Aligning Enterprise Measures, Plans, and Budgets Coordinating enterprise performance metrics and strategic plans with resource allocation Much of the material.
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Aligning Enterprise Measures, Plans, and Budgets
Coordinating enterprise performance metrics and strategic plans with resource allocation
Much of the material in this presentation was drawn from the following source:
• Allio, M. (2006), “Metrics that matter: seven guidelines for better performance measurement”, Handbook of Business Strategy, Vol. 7 Issue 1, pp. 255-263.
• Harmon, Paul (2007), Managing the Process-Centric Organization, presentation, BPMTrends.
Enterprise BPM Methodology
“Managing the Process-Centric Organization”, presentation by Paul Harmon.
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Build Process Management
Capability
Session 5Session 5 Sessions 8 & 10
Session 5
Session 8 Session 8
Session 10
Sess. 4
BA 553: Business Process Management
BA 563: Process Improvement
Aligning Strategy with Process Metrics
This is a process for ensuring alignment among the organization’s performance measures, strategic plans, improvement projects, and budgets. The items in blue were covered previously.
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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. Recalibrate enterprise KPIs and align them 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
5. Identify Process Improvement Projects
Once KPIs and strategic plans are developed, the next step is selecting improvement projects that will help achieve these goals and targets
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A starting point is the value chain, which can help identify process areas where change is likely to lead to improved KPIs
Once that area of the value chain is located, use the process architecture to narrow down the list of processes that need to be improved
The alignment of the process and performance metrics can help confirm the specific process(es) that contain the metrics that will most impact the KPIs and targets where improvement is desirable
How can we identify the most useful improvement projects?
Identifying Processes That Impact KPIs
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From Last Session:Estimate Impact of Projects on KPIsBSC 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) (same) (same) (same) Train field personnel
$2M
Customer
Customer satisfaction rating
Impr. reliability of shipments
On-time shipments %
80% 95% (+15%)
Impr. inventory processes
5%
(Same as above) (same) (same) (same) (same) Impr. shipping processes
10%
Internal Process
Production rate Reduce rework
Rework, % 7% 3% (-4%)
Impr. quality of incoming parts
2%
(Same as above) (same) (same) (same) (same) Impr. mfg. processes
2%
Learning/Growth
etc.
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6. Allocate Budget Aligned with Strategy
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Traditional Budget Allocation Approach
In traditional organizations, budget is allocated based upon last year’s budget
This is like driving a vehicle while only looking in the rear-view mirror
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Improved Budget Allocation Approach
In order to get where you want to go and achieve the organization’s goals, you need to be looking ahead
The budget needed to accomplish the goals should be allocated according to the new direction for this year, not based upon what was done last year
Management assesses industry, market, company performance - then clarifies the firm’s vision
Management team formulates specific strategies needed to propel the firm towards its vision
Strategy dictates resource allocation priorities: the budget reflects the strategy
Managers implement and measure strategic performance, then realign strategies; the process repeats, as needed
What Other Resources Need to be Aligned?
In addition to the annual budget, there are other resources that need to be aligned properly in the organization
These include:
Personnel
Support processes
Infrastructure
Policies
IT resources
Job descriptions
Training
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Aligning Other Resources with Processes
A well-structured process architecture gives you a way of tracking the alignment of a variety of corporate resources
By documenting the resources on the process architecture, you can identify where your resources are being spent, and possibly where they’re being inefficiently used
Different organizations will stress different types of alignment – this depends on the organization’s goals:
The US Government is largely focused on IT alignment
Many companies are heavily focused on identifying common processes to reduce the number of ERP applications they need to maintain
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Items to Consider When Aligning BPM
Alignment of corporate strategies and goals with BPM
Alignment with specific process strategies Alignment with stakeholder needs and KPIs
Alignment of other processes with BPM
Management processes Support processes Repeated standard processes
Alignment of policies and rules with BPM
Which processes implement which policies? Which processes rely on which business rules?
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Items to Consider When Aligning BPM
Alignment of IT resources (e.g. with an Enterprise Architecture) with BPM
Which software applications are used by which processes? Which databases are used by which processes?
Alignment of HR resources with BPM
Which job descriptions are used by which processes? Which training courses support which processes? Which hiring practices will support process management?
Alignment of standards such as Sarbanes-Oxley (SOx), ISO 9000, and various risk management standards with BPM
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