1. Graduate Program in Business Information Systems
BIS 581 Business Process Management
Lecture - 6
Aslı Sencer
Department of Management Information Systems

2. Business Process Management– 6
Framework for BPI

3. 10 Steps for BPI (based on Page, 2010)
Develop the process inventory
Establish the foundation
Draw the process map
Estimate time and cost
Validate the process map
Apply improvement techniques
Create internal controls, tools and metrics
Test and rework
Implement the change
Drive continuous improvement

4. Step 1: Develop the process inventory
The process inventory lists the entire compliment of business processes to identify the most critical process to start the BPI.
Identify the business processes
Create prioritization criteria, i.e., KPI’s
Evaluate each process with respect to theses criteria
Create the process prioritization table to identify the most critical process.

5. Step 2: Establish the Foundation
Process identification form guides you through the exercise of establishing the foundation for a business process.
The foundation helps to avoid scope creep, veering away from the original purpose of the work without an increase in time, resources or money.
Ex: Continual addition of new functionalities during the design and development of a new software increases the time and resources required to develop the product, thereby increases the costs and time to market the product.

6. Step 3: Draw the Process Map
Draw a detailed level process map if the process
If the process is often used by many people
Experience high turnover among process workers
Is a subprocess of another business process
Draw a high level process map if the process
Is undefined and little shared understanding exists in the organization of the end-to-end business process
Is a complex process
Is a highly variable process
Has many subprocesses

7. Step 4: Estimate Time and Cost
Time components:
Process time: is the time to complete a single activity.
Cycle time: is the time required to complete an entire process, from its first to its last step, i.e., elapsed time. It includes all interruptions that are not directly related with the process itself, like an incoming phone call, an unexpected visitor, a boss request, etc.
Cost components:
The cost of people who do work
The cost of technology tools used in the process
The cost of overhead such as physical office space, utilities, supplies, taxes, insurenca and computer equipment.

8. Step 4: (cont’d.) Process and Cycle Times
Activity Number
Description
Process Time (min./award)
Cycle Time (hrs./award) 1
Complete recognition bonus award form and mail to next level manager 20 2
Approve and reject request
7.5 40 3
Review eligibility, justification and award amount 25 32 4
OK to Proceed? -
N/A 5
Send authorization to payroll 6
Notify requesting manager 7
Communicate award to employee 8
Update employee system of record and retain hardcopy 11
Total minutes/award
78.5 92

9. Step 4: (cont’d.) People Costs
List the process activities and times
Calculate the required annual workload
Annual workload (manhour/year)
=Annual volume (completed tasks/year) x Process time (manhr/completed task)
=1,500 awards/year x 46 min/award=69,000 min/year=1,150 hrs/year
Calculate the available Annual workinghours per employee
Annual hours 2,080 (= 40 hrs/wk x 52 wk/year)
Less 2 weeks vacation
Less 1 week sick
Less 10 days paid holidays
Total 1,880 hrs/year
Calculate Full time equivalent, FTE (# workers)
FTE =Annual workload / Annual workinghours per worker
=1,150/1,880=0,611

10. Step 4: (cont’d.) People Costs
Determine Labor-Only Employee cost ($/year)
Annual labor-only employee cost=Annual salary per employee x FTE
=50,000 x 0,611 = $30,550
Determine Additional Employee Benefits
Additional employee benefits = benefit percentage x annual labor-only employee cost
= 30% x 30,550 = $9,165
Determine Total Annual employee cost dedicated to the business process
Annual Employee Cost = annual labor-only employee cost + Additional employee benefits
=30, ,165 = $39,715

