Best Practices in the Governance of Business Process ...

1 best Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Practices in the Governance of Business Process ManagementPaul HarmonExecutive EditorBusiness Process Trends 2005, Business Process Gradual Revolution in Management Thinking In the aftermath of the Industrial Revolution managers followed Adam Smith, Henry Ford, and Frederick Taylor subdivided tasks toachieve 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.

2 For most companies its just begun, but its steadily gaining tractionBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Integration in NinetiesSalesDepartmentExecutiveManageme ntHorizonally Integrated Business ProcessThat Delivers A Specfic Product to a Targeted Group ofCustomersStrategyCommittee 2005, Business Process : Horizontal & Vertical AlignmentSalesDepartmentExecutiveManagem entStrategyCommitteeVerticallyIntegrated Measures,Managers, andResourcesEmployees & IT Applications andInfrastructureHorizonally IntegratedProcessesFrom Suppliers to CustomersBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business 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 2005.

3 Business Process 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 ActivitiesBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Management ConcernsSpecific ProcessValue ChainPlans & GoalsProcess Automatedby IT SystemsProcess Performedby EmployeesPhysical Plant and Hardware ProcessLevelImplementationLevelProcessMa nagement andMeasurementSenior Management - Better Overview of What's Happening - Better Way to Plan for Change - Better Way to Assign ResponsibilitiesMiddle Management (Including IT Mangers) - Better Overview of What's Happening - Better Way to Plan for Change - Clearer Priorities - Better Way to Assign ResponsibilitiesSupervisors and Change Specialists - Clearer Priorities - Better Understanding of Task - Better Way of Measuring Results 2005, Business Process Aside.

4 Processes Come in Different SizesValue ChainBusiness ProcessBusiness ProcessBusiness ProcessProcessProcessProcessSub-ProcessS ub-ProcessSub-ProcessSub-Sub-ProcessActi vityActivitySub-Sub-ProcessArchitectureS COR FrameworkProcess Redesign ProjectsBusiness Rule ProjectsSix Sigma ProjectsIT Automation ProjectsSAP Process ModelsBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Porter s Value ChainNew ProductDevelopmentOperationsDistribution Marketingand SalesServiceProcurementTechnology DevelopmentHuman Resource ManagementCorporate ManagementMarginSupport ProcessesCore Business ProcessesFinance and AccountingFrom Michael Porter, Competitive Advantage, Harvard, 1985 2005, Business Process Corp. Functions and Value ChainsUnisysSeniorManagementMarketingFin anceSalesServiceManufacturingNew ProductDevelopmentStrategy CommitteeValue Chain: Systems IntegrationValue Chain: OutsourcingValue Chain: Network ServicesValue Chain: Core ServicesValue Chain.

5 Enterprise Server TechnologyOther Value ChainsBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process a Business Process Architecture The key tool for Process management A high-level overview of the value chainsand key processes that make up the organization An alignmentof strategic goals, value chains and key processes A clear-cut way to monitor the performance of the value chainsand processes (KPIs) A BP Architecture is NOT an IT EA Architecture 2005, Business Process Process Management Alignment ProcessOngoing BusinessStrategic ProcessBusinessModelManagem entPlanPerformanceMeasuresBusiness Process ArchitectureCEOV alue ChainSubProcessActivitiesProcessSubProce ssSubSubProcessActivitiesOrganizational Alignm entSee that models, measures and managem ent plans arealigned with those above and belowProcessHierarchyManagementHierarchy LineManagersMiddleManagersSupervisorsBus ProcessBus ProcessProcessBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Business Process Frameworks BP Frameworks are often called Operation Reference (OR)

6 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 2005, Business Process MODEL: Level 1 SupplyChainDeliverMakeSourcePlanReturnBe st Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Level 1 SCOR NotationS1M1D1S1S1D1S1M1D1 Key OtherRM SuppliersEuropeanRM SupplierRMSuppliersALPHAA lphaRegionalWarehouseCustomerDR1SR1DR1SR 1SR3DR3P1P2P3P4P1P2P3P4P1P2P4S2M2DR1D2SR 1S2 2005, Business Process s Level 1 ScorecardPerformanceAttributePerformance Attribute DefinitionLevel 1 MetricSupply Chain DeliveryReliabilityThe performance of the supply chain indelivering: the correct product, to the correctplace, at the correct time, in the correctcondition and packaging, in the correctquantity, with the correct documentation, tothe correct PerformanceFill RatesPerfect Order FulfillmentSupply ChainResponsivenessThe velocity at which a supply chain providesproducts to the Fulfillment Lead TimesSupply ChainFlexibilityThe agility of a supply chain in responding tomarketplace changes to gain or maintaincompetitive Chain Response TimeProduction FlexibilitySupply Chain CostsThe costs associated with operating thesupply of Goods SoldTotal Supply Chain ManagementCostsValue-Added ProductivityW arranty / Returns ProcessingCostsSupply Chain AssetManagementEfficiencyThe effectiveness of an organization inmanaging assets to support demandsatisfaction.

