Building a Process Performance Measurement System: Some …nopr.niscair.res.in/bitstream/123456789/17801/1/JSIR 58(3-4) 149... · Building a Process Performance Measurement System:

Journal of Scientific & Industrial Research Vol. 58, March - April 1999, pp 149-159

Building a Process Performance Measurement System: Some Early Experiences

P Kueng* University of Fribourg, Rue Facigny 2, 1700 Fribourg, Switzerland

e-mail: [email protected]; Fax : ++41 263009726

and A JW Krahn

A T Kearney (International), Bahnhofstrasse 8, 6300 Zug, Switzerland

In order to gain a competitive advantage many companies are engaging in the reorgani zation of their business processes and implementing process-based management. However, the effects of such change programmes are often not readily apparent. Process Performance Measurement Systems (PPMS) can be used to deal with this shortcoming. The authors argue that modern process-oriented organizations need to establish a system which provides comprehensive and timely information on the performance of business processes. Based on the authors' experience with several enterpri ses, an approach to composi ng a sound PPMS is described and conclusions are reported .

1 Introduction "Measurements are key. If you cannot measure it, you

cannot control it. If you cannot control it, you cannot manage it. If you cannot manage it, you cannot improve it."! And further on, the same author writes "Measurement is fundamental to our way of life. We measure everything. ( ... ) When we were babies, the doctor measured our height and weight to be sure that we were healthy. When we started school, our teachers measured us to understand our weaknesses and help us progress."! Although these statements made by James Harrington - one of the early proponents of business process restructuring - are almost ten years old and have been repeated quite often, they have not lost their relevance. Even a cursory examination shows that many organizations have been undergoing business process reengineering (BPR) programmes in the last few years .2 Despite the large expenditures on reengineering programmes, few companies are able to assess the current level of performance of their processes. Performance measurement at the process level still plays a minor role. Additionally, those few enterprises which do have a process-oriented measurement system in place usually take only financial and time-related aspects into consideration.

"Corresponding au thor

An enterprise which is implementing a process-based organization, either through a radical or a stepwise approach, should be able to answer the following two questions: (I) Is the current performance of the busi ness process better than it was yesterday? (2) To what degree are the to-be values fulfilled? In order to answer these questions, the so-called Process Performance Measurement System (PPMS) is needed .

The paper is structured as follows: the main components of process management are presented in Section 2. In Section 3 an overview of the state of the art in the field of performance measurement is given. Section 4 outlines the functional requirements for a PPMS. Section 5 presents a nine-step approach - applied in the project PROMOSYS - to compose a PPMS. Finally, Section 6 concludes with some lessons learned. (An earlier version of this paper has been published in the proceedings of the BITWorld conference.3)

2. Three Components of Process Management

In the past, Taylorism made it possible to build up organizations along functional lines. While this sort of organization was an effective way to increase productivity during the industrialization era, it was later recognized that core competencies lie in cross-functional

150 J SCI IND RES VOL 58 MARCH - APRIL 1999

processes. Therefore business process management was

introduced which includes the fo ll owing components:

Process design: Since many corporations are organized

along functional lines, they usually have little knowledge

about the ir processes . T hus , e stabli shin g a processoriented organization starts with the identifi cation of the

processes needed. In order to des ign, communicate, and implement business processes, process models can be

seen as an essenti a l pre requi site . Kueng and Kawalek4

descr ibe a goal-based approac h to bus iness process

mode lling . It is composed o f the fo ll ow ing steps : I .

De fin iti o n o f bu s in ess process- re lated goa ls. 2.

De ri vation and de finiti on o f business ac tiviti es. 3.

Description and ass ignment of roles . 4. Mode lling of

objec ts.

Bllsiness case execut ion: Afte r compos in g and imple mentin g the new es tablished processes, business

cases (i .e . instances of a process such as ' loan appl icati on No . 597 1') are carri ed out. T he executi on o f business

cases re li es upo n th e coo rdin a ti o n , co ntro l, and

com lllunicati on of ac tiviti es (wo rkin g steps) . As the

capabilities of in format ion techno logies have improved

cons ide rab ly, th e de pl oy me nt of so -ca ll ed CSCW (co mputer-supp o rt e d coo pe rative wo rk ) too ls is

becoming more and mo re com ll1on. Put s impl y, two ca tegories of CSCW tools can be di stingui shed: workflow

systems that ca n be effective ly used fo r high Iy structured, pre-defined processes, and g roup ware tools which are

a im ed a t supporting ra th e r un s tru c ture d , ad-h oc

processes.

