Whilst working at my current company, I was given the responsibility of developing the To-Be Business Processes in a major Project. I had to think carefully about how I was going to approach this project because I wanted to take into account that I was entering it after a considerable amount of work had already been completed.

I wanted to try and introduce into the project a more modern approach to Business Process development. The As-Is processes had been developed in Visio but not in a conventional way, never the less, they were easy to read and detailed. The To-Be processes would be built to support a new software architecture centred on a new ERP system which utilised Workflow both to support procedures in application areas and external supporting activities. 

This was a great opportunity to introduce BPMN as the process mapping notation, as I foresaw that in the future additional services would need to be developed to support the selected ERP solution. Also the internal workflow in the selected application used a BPMN like notation. In looking for a Tool I came across Aris Express, which support BPMN diagrams but had an additional advantage as it included Process Landscaping, Organisation Charting, IT Infrastructure and produces RTF documentation. This was important as I intended to include in my design some of the tools we have previously discussed in the Blog.

I will now run through the approach I have taken to the project and hope it will help all who have taken the time to read my Blog.

The Approach

1.       Analyse the RFP and tender documents plus the response to the tender and structure the key information in a mind mapping tool. The one I use for this is Freemind it’s a really great open source mind mapping tool.

2.       Map the As-Is Organisation and the To-Be Organisations recommend changes along with any changes in responsibility. This exercise was carried out in Aris Express

3.       Map the Core Application software areas that the To-Be processes will be interacting with. The new software was very different from the old software in that the Master Data was build up in a particular sequence. Also Master Data had to be in place before the in-built workflow could be executed.

4.       Build the Entity Business Model, this provides an overview of the high level processes for a particular Industry and Company. It also documents the external influences on the Core Processes. I try to align this to the Value Chain.

5.       Next step was to build a Value Chain, this provides with the means of having a clear understanding of how value is created with an organisation. Also it provides a view of the end to end process which is often forgotten.

6.       Having completed the Value Chain the next step is to agree the Nomenclature which I usually base on AQPC- PCF (Process Classification Framework)

7.       Once the Framework is in place then I will investigate the quick win areas, and focus my attention in starting to build the processes. Obviously at this stage you need to review the As-Is processes and new application requirements.

8.       When building Processes with Tools that have no database I build a folder structure that represents the AQPC Nomenclature to store the processes and design documents. I also number each activity within a process; this is to manage changes that may occur through a BPI exercise.

9.       The next step in this case was to create a report that documents the process for signoff.  To create this document I combined the Aris RTF document with a template I created taking into account the Entity Business Model.

In Summary

The project is ongoing and will take some time yet before I get any feedback on the both the approach. There many hurdles still to overcome, but the project team I a working with have very receptive to the approach and results so far. There will be workshops with the various parts of the organisation to introduce the new approach to creating Business Processes. We have decided to focus primarily on one area of the organisation that has been identified as a quick win and will start piloting very soon. It is complex project and as such will be a good test of whether the approach I used in Asia can be accepted and adopted here in Europe. I will keep you posted as the project progresses and feed back to you the results as they come in.

Working as an Employee can be frustrating and at times seems pointless without direction and reward for success. Many Organisations, who do not share with their workers their aspirations and drive for success, reward their workers with yet another Dull Day in what has been a Dull Week, Month and Year. The Grey and Dull environment percolates through the business reaching the very top and very bottom of the company.

In contrast an Organisation that states it’s Goals, articulates its Strategy and the Value it intends to deliver to its Customers, Suppliers, Workers and Investors is Bright and Shines. It is a self motivating environment that touches all who come into contact with it. This way of thinking is what motivated me to focus on Business Performance, and by way the term Business can be substituted for all the things we do that can be improved upon. The focus on performance, eliminates waste, it questions product introduction strategies that threaten our environment, health and the future of this planet. It provides stability, sufficient financial reward and a community pride in our collective work environment. By training to optimise performance you are bringing value to your organisation and community you serve. There is no better thing to do!

All employees, Stakeholders and Owners have a right to know the goals, objectives and the delivery strategy. That said if the organisation does share its insights with you then be prepared to take ownership of your positions contribution to the success of the plan.

