Best Practices in the Governance of Business Management Executive Editor Business Trends 2005, Business Trends www.bptrends.com 1 The Gradual Revolution in Management Thinking In the aftermath of the Industrial Revolution managers followed Adam Smith, Henry Ford, and Frederick Taylor subdivided tasks to achieve productivity In the Seventies computers were used to reinforce departmental or functional specialization Starting in the Eighties, with Michael Porter, Edwards Deming, and Geary Rummler, the tide began to reverse and managers began to think in terms of value chains and processes In the Nineties IT gurus joined in with Business Reengineering, Workflow, and, more recently BPM Systems and executives like Jack Welch promoted Six Sigma Today we are witnessing a shift from management based on departments to management based on processes. For most companies its just begun, but its steadily gaining traction 2005, Business Trends www.bptrends.com 2 IQPC BPM May 2005 www.bptrends.com 1
Integration in Nineties Executive Management Strategy Committee Sales Department Horizonally Integrated Business That Delivers A Specfic Product to a Targeted Group of Customers 2005, Business Trends www.bptrends.com 3 Today: Horizontal & Vertical Alignment Executive Management Strategy Committee Sales Department Horizonally Integrated es From Suppliers to Customers Vertically Integrated Measures, Managers, and Resources Employees & IT Applications and Infrastructure 2005, Business Trends www.bptrends.com 4 IQPC BPM May 2005 www.bptrends.com 2
Management and Organization Management BPM as a Management Philosophy Senior Executives KPIs BPM as a Way of Organizing the Company Middle Managers Reporting Relationships BPM Architecture and Dashboards The Management of Specific es Supervisors Improving Specific es Managing the Employees Executing the es 2005, Business Trends www.bptrends.com 5 Three Levels of Governance Executives Organization Performance & Responsiveness Line and Managers Value Chain/ Performance and Priorities for Improvement Supervisors Efficient & Effective Organization of Subprocesses and Activities 2005, Business Trends www.bptrends.com 6 IQPC BPM May 2005 www.bptrends.com 3
Some Management Concerns Strategy Level Plans & Goals Senior Management - Better Overview of What's Happening - Better Way to Plan for Change - Better Way to Assign Responsibilities Business Level Management and Measurement Value Chain Specific Middle Management (Including IT Mangers) - Better Overview of What's Happening - Better Way to Plan for Change - Clearer Priorities - Better Way to Assign Responsibilities Implementation Level Performed by Employees Automated by IT Systems Supervisors and Change Specialists - Clearer Priorities - Better Understanding of Task - Better Way of Measuring Results Physical Plant and Hardware Used. 2005, Business Trends www.bptrends.com 7 An Aside: es Come in Different Sizes Architecture SCOR Framework Value Chain Business Business Business Redesign Projects Business Rule Projects Sub- Sub- Sub- Six Sigma Projects IT Automation Projects SAP Models Sub-Sub- Sub-Sub- Activity Activity 2005, Business Trends www.bptrends.com 8 IQPC BPM May 2005 www.bptrends.com 4
Michael Porter s Value Chain Corporate Management Support es Core Business es New Product Development Human Resource Management Finance and Accounting Technology Development Procurement Operations Distribution Service Marketing and Sales Margin From Michael Porter, Competitive Advantage, Harvard, 1985 2005, Business Trends www.bptrends.com 9 Unisys Corp. Functions and Value Chains Unisys Senior Management Strategy Committee Marketing Sales Finance New Product Development Manufacturing Service Value Chain: Systems Integration Value Chain: Outsourcing Value Chain: Network Services Value Chain: Core Services Value Chain: Enterprise Server Technology Other Value Chains 2005, Business Trends www.bptrends.com 10 IQPC BPM May 2005 www.bptrends.com 5
