Best Practices in The Governace of Business

Best Practices in BPM Governance Paul Harmon
Best Practices
in the Governance of
Business Process Management
Paul Harmon
Executive Editor
Business Process Trends
© 2005, Business Process 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 Process
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
IQPC BPM – May 2005 www.bptrends.com 1

Process Integration in Nineties
Executive
Management
Strategy
Committee
Sales
Department
Horizonally Integrated Business Process

That Delivers A Specfic Product to a Targeted Group of
Customers
Today: Horizontal & Vertical Alignment
Executive
Management
Strategy
Committee
Sales
Department
Vertically
Integrated
Horizonally Integrated Measures,
Processes Managers, and
From Suppliers to Customers Resources
Employees & IT Applications and

Infrastructure

Process 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 Processes
– Supervisors
– Improving Specific Processes
– Managing the Employees Executing the Processes
Three Levels of Governance
• Executives – Organization Performance &

Responsiveness
• Line and Process Managers – Value Chain/Process
Performance and Priorities for Improvement
• Process Supervisors – Efficient & Effective Organization
of Subprocesses and Activities

Some Management Concerns
Senior Management
Strategy - Better Overview of What's Happening
Level Plans - Better Way to Plan for Change
& Goals - Better Way to Assign Responsibilities
Business Process Middle Management (Including IT Mangers)

Level Value Chain - Better Overview of What's Happening
Process - Better Way to Plan for Change
Management and Specific Process - Clearer Priorities
Measurement - Better Way to Assign Responsibilities
Implementation Supervisors and Change Specialists

Level Process Performed Process Automated - Clearer Priorities
by Employees by IT Systems
- Better Understanding of Task
- Better Way of Measuring Results
Physical Plant and Hardware Used.
An Aside: Processes Come in Different Sizes
Value Chain
Architecture
SCOR Framework
Business Process Business Process Business Process
Process Redesign Projects Process Process Process

Business Rule Projects
Sub-Process Sub-Process Sub-Process
Six Sigma Projects Sub-Sub-Process Sub-Sub-Process

IT Automation Projects
SAP Process Models
Activity Activity

Michael Porter’s Value Chain
Corporate Management
Support Processes Human Resource Management
Finance and Accounting
Technology Development
Procurement
Margin
Core Business Processes
New Product Marketing

Operations Distribution Service
Development and Sales
From Michael Porter, Competitive Advantage, Harvard, 1985

Unisys Corp. Functions and Value Chains
Unisys
Senior
Management
Strategy Committee
Marketing Sales Finance New Product Manufacturing Service

Development
Value Chain: Systems Integration
Value Chain: Outsourcing
Value Chain: Network Services
Value Chain: Core Services
Value Chain: Enterprise Server Technology
Other Value Chains

Defining a Business Process 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
The Process Management Alignment Process

O ng o ing B usiness
S trateg ic P ro cess
B usiness Pro cess Architecture

B usiness M anagem ent P erform ance
P ro cess M odel P lan M easures M anag em ent
H ierarchy H ierarchy
CEO
Value C hain
L ine
M anag ers
Bus Process B us P rocess
P rocess P rocess O rganizatio nal Alig nm ent

S ee that m odels, m easures and m anagem ent plans are
aligned with those abov e and below M id dle
M anag ers
S ubProcess S ubProcess
SubS ubProcess
S up erviso rs
A ctivities A ctivities

Available Business Process 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
SCOR MODEL: Level 1
Supply
Chain
Plan
Source Make Deliver
Return

The Level 1 SCOR Notation
P1 P1 P1
P3 P3
P2 P4 P2 P4 P2 P4
European
S2 M2 D2
RM Supplier
S2
M1 D1 S1 D1 S1
DR1 SR1
DR1 SR1 DR1 SR1
Key Other
S1 M1 D1 S1
RM Suppliers
DR3 SR3
Alpha
RM
ALPHA Regional Customer
Suppliers
Warehouse
SCOR’s Level 1 Scorecard

Performance
Performance Attribute Definition Level 1 Metric
Attribute
The performance of the supply chain in

Customer Facing Attributes
delivering: the correct product, to the correct Delivery Performance

Supply Chain Delivery place, at the correct time, in the correct
Fill Rates
Reliability condition and packaging, in the correct
quantity, with the correct documentation, to
Perfect Order Fulfillment
the correct customer.
Supply Chain The velocity at which a supply chain provides
Order Fulfillment Lead Times
Responsiveness products to the customer.
The agility of a supply chain in responding to Supply Chain Response Time