Currently as previously stated I am working on new project in Malta. I am learning a lot from the project, and from the cultural changes of working in a new country. That aside I am confident I can make a difference and will strive to deliver what I have employed to do. What I am enjoying most at the moment is that it’s give a me a great opportunity to investigate new Business Process Tools and some of the more well known  Open Source Workflow Management systems. Of the next few weeks I will share some of this experience with you.

In the mean time, think positive, think performance, think I want to be measured and rewarded for contributing to the success of the organisation or project. Back soon

I apologise for being off-line for the last few days. We had a technical glitch, that could only be resolved by reloading the site. So I have taken the time to upgrade the version of BlogEngine.Net to version 1.6.1.

Hopefully over the next couple of days I will start Blogging once more. If you have combed through the Blog site you will see that I am currently based in Malta. Since moving here some 3 months ago I have found myself some work and starting to get engaged in a few BPM opportunities. This is taking a little of my time, but will enhance my experience and give me the opportunity to share with you some more of my experiences.

Catch up with you all later

David

Strategy maps provide the means of linking an organisation’s Goals and Aspirations to their Operational Scorecards. Although strategy maps were originally developed by Kaplan and Norton to support the balanced scorecard they can be applied to any scorecard framework. The strategy map, thus, provides a roadmap linking the operation performance indicators to the strategy of the company.

Strategy maps without a destination statement, or ultimate goal, are of little use.  This important addition to the strategy map was added at a later stage giving it a purpose and set of stretch targets over a period of 2 to 3 years. As show in the diagram above for each perspective there are a set of objectives. Measures within the scorecard framework are aligned to the objectives and targets set. An action plan is linked to the objectives and along with this an associated budget.

Frameworks for linking strategy to the measures and defining actions have been around for a long time. Many eminent researchers have developed ways of grouping the processes resulting in an assortment of metrics based frameworks. Some frameworks however are operational, such as SCOR, without an obvious link to the financial process types. Others like balanced scorecard do not push down far enough into the operational processes. I personally like to mix and match, using the Balance Scorecard and industry specific Scorecards to link the operational measures to the financial measures. Because the Balanced Scorecard has a Financial and Customer perspective this provides a link from sales through the value proposition to finance driving asset utilsation and revenue.

The Strategy map provides a link between the Business Modeling and the Business Intelligence and Business Process Management activities. It establishes the objectives and their corresponding Critical Success Factors (CSFs) and Key Performance Indicators (KPIs). Knowing the performance expectations provides the means for designing optimal business processes and driving the business performance improvement programmes.

This question in the Blog Title was posed by one of the readers. It never ceases to amaze me how we only react to external factors after they have happened. In my humble opinion we should always be looking to improve the Business Processes with our organisation. Business Process Improvement is not something we do to prevent an event from happening again, as it is very seldom that an identical event will happen more than once. We need to be vigilant when monitoring our processes and take the necessary steps to ensure we can identify quickly an adverse occurrence and be resourceful in correcting it.

I read an article which was published during the recession, unfortunately I cannot remember who wrote the article, defining a number of rules on how to handle the recessionary situation:

•       Rule 1: Protect Your Best Customers, Products & Channels

•       Rule 2: Refocus the Customer Experience Around the Value Equation

•       Rule 3: Sweat Your Customer Management Assets

•       Rule 4: Cut Non-value-adding Costs while Protecting Value

•       Rule 5: Support & Incentivise Staff to Deliver Value

•       Rule 6: Focus on the Long-term while Supporting the Short-term

These six simple rules do not just apply to recession, they apply to all organisations doing business when ever or whatever the situation. These are drivers for significant drivers for implementing a Business Process Improvement culture within a business.

There are many methodologies for analysing process and activities within an organisation with the aim to continuously improve the performance of the business and reduce waste. One of the early advocates was Edward Deming who modified Walter Stewarts’ concept of Plan, Do, and See to create the Deming Cycle (PDSA). This concept has been utilised and modified by many, to create continuous improvement cycles. There are many different methodologies available for continuous process improvement:

1.       Six Sigma

2.       Kaizen

3.       Lean Manufacturing

4.       Total Quality Management

5.       Toyota Production System

6.       Theory of Constraints etc.

Many of these methodologies were originally developed for manufacturing companies have been adopted for other industries. In my limited experience though the problem I have seen with many implementations of continuous improvement, it has not extended to the management level.