Defining a Business Architecture The key tool for process management A high-level overview of the value chains and key processes that make up the organization An alignment of strategic goals, value chains and key processes A clear-cut way to monitor the performance of the value chains and processes (KPIs) A BP Architecture is NOT an IT EA Architecture 2005, Business Trends www.bptrends.com 11 The Management Alignment Ongoing Business Strategic Hierarchy Value Chain Business Architecture Business Model Management Plan Performance Measures Management Hierarchy CEO Line Managers Bus Bus Sub Sub Organizational Alignment See that models, measures and management plans are aligned with those above and below Middle Managers SubSub Supervisors Activities Activities 2005, Business Trends www.bptrends.com 12 IQPC BPM May 2005 www.bptrends.com 6
Available Business Frameworks BP Frameworks are often called Operation Reference (OR) Frameworks A BP or OR Framework is a template for a BP Architecture The Supply Chain Council s SCOR Framework The TeleManagement Forum s etom/ngoss Framework Hewlett Packard s Framework Suite The VCOR Initiative 2005, Business Trends www.bptrends.com 13 SCOR MODEL: Level 1 Plan Supply Chain Source Make Deliver Return 2005, Business Trends www.bptrends.com 14 IQPC BPM May 2005 www.bptrends.com 7
The Level 1 SCOR Notation P1 P1 P1 P3 P3 P2 P4 P2 P4 P2 P4 European RM Supplier S2 M2 D2 S2 DR1 SR1 M1 D1 S1 D1 S1 DR1 SR1 DR1 SR1 Key Other RM Suppliers S1 M1 D1 S1 DR3 SR3 RM Suppliers ALPHA Alpha Regional Warehouse Customer 2005, Business Trends www.bptrends.com 15 SCOR s Level 1 Scorecard Performance Attribute Performance Attribute Definition Level 1 Metric Customer Facing Attributes Supply Chain Delivery Reliability Supply Chain Responsiveness Supply Chain Flexibility The performance of the supply chain in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer. The velocity at which a supply chain provides products to the customer. The agility of a supply chain in responding to marketplace changes to gain or maintain competitive advantage. Delivery Performance Fill Rates Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time Production Flexibility Internal Facing Attributes Supply Chain Costs Supply Chain Asset Management Efficiency The costs associated with operating the supply chain. The effectiveness of an organization in managing assets to support demand satisfaction. This includes the management of all assets: fixed and working capital. Cost of Goods Sold Total Supply Chain Management Costs Value-Added Productivity Warranty / Returns ing Costs Cash-to-Cash Cycle Time Inventory Days of Supply Asset Turns 2005, Business Trends www.bptrends.com 16 IQPC BPM May 2005 www.bptrends.com 8
SCOR Benchmarks Provide Instant ROI Supply Chain SCORcard Industry Benchmarks Overview Metrics SCOR Level 1 Metrics Actual Parity Advantage Superior Value from Improvements Delivery Performance to Commit Date 50% 85% 90% 95% Supply Chain Reliability Fill Rates 63% 94% 96% 98% EXTERNAL Responsiveness Flexibility Perfect Order Fulfillment Order Fulfillment Lead Times Supply Chain Response Time 0% 35 days 97 days 80% 85% 90% 7 days 5 days 3 days 82 days 55 days 13 days Production Flexibility 45 days 30 days 25 days 20 days $30M Revenue $30M Revenue Key enabler to cost and asset improvements Total SCM Management Cost 19% 13% 8% 3% $30M Indirect Cost Cost Warranty Cost NA NA NA NA NA INTERNAL Assets Value Added Employee Productivity Inventory Days of Supply Cash-to-Cash Cycle Time Net Asset Turns (Working Capital) NA $156K $306K $460K NA 119 days 55 days 38 days 22 days NA 196 days 80 days 46 days 28 days $7 M Capital Charge 2.2 turns 8 turns 12 turns 19 turns NA 2005, Business Trends www.bptrends.com 17 Three Levels of Governance Executives Organization Performance & Responsiveness Line and Managers Value Chain/ Performance and Priorities for Improvement Supervisors Efficient & Effective Organization of Subprocesses and Activities 2005, Business Trends www.bptrends.com 18 IQPC BPM May 2005 www.bptrends.com 9
Basic BP Management Model Job Functions of a Manager Responsible for a Plan & Organize Set goals and expectiations Establish plans and budget Provide resources & staff Implement process Changes in Goals and Plans Goals/Measures Monitor & Control Monitor process Reinforce success Diagnose deviations Take necessary corrective actions Inputs Expectations, Plans & Resources Executed Feedback Data About Results Measures Results 2005, Business Trends www.bptrends.com 19 Aligning Managers and Measures Manager Responsible for Plan & Organize Monitor & Control Measure SOURCE PROCESS Manager Responsible for Plan & Organize Monitor & Control Measure S2 Source MTO Products Reporting Relationship Manager Responsible for Plan & Organize Plan & Monitor & Control Monitor & Measure S2.2 Recieve Product 2005, Business Trends www.bptrends.com 20 IQPC BPM May 2005 www.bptrends.com 10
