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 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 Management2 Build Process Management Capability Session 5 Sessions 8 & 10 Session 5 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 Management3 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 Management4 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 Management5

From Last Session: Estimate Impact of Projects on KPIs BSC Category and Item ObjectiveMeasureCurrentTargetInitiative/ Project Impacts KPI Financial Warranty costs Decrease warranty costs Repair cost, $ $20M$15M (-$5M) Impr. quality of incoming parts $3M (Same as above)(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) Impr. shipping processes 10% Internal Process Production rate Reduce reworkRework, %7%3% (-4%) Impr. quality of incoming parts 2% (Same as above)(same) Impr. mfg. processes 2% Learning/Growth etc. BA 553: Business Process Management6

6. Allocate Budget Aligned with Strategy BA 553: Business Process Management7

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 Management9 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 Management10

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 Management11

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 Management12

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 Management13