This article originally appeared on the BeyeNETWORK
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Managing performance within an organization requires that effective processes and supporting systems be employed. Optimum processes should be rational, cost-effective, flexible and transparent, and the technology on which a given set of procedures relies should also support these procedures and enable them to be more effective. It’s critical to understand not only the processes and systems within your organization, but also the relationship between them when designing and implementing a business performance management solution.
The term business performance management (BPM) can describe an array of functions. In general, it can be described as a set of integrated operational and analytic processes which facilitate the creation of strategic goals and the subsequent management of performance to those goals. In order for performance to be managed, it must first be measured. Meaningful strategic goals are created and defined in terms of specific objectives and key performance indicators. These indicators then are related to operational metrics and linked to performance incentives throughout the organization.
It’s much easier said then done—however, many business performance management efforts are doomed for failure from the start because of misconceptions about what processes currently exist and high expectations regarding what BPM information systems alone can accomplish. Robust BPM is challenging enough: no organization should start down this road and realize the map they have in hand didn’t account for the rough terrain. Without a clear understanding of current processes, it’s more difficult to determine what targeted processes should be and how BPM systems can both support and enable them.
Documenting Existing Processes
It’s not the most glamorous work, and perhaps that’s why appropriate attention isn’t usually paid to it. But during the past year, Sarbanes-Oxley 404 requirements have caused many companies to dust off their old flowcharts and take another crack at documenting processes currently in use.
The problem with many of these process analyses is that they’re not accurate. Most people who have documented processes within an organization can attest to the tendency of different functional groups to disagree about current procedures. This often results in the description of what should be, not what actually exists. Flow diagrams which neglect to highlight important procedures, systems and other special situations can lead to delayed BPM projects, poor system choices or both.
It’s also not uncommon for organizations to completely ignore current processes and instead rely on a new system to determine an ideal state. This can particularly be true if the product or product suite describes itself as a business performance management solution. Although these solutions can provide tremendous value if designed and implemented correctly, no BPM system is a silver bullet. Organizations must know their processes in order to better comprehend their needs. Failing to do so may result in the failure to leverage existing systems, poor system design, the purchase of the wrong product or even over-expenditures for the right one.
This point is easier to illustrate when considering a specific BPM-related process: collecting reporting and analyzing financial and other operational results. In this instance, the process to be documented must also include critical data flow: information that describes source systems employed, data descriptions, as well as data ETL (extract, transformation, and load systems and activities). Failure to do so may oversimplify a new systems’ implementation effort or even misrepresent the level to which an organization accurately adheres to a global chart of accounts. One-off information requests and reconciliation processes should also be incorporated into the flow diagram.
Determining Targeted Processes
It’s also difficult to design new processes if current processes are unknown. You can’t estimate the plausibility of going from here to there if you don’t know where you are. Furthermore, the return on investment of process reengineering initiatives, in terms of technical solution cost, consulting services and internal efforts can’t be estimated unless costs embedded in current processes are known.
Determining targeted processes must also be done with a solid knowledge how technology can enable greater effectiveness. Many business performance management software tools and packages are readily available. Their ability to integrate with existing systems and infrastructure is a necessary factor in determining what targeted processes should be. Related system performance and security considerations should also be taken into account.
Once again, taking our financial collection and reporting system as an example, Sarbanes-Oxley legislation will determine the length of financial close cycles, but as the military adage goes, “it’s dangerous to confuse desire with capability.” Shorter close cycles may not be possible within an organization if manual reconciliations between data sources are not eliminated or if the infrastructure used doesn’t support more centralized, secure Web-based reporting and analysis solutions.
Designing the BPM System
Choosing and designing business performance management solutions around targeted processes requires striking the right balance between processes and systems. It can be said that effective performance management is chiefly about processes—but the design of the supporting (and enabling) technologies will make or break overall success.
When determining which systems and technology should be employed, always start with the problem at hand. For example, if the problem is process, then determine where and why the problem exists. If the problem is system related, don’t think that replacing the system is the easy answer: no new system will be effective unless they address specific needs and use good processes. A good system, wrapped around poor processes only amplifies the problem. Make sure you’re not just treating a problem’s symptoms; go after its cause.
To illustrate this point using our financial reporting system, long close cycles may not be solvable with a new solution. For example, an organization that slows its close cycle down by using multiple reporting systems instead of a centralized solution may blame integration between the systems, while minimizing the real cause. This real problem may be the hesitation of operating areas to have their results passed along to a central location before they’ve had time to work with them, or the need of a financial controller’s area to fully “own” their reporting system without having to rely on the information management services area of their organization. Both of these real causes won’t be fixed with any new business performance management tool or suite of products.
Business performance management solutions have had a great deal of success in recent years. Companies like Hyperion Solutions, Cognos and others have expanded their product lines to include increasing number of BPM system needs. However, the processes that underlie your overall strategy determine your system needs. Always ensure these needs dictate system investment, but do so only with the full knowledge of the capabilities and limitations of the packages and technology available to you.