Process m eaSlIreJll ent {[nd illlprovement: BPR projects usua lly sto p afte r impleme nting the new ly des ig ned p rocesses. ]f no furth e r ac t iv it ies took place, th e e nte rpr ises a nd the ir proce ·s manage rs wou ld fa ce

~eve r LtI s hortcomin gs: no informati on o n the ac tu a l perfo rmance o f bus iness processes wou ld be ava ilable,

dec is ions about effec ti ve resource a ll ocat ion coul d not

be mad~ on a sound basi s, d iagnos ing the weaknesses o f bus in ess processes would be hard , and dec is ion

makin g rega rdin g co rrec ti ve a c ti o ns wo uld be exceeding ly diffi cu lt. Dea ling with these aspects is the

aim ofaPPMS.

3. Performance Measurement: State Of The A,·t Performance measu rement systems have been around

for quite some time. The inte ll ectual roots of today 's

measurement systems can be found in the pe ri od of

move ment towards sc ientific management at the end of

the 19th century. For a long time, the most popu lar measurement system was the so-called DuPont scheme,

introduced in 191 9 by the DuPont company. Even though the DuPont scheme (whi ch had as its main measure

'return on investment' ROI) has been c ri tic ized heav i Iy, it is s till be ing taught in its origi na l or in a sli g htl y

m odifi ed fOfm . Much m ore importantly , in man y e nte rpri ses, the co ntro ll e rs s till assess performan ce

mainl y throug h finan c ia l measures. Moreover, to the

ex tent that managers do focus on finan c ia l parameters,

they have a strong incenti ve to m~\J1ipulate the

fi gures they report. ) A furthe r aspec t is rai sed by

Letza: " ... traditi o nal measure me nt sys te ms have a

contro l bi as, that is, they specify the parti cular acti ons

they want empl oyees to take and then measure to see w hether or not the employees have taken these acti onsthey try to control behav iour."()

During the 1980s and 1990s the s ituation c hanged in

a s ignifi cant way: self-assess me nts, qua lity awards,

be nchmarkin g, ac ti v it y-based cos t ing, capab i li ty

maturity model, balanced scorecard , workflow-based

monitoring, etc. were the buzzwords wh ich dominated

discuss ions in the fie ld of performance evaluation. T hese approach es are dis c u ssed be low and th e ir m a in

characteri stics are sLlmmari zed in Table I.

3. 1 Activity-Based Costing

Activity-Based Costing (ABC) was developed in the

mid 1980s within the framework of Cost Manageme nt

System-Programs by Computer A ided M anu fac turingInte rnati ona l, In c . The ir conce ption came fro m th e fo ll ow in g co ns id e rati o ns : Mod e rn m a nufac turin g, log isti cs and info rmati o n techn o log ies c hange, to a cons iderab le degree, the process and cos t structures. Instead of direc t, va lue added manufac tu ri ng ac tiviti es more and more planning, monitoring and contro lling

activ ities, in the indirect ranges, dom inate in enterprises.

As a con~:equence thi s activ ity shi ft bas substanti al effects o n th e ope r a ti o nal co s t s tru c ture. The g row in g importance of fi xed overhead cos ts leads to the des ire for bette r cos t transparency by developi ng A BC. In other

words, ABC systems assign the costs of an organiza ti on's acti vities more accura te ly to its products and produc t li nes. ABC sys tems are designed by firs t ident ify ing the

act iv i ti es performed by eac h su pport an d ope rati ng

.-' I

KUENG & KRAHN PROCESS PERFORMANCE MEASUREMENT SYSTEM 151

Table I - Characteristics of selected measurement approaches

Criteria

Approach

DuPont scheme

Activity-Based Costing

(ABC)

Balanced Scorecard (BSC)

Self-Assessment (e.g. by

the EFQM model)

Competitive

Benchmarking

Statistical Process Control

(SPC)

Workflow-based

Monitoring

Capability Maturity Model

(SW-CMM)

Process Performance

Measurement System

(PPMS)

