78436393BPM Are You Ready for the Future2012
Content
Knowledge and Process Management Volume 19 Number 3 pp 111–120 (2012) Published online 8 May 2012 in Wiley Online Library (www.wileyonlinelibrary.com) DOI: 10.1002/kpm.1388
■ Research Article
Business Process Management—Are You Ready for the Future?
Clemente Minonne1 and Geoff Turner2*
Zurich University of Applied Sciences, Center for Knowledge and Information Management, Zurich, Switzerland 2 University of Nicosia, European Centre of Knowledge Management Research, Nicosia, Cyprus
1
Business process management is the discipline that encompasses the analysis, modelling, implementation, execution, monitoring/control and continuous improvement of business processes. Methods and models developed for this management activity offer wide-ranging assistance to, and potential for, most organisations, yet even a general awareness of them seems to be non-existent in many organisations. An empirical study, conducted in the German-speaking region of Europe, gathered useful data on issues relating to current and future investment in business process management, including initiatives in the field of business process outsourcing. Analysis of that data allows for the critical interpretation of the current viewpoint of this business discipline as well as providing some interesting new insights into applications in use, level of maturity, realised benefits and outsourcing opportunities. A bright future exists for business process management as long as the most significant hurdle, the failure to link the discipline with organisational strategy, is overcome. The pathway to achieve this lies in the development of a reliable and effective performance measurement system that, for the most part, will be unique to each organisation. Copyright © 2012 John Wiley & Sons, Ltd.
INTRODUCTION
To better understand the modern business discipline of business process management (BPM), it is necessary to return to the early 1990s when Johansson’s term business process re-engineering (BPR) was first in vogue (Johansson et al., 1993). Sometime later, Hammer and Champy (1993) redefined BPR as a fundamental rethink and radical redesign of business processes to achieve dramatic improvements in important metrics such as cost, quality, service and cycle time. By the mid-1990s, BPR gained the unfortunate reputation of being a nice way of saying downsizing. Writing towards the end of a period of recession, Hammer and Champy believed that the lack of sustained management commitment and leadership, unrealistic scope and expectations, and resistance to change prompted management to abandon the concept of BPR. It could also be that
*Correspondence to: Geoff Turner, University of Nicosia, European Centre of Knowledge Management Research, Nicosia, Cyprus. E-mail: [email protected]
the start of what was to become an unprecedented period of economic expansion may have clouded judgement about the need for BPR. In contrast, business process optimisation, where only more effective or more efficient individual business processes should be designed, provides the foundation for BPR from the point of view of internal business analysis. The aim of business process optimisation typically lies in the reduction of processing time and the avoidance of work redundancy. Accordingly, it should be applied to all business processes throughout an organisations’ value chain so that it has a positive impact on both the intra-organisational and inter-organisational workflows. While business process optimisation has the appearance of an operational activity, this alignment with the value chain implies a strategic emphasis. Modern-day strategic planning should be an exercise in interpolation rather than extrapolation. This means that organisations start with an image of what they want to look like in the future, highlighted in their vision statement. Then, they decide on the changes required to develop that image from their current state for inclusion in their mission statement.
Copyright © 2012 John Wiley & Sons, Ltd.
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C. Minonne and G. Turner At the present time, within business organisations in the German-speaking region of Europe (in particular Switzerland, Germany and Austria), there is a degree of hype surrounding BPM. Indeed, there are a number of well-known organisations, in various industries and in many places, where implementation projects of one form or another are underway. With these observations in mind, this study was structured to address a number of different aspects relating to BPM—applications in use, level of maturity, realised benefits and possible outsourcing opportunities. Furthermore, with respect to each of these aspects, the authors were keen to understand what promoted and what impeded the adoption of BPM.
If this process takes a static view of the future, then the level of implementation is decided first and the control system put in place afterwards to identify actual deviations from plans, the causes of the deviations and the appropriate actions to remedy the situation. As one essential phase of strategy development, BPR entails a radical rethinking of an organisation’s value chain resulting in the core, supporting and management processes being subjected to a business process optimisation exercise. Generally, all of these activities are focused on business processes that have a high added-value potential for the organisation (Prahalad and Hamel, 1990) and that will be particularly derived from core processes and their underlying core competencies. The business disciplines of knowledge management (Minonne, 2009) and information management, in conjunction with relevant information systems concepts and associated information technology solutions for process support, are used extensively here. We then move forward to the next generation of BPR that is typically referred to as BPM, which can be represented as a divided cube framework, as depicted in Figure 1. The divided cube can be used as the basis for more extensive investigation of BPM. Here, the business and technology perspectives are seen to be useful when looking at BPM from a starting position especially when adopting a causal perspective. However, when subsequently viewed from a hierarchical perspective, a strategic or operational orientation is preferred depending on the extent of experience, or level of maturity, with BPM. Furthermore, it seems reasonable that, in this type of empirical investigation, you would also consider the temporal dimension, namely the present and the future. These eight different configurations defined the research areas of this quantitative empirical study.
STUDY DESIGN
At the outset, the research context and content were formulated in the manner shown in Figure 2. To facilitate the design of a quantitative survey, the first step, which is a comprehensive review of the relevant literature, was undertaken. There were about three dozen sources of particular interest from authors of publications about similar research into the qualitative aspects of BPM, which supported drafting the survey needed for an investigation along the lines shown in the divided cube framework (Figure 1).
Figure 1 Divided cube framework
Figure 2 Research methodology
Copyright © 2012 John Wiley & Sons, Ltd.
Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
BPM—Are You Ready for the Future? 113 The questionnaire that was developed comprised 41 basic and detailed questions covering BPM in each of the eight different configurations of the framework with emphasis on the use of BPM tools and business process outsourcing (BPO). The content of the questionnaire was then discussed in a workshop with business representatives who are actively engaged in the field of BPM. Thanks to the dialogue with these experts, all of whom have long-standing experience in the field of BPM, the questionnaire was assessed objectively and modifications made to establish the quality of questionnaire content so that useful and meaningful results would be achieved. that have already implemented methods or that plan to do so in the near future.
BUSINESS PROCESS MANAGEMENT—HYPE OR HOPE?
Business process management helps the organisation— in accordance with the process-oriented measures derived from its strategic objectives—with the analysis, modelling, implementation, execution, monitoring/control and continuous improvement of business processes. This potentially leads to the increase of organisational productivity, quality and innovativeness. In other words, business processes, and the clarity of their design, greatly determine the quality, the degree of innovation and the productivity of organisations. One outcome of this empirical study has been to identify the main objectives of BPM that are characterised in particular by targets of quality improvement (76%), process optimisation by means of standardisation of processes (73%) and an increase in organisational productivity (61%). A general increase in the transparency of costs and the explicit identification of cost-critical process activities were considered important in this context by 27% of respondents. Furthermore, only about one-fifth (19%) of respondents indicated that BPM is used to increase the level of innovation. Other objectives such as finding procedural bottlenecks (12%) and support for outsourcing decisions (9%) seem to play a minor role in formulating BPM activities.
