Align Business Process Management Measures with Organizational Goals and Strategies
Business process management is currently a hot topic. Depending on whom you talk to, business process management can include business performance management, business intelligence and executive dashboards, the creation of a business process architecture, process redesign and improvement, Six Sigma and Lean Management, as well as a host of business process management software systems.
Surveys typically find that senior executives are not very happy with the way their organizations implement corporate strategies. Senior managers consistently say that one of the things they hope to get from business process management is an improved way of measuring corporate performance. If you look at most business process management methodologies, however, you will find them long on redesign and improvement techniques and on business process architecture concepts, but surprisingly short on performance measurement.
Goals of Business Process Management
Most business process redesign or improvement programs talk about the importance of measurements. Some projects, especially those led by Six Sigma practitioners, gather lots of data on process performance. Unfortunately, most of these measurement efforts are project focused. They start with the process and measure improvements in the process. They sometimes relate metrics to measures of customer satisfaction, but they very rarely show how the process measures are actually aligned with the organization’s goals and strategies. In other words, most organizations do not have a systematic way of tying specific measures derived from a particular process to the overall goals or strategies of the company. Nor is there a systematic effort to gather measures on all processes in the organization that could enable comparisons between changes in one process and changes in related processes.
This situation is about to reach crisis proportions within the business process management community as companies increasingly adopt business process management software products that are capable of automatically gathering process measures and transmitting them to executive dashboards. During the past year, many of the leading business process management software companies have announced acquisitions of Business Intelligence firms. Those acquisitions are predicated on the assumption that companies will use these capabilities to report metrics to executives, and then provide those executives with advice about trends that can guide executive decisions. It will be ironic if the business process management vendors acquire a lot of fancy technology and then can’t offer their clients a systematic approach to determining what process measures their fancy tools should actually monitor and report.
Balanced Scorecards and Business Process Management
The approach to corporate performance measurement that has been most widely adopted over the past decade derives from Robert Kaplan and David Norton’s work on Balanced Scorecards, which they initially defined in the Harvard Business Review in the early 1990s. In their original articles and subsequent books, Kaplan and Norton focused on helping organizations broaden the number of things they measured. The "Balanced Scorecard," as conceived by Kaplan and Norton, was a grid that considered financial, customer, operational and learning and growth measures. As they developed their ideas over the course of the past decade, Kaplan and Norton have increasingly sought to tie their Balanced Scorecard measures to an organization’s strategic goals. Kaplan and Norton now speak of Strategy Maps and seek to derive measures from a hierarchy of business activities.
Many organizations have explored the Balanced Scorecard approach, some with notable success. Unfortunately, most organizations have used the Balanced Scorecard to reinforce their existing organizational structures. Thus, organizations begin by creating a corporate scorecard. The goals and measures defined on the corporate scorecard are then delegated to divisional or departmental scorecards, and then, in top-down fashion, to subdivisions or functional units within departments. In too many organizations, scorecards have served to reinforce the departmental silos and management practices that are so detrimental to effective organizational performance.
Author Praveen Gupta’s book Six Sigma Business Scorecard (Mcgraw-Hill 2004) initiated a very fruitful dialogue within the business process community and has led a number of business process gurus to see how a scorecard approach can provide business process developers with a more systematic way of generating and maintaining an enterprise-wide process/performance measurement system.
As a generalization, manufacturing businesses generate products, which are then packaged and delivered to customers. Service businesses don’t so much create products as they create customer experiences. The actual "product" they deliver is modified as it is delivered, consisting, as it does, of interactions between the customer and the company employees engaged in providing the service. Obviously this isn’t a sharp distinction, but it is an important one that results in particular challenges for business executives who seek to measure the success of service-oriented business efforts.
Adapted from A Complete and Balanced Service Scorecard: Creating Value Through Sustained Performance Improvement (2008 FT Press).