As business process management understanding matures within organizations, new challenges will arise. Sometimes it helps to know how other disciplines have addressed similar issues as it avoids the “reinventing the wheel” syndrome. For the last decade forward thinking organizations have conducted reviews of their business processes and taken steps to streamline them, i.e., minimize the “handoffs” between business units. For publicly traded companies, Sarbanes-Oxley has increased the complexity of business processes and prevented the streamlining of certain processes. While this situation can be frustrating to employees, customers, and suppliers, it is also necessary.Other means of optimizing business processes do exist. One of those means involves measurement of the steps and sub processes can provide not only hard data, but valuable insight into where a process might or might not be improved.
Measurement within the business arena is not a new concept. Corporate performance management is all about using financial and operational measures to guide management toward achieving particular goals necessary for accomplishing the organization’s business strategy. The balanced scorecard approach is probably the most well-known and used framework for assisting organizations with developing and measuring strategic goals.What do corporate performance management and the balanced scorecard approach have to do with business process management and process improvement? Many of the lessons learned during the application of those two concepts are appropriate for business process management.
Lesson 1: “What’s measured is managed!”Lesson 2: “Technology isn’t always the solution!”Lesson 3: “Ownership is essential for accountability!”
Measurement and Management
The relationship among behavior, measured activities, and management of performance is probably the most straightforward. Behavior and tasks that are measured by the organization are also overseen by managers and their teams.
If the general ledger accounting manager knows that her department’s performance is measured solely on the number of days expended to close the books for month end, her team will make certain that the period is closed as quickly as possible. Since accuracy and adjustments are not measured, the team won’t focus as much on those issues as they will on spending as few days as humanly possible to accomplish the task.
On the other hand, if the accounting team is measured on days spent to close the period, number of corrections, and number of adjustments, the result is more likely to be one that is workable for the business as a whole.
Measuring one aspect or portion of a process motivates employees to focus on a single issue and behave to ensure that challenge is addressed rather than considering the entire process and working toward a more holistic solution.
Is Technology Really Necessary?
It is easy to be caught up in software vendor claims how automation improves efficiency, provides greater visibility into controls, or increases measurement capability. Sometimes these claims are accurate. However, in many instances, the challenges surrounding process improvement are not about technology. They are about people and performance.
Returning to the example of month end close, technology will not necessarily resolve the issues of needed corrections or adjustments to the corporate books. Technology could be used to automate some of the sub processes leading up to month end close activities thereby enabling the team to speed the process.
Turning to a different example, think about a process for resolution of a customer problem. The customer contacts the service unit by some means — e-mail, phone call, or fax. A customer service representative responds to the query and works with the customer to resolve the issue, which could occur through any one of the following:
- Walking the customer through a simple fix either by phone or written instructions
- Returned merchandise authorization
- Referral to field service
While some of these activities can function more smoothly through technology enablement, the customer’s speedy resolution relies more on the training and judgment abilities of the customer service representative, not the technical enabling software.
Owning Metrics
When an organization embarks on a metrics effort the work is not complete with the establishment of measures for its various processes. Ownership must be assigned and specific managers and teams must be accountable for the results. Otherwise, the metrics are meaningless. Too often senior and middle management work very hard to address the first part of a metrics program only to see that work shelved because the second, and equally crucial, part was not completed.
Remember, teams manage behavior and activities that are measured. If an owner is not identified and the owner’s team is not held accountable for the results, eventually they discover that they need not pay attention to the metric.
Over the last several years, certain professional services organizations have started tying customer satisfaction metrics to sales incentive compensation. The effect of making sales people accountable for customer satisfaction has changed their behavior. With a simple revenue metric, sales people tend to work very hard at establishing good customer relationships, but they have less incentive to ensure that the customer is satisfied with the result. The combination of revenue and satisfaction metrics, encourages sales people not only to build good customer relations, but to maintain them and act as a customer advocate.
In the situation of the general ledger manager, she and her team must be held accountable for:
- Number of days spent to close
- Number of corrections
- Number of adjustments (outside of accruals and ordinary items)
Without accountability for these metrics neither the manager nor her team will be motivated to improve the process and achieve better results. Ownership of metrics is an essential component of process ownership.
Measurement as a discipline in business process management and improvement is coming. If your organization is not using process metrics today, it will in the future. Rather than reinventing the wheel, look at the methodologies and tools used by corporate performance management and business intelligence professionals to address the metrics challenge. Build upon their lessons learned and you can shorten the learning curve.