Data collection An online survey was carried out in a 3-month period starting at the beginning of November 2010. The target group for the survey were individuals who had expertise in and who were currently working on a daily basis with BPM. Participants were selected randomly through relevant research groups, specialised technical forums, newsletters and invitations posted on appropriate websites. In addition, direct invitations were made using a snowball selection process to ensure that different sectors were represented in that data collection. With the confidentiality of respondents and responses being respected, all participants agreed to contribute to the study on a voluntary basis. Data collection was mostly based on assessments based on a Likert scale so that ordinal and nominally scaled attributes could be applied to the responses. For some questions, it was possible to have multiple answers. Furthermore, with every question, participants were given the ability to respond with ‘no evaluation’ simply to prevent a random response due to a lack of knowledge on that topic.
BUSINESS PROCESS MANAGEMENT MATURITY
The degree of maturity of these organisations in BPM was assessed using the business process maturity model (BPMM) as applied to the Object Management Group (OMG). To make this concept easier to understand, the model has been limited to four levels of maturity. Organisations at level 1 are considered to understand the need for continuous improvement and have a general awareness of BPM. At level 2, organisations have moved on from level 1 by identifying and addressing a few individual topics within BPM. To reach level 3, organisations must have applied substantial elements of BPM as part of their continuous improvement programme, whereas at level 4, they have established policies and procedures for continuous improvement through the application of BPM. Figure 3 shows how respondent organisations see their BPM positioning in this context. Of the respondents, 61% replied that the BPM maturity level in their organisation was at either level 1 or level 2, and 32% indicated that only certain BPM methods aimed at continuous improvement were introduced. Only 7% of the respondents Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
Data analysis In total, 219 completed questionnaires formed the sample for this study. Analysis of the quantitative data was performed using the statistical software package SPSS (IBM Corp., Armonk, NY, USA). For a more precise investigation, contingency tables were used. These tables, also known as crosstabs, contain either absolute or relative characteristics that usually provide a rich supply of data to enhance any study. In this study, crosstabs were created for all questions to facilitate a comparison between the industries and company sizes of the study participants. Here, where there were insufficient responses from a particular industry, that industry was grouped with others in the category Other industries. It should be noted that the results obtained from this study primarily reflect the opinions of executives and specialists who deal with BPM in organisations Copyright © 2012 John Wiley & Sons, Ltd.
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C. Minonne and G. Turner to be further impediments. High investment or operating costs do not appear to impede the introduction of BPM methods and systems. By breaking down these observations into different sectors, it is apparent that in information technology, as well as in the provision of services or consulting, the failure to elaborate on the financial benefits of any proposal is a key obstacle to its implementation. In the banking sector in particular, the lack of interest shown by the management team, as well as an understanding that BPM activities should be derived from corporate strategy provide a significant barrier to implementation. Figure 4 shows the relative importance of the critical success factors that are, from the respondents’ perspective, decisive in the successful implementation of BPM methods and systems. The highest ranking is given to the support provided by senior management, which is regarded by the respondents as critical to BPM success. This factor is achieved by defining clear responsibilities and the adaptation of a supportive corporate culture. All three factors relate to the principal responsibilities of an organisation’s management team and underline the importance of close involvement of senior management to ensure a successful implementation of BPM. This correlates well with the lack of interest of the leadership team being assessed by respondents as the greatest obstacle to effective BPM.
Figure 3 Attained levels of maturity
indicated that appropriate policies and methods have already been introduced. A sector-specific analysis reveals that BPM maturity levels 3 and 4 have primarily been achieved in the banking and information technology sectors. Overall, it is not surprising that organisations only reach their individual maturity optimum if they define combined guidelines, specifications and practices, and then fully implement them.
Strategy comes first Lack of support on the part of the leadership team (50%), as well as missing or inadequate specifications of corporate strategy (46%), appears to be the biggest obstacle in developing a process-oriented organisation. This revelation is not particularly surprising because organisational development and transition should be, by definition, an outcome of the direction of corporate strategy. Significantly, being unable to enumerate and explain the financial benefits of BPM (43%) was mentioned as another obstacle. The lack of expertise (42%) and lack of resources (38%) seem, according to the respondents,
Process follows strategy The study reveals that 78% of respondents believe that business processes are either not derived or only partially derived to support organisational strategy. Only 14% of respondents judge the contrary view, which is that business processes are developed mostly or completely to drive a successful implementation of organisational strategy, to be sound. The practical experience of the authors suggests that a
Figure 4 Impediments to implementing BPM
Copyright © 2012 John Wiley & Sons, Ltd.
Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
BPM—Are You Ready for the Future? 115 possible explanation for this bias lies in an inability to articulate strategic objectives into concrete measures of operational performance with a high level of granularity. What should be done when the people who matter most in an organisation, the frontline employees, do not understand the organisation’s strategy, the relevant performance measures, the cost structure and the economics of the environment in which they are operating? It is much easier to engage with a transformation process such as BPM when measures are clearly linked to strategies. Failure to do so creates misalignment of cost structures and priorities with the strategy. To avoid this problem, organisations need to improve communication. Ideally, everyone in an organisation should be quickly able to answer this question: How am I doing on what is important for the organisation? To facilitate answers, organisations need to provide tools that will help every employee align their activities with strategy. Scorecards, for example, will do this because they express the strategy in measurable terms, communicating what must be done and how everyone is progressing. There are a number of different alternative scorecards available, the most popular of which is Kaplan and Norton’s (1996) balanced scorecard. The concept of this scorecard, depicted in Figure 5, recognises the importance of both financial and non-financial performance measures as it examines our organisation through four different but interrelated perspectives: financial, customer, internal processes and learning and development. Logically, key performance indicators (KPIs) in each of the four perspectives of the scorecard should be either directly related or indirectly related to each other. Organisational strategy is the starting point and dictates the financial objectives. One way to achieve the financial objectives is to review relationships with customers and determine how we can best add value for them. The primary source of that added value lies in the quality and efficient working of an organisation’s internal business processes, which is where BPM is most actively involved. Processes cannot operate efficiently, however, without appropriate learning and development within the organisation. Identifying these links, and understanding the specific relationship between them, is key to implementing a successful balanced scorecard. This, in turn, is vital to understanding progress toward achieving the identified strategic objectives.
Structure follows process Structure follows process within the framework of sustainable organisational development. It is also particularly important that, in the context of BPM, dedicated roles be established in an organisation, which promote and support the procedural development of this management discipline. Considering that BPM itself is a process, it is reassuring that the results of the study indicate that half of the respondents have identified dedicated responsibility for BPM within their organisation. The other half seem not to have explicitly identified such a responsible person, team or department or are not able to make an observation in this regard. The study showed that those organisations in which there is identified responsibility for BPM are the most advanced in the field. The majority, or 79% of the respondents who confirmed identified responsibility, indicate that this appointment exists within the central organisational structure. Another 12% of respondents perceived this responsibility to be decentralised. The remaining 9% of respondents mentioned other structural shapes, such as a matrix organisation. Furthermore, it was determined that in two-thirds of organisations, this responsibility is found mostly in organisational management (31%) but also in organisational development (19%) and quality management (17%). In another 13% of cases, this responsibility is located in the information technology unit. In addition, it should be noted that in 64% of organisations that have identified responsibility for BPM, responsibility extends to the definition and design (modelling) of business processes. Other key findings concerning the relationship between structure and process are first, that 63% of respondents identified the responsibility resting with an internal consultancy unit, and second, in 59% of organisations, a department responsible for the maintenance and optimisation of existing business processes already existed. In an important logical contradiction, just 28% of respondents considered it important that BPM should be strictly derived from organisational strategy.