Objects measured

enterprise

activities and

processes

enterprise or

organizational units

enterprise or

organizational units

enterprise,

organizational units,

processes

processes

processes

software processes

processes

depa rtment a nd the n computing the unit costs of performing these activities .7. x

3.2 Balanced Scorecard The Balanced Scorecard (BSC), developed by Kapl an

and Norton~, was developed to describe an organization's overa ll performance using a number of financial and nonfinancial indica tors on a regul ar basis. For thi s purpose a framework with four perspectives has been suggested : th e fin anc ial , the customer, th e inte rnal bus iness, and the learning and growth perspective. According to the originators, the application of this tool can be seen in three areas: for the purpose of strategic perfo rmance reporting; to link strategy with performance measures ; to present different perspectives. An important

Frequency

recurring

recurring

recurring

nonrecurring or

recurring

nonrecurring or

recurring

continuously

continuously

recurring

recurring or

continuously

Type of measures

financial

financial

financial and

nonfinancial,

quantitative and

qualitative

mainly nonfinancial

mainly nonfinancial

and quantitative

mainly nonfinancial

and quantitative

mainly nonfinancial

and quantitative

nonfinancial

financial and

nonfinancial,

quantitative and

qualitative

Recipients ofresults

middle and top

management

finance department

mainly top

management

middle and top

management

middle and top

management

middle management

and process actors

middle management

and process actors

middle management

and process actors

middle management

and process actors

characteri stic ofBSC is that the tool is concentrated upon corporations or organizational units such as strateg ic

business units . It looks at business processes only in as far as they are c riti ca l for achieving customer and shareho lder objec tives. 111

3.3 Selj~assessfll enf

The roots of the so-called self assessmen ts can be seen in the quality movement which started in Japan. In 1951 , Japan awarded the first quality-driven enterprise with th e so-ca ll ed D e min g Application Prize. Encouraged by the Japanese success the USA launched th e Malcolm B a ldrid ge Nationa l Quality Award (MBNQA) in 1988 . Finally the European Foundation for Quality Management (EFQM) followed in 1992 with


the European Quality Award (EQA). In the American approach the criteria used belong to the following seven categories : leadership, strategic planning, customer and market focus, information and analysis, human resource deve lopment, process management, and business results .11 The EFQM model on the other hand applies the following nine categories of criteria: leadership, people management, policy and strategy, resources, processes, people satisfaction, customer satisfaction, impact on society, and business results .12 These criteria can be used separately, i.e. without applying for an award. From thi s it follows that a self-assessment, based on the approaches di scussed, may help to assess process performance , U but one has to keep in mind that the primary focu s is upon organization s , and not on processes.

3.4 Competitive Benchmarking " ... we reali sed that benchmarking could be applied

to all aspects of our business , and comparing ourselves aga inst companies outside our immediate competition", is a statement from two Xerox employees, Cross and Iqbal. I ,) It is not accidental that a quote from Xerox has bee n c ho se n, s ince Xe rox was th e company that introdu ced th e now w id e ly appli e d c oncept of benchmarking. In additi on to a systematic evaluation of business performance, benchmarking seeks to achieve a second goal , the identifi cati on of the bes t prac ti ces; but thi s is beyond the scope of thi s paper. W hat is the relevance of competitive benchmarking within the fi e ld of process performance measurement? The benefits are twofold. First, it can be llsed to stimulate the di scuss ion of perfo rmance measure ment. Kn ow ing the process pe rfo rman ce leve ls of an exce ll e nt com pany may moti vate not onl y chief executi ves, but also lower-level manage rs and ordin a ry s ta ff. Seco nd , co mpetiti ve benchmark ing can be used to set targets for the process perfo rmance leve l a company wants to achieve.

3.5 Statistica l Process COlltro l Acco rdin g to Juran and G ryna stati sti cal process

cont ro l (SPC) can be defined as " .. . the applica ti on of statistical methods to the measurement and analysis of variation in any process" l'i. The essence of SPC is to take as much vari ati on as possibl e out of the process. In oth er words, the main objec ti ve of SPC li es in the achievement of stable processes through a reducti on of process variati on. Stability in a process, i.e . a state of s tati s ti ca l co nt ro l, makes it poss ibl e to predi c t th e

behaviour of the process. To this end, making reliable predictions regarding product quality (i .e. predicting whether the product specifications will be met) has become an important tool of competition. 15

