1. Assistance for student revision efforts: Class sessions 1 through 7
BA 553 Course Review
Assistance for student revision efforts: Class sessions 1 through 7

2. Enterprise BPM Methodology: Course Model
BA 553: Business Process Management
Session 5
Session 5
Sessions 8 & 10
Build Process Management Capability
Sess. 4
Session 5
Session 8
Session 8
Session 10
BA 563: Process Improvement
“Managing the Process-Centric Organization”, presentation by Paul Harmon.
BA 553: Business Process Management

3. What is BPM? From session 1 Process
The act of taking something through an established … set of procedures to convert it from one form to another, as a manufacturing or administrative procedure.1
Business Process
At its most generic, any set of activities performed by a business that is initiated by an event, transforms information, materials or business commitments, and produces an output.2
Business Process Management
Aligning processes with the organization's strategic goals, designing and implementing process architectures, establishing process measurement systems that align with organizational goals, and educating and organizing managers so that they will manage processes effectively.2
A holistic management approach that promotes business effectiveness and efficiency while striving for innovation, flexibility, and integration with technology. Business process management attempts to improve processes continuously. It could therefore be described as a "process optimization process." 1
website, January 2010.
website, January 2008.
BA 553: Business Process Management

4. Complete Systems Diagram
From session 2
Suppliers
Who is the input coming from, or who do you see if it is defective?
Inputs
What is being delivered?
Constraints
Factors that restrict the way in which the transformation process can be undertaken
Outputs
New thing (everything that goes in must come out in some form)
Customers
Who is the output going to, or who will care if it is defective?
Environment
Equipment
Methods
People
Materials
Transformation process
Environment
Equipment
Methods
People
Product/scrap
Enabling Mechanisms
Facilitating individuals, groups, processes, and work environment factors that improve the efficiency and effectiveness of the transformation process and output value
BA 553: Business Process Management

5. Functional Hierarchy vs. Product/Service Flow
From session 2
Can you explain this picture?
CEO
Dept. 1
Dept. 2
Dept. 3
Dept. 4
Direction of Control
Functional
Hierarchy
Direction of Process Flow
BA 553: Business Process Management

6. Strategies for Competing
From session 3
Cost leadership
This involves offering the product or service at the cheapest price. It can be accomplished by relying on economies of scale, controlling the supply chain, or increasing efficiency.
Can you think of an example?
Differentiation
This involves providing better or more desirable products and services. This enables the organization to obtain a higher price for the item. It can be accomplished by using more expensive materials, a unique design, or superior craftsmanship.
What are other ways to differentiate your organization?
Niche specialization
This involves focusing the marketing effort on specific buyers, specific market segments, or particular geographies. It can also involve offering only a subset of the industry’s products or services.
BA 553: Business Process Management

7. Aligning Strategy with Process Metrics
From session 3
This is a process for ensuring alignment among the organization’s performance measures, strategic plans, improvement projects, and budgets. The items in grey will be covered in later sessions.
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. Enterprise KPIs are then recalibrated and aligned 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
BA 553: Business Process Management

8. The Seven Principles of Hoshin Planning
From session 3
Participation by
all managers
Focus on
process
Catch ball
understanding
Quality
first
Individual
initiative and
responsibility
root causes
No tie to
performance
appraisals
King, Bob, Hoshin Planning: The Developmental Approach, Methuen, MA: GOAL/QPC, 1989.
BA 553: Business Process Management

9. The Hoshin Planning System
From session 3
5-year vision
President’s
annual
audit
Monthly
diagnosis
Detailed
implementation
Deploy to
departments
1-year plan
Plan
Audit
Execute
King, Bob, Hoshin Planning: The Developmental Approach, Methuen, MA: GOAL/QPC, 1989.
BA 553: Business Process Management

10. Examples of Performance Measures/KPIs
From session 4
Performance measures indicate the organization’s performance in areas that affect the continued existence of the company. Examples include:
Net income
Net income growth
Return on investment
Actual vs. estimated budget
Stock price increase
Market share
Sales volume
Percentage of satisfied customers
Annual inventory turnover
Total rework or scrap dollars
Labor cost per sales dollar
Direct vs. indirect labor dollars
Overtime cost per sales dollar
BA 553: Business Process Management

11. Understanding the Balanced Scorecard (BSC)
From session 4
It is a management system that enables organizations to clarify their vision and strategy and translate them into action. It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results
Originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance
The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system
The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis
website, accessed 12 April 2010.
BA 553: Business Process Management