LOOKING TO THE FUTURE
Figure 5 Balanced scorecard concept. Source: Turner (2011), p.105
Respondents suggest that many functional areas are seen to benefit from the introduction of BPM (Figure 6) but the ones for which the largest benefit Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
Copyright © 2012 John Wiley & Sons, Ltd.
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Figure 6 Functional areas with maximum benefit from BPM
appears to have been achieved are consulting/service delivery (57%), information technology (51%) and procurement/purchasing (49%). It may be concluded that, from the perspective of respondents in these functional areas, optimisation of business processes would generate significant benefits for their organisations. By looking at this aspect on a sector-by-sector basis, the above answers seem to derive mostly from the banking sector. In those organisations where BPM methods are already extensively used, the functional areas—and here, it was possible for respondents to select more than one functional area—at the forefront are information technology departments with 52%, followed by (internal) service provision/consulting with 44% and procurement/ purchasing with 43%. These results are not considered exceptional because, in practice, BPM is heavily reliant on systems that facilitate information management, and in these functional areas, information technology plays a central role.
From a secondary analysis of the collected data, it was clear that, in just under two-thirds of organisations (63%) where more than one-quarter of business processes were documented, a software-based BPM tool was being used. This confirms that relatively sophisticated BPM tools are currently widely used for documenting business processes.
Business process modelling notation The study revealed that a number of accurate modelling notations were in use as shown in Figure 7. The most popular being used by 63% of respondents was the classic flow chart. This popularity may be attributed to familiarity with, and availability of, the means of production such as the Microsoft Visio software tool. Business process modelling notation (BPMN) followed in second place with 49% of respondents claiming use of this modelling notation, which is widely accepted as a standard for BPM. Other forms of modelling notation more commonly in use are event-driven process chain (47%), which is followed by unified modelling language (28%). In this context, it should be noted that, on the issue of importance of BPM standards, 54% of the respondents consider them unimportant in their organisations. On the other hand, in 33% of organisations, the issue of standards is considered important or very important. The remaining participants (13%) took no position on this issue. By looking at these findings by industry, in the sectors of banking, information technology and consulting/service delivery, modelling standards are now considered an important element in the implementation of BPM in their organisations. An in-depth analysis of the application of the notations in different industries confirms that BPMN is already in widespread use in the banking, information technology and consulting/service delivery sectors. Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
Process description and modelling The first step in the BPM lifecycle, which at the same time is usually the first level of the BPM maturity model, requires description and analysis, or modelling, of almost every business process in the organisation. Evaluation of the data collected indicates that, in 42% of organisations, between one-quarter and three-quarters of all business processes are documented. Further, in 17% of organisations, only a small part of that organisation has documented more than three-quarters of their processes. This seems to indicate that documentation of business processes is actually being carried out in a significant number of organisations. In these circumstances, they have made a fundamental step in the direction of full implementation of BPM. Copyright © 2012 John Wiley & Sons, Ltd.
BPM—Are You Ready for the Future? 117
Figure 7 Notations used in documenting business process models
Other industries, where the standardisation of process models plays a minor role, increasingly use flow charts as well as EPC. BPMN is increasingly accepted in most industries as well as in public administration. When considering organisational size, it became apparent that BPMN is not the notation of choice for small-sized and medium-sized organisations. However, it is striking that its use is common in organisations with more than 1000 employees and that considerable effort is being applied to achieve standardisation using BPMN.
Use of business process management tools At present, more than half (57%) of the respondents indicate that a BPM software-based tool was used in their organisation, and only 37% indicate that, currently, a tool was not used. These results underline the acceptance and use of software-based tools for the implementation of BPM by a large proportion of organisations. When asked about the objective behind the use of BPM tools, improvement in the quality of their business processes was the first priority for the respondents followed closely by improvement in the quality of the services and products they offered. Based on some comments it would seem that, in practice, these objectives are closely linked. Using BPM tools, organisations expect, in the first instance, to lower process costs although this is more likely to be achieved through the full implementation of BPM methods. Business process management tools were used most frequently by respondents for modelling business processes (81%). Other uses are related to the analysis of business processes (55%) and the support for governance, risk and compliance issues (46%). In addition, it was found that BPM tools were used more for automation (41%) and monitoring (38%) of business processes than their Copyright © 2012 John Wiley & Sons, Ltd.
simulation (17%). This, of course, may be attributed to the often-missing functionality of tools currently available. In assessing the importance of the functions that have a use for BPM tools, modelling of business processes was at the forefront, closely followed by analysis of the same. The respondents particularly highlighted the importance of BPM tools meeting the functionality required for these purposes. By looking to the future, modelling of business processes was still seen as the most important application. However, the respondents suggested that in the near future, they plan to launch applications that better support them in the presentation of performance indicators as well as in the monitoring of business processes. To this end, Software AG is the leading provider in the field of BPM solutions according to 35% of the participants. Microsoft, whose BPM solutions are used by 32% of respondents and SAP with 27% follow closely. Solution providers such as IBM (18%), TIBCO (10%) and Oracle (9%) are in the lower order. This analysis reveals that a variety of BPM solution providers is present in the market and in a position to challenge the traditional providers of standard commercial applications (such as enterprise resource planning, customer relationship management or supply chain management).
Performance management and measurement Earlier, it was suggested that implementation of a well-designed balanced scorecard was critical in not only linking processes and activities to organisational strategy but also understanding progress toward achieving its strategic objectives. The first task in building an effective balanced scorecard is to define strategic objectives, establish initiatives and construct targets across the four perspectives although, in this context, most emphasis is placed on the internal business processes perspective. Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
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C. Minonne and G. Turner Clearly, there is no unique solution to this issue. Uniqueness only arises in the need to have an assessable strategy, which makes it impossible to design a completely generic system for measuring the performance of an organisation’s BPM practices. Indeed, a custom solution is needed for almost every organisation. The KPIs, which form the basis of the control system for the effective implementation of BPM, need to measure current performance and guide the organisation toward its changing image of the future. To do this effectively, a system should include four compulsory elements before control may be fully established. These elements are a predetermined set of targets, a means of measuring current activity, a means of comparing current activity with each target, and a means of correcting deviations from the targets. These targets may be scientifically calculated or set arbitrarily using reasonable or totally unreasonable expectations, good or bad. The control system merely provides a means by which activity is directed toward their achievement. In general, the predetermined criteria should be stated explicitly and, for this reason, quantitative statements are preferred although not absolutely necessary. On a Likert scale of 1 to 4, where 4 represented ‘very important’, respondents in the study rated uniform and consistent measurement of targets, on average at 3.08, with no assessment of this factor below the ‘important’ rating of 3. Therefore, it seems that BPM, and particularly its performance measurement dimension, is now recognised by most organisations as an important operational task. For management accountants, this situation raises the thorny issue of how to account for its management. They need to establish a set of KPIs that assess their organisation’s performance in implementing BPM. In doing so, they should resist the temptation to focus only on what is easily measurable, which generally is the efficiency dimension. This is not to say that such measures are not useful in the right context. However, there should be an equal or greater focus on measuring outcomes that meet real organisational needs, which are more likely to represent BPM effectiveness rather than efficiency. Although numerous performance indicators may be developed, each is only useful if it allows managers to evaluate ongoing performance. As such, it is considered necessary that senior managers, who have a comprehensive picture of the organisation’s vision and priorities, are involved in developing KPIs.