In one of my earlier Blogs I did touch on the Business Process Improvement Cycle (BPM is an essential part of a Continuous Performance Improvement Project). This is also an adaptation of the Deming Cycle. I would also state that in some cases, and this would depend on extent of the changes to the Business Model, it may be better to create another division and re-design the Business Processes from the beginning.

Over the past 3 to 4 months there have been a number of questions posed by Subscribers, in the “Comments” submitted, to my Blog. In the future I will add a few additional pages to aid subscribers in accessing the content of the Blog.

Question 1 - I am feeling a little overwhelmed by the content and would like to understand the direction the Blog is taking?

The Blog is based on my experience as Performance Management Consultant. The extent of the content may not be entirely in-line with some the books or theories on Performance Management. I define Performance Management in four areas as the diagram below shows

The Blog will take these four categories and expand on them raising interesting discussion points on the various topics under each group. In the future I will re-categorise the blog content so that each submission falls within these four groups.

Question 2 - What Blog Software are you using?

The Blog software is BlogEngine.Net, I selected this Blog Engine for its comprehensive functionality and also because I wanted to host the Blog at my current web site hosting service. There was one other reason, my website was developed using Visual Studio and I wanted a Blog Engine that was compatible with my exiting web site development tools.

Question 3 - How did you develop the look and feel on your Blog site?

The Blog functionality is standard Blogengine.net, however the content layout and colours scheme is a custom built Theme.

Question 4 - What hosting service do you use?

My Blog is hosted at IX Web Hosting . The site hosting service is excellent and most problems I have had with the set up of the Blog have been resolved by their support team in very timely manner.

Question 5 - How do you set up an RSS feed from your Blog site?

The easiest way to access an RSS feed is to click on subscribe in the main menu bar. A web page opens with last 10 blogs, click on subscribe, and this will added to your favourites. Alternately if you have an RSS Viewer, click on add feed and enter RSS Syndication URL is http://biz-perfblog.biz-performance.com/syndication.axd  .

I hope this helps, and please keep the comments coming.

The Business Process models are usually built at a high level in this stage of the Business Modeling process. For those of you who are familiar with the Supply Chain Council Reference Model (SCOR) or APQC – Process Calcification Framework (PCF) it would be comparable to their Level 1 and Level 2 process maps i.e. Process Category or Group.

The starting point for me is usually developing an Entity Business Model, this enables the Major Categories of Business Processes to be defined, to support the Business Model, within a standard framework. I have a number of standard models developed for various industries that I have accumulated over time which I use to accelerate the process. The Entity Business Model illustrated is an example of Shipping Industry Model. When working for a number of Container Shipping companies I refined the diagram to just focus on a specific segment of the Shipping Industry. After an agreement has been reached on the categories of Business Processes a value chain diagram is created for those process categories that create value for the business and those that support value creation. At the same time the organisation structure defined in the Resourcing Model can be mapped to the Processes Categories so that high level responsibilities can be considered.

When mapping Business Processes I recommend that a BPM/BPA system is used so that conventions can be standardised and change management can be addressed through the development and aligning of the processes to the specific business requirements. Many of the systems have simulation capability which can be useful, plus it keeps a history of the changes, capturing how you arrive at the Process Model.

The Value Chain is defined by the Value Proposition and Profit Model. Since we are concerned at this stage with the Value we bring to our customers and how we diferentiate oursleves from the competition the focus initially will be on the Core Processe. The Value Chain Core Processes manages suppliers, internal product development, production and logistics as well the Sales and after Sales Service. Therefore they manage the cash-to-cash process which is ultimately captured and reported in the Financial Management system.

Also I would recommend that a CPM software solution is considered for Financial Planning, Budgeting and Forecasting as it allows business drivers to be defined and “what if” simulation to applied to various test scenarios. Also in some industries pricing and product strategies play a significant part in the Business Modeling process and may also need further maintenance through the business year. Also history plays a large part in prediciting future forecasts and demand plans which require sofisticated algorithums to be applied to provide a more accurate result.