Coordinating the Management of es CEO Architecture Committee Executive Committee Widget Sales Department Manufacturing Department Delivery Department SVP Widget VP Sales VP Manufacturing VP Delivery Management Team Sales Supervisor Manf. Supervisor Delivery Supervisor Sales Manufacturing Delivery Customer Widget Value Chain 2005, Business Trends www.bptrends.com 21 A Specific Example of BPM Management Pamela Garretson Director, Business Excellence Boeing Airlift and Tanker Programs 2005, Business Trends www.bptrends.com 22 IQPC BPM May 2005 www.bptrends.com 11
The Boeing Airlift and Tanker Organization The Boeing Company Commercial Airplanes Integrated Defense Systems Phantom Works Shared Services Connexion by Boeing Air Force Systems Airlift and Tanker Programs Boeing Capital Corporation Air Traffic Management C-17 Program 767 Tankers Program C-17 Program Advanced A&T HQ in Long Beach, CA 2005, Business Trends www.bptrends.com 23 The Boeing A&T Enterprise Model 2005, Business Trends www.bptrends.com 24 IQPC BPM May 2005 www.bptrends.com 12
1.01 Plan and Integrate Performance 1.02 Manage Procedural Documentation 2.0 2.0 Acquire Business 2.01 Develop Opportunity/Pop- Up Opportunity 2.02 Develop Win Strategy 2.03 Execute Campaign 2.04 Document Offering 2.05 Keep It Sold Aircraft and Missiles - Southern California (A&M-SoCal SoCal) Enterprise Model 1.0 1.0 Enterprise Management 1.03 Learn and Implement Improvements 1.05 Provide Communications 1.04 Strengthen the Team 1.06 Manage Customer Satisfaction Approach and Deployment 3.0 3.0 4.0 4.0 5.0 Program Integrate 5.0 6.0 Planning & Product Supplier 6.0 Production Control Definition Management 3.01 (UNASSIGNED) 3.02 (UNASSIGNED) 3.03 Manage Transfer of Work (out) 3.04 Administer Contracts 3.05 Manage Change 3.06 Manage Risk 3.07 Manage Cost and Schedule 3.08 Manage Material Requirements 3.09 Manage Inventory 3.10 Manage Government Property 4.01 Integrate Product with System Requirements 4.02 Plan and Control Product Development 4.03 Provide Concurrent Definition 4.04 Verify Validate / Product Definition 5.01 Select Source 5.02 Issue Orders 5.03 Manage Supplier Performance 5.04 Assure Supplier Quality 6.01 (UNASSIGNED) 6.02 Fabricate Tools 6.03 Assemble Product 6.04 Provide FOD Control 6.05 Assure Product Quality 6.06 (UNASSIGNED) 6.07 Certify Factory Floor es 1.07 Perform Self Governance 7.0 7.0 Post Delivery Support 7.01 Provide Technical Publications 7.02 Perform Spares Sales Services 7.03 Perform Product Training Support 7.04 Perform Field Services 7.05 Perform Repair Services 7.06 Perform Maintenance and Modifications Services 7.07 Manage Support & Test Equipment 7.08 Perform Asset Management Services 8.0 8.0 Support & Services 8.01 Provide Human Resource Services 8.05 Manage Facilities & Equipment 8.07 Perform Accounting 8.02 Provide Security and Fire Protection Services 8.06 Provide Legal Services 8.08 Perform Financial Services 8.03 Provide General Services 8.09 Provide Integrated Information Systems 8.04 Provide Safety, Health, & Environm ental Solutions Services 8.10 Provide Flight Operations Services Sherry Wilson (562) 593-1339 (UNASSIGNED) = A process is now performed within another process or is no longer performed at all. (atpm) Revised July 18, 2002 http://ams-socal.web.boeing.com/dbbg/epm/epm.html Best Practices in BPM Governance Levels of es Level 0 6.0 As one process level is defined, the next lower level is identified Level 1 6.02 6.01 6.02 6.03 6.04 6.05 Level 2 6.02.03 6.02.01 6.02.02 6.02.03 6.02.04 6.02.05 and so on 2005, Business Trends www.bptrends.com 25 Owners: What Do They Do? Responsible for: Implementing the steps of PBM Documenting the process Ensuring process performance Ensuring both internal and external customer involvement Involving suppliers of incoming processes Improving the process For certain processes, may manage the process jointly with the Government Customer Must ensure associated procedures are current and are adhered to 2005, Business Trends www.bptrends.com 26 IQPC BPM May 2005 www.bptrends.com 13