12. Integrating BSC and Hoshin Planning
From session 4
Starting with a vision and strategy, as described in session 2 of the class, the activities for Hoshin and BSC can then be aligned.
Hoshin Planning
Balanced Scorecard
1. Develop 5-year vision
2. Create destination statement (vision of the future state)
4. Establish integrated 1-year plan
3. Develop strategy map (strategic objectives and their relationships
5. Deploy to departments, identify measures and targets
6. Develop balanced scorecard
7. Execution of the plan
9. Report on progress regularly
8. Audits (monthly and yearly)
Change direction if needed *
10. Update 5-year and 1-year plans as needed
11. Update destination statement, strategy map, or scorecard
* This activity is part of both approaches, but is not listed in either as a separate step.
BA 553: Business Process Management

13. Value Chains From session 5
The value chain categorizes the generic value-adding activities of an organization
The value-chain concept has been extended beyond individual firms. It can apply to whole supply chains and distribution networks
Identifying value chain processes enables process improvement efforts to be focused on the processes that could potentially add the most value to the customer
The goal of identifying and improving the value chain is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin
The firm's profit margin then depends on its effectiveness in performing these activities efficiently. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation
accessed on 16 March 2010.
accessed on 16 March 2010.
BA 553: Business Process Management

14. Value Chain: Graphic View
From session 5
These activities are typically shown in a graphic format first developed by Michael Porter, the person who first wrote about value chains:
Porter, M. (1985), Competitive Advantage: Creating and Sustaining Superior Performance (Free Press: New York).
BA 553: Business Process Management

15. A Process Network View of the Organization
From session 5
Suppliers
Customers
Internal to the organization
BA 553: Business Process Management

16. Downstream Processes of Outage Maintenance
From session 5
Providing Clearances
Equipment
available
Equipment
working
Creating Work Orders
Doing Daily Maint.
Planned schedule
Planned budget
Planned work scope
Outage W/O’s
Actual schedule
Actual budget
Actual work
completed
Paperwork done
W/O’s with
status of
equipment
to be fixed
Planning
Outages
Doing
Outage Maintenance
Managing the Workforce
Operating Plant
Manpower
availability
Used parts
Ordering Parts
Materials/
Parts
Level of satisfac-tion with contractor
Storing or Disposing of Scrap
Amount of contractor work complete
Managing
Contractors
Contractors
and their work scope
BA 553: Business Process Management

17. PMI’s Project Management Process Network
From session 5
Initiating
Controlling
Executing
Closing
Planning
BA 553: Business Process Management

18. What is a process enterprise?
From session 6
An organization in which senior executives rely heavily on process concepts and techniques to manage the organization
An organization in which senior executives rely heavily on process performance measures
It’s an evolving concept. Some organizations are completely organized around their business processes but most process- centric organizations have a mix of functional and process structures
The key is the interest and commitment on the part of corporate executives to the use of process concepts
Harmon, Paul (2007), Managing the Process-Centric Organization, presentation, BPMTrends.
BA 553: Business Process Management

19. Organizational Structure
From session 6
This does not have to be an “either-or” decision: matrix management is an approach that enables a focus on function AND a focus on process
The approach depends on key decisions such as:
Who owns the resources?
Who owns the budget?
Is there a dedicated group of process managers?
Project Management Institute’s classification of the 5 organizational types
BA 553: Business Process Management

20. Coordinating the Management of Processes
From session 6
BA 553: Business Process Management

21. Why standardize processes?
From session 6
Reduces costs:
Lowers salary costs due to collaboration between units (employees can fill in for each other)
Lowers overhead costs due to sharing documentation and training materials across company
Reduces materials costs (ordering larger quantities of standard parts and materials provides purchasing leverage: buyers benefit from suppliers economies-of-scale)
Increases quality:
Reduces variability in product / service quality, as all employees perform the process in a similar manner
Improves product / service quality through the use of continuous improvement and sharing of best practices
Reduces cycle time:
Reduces rework and inefficiency - less work at business unit level as processes are developed once instead of ten times
Improves organizational management:
Facilitates early identification and proactive management of risks
Improves accuracy of estimates
Provides a stronger foundation for any organizational restructuring, as processes are similar across similar job functions
Facilitates various organizational reviews (e.g., SOX reviews)
Increases organizational flexibility, as resources such as people and assets can be reassigned according to market requirements
Enables implementation of process control methods (collecting similar metrics and reporting on them)
BA 553: Business Process Management