Supply Chain
Flexibility marketplace changes to gain or maintain
competitive advantage. Production Flexibility
Cost of Goods Sold

Internal Facing Attributes
Total Supply Chain Management

The costs associated with operating the Costs
Supply Chain Costs
supply chain.
Value-Added Productivity
Warranty / Returns Processing
Costs
Cash-to-Cash Cycle Time
The effectiveness of an organization in
Supply Chain Asset
managing assets to support demand
Management Inventory Days of Supply
satisfaction. This includes the management
Efficiency
of all assets: fixed and working capital. Asset Turns

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
50% 85% 90% 95%
to Commit Date
Supply Chain
Fill Rates 63% 94% 96% 98%
Reliability
EXTERNAL
Perfect Order
0% 80% 85% 90% $30M Revenue
Fulfillment
Order Fulfillment
Responsiveness 35 days 7 days 5 days 3 days $30M Revenue
Lead Times
Supply Chain Key enabler to cost and
97 days 82 days 55 days 13 days
Response Time asset improvements
Flexibility
Production Flexibility 45 days 30 days 25 days 20 days
Total SCM
19% 13% 8% 3% $30M Indirect Cost
Management Cost
Cost Warranty Cost NA NA NA NA NA
Value Added Employee

INTERNAL
NA $156K $306K $460K NA

Productivity
Inventory Days of
119 days 55 days 38 days 22 days NA
Supply
Cash-to-Cash Cycle
Assets 196 days 80 days 46 days 28 days $7 M Capital Charge
Time
Net Asset Turns
2.2 turns 8 turns 12 turns 19 turns NA
(Working Capital)

Responsiveness
• Process Supervisors – Efficient & Effective Organization
of Subprocesses and Activities

Basic BP Management Model
Job Functions of a Manager Responsible for a Process
Changes in Goals and Plans
Plan & Organize Monitor & Control

Process Goals/Measures Process
y Set goals and expectiations y Monitor process
y Establish plans and budget y Reinforce success
y Provide resources & staff y Diagnose deviations
y Implement process y Take necessary corrective
actions
Expectations, Data About

Plans & Resources Feedback
Results
Process Measures
Process
Inputs Executed Results
Aligning Managers and Measures
Manager Responsible for Process
Plan & Monitor & Measure

Organize Control Process
Process Process
SOURCE Manager Responsible for Process

PROCESS
Plan & Monitor &
Measure
Organize Control
Process
Process Process
Reporting
S2 Source Relationship
MTO Products
Manager Responsible for Process
Plan & Monitor & Measure

Organize Control Process
Process Process
Plan & Monitor &
S2.2 Recieve Product

Coordinating the Management of Processes

CEO
Process Architecture
Executive Committee
Committee
Widget Sales Manufacturing Delivery

Process Department Department Department
SVP Widget VP VP VP
Process Sales Manufacturing Delivery
Process
Management Manf. Delivery
Sales Supervisor
Team Supervisor Supervisor
Sales Manufacturing Delivery

Customer
Process Process Process
Widget Value Chain
A Specific Example of BPM Management
Pamela Garretson
Director, Business Excellence
Boeing Airlift and Tanker Programs

The Boeing Airlift and Tanker Organization
The Boeing Company
Commercial Integrated Phantom Shared

Airplanes Defense Works Services
Systems
Connexion Air Force Boeing Air

by Systems Capital Traffic
Boeing Corporation Management
Airlift and
Tanker
Programs
767 Tankers
C-17 Program
Program
C-17 Program Advanced A&T
HQ in Long Beach, CA
The Boeing A&T Enterprise Process Model

Levels of Processes
As one process level is defined,

Level 0 Process 6.0
the next lower level is identified
A ircraft
Airc raft and Missile
M issile s - So uthern
uthe rn Ca lifo rnia (A&
C alifo (A & M-
M -SoC al))
So Cal
E nte rprise Process M odel
Enterprise ode l
1.0
1.0 EEnterprise
nterprise Man
M
Man
anagem
ag
agem
ement
ent
1.01 Plan and Inte grate P erform ance 1.03 Lear n and Im plem e nt Im pro vem e nts 1 .05 Provide Com m u nicatio ns 1.07 Perfor m Self Gover nance
1.02 M anag e Proc edural Docum entation 1.04 Stren gthen the Team 1 .06 M anage Custom e r Satisfaction
Approac h and De ploym ent
Level 1 Process 6.02