Owners Use PBM Seven-Step Methodology DEFINE MEASURE IMPROVE Return to Step 3 Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Step 7 Define Define the the Establish Establish Metrics Metrics Determine Determine Performance Performance Analyze Analyze Stability Stability Set Set Goals Goals Analyze Analyze and Plan and Plan Improvements Improvements Implement Implement Improvements Improvements Six to Ten Manageable Steps Metrics from Customer s Perspective How You Are Doing Predictable Performance Where You Are Going and Why How and Why You Will Get There Get There! -Based Management (PBM) is a management approach that defines an organization as a collection of processes focused on customer satisfaction and waste reduction by defining measures, stabilizing and improving processes 2005, Business Trends www.bptrends.com 27 Key to PBM: Owners Document and Define es, with Customer Agreement PROCESS DEFINITION PROCESS DEFINITION Integrated Defense Systems (IDS) Long Beach Integrated Defense Systems (IDS) Long Beach Title: Negotiate and Award Purchase Order No.: 5.02 Title: Negotiate and Award Purchase Order 5.02 PROCESS PERFORMANCE AGREEMENT Creation Date: No.: 01/03/01 PROCESS PERFORMANCE AGREEMENT 01/03/01 Integrated Defense Systems (IDS) Long Beach Revision Creation Date: Date: 01/10/03 Integrated Defense Systems (IDS) Long Beach Revision Date: 01/10/03 Next-Higher-Level Title No. Title: : Supplier Management 5.0 Next-Higher-Level Title No. Title: : No.: Supplier Management 5.0 No.: Creation Date Objective: Creation Establish Date: a contract Creation with a supplier, Dateincluding compliant documentation and provide Objective: Creation Date: clear Establish a contract with a supplier, including compliant documentation and provide Revision Date: Revision Date Revision requirements clear Date: to the Revision supplier. Date Next-higher level process requirements to the supplier. Next-Higher-Level : Next-Higher-Level : Next-higher level process Minimum Annual / Weighting Measurement Tasks Minimum Annual / Weighting Measurement Acceptable Multi-Year Factor Tasks Acceptable Multi-Year (Must Factor Metric Definition Have At Metric Category Inputs Beginning Boundary Task: Level (MAL) Goals Benchmark Beginning Metric Definition (Must Boundary Have At Task: Outputs Metric Category Inputs Level (MAL) Goals Benchmark Receive Purchase Least One Requisition 1 ) Outputs Receive Purchase Least One Requisition 1 ) Quality Metric Definition (list company/ Purchase Requisition MAL (PR) Goals Weight Purchase Order Quality Metric Definition (list company/ MAL Goals Weight Quality organization/source benchmarked [if Purchase Requisition (PR).01 Evaluate Purchase Requisition Q Select Source 5.01 Benchmark Manage Purchase Supplier OrderPerformance 5.03 Quality Q applicable]) organization/source benchmarked [if Select Source 5.01 Benchmark.02.01 Issue Evaluate Undefinitized Purchase Purchase Requisition Order Manage Supplier Performance 5.03.03.02 Receive Issue and Undefinitized evaluate proposal Purchase from Order applicable]) Supplier.03 Receive and Develop and evaluate Negotiation proposal Planfrom Timeliness Metric Definition (list company/ Suppliers MAL Goals.04 Supplier Solicit & and Evaluate Develop Weight Bids Negotiation from Plan Customers Timeliness Metric Definition (list company/ Suppliers MAL Goals Benchmark Suppliers.04 Solicit & Select & Evaluate Supplier Weight Bids from Customers Timeliness T organization/source benchmarked [if Select Source 5.01 Benchmark.05 Suppliers Negotiate & Select Contract Supplier Requirements Manage Supplier Performance 5.03 Timeliness T applicable]) organization/source benchmarked [if Select Source 5.01 with.05 Supplier Negotiate Contract Requirements Manage Supplier Performance 5.03 applicable]).06 with Develop Supplier Procurement File to Requirements..06 Develop Procurement File to Efficiency Metric Definition (list company/ MAL Goals Weight Requirements. Efficiency Metric Definition (list company/ MAL Goals Benchmark Weight Efficiency organization/source benchmarked [if Benchmark Efficiency E Requirement Sources: organization/source benchmarked [if Ending Boundary Task: Owner: E