7 This includes the managementof all assets: fixed and working Cycle TimeInventory Days of SupplyAsset TurnsCustomer Facing AttributesInternal Facing AttributesBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Benchmarks Provide Instant ROI50%$30M Revenue$30M Indirect Cost35 days97 days0%63%Supply Chain SCOR cardIndustry BenchmarksOverview Metrics SCOR Level 1 MetricsActualParityAdvantageSuperiorValu e from ImprovementsDelivery Performanceto Commit Date85%90%95%Fill Rates94%96%98%EXTERNALS upply ChainReliabilityPerfect OrderFulfillment80%85%90%Order FulfillmentLead Times7 days5 days3 daysFlexibilityResponsivenessProduction Flexibility30 days25 days20 daysTotal SCMM anagement Cost19%13%8%3%INTERNALCostWarranty CostNANANANANAV alue Added EmployeeProductivityNA$156K$306K$460 KNAI nventory Days ofSupply119 days55 days38 days22 daysNAAssetsCash-to-Cash CycleTime196 days80 days46 days28 daysNet Asset Turns(Working Capital)

8 Turns8 turns12 turns19 turnsNASupply ChainResponse Time82 days55 days13 days45 days$7 M Capital ChargeKey enabler to cost andasset improvements$30M Revenue 2005, Business Process 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 ActivitiesBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process BP Management ModelPlan & OrganizeProcessySet goals and expectiationsyEstablish plans and budgetyProvide resources & staffyImplement processMonitor & ControlProcessyMonitor processyReinforce successyDiagnose deviationsyTake necessary correctiveactionsExpectations,Plans & ResourcesResultsData AboutResultsGoals/MeasuresJob Functions of a Manager Responsible for a ProcessInputsChanges in Goals and PlansFeedbackProcessExecutedProcess Measures 2005, Business Process Managers and MeasuresSOURCEPROCESSS2 SourceMTO Recieve ProductMeasureProcessMonitor &Plan &ReportingRelationshipMeasureProcessMoni tor &ControlProcessManager Responsible for ProcessPlan &OrganizeProcessMonitor &ControlProcessManager Responsible for ProcessPlan &OrganizeProcessMeasureProcessMonitor &ControlProcessManager Responsible for ProcessPlan &OrganizeProcessBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005.

9 Business Process the Management of ProcessesCEOE xecutive CommitteeProcessManagementTeamDeliveryDe partmentManufacturingDepartmentSalesDepa rtmentCustomerProcess ArchitectureCommitteeSales Value ChainSalesProcessDeliveryProcessManufact uringProcessVPDeliveryVPManufacturingVPS alesSVP WidgetProcessWidgetProcess 2005, Business Process Specific Example of BPM ManagementPamela GarretsonDirector, Business ExcellenceBoeing Airlift and Tanker ProgramsBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process Boeing Airlift and Tanker OrganizationCommercialAirplanesSharedSer vicesPhantomWorksIntegratedDefenseSystem sThe Boeing CompanyHQ in Long Beach, CAAirlift andTankerProgramsBoeingCapitalCorporatio nConnexionbyBoeingAirTrafficManagementAi r ForceSystemsC-17 Program767 Tankers ProgramC-17 ProgramAdvanced A&T 2005, Business Process Boeing A&T Enterprise Process ModelBest Practices in BPM GovernancePaul HarmonIQPC BPM May 2005 2005, Business Process one Process level is defined, the next lower level is identifiedLevel 1 Process 2 Process 0 Process of ProcessesLevels of ProcessesAircraft and Missiles - Southern California (A&M-Aircraft and Missiles - Southern California (A&M-SoCalSoCal))

10 Enterprise Process ModelEnterprise Process Enterprise Enterprise Enterprise Support & Support & Support & Provide Manage Customer Satisfaction Approach and Deploym Learn and Im plement Strengthen the Provide Human Resource Provide Security and Fire Protection Services8 .03 Provide Gene ral S ervic es8 .04 Provide Safe ty, Hea lth, & E nvironm Perform Perform Financial Provide Integrated Information Provide Flight Operations 5 Ma nage Fa cilitie s & E quipmen Provide Legal Integrate Productwith Plan and ProvideConcurrentDefinitio Verify Validate /Product & &Planning & DevelopOpportunity/Pop-Up Develop Execute Docum ent Kee p It (UNASSIGNED) (UNASSIGNED) Manage Transfer ofWork (out) Administer Manage Manage Manage Cost Manage Manage Manage Select Issue Manage SupplierPerform Assure (UNASSIGNED) Fabricate Assem Provide Assure (UNASSIGNED)