2.0 3.0
3.0 4.0
4.0 5.0 7.0
7.0
2.0 P ro gram
Pro In tegrate
Integrate 5.0 6.0 Po
PPoost
Acqu ire
Acquire Pro gram Integrate SSu
uppplier
plier 6.0 st
A cquire PPlan
lanning
ning && P ro duct
Pro up plier PPro Delivery
Business Pro duct M roductio
ductionn Delivery
B
Business
usiness Co
Con
Conntrol
trol
trol Definition
D
Definition
efinition Managem
an agemen
anagem entt Su
SSuuppo
pportrt
2.01 Dev elop 3.01 (UNASS IGNED) 4.01 Integra te Produ ct 5 .01 Selec t Sourc e 6 .01 (UNASSIG NED) 7.01 P rovide Technical
Oppor tunity/Po p- with Sy stem P ublica tions
Up Op portunity 3.02 (UNASS IGNED) Require m ents 5 .02 Issue Orders 6 .02 Fabrica te Tools
7.02 P erform Spares Sale s
2.02 Dev elop W in 3.03 M anag e Tran sfer of 4.02 Plan a nd Contro l 5 .03 M anage Supplie r 6 .03 Assem ble S ervic es
Strate gy W ork (o ut) Produc t Perform ance Product
Developm ent 7.03 P erform Product
2.03 Exe cute Ca m paig n 3.04 Adm inister Con tracts 5 .04 Assure Supplier 6 .04 Provide FOD Tr aining S upport
4.03 Provid e Quality Control
2.04 Docum ent Offe ring 3.05 M anag e Chan ge 7.04 P erform Field S ervic es
Concurr ent 6 .05 Assure Produc t
2.05 Kee p It Sold 3.06 M anag e Risk Definitio n Quality 7.05 P erform Repair
3.07 M anag e Cost and 4.04 Verify Valid ate / S ervic es
6 .06 (UNASSIG NED)
Sche dule Produc t Definitio n 7.06 P erform M aintena nce
6 .07 Certify F actory a nd M odific ations
3.08 M anag e M ate rial Floor Pr ocess es
Requir em ents S ervic es
3.09 M anag e Inve ntory 7.07 M a nage Support & Test
E quipm en t
3.10 M anag e Gov ernm en t
Prope rty 7.08 P erform Asset
M a nagem ent Se rvice s
8.0
8.0 SSup
upp
uppport
ort&& SServices
ort ervices
8 .01 Provide Hum a n Resou rce S ervic es
8 .02 Provide Sec urity a nd Fire Protec tion Ser vices
8 .03 Provide Gene ral S ervic es
8.0 5 M a nage Fa cilitie s & E quipm en t
8.0 6 Pr ovide Legal S ervic es
8.07 Perfo rm Acc ounting
8.08 Perfo rm Fina ncial Services
8.09 Prov ide Inte grated Inform ation Sys tem s
• 6.01 ______
Level 2 Process 6.02.03

8 .04 Provide Safe ty, Hea lth, & E nvironm ental Solutions
Services 8.10 Prov ide Flight Oper ations S ervic es
Sh erry W ilso n (5 6 2) 59 3 -1 3 39
(UN ASSIGN ED) = A process is now performed within a nother process or is no long er performed at all. (a tp m) R e vi se d Ju ly 1 8 , 2 00 2
h ttp ://am s-so cal.w e b.b o ein g .co m/d bb g /e p m/e pm .h tml
• 6.02 ______
• 6.03 ______ • 6.02.01 ______
• 6.04 ______ • 6.02.02 ______
• 6.05 ______ • 6.02.03 ______
• 6.02.04 ______
and so
• 6.02.05 ______
on…
Process 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

Process 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 Establish Determine Analyze Set Analyze Implement