applicable]) Requirement Sources: Ending Boundary Task: Owner: applicable]) TA-QA-039 Issue Purchase Order Name of Owner Name of Owner TA-QA-039 Issue Purchase Order Customer(s): Cycle Time Metric Definition (list company/ 1.8.2.6 MAL Goals Benchmark Weight Customer(s): Cycle Time Metric Definition (list company/ 1.8.2.6 Name of Customer(s) MAL Goals Benchmark Weight Cycle Time organization/source benchmarked TA-QA-111 [if Name of Customer(s) Cycle TimeCT organization/source benchmarked TA-QA-111 Specialist: [if Specialist: CT applicable]) Information applicable]) Systems Information MAIN, TPS, EDI, UDFC TRACKING Name of Specialist (if MAIN, TPS, EDI, UDFC TRACKING Name of Specialist (if SYS applicable) Systems SYS applicable) MD-1771-01 (06 JUN 2002) REVISED (Must have concurrence on file for all process changes. Use second page if necessary.) MD-1771-01 (06 JUN 2002) REVISED (Must have concurrence on file for all process changes. Use second page if necessary.) Concurrence Concurrence Concurrence Concurrence Concurrence Concurrence Owner s Name Customer s Name(s) Specialist s Name Owner s Name Customer s Name(s) Specialist s Name (Must have concurrence on file for all process changes. Use second page (Must if necessary have concurrence for additional on file metric for all definitions process changes. and/or signatures.) Use second page if necessary for additional metric definitions and/or signatures.) MD-1773-01 (4 OCT 2002) REVISED MD-1773-01 (4 OCT 2002) REVISED 2005, Business Trends www.bptrends.com 28 IQPC BPM May 2005 www.bptrends.com 14
Owners Define the in a Flow Chart PROCESS FLOWCHART Applies To: <Bus. Unit/Program Name Here> Who Input Responsible Major Tasks for: Negotiate and Award Purchase Order Organization or Owner: < Owner Name Here> Individuals 3.08.04 Release Purchase Requisitions and W ork Orders Purchase Requisition Number: 5.02 Output Creation Date: <Origin Date Here> Revision Date: <Revision Date Here> Suppliers Supplier Proposal Purchase Order Program Engineer Cost Analyst Technical Evaluation Cost/Price Analysis b Receive and Evaluate Proposal from Supplier and Develop Negotiation Plan a a Negotiate Contract Requirements with Supplier Buyer Issue Undefinitized Purchase Order N Solicit and Evaluate Bids from Suppliers and Select Supplier Y Develop Procurement File to Requirements Issue Definitized Purchase Order Procurement Management Procurement Advisor Receive Purchase Requisition Evaluate Purchase Requisition Procurement Competitive? Y Negotiation Plan Adequate? N b N Procurement Y File Compliant? R Procurement File EST. TIME TOTAL TIME LEGEND Input/Output Task Decision a Connector R Record Control Point MD-7148 (02 JUL 2004) REVISED 2005, Business Trends www.bptrends.com 29 Owners Use Metric Categories to Establish Measures Requirements Key Performance Categories Performance Meet or Exceed Customer Expectations Attain Superior Business Results Quality Timeliness Efficiency Cycle-Time Measure of conformance or non-conformance (defects) to requirements or expected performance Measure of success in meeting a customer commitment Measure of output that a process produces in relation to costs Measure of time between a customer request and delivery of the product or service to the customer 2005, Business Trends www.bptrends.com 30 IQPC BPM May 2005 www.bptrends.com 15
The Same Metrics Are Used at All Levels Customers Executive Leadership Leadership Shared Data Quality Timeliness Efficiency Cycle Time Teams Suppliers 2005, Business Trends www.bptrends.com 31 Owners Use Metrics to Measure a Performance Assessment 02 03 J F M A M J J A S O N D ND ND 1.5 2.0 2.0 2.0 1.5 1.5 Quality (1X) Efficiency (1X) 100 Good 100 Good 90 90 Percent Compliant Orders 80 70 60 50 40 30 Completed Items per Man-hour 80 70 60 50 40 30 20 20 10 10 Assessment 02 03 J F M A M J J A S O N D ND ND 1 2 2 2 2 2 02 03 J F M A M J J A S O N D Assessment ND ND 2 2 2 2 1 1 2005, Business Trends www.bptrends.com 32 IQPC BPM May 2005 www.bptrends.com 16