The Resourcing Model can quite complex as it needs to ensure there are sufficient resources to deliver the Value Proposition and achieve the Profit Mode. It is not just a Human Resourcing model it covers all aspects of resourcing:

1.       Finance Management– That there is sufficient working capital to meet the operational needs of the business.

2.       Human Resources Management– The human resource plan has the appropriate skills and experience to deliver the value Proposition.

3.       Fixed Assets Management – That there is sufficient capacity and investment in assets to meet the business needs in terms of delivering the products or services to the customers.

4.       Materials Management – Ensure that the supplier contracts deliver the quality and reliability to meet the customers demand for products and services.

 Funding

In previous Blog “Starting with the Cash–to-Cash Business Process” I discussed the sources of cash to meet the operating needs of a business. This is an important factor in ensuring there is sufficient Working Capital to support the Profit Model. Cash is the life blood of a business and if the flow of cash is insufficient to meet the operational needs of a business there can be very serious consequences.

The Cash Cycle is defined as the length of time between the purchase of raw materials and the collection of accounts receivable generated in the sale of the final product. However, what we are really interested in is the impact on the business of not being able to meet the daily cash needs of the company. The Cash reservoir is supported by the unused short term loans to supply the day to day cash needs of the business.  Flowing into the reservoir is accounts receivable, which is the payment from the customers for products and services. As we indicated previously in the Profit Model, labour and materials is the two main out goings in the operational model. The Cash Cycle is expressed as a formula “Inventory Days plus Payable Days minus Receivable Days equals Working Capital Days”.  Whereas “Working Capital is equal to Current Assets minus Current Liabilities” a positive working capital means that the company is able to pay off its short-term liabilities from the available cash, accounts receivable and inventory. If a company is unable to pay its creditors then a plan should be in place to obtain additional loans from the various sources of funding i.e. disposal of assets, raising of equity capital etc., in conjunction with a strategy to reduce operating costs. The funding strategy at this stage should be based on how an investor will perceive your business and what returns they would expect to see from investing in the business.

Human Resources

The skills and expertise required to meet the requirements of the business is critical to its success. Also as this is a heavy ongoing expense, care needs to taken in the way human resources are brought into the business and right from the outset how their success will measured and rewarded. No Human Resource should be indispensable, the business will develop a life of its own and so succession planning needs to taken into account.

The organisation structure will be considered at this stage and how the resources are distributed to meet the business requirements. This structure becomes very important once we start investigating business processes and defining ownership and responsibilities.

An important consideration also is to ensure that the planned Human Resources accept responsibility for performance and are actively engaged in business process improvement schemes embarked upon by the business. It is extremely difficult to introduce and get acceptance for performance related payment schemes once employees are used and comfortable with a basic salary plan. Also by pushing the performance indicators and ownership lower down in the organisation there is less requirement for intermediate management and hence an increase in control over costs.

Fixed Assets Management

There is usually a significant investment in Machinery and Buildings etc. to deliver the products and services. This varies depending on the industry type. There may also be requirement for the Assets to be strategically placed to better service the customers. An outsourcing strategy can be considered to investigate better ways of managing the investment in expensive assets with a focus on freeing up more funding for investing in the delivery of products and services.

Material Management

The Supply of materials is a key area and sits in the Value Chain of an organisation. The selection of suppliers and the negotiated contracts will impact the way a business delivers its products and services to its customers. It also impacts the Working Capital strategy for an organisation affecting the Working Capital days. Key also to this is the strategy to be adopted by the business on the receiving of materials i.e. how often are deliveries made, are raw materials purchased and manufacture into final products or sub-assemblies purchased and only the final assembly performed. Or as is becoming popular now is the whole manufacturing and logistics processes sub-contracted. Finally the quality standards are negotiated with suppliers to meet the Value Proposition previously defined.

In a previous blog “Ratio Analysis is KEY to Understanding Process Decomposition” I touched on the DuPont Ratio Analysis technique which is also known as the Strategic Profit Model. The DuPont Ratio Analysis Model is an excellent representation of how KPI decomposition is achieved. Also with its emphasis on Operational Performance it ties key activities to the financial performance of the company.