Define Establish Determine Analyze Set Analyze Implement
the Metrics Performance Process Goals and
the Metrics Performance Process Goals andPlan
Plan Improvements
Improvements
Process Stability Improvements
Process Stability Improvements
Six to Ten Metrics from How You Predictable Where You How and Get There!
Manageable Customer’s Are Doing Performance Are Going Why You
Steps Perspective and Why Will Get
There
Process-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
Key to PBM: Process Owners Document and Define Processes,

with Customer Agreement
PROCESS DEFINITION
PROCESS DEFINITION
Integrated Defense Systems (IDS) – Long Beach
Process Title: Negotiate and Award Purchase Order Process No.: 5.02
Process Title: Negotiate and Award Purchase Order ProcessDate:
No.: 01/03/01
5.02
PROCESS PERFORMANCE AGREEMENT Creation
PROCESS PERFORMANCE AGREEMENT CreationDate:
Revision Date: 01/10/03
01/03/01
Integrated Defense Systems (IDS) – Long Beach Revision Date: 01/10/03
Next-Higher-Level
ProcessProcess: Supplier
Process
No.: Supplier
Management
No. 5.0
Process Title: Process Title Next-Higher-Level Process:
Process No.: Process No.
Management 5.0
Process Title: Process Title Creation Date: Creation Date including compliant documentation and provide
Process Objective:Creation Date:
Establish Creation
a contract Date
with a supplier,
Process Objective: Establish
clear a contract with a supplier, including compliant documentation and provide
Revision Date
Revision Date: to the
Revision clear
Date: Revision
requirements supplier. Date
Next-Higher-Level Process: Next-higher level process requirements to the supplier.
Next-Higher-Level Process: Next-higher level process
Process Measurement Minimum Annual / Process Tasks
Weighting
Process Measurement Annual /
Minimum Multi-Year
Acceptable
Process Tasks
Weighting
Factor
Inputs LevelAcceptable Multi-Year Beginning(MustBoundary
Have At Task:
Factor
Outputs
Metric Category Metric Definition Goals Benchmark
Beginning Boundary Task:
Metric Category Metric Definition Inputs Level(MAL)
(MAL) Goals Receive
Benchmark
(Must
Purchase
Least Have
“1”)At
Requisition
One Outputs
Receive Purchase
Quality Metric Definition (list company/ MAL (PR) Goals
• Purchase Requisition WeightRequisition
Least One “1”)
• Purchase Order
Quality Metric Definition (list company/ • Purchase MAL (PR) Goals
Requisition Weight • Purchase Order Performance 5.03
Quality Q organization/source benchmarked [if• Select Source 5.01 .01 Evaluate Purchase
Benchmark Requisition
• Manage Supplier
Quality Q organization/source benchmarked [if• Select Source 5.01
applicable])
.02.01Issue
Benchmark
.03.02
Evaluate
Issue and
Receive
Purchase
Undefinitized
Undefinitized
Requisition
Purchase Order
Purchasefrom
evaluate proposal Order
• Manage Supplier Performance 5.03
applicable]) .03 Receive
Supplier and evaluate
and Develop proposal
Negotiation from
Plan
Suppliers MAL
Timeliness Metric Definition (list company/ Goals .04Supplier
Solicit &and Weight
Develop
Evaluate Negotiation
Bids from Plan Customers
Timeliness Metric Definition Suppliers MAL
(list company/ Goals Benchmark
.04 Solicit
Suppliers Weight
& Evaluate
& Select Bids from
Supplier Customers
Timeliness T organization/source benchmarked
organization/source benchmarked•[ifSelect
[if Source 5.01 Benchmark
.05Suppliers
Negotiate& Select Supplier
Contract Requirements • Manage Supplier Performance 5.03
Timeliness T applicable]) • Select Source 5.01 .05Supplier
with Negotiate Contract Requirements • Manage Supplier Performance 5.03
applicable]) .06with Supplier
Develop Procurement File to
.06 Develop
Requirements. Procurement File to
Efficiency Metric Definition (list company/ MAL Goals Requirements.
Weight
Efficiency Metric Definition (list company/ MAL Goals Benchmark Weight
Efficiency organization/source benchmarked Process [if Benchmark
Efficiency E organization/source benchmarked Process [if Requirement Sources: Ending Boundary Task: Process Owner:
E applicable])
applicable]) • TA-QA-039
Requirement Sources: EndingIssue Boundary
Purchase Order Task: Process
Name Owner:Owner
of Process
Name ofCustomer(s):
Process Owner
• TA-QA-039 Issue Purchase Order Process
• 1.8.2.6
Cycle Time Metric Definition (list company/ MAL Goals Benchmark Weight Process
Name Customer(s):
of Process Customer(s)
Cycle Time Metric Definition (list • 1.8.2.6
company/
• TA-QA-111 MAL Goals Benchmark Weight Name ofSpecialist:
Process Customer(s)
Cycle Time organization/source benchmarked [if• TA-QA-111 Process
Cycle Time CT organization/source benchmarked [if Information MAIN, TPS, EDI, UDFC TRACKING Process Specialist:
Name of Process Specialist (if
CT applicable])
applicable]) Information MAIN, TPS, EDI, UDFC TRACKING
Systems SYS
Name of Process Specialist (if
applicable)
Systems applicable)
MD-1771-01 (06 JUN 2002) REVISED (Must have concurrence SYS
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
Process Owner’s Name Process Customer’s Name(s) Process Specialist’s Name
Process Owner’s Name Process Customer’s Name(s) Process Specialist’s Name
(Must have concurrence on file for all process changes.
(Must
Use second page have concurrence
if necessary on filemetric
for additional 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