3.6 Capability Maturity Model for Software The Capability Maturity Model for Software (SW

CMM), was developed by the Software Engineering Institute (SEI) of the Carnegie Mellon Universi ty in Pittsburgh. The underlying premise of SEI's maturity model is that the quality of software is largely determined by the quality of the software development process applied to build it. By means of a questionnaire, an organization can assess the quality (maturity leve l) of its software process. The five stages, defined by SEI, are as follow s: ( I) Initial, i.e . the software process is characterized as ad hoc , and occasionally even chaotic. Few processes are defined, and success depend s on individual effort and heroics. (2) Repeatable . (3) Defin ed, i.e. the software process for both management and engineering activities is documented, standardized, and integrated into a standard software process fo r the organization. (4 ) Managed, and (5) Optimizing, i.e. continuous process imp ro ve me nt is enabl ed by quantitative feedback from the process and from piloting innovative ideas and technol ogies . 16, 17 One of the most important strength s of the CMM mode l is that each maturity level (except leve l one) is decomposed into several key process areas that indicate the areas an organization should focus on to move fro m one leve l to the next.

3.7 Workf low-based Monitoring During the past few years workflow systems have been

g iven considerable attention, both in research and in practi ce . Workfl ow sys tems support automatic or semiautomatic executi on of process instances, coordinati on between process ac ti viti es, and the communication between process ac tors, As a by-product of thi s support masses of data are gathered . They ca n be evaluated aut omati ca ll y and may o ffe r useful info rm ati o n regarding ac tivity-related cos ts, queuing ti me of process instances, workl oad of process paTtic ipants, etc . While traditional measurement covers the fitem in its ent irety, workfl ow-based monitoring concentrates upon business processes. A further difference lies in the time peri od reported . Traditi onal contro l offers a pos t-hoc view, whereas workflow-based monitoring has the character of real-time reporting. IX The merits of workflow-based


Financial aspects

Innovation aspects

Societal aspects

Customer aspects

Employee aspects

Figure I - Five performance relevant aspects

monitoring lie in the fast reporting procedure as well as in its focus on business processes. Its limitations, on the other hand, are that qualitative performance data and performance data about activities carried out manually, can hardly be taken into consideration. A technical view is given by the Workflow Management Coalition which defines the term Workflow Monitoring as " ... the ability to track and report on workflow events during workfl ow execution . Workfl ow monitoring may be used, for example, by process owners to monitor the performance of a process instance during its executi on"IY.

3.8 Comparison of Measurement Approaches

As we have seen in Secti on 2 , process-ori ented organi zations need a process management which is able to measure the current level of process performance. Therefore a measurement system is needed which is f ocused upon processes - and not on organi sational units such as departments. Since business processes may cross departments or even divi sions, thi s aspect is central. Additi onall y, effecti ve process management requires a broad spectrum of performance-relevant da la. Thus, fin anc ial and nonfinanc ia l data as we ll as quantitati ve and qualitati ve data are needed . From Table I we can see that none of the measurement approaches fulfil these two criteria . The aim of a PPMS is to fill thi s gap.

4. PPMS: The Concept

In general, a PPMS can be seen as an information system which supports process actor and their colleagues to improve the competitiveness of business processes sustainably. It is a tool to visualize and to improve process performance continuously. Thus, it assists both a total quality management philosophy and a processbased approach. One of the main characteri stics ofPPMS is that it presents an integral and holistic view of the performance of business processes. In order to guarantee a sound view, we apply a stakeholder-driven approach. The stakeholders we take into account are the following: mon e y le nd e rslin ves to rs, e mplo yees, cu s to me rs (suppli ers and buyers), and soc iety. Each group of stakeholders is represented by an aspect or a dimension of performance. Thus, the aspects of performance we are looking at are as follows: ( I ) financia l aspects (to measure the degree of sati sfaction of the money lenders/ investors), (2) employee aspects, (3) customer aspects, and (4) soc ietal aspects. As innovati on is an essenti al driver of future perfo rmance, a fifth aspect has to be added - innovati on; (see F igure I ).

