Improving Business Process Performance

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1 Improving Business Process Performance Gain Agility, Create Value, and Achieve Success JOSEPH RAYNUS CRC Press Taylor & Francis Croup Boca Raton London New York CRC Press is an imprint of the Taylor & Francis Croup, an informa business AN AUERBACH BOOK

2 Contents Foreword Introduction Why Value? References Acknowledgments Hie Author xi xiii xiii xix xxi xxiii 1 The Paradigm 1 The Paradigm 1 Criterion 1: Organization versus Structure 4 Criterion 2: Process Focus 5 More Process Focus: The Tale of Hora and Tempus 8 Business Performance Engineering and Management 8 BPM and the Hot Hand 10 Strategy, Strategic Management, and BPE 11 Competition at the Crossroads 12 BPM: A Brief History :!. 13 References 15 2 The Change 17 Change 17 CATWOE 18 The Business Perspective 25 Do You Still Remember the Late 1990s? 27 References 34 3 Dynamic Balance of Strategy and Performance 35 Dynamic Balance: The Way of Business Agility 35 Danger and Opportunity 37 The Rules of Engagement Have Changed 38 Balanced Growth 39

3 vi Contents Balanced Change Management 39 Yin Yang, Big Bang 39 Balancing the S-Curve 41 The Need for the Framework 43 References 44 4 Impact Framework 45 IMPACT Model 45 Lessons Learned 45 What Happened? 47 The Foundation of the IMPACT 48 Step 1: Strategy Mapping 52 Step 2: Goal Setting 52 Step 3: Performance Measurement Framework Baseline 52 Step 4: Performance Management 52 Performance Management 53 An Eight-Step Framework to Execute Your Business Process Management Strategy 60 Drive Strategy across All Levels of the Business 61 A Clearer Approach to Improving Processes 61 Executing the Eight Simple Steps 62 Core versus Enabling Processes 65 Business Process Goals 65 A Closer Look at the Scorecard 66 Performance Measurements 67 Do You Accept the Challenge? 71 References 73 5 Business: The Value Planning Domain 75 The Logic Model 75 What Is the Logic Model? 76 Situation Analysis and Problem Definition 80 How to Build a Logic Model 84 Why Use the Logic Model? 85 A Value Stream Focus within the Enterprise 86 Process and Continuous Process Improvement 87 Step 1: Validate the Problem Using KPI 91 Step 2: Develop a Problem Statement 91 Which Problems First? 92 How to Craft a Problem Statement 93 Step 3: Set Improvement Objectives in Support of Goals 93 Step 4: Determine Gaps in Value Stream Delivery Process 94

4 Contents vii Step 5: Apply Applicable Methodology and Toolboxes for Analysis...95 Strategic Vision 95 Tactical Targets 95 CPI Management Tools 96 LEAN 96 5S 98 5S and Its Environment 98 Goals 98 Principles behind GQM 104 GQM Process Details 108 Step 1: Establishing Goals 108 Step 2: Generating Questions 108 Step 3: Specifying the Measures 109 Step 4: Preparing for Data Collection Ill Step 5: Collecting, Validating, and Analyzing the Data for Decision Making 112 Step 6: Analyzing the Data for Goal Attainment and Learning 113 Applying GQM at Varying Levels within an Organization 113 References 116 Value Management Domain 119 Strategic Planning 119 The Balanced Scorecard 121 Development of Strategies for Each Goal 122 How to Formulate Strategy? Strategy Map Development 123 Connection Strategy and Goals 123 Key Performance Indicators ;'. 125 What Is a Key Performance Indicator? 125 Definition 126 Purpose of the Key Performance Indicators 126 Benefits of Key Performance Indicators 127 Category of Key Performance Indicators 127 Types of KPIs: Which One Should I Use? 127 Features Key Performance Indicators Should Encompass 127 How to Establish Effective KPIs for Your Organization 128 Key Performance Indicator Measures Overview 130 Additional Key Facts: Lead and Lag Indicators 130 Definitions 130 KPI versus CSF 131 Leading Indicators 133 Performance Measures 136