Airlift and Tanker Programs Quality Journey: Results Focus 7 Malcolm Baldrige Range 6 5 4 3 2 1 0 Performance Factor 5.0M 4.2% 100 120 Aircraft Decision 92 93 94 95 96 Collier CalQEDDaedalian Baldrige 5X 7.5X 17X Largest Multi-year Flex C32/C40 contract Sustainment +10 Days +25 Days +40 Days +20 Days +60 Days +100 Days+204 Days+107 Days* 442 Days 380 Days 374 Days 349 Days 286 Days 268 Days 223 Days 208 Days 4.0M 2.5M 1.8M 1.4M 866K 4.3% 2.9% 2.5% 2.2% 1.9% 80 50 17 12 8 58% 58% 67% 100% 92% 100% 100% 100% 1.7 1.6 2.3 2.9 3.3 3.4 4.1 4.2 97 98 18X 15 C-17 add-on +60 appropriation 707K 1.4% 6 99 31X UK ORDER 644K 1.4% 10 100% 4.1 00 IW Finalist 50X+ UK1-4 Deliveries 535K 1.1% 15 100% 4.2 01 Awards RONA Milestones Schedule Span Time Rework/Repair $ COQ Delivery Waivers Systems CPAR KEY * Days ahead of schedule to USAF decreased due to a insertion of four UK planes into 2001 schedule 2005, Business Trends www.bptrends.com 33 A BP Group and a BP Most companies that are serious have a business process group to coordinate their efforts and provide special training and mentoring Many companies conclude that process change is its own kind of process and develop and document The Change in the same way they do other processes. 2005, Business Trends www.bptrends.com 34 IQPC BPM May 2005 www.bptrends.com 17
Kaplan and Norton s Balanced Scorecard ECI's Balanced Business Scorecard Financial Perspective Internal Business Perspective Goals Measures Goals Measures Survive Cash flow Technology capability Manufacturing geometry vs. competition Succeed Quarterly sales growth & operating income by division Manufacturing experience Cycle time, Unit cost, Yield Prosper Increased market share and ROE Design productivity Silicon efficiency, Engineering efficiency New product introduction Actual introduction schedule vs. plan Innovation & Learning Perspective Customer Perspective Goals Measures Goals Measures Technology leadership Manufacturing learning Time to develop next generation time to maturity New products Response supply Percent of sales from new products, Percent of sales from proprietary products On-time delivery (defined by customer) Product focus Percent of products that equal 80% sales Preferred supplier Share of key accounts' purchases, Ranking by key accounts Time to market New product interdiction vs. competition Customer partnership Number of cooperative engineering efforts 2005, Business Trends www.bptrends.com 35 Extending It Further Financial Perspective Improve Shareholder Value share price return on capital employed Revenue Growth Strategy Productivity Strategy Build the Franchise revenue from new sources Increase Value to Customers customer profitability Improve Cost Structure operating cost per unit produced Improve Use of Assets asset utilization Customer Perspective Product Leadership Cutomer Intimacy Operational Excellence Internal Perspective Build Franchise Through Innovations Increase Customer Value Through Customer Management es Achieve Operational Excellence Through Operations and Logistics es Become a Good Corporate Citizen Through Regulatory and Environmental es Learning & Growth Perspective Employee Competencies Technology Corporate Culture 2005, Business Trends www.bptrends.com 36 IQPC BPM May 2005 www.bptrends.com 18
An Overview of SEI s CMM Maturity Model Organizations with an mature mastery of their processes. 5. Optimizing Most organizations are between levers 2 and 3. They have processes documented and standardized but in many cases manager's goals are only loosely linked to process goals. Organizations at this level routinely expect managers and employees to work together to improve processes. They understand their processes well enough that they can conduct systematic experiments to determine if changes will be useful or not. Only a few organizations have an organization wide understanding of how processes relate and have their corporate strategies and goals aligned, via the management hierarchy to specific process activities. 2. Repeatable 3. Defined The process for both management and engineering is documented, standardized and integrated by an organization methodology 4. Managed Detailed measures of the process and product quality are collected. Both the process and products are quantitatively understood and controlled. Continuous process improvement is enabled by quantitative feedback for the process and from piloting innovative new ideals and technologies. 