22. Steps in Process Standardization
From session 6
1. Clarify the purpose of the standardization effort (e.g., reduce product cost, increase product quality, improve product cycle time)
2. Identify which aspects of the process need to be standardized to achieve the stated purpose
3. Document a single version of the process
4. Use impact analysis to identify consequences for the organization, e.g., equipment or paperwork changes required
5. Identify and document any training needs based upon standardized process design
6. Develop a plan for implementing the standardized process
7. Train employees in the new process
8. Roll out the new processes to the various regions
9. Identify decision authority for future modifications to the standardized process design
BA 553: Business Process Management

23. Process Standardization: Principles for Success
From session 6
Beginning standardization effort with a pilot process to demonstrate success
Selecting processes for standardization that are part of the value chain
Design process to achieve improved metrics around process time, cost and quality (as described earlier)
Employee involvement in designing the process, including identifying best internal practice
Employee ownership of the standardized process
Management buy-in to the process design
Management commitment to make the infrastructure changes necessary to enable standardization (e.g., purchase of common systems and software)
Process simplification wherever possible (standardization should not lead to over-complication)
Train employees as needed in the differences between their local processes and the standardized process
BA 553: Business Process Management

24. Types of Measures for a Given Purpose
From session 7
The goal for the improvement effort must be established prior to selecting metrics
If the intent is to improve process efficiency (productivity), the following types of measures might be collected:
Time-related metrics (cycle time, delays, on-time delivery, etc.)
Cost-related measures (total cost, procurement cost, etc.)
Utilization of people or equipment
If the intent is to improve process effectiveness (quality), the following types of measures might be collected:
Quality of incoming parts
Customer satisfaction
Measures of product defects (such as number of returns, cost of post-production customer service, etc.)
BA 553: Business Process Management

25. What to Measure: Where in the Process
From session 7
You will want to collect output measures to show improvement to the entire process, but you also want to collect in-process measures to show how the changes you made to parts of the process are improving the process outputs
Work Process
Inputs
Outputs
Sub-process A
Sub-process B
Sub-process C M 1 M 2 M 3 M 4
Input measures
(collected from
the customer for
the inputs - you)
In-process measures
(collected from
customers internal
to the process)
Output measures
(collected from
customers in next process, or externally)
BA 553: Business Process Management

26. Linking In-Process Measures to Process Output Measures
From session 7
It’s important to link your in-process measures to process output measures to show the results of your improvements
However, you must establish process output measures in such a way that not too many items will influence your measure: otherwise, your process improvements may not show up
For example, if you improved the production process and then measured cost per unit built, you might not see the effect of your improvement, because the cost of raw materials or supplier parts could have risen
It would be better to measure the reduction in rework, or the number of parts coming off the line per day per worker
BA 553: Business Process Management

27. Example: Linking Process Measures to KPIs
From session 7
Power Plant Core Processes
Run the
units
Equipment working
Maintenance costs
Work orders signed off
Power
Work orders
Perform
daily
maintenance
Parts
Manage
the budget
Expenses
Equip.
history
Input
measures
Number of parts of various types in warehouse
Correct min/max for parts in material management system
In-process measures
Wait time for parts
Number of times parts not available when needed
Process output measures
Performance measures
Forced outage rate
Availability
Ops & Maint. budget
Equipment working
Amount of equipment fixed
Work orders signed off
Number of work orders signed off
Maintenance costs
Cost of expedited parts
O/T costs
BA 553: Business Process Management

28. Example: Linking Process Measures to KPIs
From session 7
Process Measures
KPIs
Input
In-process
Output
BSC measures
Number of parts of various types in warehouse
Wait time for parts
Amount of equipment fixed
Forced outage rate (EFOR), availability
Overtime expense
O&M (non-Capital) budget
Correct min/max for parts in material management system
Number of times parts are not available when needed
Cost of expedited parts
BA 553: Business Process Management

29. Example: Linking Process Measures to KPIs
From session 7
Process Measures
KPIs
Input
In-process
Output
BSC measures
Number of parts of various types in warehouse
Wait time for parts
Amount of equipment fixed
Forced outage rate (EFOR), availability
Overtime expense
O&M (non-Capital) budget
Correct min/max for parts in material management system
Number of times parts are not available when needed
Cost of expedited parts
BA 553: Business Process Management

30. Estimate Impact of Projects on KPIs
From session 7
BSC 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)
Train field personnel
$2M
Customer
Customer satisfaction rating
Impr. reliability of shipments
On-time shipments %
80%
95% (+15%)
Impr. inventory processes 5%
Impr. shipping processes
10%
Internal Process
Production rate
Reduce rework
Rework, % 7% 3%
(-4%) 2%
Impr. mfg. processes
Learning/Growth
etc.
BA 553: Business Process Management