The main functi onality of a PPMS deals wi th the fo llowing (Figure 2):

The PPMS collects the current va lues (as-is values) of indi v idual , process -s pec ifi c pe rfo rm ance


Process Perfonnance Measurement System

(PPMS)

gatherperfonnance-

"'''\ ~~ \ '\

Business process actors

Figure 2 - PPMS fro m a conceptual view

•

ind icators. (The e li c ita ti on of th e ind icato rs is di scussed in Section 5.) T he PPMS compares current values again st target valu es (to-be va lu es) a nd hi stori ca l va lu es. It calculates the trend, i.e., it establi shes whether the

gap is widening or narrow ing. T he PPMS calcula tes 'cause-effect' relationships between the appli ed pe rfo rmance indi ca tors . It shows the dependencies between the indica tors and g ives hints as to whether a certain indicator could be used as a lead indicato r o r an early-warning

indica tor. T he PPMS di sseminates the results (current va lues, hi storical va lues, target values, and trend) to the process ac to rs . They can use th e informati on prov ided in order to ident ify corrective actions (e .g. process modi ficati on, stronger IT support, training, rearrangin g informati on fl ow, etc.) which should lead to a higher leve l of process performance .

s. Composing A PPMS: 9 Steps Taking in to account the conceptu al view and the

functionalities required as presented above, it becomes

obvious that PPMS cannot be bought in the form of prepac ked, o ff-th e she lf so ft ware. A lth oug h popul ar enterpri se resource pl anning (ERP) systems like Baan, P eo pleS oft , or SAP have fac iliti es to genera te performance reports, they have substantial shortcomings: firstly, the measures collec ted do not take qua litati ve aspects into considerati on. Secondly, s ince most ERP systems were built before bus iness processes became regarded as a central organizational concept, the objects measured are not always processes. Thirdl y, the reports generated comprise too much deta il which can lead to los ing one's bearings .

In order to redu ce th e sho rtco min gs of process pe rfo rm a nce meas ure me nt , F rib ourg U ni ve rs it y (Switzerland) launched the project PROMOSYS in 1996 . In co-operati on with four e nterpri ses, we composed enterpri se- and process-specific PPMS prototypes. T he four partic ipating enterpri ses can be charac teri zed as fo llows: The first one is a multinational pharmaceutical company; the PPMS to be built has to support va rious processes within the area o f 'fin ance ' . The seco nd enterpri se is a med ium-sized Swiss commerc ial bank; the process to be supported is ca lled ' managing mortgage

).


applications'. The third enterpri se is a small wholesaler which operates mainly in Switzerland; the process to be supported is called 'acquisition of new customers'. The fourth enterpri se produces e lectronic components and has manufacturing sites in four countries; the PPMS will support the ordering process - it starts with 'order entry' and ends with "checking customer's payment". The size of the partic ipating enterpri ses va ries from 50 to 60,000

employees.

The approach cons ists o f nine steps we have chosen

in order to compose a PPMS .

Step 1: Idelltifyi1lg busi1less process goals. Business processes and thei r acti vities have to make a contributi on to the process goals. Therefore process goals (sometimes referred to as process objec tives) have to c larify w hat is to be achieved for a business process to be competiti ve in the long tenn . In thi s first step, process goals are estab li shed th rough a co ll aborati on between the vari ous process parti c ipants , e.g. process manager, the process actors, the management of the enterp ri se, and the process customers (suppliers and buyers). As indicated in F igure 3, potential process goa ls are ' little working capita l', ' hi a h customer satisfac ti o n ', o r 'good working

I::>

atmosphere' .

Step 2: Defillillg illdicators for each process goal. T hrouoh the use of indicators it may be judged to what

I::>

ex tent the process goa ls have been fulfilled. In order to find possible ind icators for a certain goal, the foll ow ing

question can be asked: Which indi ca tor(s) can be used in order to measure (o r to get an indication of) the exten t to which a certain goal is ful filled? It is obvious that

many goa ls cannot be measured sufficiently by a sing le aoa ls in the foreoround and do not take furth er aspec ts -I::> I::>

which are not less important - into cons ideration. To broaden the scope towards the five aspects mentioned in Figure I , we supported the d iscuss ion through a li st of possible goa ls and indica tors for each of the five areas .

Step 4: E llsuri1lg acceptall ce . One of the crucia l req uirements fo r th e e ffe ct ive use of PPMS is the acceptance of the chosen indicat ors - by the managers as well as by the other process actors. Hence it is essenti a l to ensure that process parti c ipants can express w hether or not they cons ider the proposed goals and indi cators to be usefu l. Based on thi s feedback (obtained through a 1uesti on naire , fa ce- to- face-communicati on, or g roup

discu ss ion) goals and indicators can be changed to meet the customer's requirements more effectively.