Process Owners Define the Process in a Flow Chart

PROCESS FLOW CH ART
A p p lie s T o : < B u s . U n it/P ro gra m N a m e H e re >
W ho In p u t P ro c e s s N u m b e r: 5 .0 2 O u tp u t
R e s p o n s ib le M a jo r T a s k s fo r: N e go tia te a n d A w a rd P u rch a se O rd e r C re a tio n D a te : < O rig in D a te H e re >
O rg a n iz a tio n o r
In d iv id u a ls P ro c e s s O w n e r: < P ro c e s s O w n e r N a m e H e re > R e vis io n D a te : < R e vis io n D a te H e re >
3 .0 8.04 R elea se
P u rchase P u rchase
R equisition s and R eq uisition
W ork O rd ers
S u p p liers S u pp lier P u rchase

P rop osal O rd er
N e go tia te
Program T ech nical R e ce iv e a nd C ontra c t
a
E n gin eer E va luation E va lua te R e quire m e nts
P rop osa l fro m w ith S up p lie r
b S u pp lie r a nd
D eve lop
C ost C ost/P ric e N e go tia tio n
A n a lyst A n alysis P la n a
S o lic it a nd
Iss ue D eve lop Issue
E va lua te B id s
B u yer U nde fin it iz ed
fro m S up p lie rs
P roc u re m e nt F ile D e fin itiz e d
P u rc hase O rde r to R e quire m e nts P urc ha se O rd er
a nd S e lec t S up p lie r
N Y
R ec eive E va lua te Y
P rocu rem ent P urc hase P urc ha se
P roc ure m e nt N e go tia tio n P la n P roc u rem en t
M anagem en t C o m pe titiv e ? A deq ua te ? F ile
R e quis itio n R eq uisitio n
N P ro c u re m e nt Y
N F ile C o m p lia n t?
R
P rocu rem ent b
A d visor
E S T . T IM E T O T A L T IM E
LEGEND C o n tro l
In p u t/O u tp u t Task D e c isio n a C o n n e c to r R R e c o rd
P o in t
M D -7 1 4 8 (0 2 J U L 2 0 0 4 ) R E V IS E D
Process Owners Use Metric Categories to Establish Measures
Requirements Key Performance Categories

Measure of conformance or
Quality non-conformance (defects)
to requirements or expected
Meet or Exceed performance
Customer
Expectations Measure of success in
Timeliness meeting a customer
commitment
Process
Performance
Measure of output that a
Attain Efficiency process produces in relation
Superior to costs
Business
Results Measure of time between a
Cycle-
Cycle-Time customer request and
delivery of the product or
service to the customer

The Same Metrics Are Used at All Levels
Customers
Executive Shared Data

Leadership
Quality Timeliness
Leadership Efficiency Cycle Time
Suppliers
Teams
Process Owners Use Metrics to Measure a Process
Process 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)

Good 100 Good
100
90 90
Completed Items per Man-hour
80 80
Percent Compliant Orders
70 70
60 60
50 50
40 40
30 30
20 20
10 10
02 03 J F M A M J J A S O N D 02 03 J F M A M J J A S O N D
Assessment ND ND 1 2 2 2 2 2 Assessment ND ND 2 2 2 2 1 1

Airlift and Tanker Programs’ Quality Journey: Results Focus
6
Malcolm Baldrige Range
Performance Collier CalQED Daedalian Baldrige IW Finalist Awards