Then, to monitor and measure, it is necessary to develop metrics for performance against each of the targets. These will become the KPIs on which the effective implementation of BPM will progress. Every KPI, whether it is used to simply clarify the current position, guide the implementation of BPM, check the effectiveness of BPM or track changes in the image of the future, will affect actions and decisions. Choosing the right KPIs is critical to success, but the road to good indicators is littered with pitfalls. Many seem right and are easy to measure but have subtle, counterproductive consequences. Others are more difficult to measure but focus the organisation on those decisions and actions that are critical to success. In this setting, the immediate task is to consider ways of assessing performance in a way that will enable an organisation to evaluate its BPM policies and practices. The KPIs developed for evaluating BPM may be either qualitative or quantitative. Qualitative measures are typically judgement based. This type of measure is often used when the item to be measured, or the attribute of interest, does not lend itself to precise or quantifiable measurement. Indeed, they provide an awareness of what is happening in the sense of the direction, rather than the speed, of change. Quantitative measures, on the other hand, are used to measure the rate of change and are usually integer-based with two further divisions: financial and non-financial. An effective performance measurement system includes critical success factors, a mix of financial and non-financial information and a balance between different views. What is more, effective performance measures are dynamic, and as such, they will not be appropriate in every situation and will be subject to change at any time. At all times, however, they will be congruent with organisational objectives, easily understood by all employees and promote intended behaviour within the organisation. This will require the development of extensive quantitative, mainly operational and financial, and qualitative measurements in support of BPM. A quantitative approach to measurement promises a more sustainable information base compared with a qualitative one. If, for whatever reason, a quantitative assessment is not a realistic option, a qualitative approach to performance measurement is a better option than no measurement at all. Historically, performance indicators fall into conceptually different categories. There are those that examine the results with respect to a particular objective and others that measure the management of the means or determinants of competitive success. The mix of factors used to gain competitive advantage will vary, often significantly, among organisations. Consequently, although indicators of outcomes may be similar, those of determinants of competitive success almost certainly will not. Copyright © 2012 John Wiley & Sons, Ltd.
BUSINESS PROCESS OUTSOURCING
On the question of BPO, a little more than one-quarter (27%) of respondents indicated that they have already outsourced business processes. Just 7% of Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
BPM—Are You Ready for the Future? 119 those surveyed indicated that they would soon start outsourcing certain business processes. Nearly one-half indicated that they have not outsourced any business processes and have no plans to do so in the near future. Some 5% were of the opinion that outsourcing is not even an issue that they would consider. In the field of information technology, more than 54% of respondents reap the benefits of BPO. In human resource management, consulting/service delivery and logistics about one-third of the respondents saw a benefit in BPO. Product management, and research and development saw little benefit in BPO with only 4% responding positively. The biggest concern in the context of BPO appears to be the loss of core competencies. Study participants see the major reason for BPO as the concentration within an organisation on core competencies. This is closely followed by cost reduction and productivity arguments. The last two reasons are closely related because a reduction in costs is a key outcome of productivity gains. BPO is least used as a means of increasing the level of innovation in an organisation. This is congruent with the low positive response rate to BPO from those involved in research and development. Outsourcing in the context of risk reduction also only plays a subordinate role. Attracting a 63% response from participants, the culture of an organisation was seen as the most important reason for not outsourcing business processes. In addition, insufficient maturity in the understanding of business processes that might be suitable for outsourcing is mentioned by 50% of respondents as a reason for not pursuing this possibility. Finally, respondents considered the loss of know how (29%) as another reason for not engaging in outsourcing of business processes. processes usually only provides gains in the time dimension, which occurs mainly in terms of efficiency and productivity. Although these have a positive impact in the short term, they hardly meet the long-term strategic needs of an organisation. For this, quality and/or innovation generation are needed to provide the important effectiveness gains that are required for a competitive advantage, and these will rarely come from pure automation. Automation, in the conventional sense, means the establishment of specific processes in the most efficient and executable form. However, after process re-engineering, automation can open up major innovation potential in areas such as process, product or service. In this context, the use of more sophisticated BPM tools, which support one or more phases of a typical business process life cycle, is necessary. At this time, such tools are already accepted and used in more than half (57%) of the surveyed organisations in the German-speaking region of Europe. This empirical study shows generally that the maturity of BPM in organisations, irrespective of their size, has still not reached a significant level. There is, however, a more general awareness of BPM even though the use of BPM methods and tools has a long way to go to be universally accepted. A closer look at the objectives that are pursued using BPM reveals that factors such as quality improvement, standardisation of processes and productivity are at the forefront. In addition, critical success factors, which are crucial for the establishment and implementation of BPM, have been established, and these include unwavering support from senior management and the establishment of clearly defined responsibilities in the organisation.
CONCLUSION
The outcome of this empirical research indicates that many organisations still appear not to be fully exploiting the potential that BPM methods and dedicated software-based tools offer. In addition, BPM, in particular from a strategic perspective, is, in practice, much more complex than it appears to be at a first glance. The increasing globalisation of business means that an organisation’s business conditions are subject to continuous change because of intense competition. This change requires, in many cases, automation or at least the radical redesign of business processes to remain competitive. Unfortunately, the resulting added value typically lasts for a limited time only as competitors quickly catch up. This means that there must be continuous innovation with respect to business processes. In this regard, we would note that innovation in the form of pure automation of existing business Copyright © 2012 John Wiley & Sons, Ltd.
ACKNOWLEDGEMENT
The Center for Knowledge and Information Management, in the School of Management and Law at the Zurich University of Applied Sciences (ZHAW), is active in the empirical study of this management discipline with particular emphasis on the degree of diffusion of these processes (Minonne et al., 2011). Further, through the collection of empirical data, it is keen to explain current practice as well as identify medium-term trends in the German-speaking region of Europe. The authors are grateful for access to the data collected by the Center in the compilation of this paper.
REFERENCES
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Minonne C, Colicchio C, Litzke M, Keller T. 2011. Business Process Management 2011—Status quo und Zukunft: Eine empirische Studie im deutschsprachigen Europa. vdf Hochschulverlag: Zurich. Prahalad CK, Hamel G. 1990. The core competence of the corporation. Harvard Business Review May–Jun, pp. 79–91. Turner G. 2011. Effective Financial Management: the Cornerstone to Success. Business Expert Press: New York; 105.
