The added value of the organization
Through carefully examining the business processes, the horizontal business-driven approach offers insight into the added value of an organization and on how we can measure the performance of activities. The business processes are an important point of action for defining the information needs and for improving the organization’s performance. Practical experience also shows this: business processes form a significant point of engagement for the mapping of information needs. In this way, we obtain the ‘certainty’ that the information we need is actually relevant for the people that are part of these processes or who are responsible for them. “Every company on earth consists of processes. Processes are what companies do.”(Hammer, 1995).
Temporary or regular, strategic or operational
The information needs of an organization do not always have to be directly related to the business processes. They can also be of a temporary or one time nature. Think for example of a regional market survey, executed once to find out whether setting up a new branch in that specific region will be worth the trouble. Regular information needs – often derived from the (primary) business processes – are usually about daily performances on which management can directly steer or focus. Strategic information can be both temporary and regular. Examples are: a one time competitive analysis, a technology exploration or measuring customer satisfaction on a regular basis. Operational information however is usually regular. Generally, it is about the efficiency and the effectiveness of the organization’s (core) activities. At the lowest level of the organization – the level of employee and process – this could for example involve the number of orders processed per hour, the number of errors that occur, or processing times. When we aggregate and combine all this information, we more or less create strategic information.
Take for example weekly productivity: an aggregation and combination of the indicators ‘number of orders per hour’ and ‘number of employees’ that at a certain time is active within the business process. To achieve the highest possible return on Business Analytics, coherence between operational and strategic information and between regular and temporary information is of high importance.
The horizontal business-driven approach consists of five steps
- Classifying primary/secondary: to get to an initial selection of the most essential information needs, we classify business processes as either primary or secondary. We then measure the performance of the primary processes in order to see directly if and how well the core of the organization functions. In practice, it (still) happens that entire Business Intelligence systems are developed just to hold financial or HR related information. In some cases, these systems have cost hundreds of thousands of Euros, while they bring in hardly any money, let alone improve performance. If a secondary business process does not function properly – which happens – this does not necessarily have major adverse impact on the primary value adding process for buyers. For example, if the finance department does not properly book invoices, this is not in any way disastrous for the organization.
- Describing tasks, roles and responsibilities: not everyone has a clear view on what his role is, what is being expected of him or her and which activities should be carried out. Quite often employees are not readily able to describe their added value for the organization. Therefore, according to the horizontal business-driven approach, successful performance measurement must go hand in hand with describing tasks, roles and responsibilities and the individual aims of employees. This HR-like step offers an immediate future advantage – and Business Intelligence could really make a difference here-, namely linking performance management with competency management and organizational development. This enables an organization to quickly identify certain gaps in the knowledge and competences of employees and managers and to improve certain indicators. Using so-called Personal Development Plans (PDPs) is then a useful additional method. A PDP is an agreement between employer and employee about the employee’s personal development and it attunes with the organization’s (strategic) goals and with those things critical to good (financial) performance. Ultimately, it is the people that make the difference and not so much a Business Intelligence system with a superb dashboard and indicators – although these are also indispensable when it comes to improving performance.
- Distinguishing generic indicators: practically every process contains a number of generic indicators that may serve as a basis for performance measurement:
|Input and output||in terms of goods, information and capital, we here describe the input and output of a process.|
|Effectiveness||an organization measures this through registering outages and waste by measuring the difference between input and output. A quotation process for instance begins with a request for proposal by a potential customer. We measure the effectiveness of this process by counting the number of quotations that actually resulted in an assignment divided by the total number of offers made. In reality, this may be a bit more complicated though: what if, for example, the actual contract takes a different course and instead of ordering a thousand items, the customer now needs two thousands items delivered? Or what if an assignment is being extended by say, ten working days?|
|Processing time||this concerns the difference in time between the moment a customer submitted a request and the moment when the product or service is actually delivered. Calculating lead times is not always directly related to the delivery of products or services. A request may also concern putting together an offer for services or goods yet to be delivered.|
|Start up time||nearly every process needs some start up time to get things organized and ready for ‘take off’ as soon as the input arrives.|
|Request time||this is the amount of time a customer needs to submit a request to the organization. Does the customer need to make a phone call or can he put in a request online? If he calls, will he directly speak the right person, or will he be put through to dozens of operators first? It is the time between the moment a customer decides – based on a latent need – to place an order or to file a complaint and the moment on which the supplying organization actually registers this order or complaint. This time can be ‘measured’ simply by asking a customer how fast he was being helped.|
|Queue time||we measure the queue time by putting a timestamp on the incoming request. As soon as the request is dealt with, we can measure the queue time. The queue time is part of the overall processing time and can be quite interesting in order to find out during which part of the process certain problems occur.|
|Quality||we measure the quality by comparing the specification of the initial request with the features of the produced results at the end of a process. After having delivered a certain service or product, we can ask customers whether the delivered goods work well and meet their expectations.|
|Costs||this concerns the sum of the costs of the input and the costs for running the process smoothly (e.g. Personnel costs, depreciation expenses, etc.).|
It is of course important to make the above-mentioned generic indicators specific to the various business processes of the organization concerned.
- Connecting tasks, roles and responsibilities with the generic indicators: this is necessary in order to link process data and employees. This results in a clear view on who is responsible for which specific part of the process and allows for taking measures concerning improvement of either process or roles and responsibilities. One could for example decide to sharpen an employee’s competences.
- Identifying (inter-) dependencies: processes often depend on other processes. A certain process may perform well (intrinsically), but that does not mean it does not adversely affect other processes. Take for example a process that performs extremely well on lead times. This process may well be the instigator of increasing queue times in another process. It is therefore important for organizations to identify both these dependencies and the so-called critical path in order to create a clear view on how to improve the performance of the overall process.
In order to maximize the performance of business processes, we thus need more than just information and knowledge about the business process itself. We also require knowledge about (internal and external) adjacent processes as well as knowledge about employee competences.
The horizontal business-driven approach can be a good method when the strategic management within an organization is not yet filled in. This same situation however may also advocate for choosing the vertical business-driven approach. The latter does require some extra time, but the final result is likely to be of much better quality. The risk an organization takes when using the horizontal business-driven approach is that although the information needs indeed match business operations, (too) many indicators come into play not all of which are critical for achieving one’s mission or executing one’s strategy.