11. Step 4: (cont’d.) Tools Costs:
Tools cost of the process= Total tools cost x FTE = $425 x = $260 tool cost dedicated to business process
Activity Number
Description
Tools Used
Annual Tool License Cost Dedicated to the Process ($) 1
Complete recognition bonus award form and mail to next level manager 2
Approve and reject request 3
Review eligibility, justification and award amount 4
OK to Proceed? 5
Send authorization to payroll 6
Notify requesting manager
Outlook
75x0.611=46 7
Communicate award to employee 8
Update employee system of record and retain hardcopy
System of Record
350x0.611=214
Totals
425x0.611=260

12. Step 4: (cont’d.) Overhead costs
Companies generally use standard overhead rate such as 110% of the annual employee labor cost. Then
Overhead Cost
= Annual employee cost + Overhead rate x Annual employee labor cost
= 39, ,10 x 39,715 = $83,402
Putting it all together
Labor Cost: $39,715
Tools Cost: $260
Overhead Cost: $83,402
TOTAL: $123,377

13. Step 4: (cont’d.) Alternative Cuts of the Data
Cost for a single bonus award in compensation department,
Consider only the activities that take place in compensation department
Divide all costs by annual award size=1,500
Description
Time Estimate
Cost Estimate
Process Time (min.)
Cycle Time (min.)
Labor ($)
Tools ($)
Overhead ($)
Total ($) 1
Complete recognition bonus award form and mail to next level manager - 2
Approve and reject request 3
Review eligibility, justification and award amount 25 4
14.4
30.25
44.65
OK to Proceed? 5
Send authorization to payroll
0.3
2.88
6.05
8.93 6
Notify requesting manager
0.125
0.03
8.94 7
Communicate award to employee 8
Update employee system of record and retain hardcopy 11
6.34
0.14
13.31
19.69
Totals/award 46
10.3
26.49
0.17
55.56
82.22

14. Step 5: Validate the Process Map
Validation is to check whether the generated model of the current system is a correct representation of the real system.
If a simulation environment exists, the generated model is run with the real system inputs. The model for the current system is validated if the model outputs and the real system outputs are not significantly different.
Moreover, after the process map is completed, it should be reviewed with interested parties to confirm that it accurately reflects the existing process.
Process workers
Stakeholders
Sponsor

15. Step 6: Apply Improvement Techniques
Bureaucracy
Automation
Value added
Business Process
Internal customer
External customer
Cycle time
Dublication
Simplification

16. Step 7: Create Internal Controls, Tools and Metrics
Internal controls help prevent errors
Tools help employees perform their job more easily
Metrics show whether the process works as planned

17. Step 8: Test and Rework
Before introducing the improved process to the organization, test it and work out any bugs before communicating the change on a wide scale.
Testing the business process helps to determine how well the business process will perform in the organization so that you meet your goals, minimize errors, increase productivity, etc.
Testing helps to identify the bottlenecks and provides the chance to fix or rework the problems, ensuring the implementation works as smoothly as possible.

18. Step 8: Test and Rework (cont’d.)
Consider the following:
Whom do you involve in the testing?
What do you have to test?
Where should the testing occur?
When should the testing occur?
How will the testing happen?
5 Steps in Testing the Business Processes:
Create Test Plan
Develop Test Scenarios
Implement Test Plan
Summarize Feedback/ Rework
Retest

19. Step 9: Implement the Change
The 10 step BPI framework can be grouped under three headings:
Design: Identifies the work involved in defining and improving the business processes
Development: Creating the tools required to make the improved business process work until the testing step.
Implementation:
Change management
Testing
Communication
Training

20. Step 10: Derive Continuous Improvement
Evaluate
Execute
Test
Assess
Evaluate: Determine the opportunities
Test: Make the Change and try it out on a limited basis
Assess: Determine whether the change has worked well
Execute: Deploy the change on a wide scale

21. Group Exercise 3: Process Improvement
Consider the registration process that you have modelled.
Think about the reasons that give way to process improvement. Give an example problem for each of these reasons.
Propose an improvement for each of these problems by identifying the improvement technique that you use.
Apply step 1 of Page’s framework to decide upon the improvement proposal to start from.