Johansson HJ, McHugh P, Pendlebury AJ, Wheeler WA. 1993. Business Process Reengineering: Breakpoint Strategies for Market Dominance. John Wiley and Sons: Chichester. Kaplan RS, Norton DP. 1996. Using the balanced scorecard as a strategic management system. Harvard Business Review: Jan–Feb, pp. 75–85. Minonne C. 2009. Strategic Knowledge Management—an Integrative Approach: a Structured Guideline for Driving Innovation. Südwestdeutscher Verlag für Hochschulschriften: Saarbrücken.
Copyright © 2012 John Wiley & Sons, Ltd.
Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
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■ Research Article
Business Process Management—Are You Ready for the Future?
Clemente Minonne1 and Geoff Turner2*
Zurich University of Applied Sciences, Center for Knowledge and Information Management, Zurich, Switzerland 2 University of Nicosia, European Centre of Knowledge Management Research, Nicosia, Cyprus
1
Business process management is the discipline that encompasses the analysis, modelling, implementation, execution, monitoring/control and continuous improvement of business processes. Methods and models developed for this management activity offer wide-ranging assistance to, and potential for, most organisations, yet even a general awareness of them seems to be non-existent in many organisations. An empirical study, conducted in the German-speaking region of Europe, gathered useful data on issues relating to current and future investment in business process management, including initiatives in the field of business process outsourcing. Analysis of that data allows for the critical interpretation of the current viewpoint of this business discipline as well as providing some interesting new insights into applications in use, level of maturity, realised benefits and outsourcing opportunities. A bright future exists for business process management as long as the most significant hurdle, the failure to link the discipline with organisational strategy, is overcome. The pathway to achieve this lies in the development of a reliable and effective performance measurement system that, for the most part, will be unique to each organisation. Copyright © 2012 John Wiley & Sons, Ltd.
INTRODUCTION
To better understand the modern business discipline of business process management (BPM), it is necessary to return to the early 1990s when Johansson’s term business process re-engineering (BPR) was first in vogue (Johansson et al., 1993). Sometime later, Hammer and Champy (1993) redefined BPR as a fundamental rethink and radical redesign of business processes to achieve dramatic improvements in important metrics such as cost, quality, service and cycle time. By the mid-1990s, BPR gained the unfortunate reputation of being a nice way of saying downsizing. Writing towards the end of a period of recession, Hammer and Champy believed that the lack of sustained management commitment and leadership, unrealistic scope and expectations, and resistance to change prompted management to abandon the concept of BPR. It could also be that
*Correspondence to: Geoff Turner, University of Nicosia, European Centre of Knowledge Management Research, Nicosia, Cyprus. E-mail: [email protected]
the start of what was to become an unprecedented period of economic expansion may have clouded judgement about the need for BPR. In contrast, business process optimisation, where only more effective or more efficient individual business processes should be designed, provides the foundation for BPR from the point of view of internal business analysis. The aim of business process optimisation typically lies in the reduction of processing time and the avoidance of work redundancy. Accordingly, it should be applied to all business processes throughout an organisations’ value chain so that it has a positive impact on both the intra-organisational and inter-organisational workflows. While business process optimisation has the appearance of an operational activity, this alignment with the value chain implies a strategic emphasis. Modern-day strategic planning should be an exercise in interpolation rather than extrapolation. This means that organisations start with an image of what they want to look like in the future, highlighted in their vision statement. Then, they decide on the changes required to develop that image from their current state for inclusion in their mission statement.
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C. Minonne and G. Turner At the present time, within business organisations in the German-speaking region of Europe (in particular Switzerland, Germany and Austria), there is a degree of hype surrounding BPM. Indeed, there are a number of well-known organisations, in various industries and in many places, where implementation projects of one form or another are underway. With these observations in mind, this study was structured to address a number of different aspects relating to BPM—applications in use, level of maturity, realised benefits and possible outsourcing opportunities. Furthermore, with respect to each of these aspects, the authors were keen to understand what promoted and what impeded the adoption of BPM.
If this process takes a static view of the future, then the level of implementation is decided first and the control system put in place afterwards to identify actual deviations from plans, the causes of the deviations and the appropriate actions to remedy the situation. As one essential phase of strategy development, BPR entails a radical rethinking of an organisation’s value chain resulting in the core, supporting and management processes being subjected to a business process optimisation exercise. Generally, all of these activities are focused on business processes that have a high added-value potential for the organisation (Prahalad and Hamel, 1990) and that will be particularly derived from core processes and their underlying core competencies. The business disciplines of knowledge management (Minonne, 2009) and information management, in conjunction with relevant information systems concepts and associated information technology solutions for process support, are used extensively here. We then move forward to the next generation of BPR that is typically referred to as BPM, which can be represented as a divided cube framework, as depicted in Figure 1. The divided cube can be used as the basis for more extensive investigation of BPM. Here, the business and technology perspectives are seen to be useful when looking at BPM from a starting position especially when adopting a causal perspective. However, when subsequently viewed from a hierarchical perspective, a strategic or operational orientation is preferred depending on the extent of experience, or level of maturity, with BPM. Furthermore, it seems reasonable that, in this type of empirical investigation, you would also consider the temporal dimension, namely the present and the future. These eight different configurations defined the research areas of this quantitative empirical study.
STUDY DESIGN
At the outset, the research context and content were formulated in the manner shown in Figure 2. To facilitate the design of a quantitative survey, the first step, which is a comprehensive review of the relevant literature, was undertaken. There were about three dozen sources of particular interest from authors of publications about similar research into the qualitative aspects of BPM, which supported drafting the survey needed for an investigation along the lines shown in the divided cube framework (Figure 1).
Figure 1 Divided cube framework
Figure 2 Research methodology
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Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
BPM—Are You Ready for the Future? 113 The questionnaire that was developed comprised 41 basic and detailed questions covering BPM in each of the eight different configurations of the framework with emphasis on the use of BPM tools and business process outsourcing (BPO). The content of the questionnaire was then discussed in a workshop with business representatives who are actively engaged in the field of BPM. Thanks to the dialogue with these experts, all of whom have long-standing experience in the field of BPM, the questionnaire was assessed objectively and modifications made to establish the quality of questionnaire content so that useful and meaningful results would be achieved. that have already implemented methods or that plan to do so in the near future.
BUSINESS PROCESS MANAGEMENT—HYPE OR HOPE?
Business process management helps the organisation— in accordance with the process-oriented measures derived from its strategic objectives—with the analysis, modelling, implementation, execution, monitoring/control and continuous improvement of business processes. This potentially leads to the increase of organisational productivity, quality and innovativeness. In other words, business processes, and the clarity of their design, greatly determine the quality, the degree of innovation and the productivity of organisations. One outcome of this empirical study has been to identify the main objectives of BPM that are characterised in particular by targets of quality improvement (76%), process optimisation by means of standardisation of processes (73%) and an increase in organisational productivity (61%). A general increase in the transparency of costs and the explicit identification of cost-critical process activities were considered important in this context by 27% of respondents. Furthermore, only about one-fifth (19%) of respondents indicated that BPM is used to increase the level of innovation. Other objectives such as finding procedural bottlenecks (12%) and support for outsourcing decisions (9%) seem to play a minor role in formulating BPM activities.
