcesses

Achieve OperationalExcellence Through

Operations andLogistics Processes

Become a GoodCorporate Citizen

Through Regulatoryand Environmental

Processes

Employee Competencies Technology Corporate Culture

Financial Perspective

Customer Perspective

Internal Process Perspective

Learning & Growth Perspective

customer profitabilityrevenue from new

sourcesoperating cost per unit

produced asset utilization




An Overview of SEI’s CMM Maturity Model

The process is ad hoc. Fewactivities are explicitlydefined and success

depends on individual effortand heroics.

Basic project managementprocesses are established to

track cost, schedule, andfunctionality. The necessary

discipline is in place torepeat earlier successes

The process for bothmanagement and

engineering is documented,standardized and integrated

by an organizationmethodology

Detailed measures of theprocess and product quality

are collected. Both theprocess and products are

quantitatively understood andcontrolled.

Continuous processimprovement is enabled by

quantitative feedback for theprocess and from pilotinginnovative new ideals and

technologies.

1. Initial

2. Repeatable

3. Defined

4. Managed

5. Optimizing

Organizations with an immature mastery of their processes.

Organizations with an mature mastery of their processes.

Entrepreneurial organizations and newdivisions that do things any way they can to

get started.

As organizations become more mature they begin toconceptualize business processes and seek to organizethem, repeat successes and measure results.

Most organizations are between levers 2 and 3. Theyhave processes documented and standardized but in

many cases manager's goals are only loosely linked toprocess goals.

Only a few organizations have an organization wideunderstanding of how processes relate and have

their corporate strategies and goals aligned, via themanagement hierarchy to specific process activities.

Organizations at this level routinely expect managers and employees to work together toimprove processes. They understand their processes well enough that they can conduct

systematic experiments to determine if changes will be useful or not.









A Process Includes Its Management

Process

Measure

Manage

plan control

PeopleImplement

Process

SoftwareImplements

Process


One of Rummler’s Rules

75% of potential improvement you can obtain from a redesigning a process will come from changing

the way the process is managed

• Geary Rummler, Serious Performance Consulting, • ASTD Press, 2004




Rummler’s Human Performance Model

ExpenseReports

Updated ExpenseReport Ledger Consequences

Feedback

Activity Support

4. Consequences

Feedback

Activity:Enter Expense

Reports

Process Defined

activitymeasures

Activity Specifications

Skill, Knowledge & Capability

*

Geary Rummler & Alan Brache, Improving Performance, Josey-Bass, 1985


A More Detailed Human Performance Model

ExpenseReports

Updated ExpenseReport Ledger Consequences

Feedback

1. Activity Support

- Can the performer easily recognize theinput requiring action?- Can the activity be done withoutinterference from other activities?- Are adequate resources available forperformance (time, tools, staff, information)?

4. Consequences

- Are consequences aligned to support thedesired performance?- Are consequences meaningful from theperformer's perspective?- Are consequences timely?

5. Feedback

- Do performers receive informationabout their performance?- Is the information they receive: 1)relevant? 2) accurate?3) timely? 4) specific? 5) easy tounderstand?

Activity:Enter Expense

Reports

0. Process Defined

- Define the steps in the activityor process.- Define who will do what

activitymeasures

3. Activity Specifications

- Do activity standards exist?- Does performer know the desired output &standards?- Do performers consider the standardsattainable?

2. Skill, Knowledge andCapability

- Do the performers have the necessaryskills & knowledge to perform?- Do the performers know why desiredperformance is important?- Are the performers physically, mentally &emotionally able to perform?

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Rummler’s Rule Applies To All Level’s of Management

• The biggest problem most organizations face is that they don’t align bonuses and incentives with processes

• Thus, it is common for employees, supervisors and senior managers to get rewards for behaviors that do not result in improved performance

• Aligning incentives should be a major goal of every business process change program

• Jack Welch, the CEO of GE, made 40% of every executive’s bonus dependent on the success of their 6 Sigma program


SUMMARY

• The challenge for managers is to learn how to manage business processes

• We have too many technologies and not enough focus on why we should do BPM in the first place

• We manage processes to improve corporate performance

• Companies need to set goals, develop a strategy, and then create a business process organization that can organize and coordinate their BPM resources




For More Information

www.bptrends.comThe most comprehensive source of information and analysis on

trends, directions and best practices in Business Process Management

Slides available on BPTrends. Go to site and enter into search:

IQPC BPM Governance Talk

[email protected]

Documents

Best Practices in the Governance of Business Process ... BPT 1 Hr Talk for IQPC... · Best Practices in BPM Governance Paul Harmon IQPC BPM – May 2005 1 © 2005, Business Process