Step 5: Defining data sources and target values. For each indicator one has to define where data (input) come from and how these data can be accessed. Potential data sources are: da tabases of ERP sys te ms, workflow management systems or customer surveys. Furthermore, target values (to-be values) have to be dete rmined for eac h indicator. Omitting the definiti on of target va lues would not onl y make it impossibl e to de termine the

degree of goal fulfilment , it would a lso lead to a PPMS without moti vati onal effect. In order to set realist ic but challengin g target values the concept of compet iti ve benchmarking can serve as a he lpful instrument.

Step 6: Judging technical feasibility alld eco1lomic efficiency . To assess the current performance level of the se lected indica tors, different data sources have to be accessed. Through the identification and definit ion of data sources, hints concerning feasibility and costs can be obtained . By comparing the costs for gathering the necessary data aga in st the potential value of an ind icator, economic effic iency can be approx imated. If the number o f indi cators has to be reduced, econo mic efficiency crite ri a (po tenti a l va lue vs. costs) can be applied. What should be done if data on a certa in performance indicator are ex treme ly hard to access? Unfortunately, there is no c lear answer. As Austin21J points out , many important (c riti ca l) performance indicato rs a re difficult and expensive to measure, and it is tempting not to take them into cons iderat ion. On the other hand it would not be

w ise to measure a ll c riti ca l indicators. In short , the benefits of an indicator mu st exceed the costs .

Step 7: Implemelltillg the PPMS . O nce indicators , target va lues and data sources are defined, the in stmments for c1ata co llecti on, the c1ata management , and the calculati on procedure should be de termi ned and implemented . For the tec hnical part of the imple mentation a c lient/server syste m - w ith an und e rlyin g re lational data base management system - is usually appropri ate. Today 's operati onal information systems can de liver some input, but they are not suitecl to give sound, process-ori ented information. Therefore, add iti onal tools ancl in struments (e.g. to support employee surveys on a regular bas is) have to be des igned to gather the necessary in formation.

Step 8: Using the PPMS . Usi ng PPMS means measuring the current va lues of g iven indi cators continuous ly or

Aspects Process Goals Performance Indicators

Financial aspects little working capital

Cycle time between the activities "release order" and "record payment"

Proportion of orders where period allowed for payment is not exceeded

Customer aspects high customer satisfaction

Employee aspects good working atmosphere

Proportio6"ofprocess actors who say "My work load is too high"

'-------;1 Proport. of process actors who say "I'm usually suffering from a headache"

Societal aspects societal responsibility

Number of realized ecology measures per quarter year

Quantity of carbon dioxide emitted per man month

Innovation aspects )-------I{ creative and stimulated process actors

Number of innovations proposed per quarter yeM

Number of innovations implemented per quarter year

Figure 3 - An example o f goal~ and performance indicators for a business process

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..... CIl n -z o :;0 tTl CIl

<: o r Vl 00

3:: :> :;0 n :r:: , :> ~ F \0 \0 \0


regularly, comparing these current values against target values, and feeding back the information gained to the process participants. Some of these functions can be automated but others have to be carried out manually by personnel who have the necessary domain knowledge.

Step 9: Improving business processes and modifying the indicators continuously. Business processes have to be competitive in the sense that the market with its customers and its suppliers is sati sfied . A PPMS aims to achieve this . For that purpose one has to keep in mind that the market is dynamic: business processes which are valid today may be obsolete tomorrow. From thi s it follows that business processes as well as indicators have to be adapted frequentl y. Through thi s adaptation historical comparability may suffer "( ... ) but this is a minor loss. What matters is how a company is doing compared with its current competitors, not with its own past'" .

6. Conclusions Having worked two years on the conceptualization

and impl e me ntation of Process Performance Measurement Systems, the following conclusions are drawn.

The role of a business process manager, or process owner, is essenti al. He or she has to play the ro le of a leader, an entrepreneur and a negotiator. If hi s or her competence is narrowly limited and decisionmaking power is restricted it will be very timeconsuming to implement PPMS, and, additionally, PPMS cann ot be deployed effect ive ly if th e necessary changes cannot be realized by the process team.