Data collection An online survey was carried out in a 3-month period starting at the beginning of November 2010. The target group for the survey were individuals who had expertise in and who were currently working on a daily basis with BPM. Participants were selected randomly through relevant research groups, specialised technical forums, newsletters and invitations posted on appropriate websites. In addition, direct invitations were made using a snowball selection process to ensure that different sectors were represented in that data collection. With the confidentiality of respondents and responses being respected, all participants agreed to contribute to the study on a voluntary basis. Data collection was mostly based on assessments based on a Likert scale so that ordinal and nominally scaled attributes could be applied to the responses. For some questions, it was possible to have multiple answers. Furthermore, with every question, participants were given the ability to respond with ‘no evaluation’ simply to prevent a random response due to a lack of knowledge on that topic.
BUSINESS PROCESS MANAGEMENT MATURITY
The degree of maturity of these organisations in BPM was assessed using the business process maturity model (BPMM) as applied to the Object Management Group (OMG). To make this concept easier to understand, the model has been limited to four levels of maturity. Organisations at level 1 are considered to understand the need for continuous improvement and have a general awareness of BPM. At level 2, organisations have moved on from level 1 by identifying and addressing a few individual topics within BPM. To reach level 3, organisations must have applied substantial elements of BPM as part of their continuous improvement programme, whereas at level 4, they have established policies and procedures for continuous improvement through the application of BPM. Figure 3 shows how respondent organisations see their BPM positioning in this context. Of the respondents, 61% replied that the BPM maturity level in their organisation was at either level 1 or level 2, and 32% indicated that only certain BPM methods aimed at continuous improvement were introduced. Only 7% of the respondents Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
Data analysis In total, 219 completed questionnaires formed the sample for this study. Analysis of the quantitative data was performed using the statistical software package SPSS (IBM Corp., Armonk, NY, USA). For a more precise investigation, contingency tables were used. These tables, also known as crosstabs, contain either absolute or relative characteristics that usually provide a rich supply of data to enhance any study. In this study, crosstabs were created for all questions to facilitate a comparison between the industries and company sizes of the study participants. Here, where there were insufficient responses from a particular industry, that industry was grouped with others in the category Other industries. It should be noted that the results obtained from this study primarily reflect the opinions of executives and specialists who deal with BPM in organisations Copyright © 2012 John Wiley & Sons, Ltd.
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C. Minonne and G. Turner to be further impediments. High investment or operating costs do not appear to impede the introduction of BPM methods and systems. By breaking down these observations into different sectors, it is apparent that in information technology, as well as in the provision of services or consulting, the failure to elaborate on the financial benefits of any proposal is a key obstacle to its implementation. In the banking sector in particular, the lack of interest shown by the management team, as well as an understanding that BPM activities should be derived from corporate strategy provide a significant barrier to implementation. Figure 4 shows the relative importance of the critical success factors that are, from the respondents’ perspective, decisive in the successful implementation of BPM methods and systems. The highest ranking is given to the support provided by senior management, which is regarded by the respondents as critical to BPM success. This factor is achieved by defining clear responsibilities and the adaptation of a supportive corporate culture. All three factors relate to the principal responsibilities of an organisation’s management team and underline the importance of close involvement of senior management to ensure a successful implementation of BPM. This correlates well with the lack of interest of the leadership team being assessed by respondents as the greatest obstacle to effective BPM.
Figure 3 Attained levels of maturity
indicated that appropriate policies and methods have already been introduced. A sector-specific analysis reveals that BPM maturity levels 3 and 4 have primarily been achieved in the banking and information technology sectors. Overall, it is not surprising that organisations only reach their individual maturity optimum if they define combined guidelines, specifications and practices, and then fully implement them.
Strategy comes first Lack of support on the part of the leadership team (50%), as well as missing or inadequate specifications of corporate strategy (46%), appears to be the biggest obstacle in developing a process-oriented organisation. This revelation is not particularly surprising because organisational development and transition should be, by definition, an outcome of the direction of corporate strategy. Significantly, being unable to enumerate and explain the financial benefits of BPM (43%) was mentioned as another obstacle. The lack of expertise (42%) and lack of resources (38%) seem, according to the respondents,
Process follows strategy The study reveals that 78% of respondents believe that business processes are either not derived or only partially derived to support organisational strategy. Only 14% of respondents judge the contrary view, which is that business processes are developed mostly or completely to drive a successful implementation of organisational strategy, to be sound. The practical experience of the authors suggests that a
Figure 4 Impediments to implementing BPM
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Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
BPM—Are You Ready for the Future? 115 possible explanation for this bias lies in an inability to articulate strategic objectives into concrete measures of operational performance with a high level of granularity. What should be done when the people who matter most in an organisation, the frontline employees, do not understand the organisation’s strategy, the relevant performance measures, the cost structure and the economics of the environment in which they are operating? It is much easier to engage with a transformation process such as BPM when measures are clearly linked to strategies. Failure to do so creates misalignment of cost structures and priorities with the strategy. To avoid this problem, organisations need to improve communication. Ideally, everyone in an organisation should be quickly able to answer this question: How am I doing on what is important for the organisation? To facilitate answers, organisations need to provide tools that will help every employee align their activities with strategy. Scorecards, for example, will do this because they express the strategy in measurable terms, communicating what must be done and how everyone is progressing. There are a number of different alternative scorecards available, the most popular of which is Kaplan and Norton’s (1996) balanced scorecard. The concept of this scorecard, depicted in Figure 5, recognises the importance of both financial and non-financial performance measures as it examines our organisation through four different but interrelated perspectives: financial, customer, internal processes and learning and development. Logically, key performance indicators (KPIs) in each of the four perspectives of the scorecard should be either directly related or indirectly related to each other. Organisational strategy is the starting point and dictates the financial objectives. One way to achieve the financial objectives is to review relationships with customers and determine how we can best add value for them. The primary source of that added value lies in the quality and efficient working of an organisation’s internal business processes, which is where BPM is most actively involved. Processes cannot operate efficiently, however, without appropriate learning and development within the organisation. Identifying these links, and understanding the specific relationship between them, is key to implementing a successful balanced scorecard. This, in turn, is vital to understanding progress toward achieving the identified strategic objectives.