There are two main performance ratios associated with establishing a profit model:

1.       Return on Equity (ROE) which is used as a general indication of the company's efficiency; in other words, how much profit it is able to generate given the resources provided by its owners. Calculated by (Net Profit) / (Average Shareholder Equity for Period)

2.       Return on Total Assets (ROTA) a measure of how effectively a company uses its assets. Calculated by (Profit before interest and tax) / (Total Assets).

You may ask the question why? It really is quite obvious. ROE is a measure of what an investor gets back in monitory terms from the trust he or she puts in the management team of an organisation. Whereas the Return on Assets is a very good measure of how the management team is using the Assets of a company to generate a profit.

ROTA is used to measure the operating efficiency of the business and is the ratio over which operational management has the most control. There two main drivers that impact ROTA are:

1.       Margin on Sales percentage – Calculated by( PBIT / Sales)

2.       Sales to Total Assets Ratio – Calculated by (Sales / TA)

If we now drill down on Margin on Sales, there are four main drivers these are Materials, Labour, overheads and Admin/Selling expense. Each of these can be broken down further with their own drivers to provide a means of a more detailed analysis. Likewise if we drill down on Sales to Total Assets the most significant drivers are Fixed Assets, Inventories and Accounts Receivables which again can again have their own drivers defined to increase the operational control over the activities.

A simple spreadsheet model can be created to provide a means of adjusting the drivers to evaluate the impact on ROTA and ROE. Also a 3 to 5 years outlook can be built to ensure that model supports the aspirations of the owners and stakeholders. The cost ratios provide a mechanism to plan, budget, delegate responsibility and monitor the various functions. They can quantify the target for all areas and calculate the affects of disparity in any one of the subsidiary ratios on the overall performance. I have included a simple spreadsheet model to demonstrate the impact of changing driver values on the higher level performance ratios.

This model does not handle very well the detail around variation in different products, material costs, changes in volumes and different asset depreciation policies. There are different ways of doing this and I will get around to covering these in a later publication. There are many good planning tools around that can be used for detailed planning; however, as a first cut the DuPont Model provides an excellent insight into the impact of ratio variations on the profitability of a business.

Profit Model.xls (93.50 kb)

To help understand the areas of coverage in this Blog I will define my perception of Business Performance Management. All too often people assume Performance Management is Business Intelligence (BI). This is not the case, BI is one of the legs on the stool and as the diagram shows there two more legs and a framework within which it is defined and implemented.

The diagram highlights the three main areas which are:

·         Corporate Performance Management

·         Business Intelligence

·         Business Process Management

The framework within which the solution is built is usually part of an Enterprise Architecture (EA). As to what EA framework is used is very much down to the preference of the EA Team. During the course of this Blog I will endeavour to cover all these areas based on my experience and preferences. There is another important factor to cover which is Programme Management since implementing Performance Management comprises of multiple complex projects. The projects have many interdependencies that need to be tied together to ensure the sequence and priorities in which deliverables are made are consistent and do not impact adversely pervious deliverables.

In the centre of the diagram there is a red box called “Assigned Accountability”. One of the most difficult parts of a Performance Management project is assigning ownership of performance metrics, especially at the operational levels within a business. This has a major impact on the existing culture within and often involves assigning performance related incentives to individuals and groups who are responsible for the management of the activities that impact the performance metrics. Since activities are part of a process and processes are affected by upstream and downstream processes difficulties can arise from poor performance that has an impact on the achievements and aspirations of dependent performance metrics owners. Managing these changes is a difficult task and needs a strong management team to mitigating the risk associated with delivering a successful Performance Management Programme.

Performance Management is a top down driven programme that becomes embedded in the culture of an organisation. It is a continuous process that enables an organisation to respond to change quickly and adjust to the changing economic and market dynamics as they occur. Technology plays a large part in the delivery of a successful programme expanding its reach and response to an ever changing business environment. Performance Management projects rely heavily on applications and tools to document and deliver a successful outcome. I will expand on this in future Blogs.