1. Initial Basic project management processes are established to track cost, schedule, and functionality. The necessary discipline is in place to repeat earlier successes As organizations become more mature they begin to conceptualize business processes and seek to organize them, repeat successes and measure results. The process is ad hoc. Few activities are explicitly defined and success depends on individual effort and heroics. Entrepreneurial organizations and new divisions that do things any way they can to get started. Organizations with an immature mastery of their processes. 2005, Business Trends www.bptrends.com 37 Three Levels of Governance Executives Organization Performance & Responsiveness Line and Managers Value Chain/ Performance and Priorities for Improvement Supervisors Efficient & Effective Organization of Subprocesses and Activities 2005, Business Trends www.bptrends.com 38 IQPC BPM May 2005 www.bptrends.com 19
A Includes Its Management Manage plan control Measure People Implement Software Implements 2005, Business Trends www.bptrends.com 39 One of Rummler s Rules 75% of potential improvement you can obtain from a redesigning a process will come from changing the way the process is managed Geary Rummler, Serious Performance Consulting, ASTD Press, 2004 2005, Business Trends www.bptrends.com 40 IQPC BPM May 2005 www.bptrends.com 20
Rummler s Human Performance Model Defined Activity Support activity measures Activity Specifications Expense Reports Skill, Knowledge & Capability Activity: Enter Expense Reports * Feedback Updated Expense Report Ledger Consequences 4. Consequences Feedback Geary Rummler & Alan Brache, Improving Performance, Josey-Bass, 1985 2005, Business Trends www.bptrends.com 41 A More Detailed Human Performance Model 1. Activity Support - Can the performer easily recognize the input requiring action? - Can the activity be done without interference from other activities? - Are adequate resources available for performance (time, tools, staff, information)? 0. Defined - Define the steps in the activity or process. - Define who will do what activity measures 3. Activity Specifications - Do activity standards exist? - Does performer know the desired output & standards? - Do performers consider the standards attainable? Expense Reports 2. Skill, Knowledge and Capability - Do the performers have the necessary skills & knowledge to perform? - Do the performers know why desired performance is important? - Are the performers physically, mentally & emotionally able to perform? Activity: Enter Expense Reports * Feedback Updated Expense Report Ledger 5. Feedback - Do performers receive information about their performance? - Is the information they receive: 1) relevant? 2) accurate? 3) timely? 4) specific? 5) easy to understand? Consequences 4. Consequences - Are consequences aligned to support the desired performance? - Are consequences meaningful from the performer's perspective? - Are consequences timely? 2005, Business Trends www.bptrends.com 42 IQPC BPM May 2005 www.bptrends.com 21
Rummler s Rule Applies To All Level s of Management The biggest problem most organizations face is that they don t align bonuses and incentives with processes Thus, it is common for employees, supervisors and senior managers to get rewards for behaviors that do not result in improved performance Aligning incentives should be a major goal of every business process change program Jack Welch, the CEO of GE, made 40% of every executive s bonus dependent on the success of their 6 Sigma program 2005, Business Trends www.bptrends.com 43 SUMMARY The challenge for managers is to learn how to manage business processes We have too many technologies and not enough focus on why we should do BPM in the first place We manage processes to improve corporate performance Companies need to set goals, develop a strategy, and then create a business process organization that can organize and coordinate their BPM resources 2005, Business Trends www.bptrends.com 44 IQPC BPM May 2005 www.bptrends.com 22
For More Information www.bptrends.com The most comprehensive source of information and analysis on trends, directions and best practices in Business Management Slides available on BPTrends. Go to site and enter into search: IQPC BPM Governance Talk pharmon@bptrends.com 2005, Business Trends www.bptrends.com 45 IQPC BPM May 2005 www.bptrends.com 23