Structure follows process Structure follows process within the framework of sustainable organisational development. It is also particularly important that, in the context of BPM, dedicated roles be established in an organisation, which promote and support the procedural development of this management discipline. Considering that BPM itself is a process, it is reassuring that the results of the study indicate that half of the respondents have identified dedicated responsibility for BPM within their organisation. The other half seem not to have explicitly identified such a responsible person, team or department or are not able to make an observation in this regard. The study showed that those organisations in which there is identified responsibility for BPM are the most advanced in the field. The majority, or 79% of the respondents who confirmed identified responsibility, indicate that this appointment exists within the central organisational structure. Another 12% of respondents perceived this responsibility to be decentralised. The remaining 9% of respondents mentioned other structural shapes, such as a matrix organisation. Furthermore, it was determined that in two-thirds of organisations, this responsibility is found mostly in organisational management (31%) but also in organisational development (19%) and quality management (17%). In another 13% of cases, this responsibility is located in the information technology unit. In addition, it should be noted that in 64% of organisations that have identified responsibility for BPM, responsibility extends to the definition and design (modelling) of business processes. Other key findings concerning the relationship between structure and process are first, that 63% of respondents identified the responsibility resting with an internal consultancy unit, and second, in 59% of organisations, a department responsible for the maintenance and optimisation of existing business processes already existed. In an important logical contradiction, just 28% of respondents considered it important that BPM should be strictly derived from organisational strategy.
LOOKING TO THE FUTURE
Figure 5 Balanced scorecard concept. Source: Turner (2011), p.105
Respondents suggest that many functional areas are seen to benefit from the introduction of BPM (Figure 6) but the ones for which the largest benefit Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
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Figure 6 Functional areas with maximum benefit from BPM
appears to have been achieved are consulting/service delivery (57%), information technology (51%) and procurement/purchasing (49%). It may be concluded that, from the perspective of respondents in these functional areas, optimisation of business processes would generate significant benefits for their organisations. By looking at this aspect on a sector-by-sector basis, the above answers seem to derive mostly from the banking sector. In those organisations where BPM methods are already extensively used, the functional areas—and here, it was possible for respondents to select more than one functional area—at the forefront are information technology departments with 52%, followed by (internal) service provision/consulting with 44% and procurement/ purchasing with 43%. These results are not considered exceptional because, in practice, BPM is heavily reliant on systems that facilitate information management, and in these functional areas, information technology plays a central role.
From a secondary analysis of the collected data, it was clear that, in just under two-thirds of organisations (63%) where more than one-quarter of business processes were documented, a software-based BPM tool was being used. This confirms that relatively sophisticated BPM tools are currently widely used for documenting business processes.
Business process modelling notation The study revealed that a number of accurate modelling notations were in use as shown in Figure 7. The most popular being used by 63% of respondents was the classic flow chart. This popularity may be attributed to familiarity with, and availability of, the means of production such as the Microsoft Visio software tool. Business process modelling notation (BPMN) followed in second place with 49% of respondents claiming use of this modelling notation, which is widely accepted as a standard for BPM. Other forms of modelling notation more commonly in use are event-driven process chain (47%), which is followed by unified modelling language (28%). In this context, it should be noted that, on the issue of importance of BPM standards, 54% of the respondents consider them unimportant in their organisations. On the other hand, in 33% of organisations, the issue of standards is considered important or very important. The remaining participants (13%) took no position on this issue. By looking at these findings by industry, in the sectors of banking, information technology and consulting/service delivery, modelling standards are now considered an important element in the implementation of BPM in their organisations. An in-depth analysis of the application of the notations in different industries confirms that BPMN is already in widespread use in the banking, information technology and consulting/service delivery sectors. Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
Process description and modelling The first step in the BPM lifecycle, which at the same time is usually the first level of the BPM maturity model, requires description and analysis, or modelling, of almost every business process in the organisation. Evaluation of the data collected indicates that, in 42% of organisations, between one-quarter and three-quarters of all business processes are documented. Further, in 17% of organisations, only a small part of that organisation has documented more than three-quarters of their processes. This seems to indicate that documentation of business processes is actually being carried out in a significant number of organisations. In these circumstances, they have made a fundamental step in the direction of full implementation of BPM. Copyright © 2012 John Wiley & Sons, Ltd.
BPM—Are You Ready for the Future? 117
Figure 7 Notations used in documenting business process models
Other industries, where the standardisation of process models plays a minor role, increasingly use flow charts as well as EPC. BPMN is increasingly accepted in most industries as well as in public administration. When considering organisational size, it became apparent that BPMN is not the notation of choice for small-sized and medium-sized organisations. However, it is striking that its use is common in organisations with more than 1000 employees and that considerable effort is being applied to achieve standardisation using BPMN.
Use of business process management tools At present, more than half (57%) of the respondents indicate that a BPM software-based tool was used in their organisation, and only 37% indicate that, currently, a tool was not used. These results underline the acceptance and use of software-based tools for the implementation of BPM by a large proportion of organisations. When asked about the objective behind the use of BPM tools, improvement in the quality of their business processes was the first priority for the respondents followed closely by improvement in the quality of the services and products they offered. Based on some comments it would seem that, in practice, these objectives are closely linked. Using BPM tools, organisations expect, in the first instance, to lower process costs although this is more likely to be achieved through the full implementation of BPM methods. Business process management tools were used most frequently by respondents for modelling business processes (81%). Other uses are related to the analysis of business processes (55%) and the support for governance, risk and compliance issues (46%). In addition, it was found that BPM tools were used more for automation (41%) and monitoring (38%) of business processes than their Copyright © 2012 John Wiley & Sons, Ltd.
simulation (17%). This, of course, may be attributed to the often-missing functionality of tools currently available. In assessing the importance of the functions that have a use for BPM tools, modelling of business processes was at the forefront, closely followed by analysis of the same. The respondents particularly highlighted the importance of BPM tools meeting the functionality required for these purposes. By looking to the future, modelling of business processes was still seen as the most important application. However, the respondents suggested that in the near future, they plan to launch applications that better support them in the presentation of performance indicators as well as in the monitoring of business processes. To this end, Software AG is the leading provider in the field of BPM solutions according to 35% of the participants. Microsoft, whose BPM solutions are used by 32% of respondents and SAP with 27% follow closely. Solution providers such as IBM (18%), TIBCO (10%) and Oracle (9%) are in the lower order. This analysis reveals that a variety of BPM solution providers is present in the market and in a position to challenge the traditional providers of standard commercial applications (such as enterprise resource planning, customer relationship management or supply chain management).