5X 7.5X 17X 18X 31X 50X+
5 Factor Largest 15 C-17
RONA
120
C32/C40 add-on UK UK1-4
Aircraft Multi-year ORDER Deliveries Milestones
Flex
+60
Decision contract Sustainment appropriation
4 +10 Days +25 Days +40 Days +20 Days +60 Days +100 Days+204 Days+107 Days* Schedule
442 Days 380 Days 374 Days 349 Days 286 Days 268 Days 223 Days 208 Days Span Time
3
5.0M 4.0M 2.5M 1.8M 1.4M 866K 707K 644K 535K Rework/Repair $
4.2% 4.3% 2.9% 2.5% 2.2% 1.9% 1.4% 1.4% 1.1% COQ
2
100 80 50 17 12 8 6 10 15 Delivery
Waivers
1 100% 100% 100%
58% 58% 67% 100% 92% 100% 100% Systems
1.7 1.6 2.3 2.9 3.3 3.4 4.1 4.2 4.1 4.2 CPAR
0
‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 KEY
* Days ahead of schedule to USAF decreased

due to a insertion of four UK planes into 2001
schedule
A BP Group and a BP Process
• 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 Process Change Process
in the same way they do other processes.

Kaplan and Norton’s Balanced Scorecard

ECI's Balanced Business Scorecard
Financial Perspective Internal Business Perspective
Goals Measures Goals Measures
Survive Cash flow Technology Manufacturing geometry vs.

capability competition
Succeed Quarterly sales growth & operating Manufacturing Cycle time, Unit cost, Yield
income by division experience
Prosper Increased market share and ROE Design Silicon efficiency, Engineering
productivity efficiency
New product Actual introduction schedule vs. plan

introduction
Innovation & Learning Perspective Customer Perspective
Goals Measures Goals Measures
Technology Time to develop next generation New products Percent of sales from new products,
leadership Percent of sales from proprietary
products
Manufacturing Process time to maturity
learning Response supply On-time delivery (defined by customer)
Product focus Percent of products that equal 80% Preferred supplier Share of key accounts' purchases,
sales Ranking by key accounts
Time to market New product interdiction vs. Customer Number of cooperative engineering
competition partnership efforts
Extending It Further
Financial Perspective Improve Shareholder Value

share price return on capital employed
Revenue Growth Strategy Productivity Strategy
Build the Franchise Increase Value to Improve Cost Structure Improve Use of
revenue from new Customers operating cost per unit Assets
sources customer profitability produced asset utilization
Customer Perspective
Product Leadership
Cutomer Intimacy
Operational Excellence
Internal Process Perspective

Become a Good
Increase Customer Achieve Operational
Corporate Citizen
Build Franchise Value Through Excellence Through
Through Regulatory
Through Innovations Customer Management Operations and
and Environmental
Processes Logistics Processes
Processes
Learning & Growth Perspective
Employee Competencies Technology Corporate Culture

An Overview of SEI’s CMM Maturity Model

Organizations with an mature mastery of their processes. 5. Optimizing
Continuous process
Organizations at this level routinely expect managers and employees to work together to
improvement is enabled by
improve processes. They understand their processes well enough that they can conduct
quantitative feedback for the
systematic experiments to determine if changes will be useful or not.
process and from piloting
innovative new ideals and
4. Managed technologies.
Only a few organizations have an organization wide
understanding of how processes relate and have
their corporate strategies and goals aligned, via the Detailed measures of the
management hierarchy to specific process activities. process and product quality
are collected. Both the
process and products are
quantitatively understood and
3. Defined controlled.
Most organizations are between levers 2 and 3. They

have processes documented and standardized but in The process for both
many cases manager's goals are only loosely linked to management and
process goals. engineering is documented,
standardized and integrated
by an organization
2. Repeatable methodology
Basic project management

processes are established to
As organizations become more mature they begin to
track cost, schedule, and
conceptualize business processes and seek to organize
functionality. The necessary
them, repeat successes and measure results.
discipline is in place to
1. Initial repeat earlier successes
The process is ad hoc. Few

activities are explicitly Entrepreneurial organizations and new
defined and success divisions that do things any way they can to
depends on individual effort get started.
and heroics.
Organizations with an immature mastery of their processes.