5 viii Contents Section 1: Understand Objectives 136 What Is Involved in This Step? 136 Why Is It Important? 137 How Do You Do It? 137 Design Measures 140 What Is Involved in This Step? 140 Why Is It Important? 141 How Do You Do It? 141 Define Measures 143 What Is Involved? 143 Why It Is Important? 144 How Do You Carry It Out? 144 Implement and Evolve Measures 146 What Is Involved? 146 Why It Is Important? 146 How Do You Carry It Out? 146 Risk Management and Logic Model 148 Risk Exposure Trends 149 Risk Handling Trends 151 Risk Management 151 Purpose and Benefits of Risk Management 153 Types of Risks and Management: Which One Should I Use? 154 Risk Factors and Drivers 154 Associating with Process Improvement 155 Strategies, Tools and Techniques to Manage Risk in an Organization 156 References 159 Value Sustainment Domain 161 Value Transformation Domain 161 How Are They Important to Your Business? 165 How Do You Write a Good Critical Success Factor? 165 CSF as an Activity Statement 166 CSF as a Requirement 166 Project Success: As Commonly Measured 166 Project Success: A Different View 167 Project Success: New Metrics and Measurements 167 Alignment Process Improvement with Business Goals 171 A Range of Strategic and Operational Measures 172 A Framework for Designing a Set of Measures 173 Metrics 174 Customer-Oriented, Outcome-Based Metrics 174 Criteria for Evaluating Metrics 174

6 Contents ix Purpose of the Metrics 175 Benefits 175 Types of Metrics: Which One Should I Use? 176 Descriptions and Features Metrics Should Encompass 176 How to Establish Metrics for Your Organization 176 References Business Process Management: It Is All about Strategy and Outcomes! 181 The Value Dimension: Business 184 Business Process Goals 184 The Actionable Architecture 185 Transformation Dimension: Processes and Business Process Management 187 A Systems Model of a Business Firm 188 Basic Processes of the Physical Layer 188 The Environment 188 Environmental Interaction at the Physical Layer 189 PDCA Quality Cycles 191 Process Representation 192 Why Measure Business Performance? 193 Process Management 194 Enabling Dimension: Management 200 Process Performance Monitoring and Metrics 202 Balanced Scorecard 202 Process Improvement 203 Purpose of Process Improvement Techniques 204 Benefits of Continuous Process Improvement 204 Types of Process Improvements: Which One Should I Use? 204 Continuous Process and Performance Improvement Technique 205 Techniques and Components of Process Improvement 206 Performance Improvement 206 Measuring Performance 206 Process Measurement Tools: 207 Measuring Performance for an Organization: 207 Summary 208 References Tools of Probletunity 211 Value Analysis 211 Performing a Value Stream Analysis 212 Root Cause Analysis 213 Root Cause Analysis Technique: The Five Whys 215

7 Contents Issue Analysis 216 SWOT 217 SWOT Example for Clinical Trials 219 SIPOC 219 Pareto 221 Lean Dashboards and Scorecards 225 Tableau de bord 226 Analysis Mind Share 227 Strategic 228 Tactical 228 Operational 228 Building the Dashboard: From the Concept to Useful Tool 229 Additional Characteristics 230 Dashboard Is Built from Dependent Layers 234 The Five Planes 234 Building from Bottom to Top 234 The Surface Plane 235 The Skeleton Plane 235 The Structure Plane 235 The Scope Plane 235 The Strategy Plane 235 Dashboard Solutions 235 References 238 Conclusion 241 Appendices 243 A: Business Activity Monitoring and Simulation 243 JOSEPH M. DEFEE AND PAUL HARMON B: Driving Auto Dealer to Performance against Strategic Objectives DAVID RUSSO C: Development and Implementation of Human Capital Measures and Dashboards: Lessons Learned 287 D: Clinical Trial Process Specification 293 Index 311

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