Performance management and measurement Earlier, it was suggested that implementation of a well-designed balanced scorecard was critical in not only linking processes and activities to organisational strategy but also understanding progress toward achieving its strategic objectives. The first task in building an effective balanced scorecard is to define strategic objectives, establish initiatives and construct targets across the four perspectives although, in this context, most emphasis is placed on the internal business processes perspective. Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
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C. Minonne and G. Turner Clearly, there is no unique solution to this issue. Uniqueness only arises in the need to have an assessable strategy, which makes it impossible to design a completely generic system for measuring the performance of an organisation’s BPM practices. Indeed, a custom solution is needed for almost every organisation. The KPIs, which form the basis of the control system for the effective implementation of BPM, need to measure current performance and guide the organisation toward its changing image of the future. To do this effectively, a system should include four compulsory elements before control may be fully established. These elements are a predetermined set of targets, a means of measuring current activity, a means of comparing current activity with each target, and a means of correcting deviations from the targets. These targets may be scientifically calculated or set arbitrarily using reasonable or totally unreasonable expectations, good or bad. The control system merely provides a means by which activity is directed toward their achievement. In general, the predetermined criteria should be stated explicitly and, for this reason, quantitative statements are preferred although not absolutely necessary. On a Likert scale of 1 to 4, where 4 represented ‘very important’, respondents in the study rated uniform and consistent measurement of targets, on average at 3.08, with no assessment of this factor below the ‘important’ rating of 3. Therefore, it seems that BPM, and particularly its performance measurement dimension, is now recognised by most organisations as an important operational task. For management accountants, this situation raises the thorny issue of how to account for its management. They need to establish a set of KPIs that assess their organisation’s performance in implementing BPM. In doing so, they should resist the temptation to focus only on what is easily measurable, which generally is the efficiency dimension. This is not to say that such measures are not useful in the right context. However, there should be an equal or greater focus on measuring outcomes that meet real organisational needs, which are more likely to represent BPM effectiveness rather than efficiency. Although numerous performance indicators may be developed, each is only useful if it allows managers to evaluate ongoing performance. As such, it is considered necessary that senior managers, who have a comprehensive picture of the organisation’s vision and priorities, are involved in developing KPIs.
Then, to monitor and measure, it is necessary to develop metrics for performance against each of the targets. These will become the KPIs on which the effective implementation of BPM will progress. Every KPI, whether it is used to simply clarify the current position, guide the implementation of BPM, check the effectiveness of BPM or track changes in the image of the future, will affect actions and decisions. Choosing the right KPIs is critical to success, but the road to good indicators is littered with pitfalls. Many seem right and are easy to measure but have subtle, counterproductive consequences. Others are more difficult to measure but focus the organisation on those decisions and actions that are critical to success. In this setting, the immediate task is to consider ways of assessing performance in a way that will enable an organisation to evaluate its BPM policies and practices. The KPIs developed for evaluating BPM may be either qualitative or quantitative. Qualitative measures are typically judgement based. This type of measure is often used when the item to be measured, or the attribute of interest, does not lend itself to precise or quantifiable measurement. Indeed, they provide an awareness of what is happening in the sense of the direction, rather than the speed, of change. Quantitative measures, on the other hand, are used to measure the rate of change and are usually integer-based with two further divisions: financial and non-financial. An effective performance measurement system includes critical success factors, a mix of financial and non-financial information and a balance between different views. What is more, effective performance measures are dynamic, and as such, they will not be appropriate in every situation and will be subject to change at any time. At all times, however, they will be congruent with organisational objectives, easily understood by all employees and promote intended behaviour within the organisation. This will require the development of extensive quantitative, mainly operational and financial, and qualitative measurements in support of BPM. A quantitative approach to measurement promises a more sustainable information base compared with a qualitative one. If, for whatever reason, a quantitative assessment is not a realistic option, a qualitative approach to performance measurement is a better option than no measurement at all. Historically, performance indicators fall into conceptually different categories. There are those that examine the results with respect to a particular objective and others that measure the management of the means or determinants of competitive success. The mix of factors used to gain competitive advantage will vary, often significantly, among organisations. Consequently, although indicators of outcomes may be similar, those of determinants of competitive success almost certainly will not. Copyright © 2012 John Wiley & Sons, Ltd.
BUSINESS PROCESS OUTSOURCING
On the question of BPO, a little more than one-quarter (27%) of respondents indicated that they have already outsourced business processes. Just 7% of Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
BPM—Are You Ready for the Future? 119 those surveyed indicated that they would soon start outsourcing certain business processes. Nearly one-half indicated that they have not outsourced any business processes and have no plans to do so in the near future. Some 5% were of the opinion that outsourcing is not even an issue that they would consider. In the field of information technology, more than 54% of respondents reap the benefits of BPO. In human resource management, consulting/service delivery and logistics about one-third of the respondents saw a benefit in BPO. Product management, and research and development saw little benefit in BPO with only 4% responding positively. The biggest concern in the context of BPO appears to be the loss of core competencies. Study participants see the major reason for BPO as the concentration within an organisation on core competencies. This is closely followed by cost reduction and productivity arguments. The last two reasons are closely related because a reduction in costs is a key outcome of productivity gains. BPO is least used as a means of increasing the level of innovation in an organisation. This is congruent with the low positive response rate to BPO from those involved in research and development. Outsourcing in the context of risk reduction also only plays a subordinate role. Attracting a 63% response from participants, the culture of an organisation was seen as the most important reason for not outsourcing business processes. In addition, insufficient maturity in the understanding of business processes that might be suitable for outsourcing is mentioned by 50% of respondents as a reason for not pursuing this possibility. Finally, respondents considered the loss of know how (29%) as another reason for not engaging in outsourcing of business processes. processes usually only provides gains in the time dimension, which occurs mainly in terms of efficiency and productivity. Although these have a positive impact in the short term, they hardly meet the long-term strategic needs of an organisation. For this, quality and/or innovation generation are needed to provide the important effectiveness gains that are required for a competitive advantage, and these will rarely come from pure automation. Automation, in the conventional sense, means the establishment of specific processes in the most efficient and executable form. However, after process re-engineering, automation can open up major innovation potential in areas such as process, product or service. In this context, the use of more sophisticated BPM tools, which support one or more phases of a typical business process life cycle, is necessary. At this time, such tools are already accepted and used in more than half (57%) of the surveyed organisations in the German-speaking region of Europe. This empirical study shows generally that the maturity of BPM in organisations, irrespective of their size, has still not reached a significant level. There is, however, a more general awareness of BPM even though the use of BPM methods and tools has a long way to go to be universally accepted. A closer look at the objectives that are pursued using BPM reveals that factors such as quality improvement, standardisation of processes and productivity are at the forefront. In addition, critical success factors, which are crucial for the establishment and implementation of BPM, have been established, and these include unwavering support from senior management and the establishment of clearly defined responsibilities in the organisation.
CONCLUSION
The outcome of this empirical research indicates that many organisations still appear not to be fully exploiting the potential that BPM methods and dedicated software-based tools offer. In addition, BPM, in particular from a strategic perspective, is, in practice, much more complex than it appears to be at a first glance. The increasing globalisation of business means that an organisation’s business conditions are subject to continuous change because of intense competition. This change requires, in many cases, automation or at least the radical redesign of business processes to remain competitive. Unfortunately, the resulting added value typically lasts for a limited time only as competitors quickly catch up. This means that there must be continuous innovation with respect to business processes. In this regard, we would note that innovation in the form of pure automation of existing business Copyright © 2012 John Wiley & Sons, Ltd.
ACKNOWLEDGEMENT
The Center for Knowledge and Information Management, in the School of Management and Law at the Zurich University of Applied Sciences (ZHAW), is active in the empirical study of this management discipline with particular emphasis on the degree of diffusion of these processes (Minonne et al., 2011). Further, through the collection of empirical data, it is keen to explain current practice as well as identify medium-term trends in the German-speaking region of Europe. The authors are grateful for access to the data collected by the Center in the compilation of this paper.
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Know. Process Mgmt. 19, 111–120 (2012) DOI: 10.1002/kpm
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