• If PPMS is perceived as a sys tem dedicated to managers, resistance to feeding the sys tem (i.e. not entering needed data) may result. In other words , PPMS mu st offer a be ne fit for eac h process participant - an incentive to do the job better and to be more goal-direc ted .

• In order to compose PPMS, communi cation within the process team and communication with different organizationa l units (e.g. the IS department) is a key factor. To facilitate communication, the business process should be documented graphica lly. One of the cruci al aspects in the process of building PPMS lies in the identifi cation of the appropriate performance indicators. Generally speaking, two

•

•

possibilities exist: ( I) pre-defined, generally valid indicators can be applied; or (2) indicators have to be fitted exactly to a given enterprise and its business proce sses. As mentioned above, in all four participating enterprises, the second approach was chosen - and we are convinced that this approach was appropriate. From our experience we can also conclude that process goals were a good starting point for gathering the right indicators. However, it turned out that the identification of the business process goals was often very time consuming. This may be connected with the fact that until recently, in most enterprises, goals were defined only at the enterprise or divi sion level, but not at the business process level. Thinking in terms of process goals helps both the process owners and the process actors to put forward the idea of a 'process management '. The definition of indicators was also time consuming. E speci a ll y difficult was finding quantitati ve measures for aspects w hich are rather qualitative in nature (e.g . customer satisfaction , social aspects , etc .). Process indicators have to be accepted not only by the process owner and hi s/her colleagues but also by the next higher management level. If thi s is not the case performance-relevant data from PPMS will not be regarded as a solid basis, a basis to initi alize or to promote broad corrective actions. In order to impro ve acceptance , th e process actors were involved in the task of defining the indicators: workshops have been organized and questionnai res have been used to get feedback from process actors. In contrast to the other measurement instruments, such as Balanced Scorecard, PPMS measures the performance of business processes - and not of corporati ons or organizational units. As PPMS may offer a ho li sti c view on processes, it may effect ive ly support a process-oriented organi za ti on, or an organi zat ion which wants to become processoriented. The implementati on of PPMS requires a lot of resources and is therefore expensive. While the cos ts for hardware and software (e.g. interfaces to ex isting software, software for presenting the results) might be moderate, the labour cost for the conceptual part of the implementation can reach a level where it becomes difficult to claim that the benefits ofPPMS clearly exceed the yie ld .


• Managers and business consultants quite often see performance measurement systems as a 'cockpit'.~ Using this metaphor the process manager is seen as somebody who has to check various instruments (where the level of performance for selected indicators is shown) constantly. As soon as an unexpected signal appears, or a light switches to red, the process manager queries his information system to find the source of trouble . It is certainly difficult to describe the way in which PPMS should work, but a purely mechanistic approach would definitely be inappropriate. Successful deployment of PPMS requires organizational and social infrastructure. A corporate culture with a trusting environment is needed where process actors participate in designing and measuring their own tasks .

Finally it can be observed that today's performance measurement systems still lack effective measurement of nonfinancial aspects and that they are not focused upon business processes. We believe that process performance measurement is a necessity for a modern process-oriented organization . Based on the authors' experiences with several enterprises it seems very unlikely that a universal set of performance indicators can be applied successfully to all business processes. Thus, performance indicators must be process-speci fic and have to be derived mainly from process goal '. Thi s al so implies, that it will not be possible for an off-the shelf software to support the measurement of process performance fu I I y.

Acknowledgement The authors are grate ful to the CTI (Commission for

Technology and Innovation, Berne) for the ir funding .

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KUENG & KRAHN PROCESS PERFORMANCE MEASUREMENT SYSTEM

Peter Kueng is a Research Assos iate of the University of Fribourg, Switzerl and. He received hi s Ph D in Information System in 1994. He recently spent two years as Visiting Researcher at Linz University and Manchester Uni versity. Hi s research focuses on pl anning and development of IS , process management , and worktlow system.

Adrian Krahn is a Consultant of A T. Kearney (Internati onal) AG, Switzerland. He received hi s Ph D in In fo rmation Systems in 1998 from Uni versit y of Fribourg. Before joining theA T Kearny he worked fo r three years as a project leader at F HotTmann-La Roche AG, Sw it ze rl and . Hi s current resea rch interes ts include process management, and process measurement.

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