Responsiveness
• Process Supervisors – Efficient & Effective
Organization of Subprocesses and Activities

A Process Includes Its Management
Manage
Measure
plan control
Process
People Software
Implement Implements
Process Process
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

Rummler’s Human Performance Model
Process Defined
Activity Specifications
Activity Support
activity
measures
Activity:
Expense Enter Expense Updated Expense
Consequences
Reports Reports Report Ledger
*
Feedback
Skill, Knowledge & Capability 4. Consequences
Feedback
Geary Rummler & Alan Brache, Improving Performance, Josey-Bass, 1985
A More Detailed Human Performance Model

0. Process Defined
1. Activity Support 3. Activity Specifications
- Define the steps in the activity
- Can the performer easily recognize the or process. - Do activity standards exist?
input requiring action? - Define who will do what - Does performer know the desired output &
- Can the activity be done without standards?
interference from other activities? - Do performers consider the standards
- Are adequate resources available for attainable?
performance (time, tools, staff, information)?
activity
measures
Activity:
Expense Enter Expense Updated Expense
Consequences
Reports Reports Report Ledger
*
Feedback
2. Skill, Knowledge and 4. Consequences
Capability
- Are consequences aligned to support the
- Do the performers have the necessary 5. Feedback desired performance?
skills & knowledge to perform? - Are consequences meaningful from the
- Do the performers know why desired - Do performers receive information performer's perspective?
performance is important? about their performance? - Are consequences timely?
- Are the performers physically, mentally & - Is the information they receive: 1)
emotionally able to perform? relevant? 2) accurate?
3) timely? 4) specific? 5) easy to
understand?

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
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

For More Information
www.bptrends.com
The most comprehensive source of information and analysis on
trends, directions and best practices in Business Process
Management
Slides available on BPTrends. Go to site and enter into search:
IQPC BPM Governance Talk
pharmon@bptrends.com

Best Practices in The Governace of Business

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Best Practices in The Governace of Business

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Best Practices in BPM Governance Paul Harmon

© 2005, Business Process Trends www.bptrends.com 1

The Gradual Revolution in Management Thinking

• In the aftermath of the Industrial Revolution managers followed

© 2005, Business Process Trends www.bptrends.com 2

IQPC BPM – May 2005 www.bptrends.com 1

Process Integration in Nineties

Horizonally Integrated Business Process

© 2005, Business Process Trends www.bptrends.com 3

Today: Horizontal & Vertical Alignment

Employees & IT Applications and

© 2005, Business Process Trends www.bptrends.com 4

IQPC BPM – May 2005 www.bptrends.com 2

Process Management and Organization Management

• BPM as a Management Philosophy

© 2005, Business Process Trends www.bptrends.com 5

Three Levels of Governance

• Executives – Organization Performance &

© 2005, Business Process Trends www.bptrends.com 6

IQPC BPM – May 2005 www.bptrends.com 3

Some Management Concerns

Business Process Middle Management (Including IT Mangers)

Implementation Supervisors and Change Specialists

Physical Plant and Hardware Used.

© 2005, Business Process Trends www.bptrends.com 7

An Aside: Processes Come in Different Sizes

Business Process Business Process Business Process

Process Redesign Projects Process Process Process

Sub-Process Sub-Process Sub-Process

Six Sigma Projects Sub-Sub-Process Sub-Sub-Process

© 2005, Business Process Trends www.bptrends.com 8

IQPC BPM – May 2005 www.bptrends.com 4

Michael Porter’s Value Chain

Support Processes Human Resource Management

Finance and Accounting

New Product Marketing

From Michael Porter, Competitive Advantage, Harvard, 1985

Unisys Corp. Functions and Value Chains

Marketing Sales Finance New Product 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 Process Trends www.bptrends.com 10

IQPC BPM – May 2005 www.bptrends.com 5

Defining a Business Process Architecture

• The key tool for process management

• A BP Architecture is NOT an IT EA Architecture

© 2005, Business Process Trends www.bptrends.com 11

The Process Management Alignment Process

B usiness Pro cess Architecture

Bus Process B us P rocess

P rocess P rocess O rganizatio nal Alig nm ent

© 2005, Business Process Trends www.bptrends.com 12

IQPC BPM – May 2005 www.bptrends.com 6

Available Business Process Frameworks

• BP Frameworks are often called Operation Reference

• The Supply Chain Council’s SCOR Framework

© 2005, Business Process Trends www.bptrends.com 13

SCOR MODEL: Level 1

Source Make Deliver

• 6.03 • 6.02.01

• 6.04 • 6.02.02

• 6.05 • 6.02.03