Vaco Cpe Session I

VACO CPE SERIES August 19, 2009

Benefiting From Business Process Management & Business Intelligence (Performance Management) Consider that “Business” in this context = “Enterprise”

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WITH A PURPOSE LawrencePROCESS E. Lackey Process Guidance, inc. Raleigh, North Carolina 1 (919) 606-4988 [email protected] PROCESS WITH A PURPOSE

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Session Topics Are Complementary oSession

One --- Utilizing Business Process Management Techniques to Identifying and Resolve Process Issues

oSession

Two --- Utilizing Business Intelligence to Sustain Improvement and Enable Adaption to Changes

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BUSINESS PROCESS MANAGEMENT (BPM) SESSION ONE AGENDA •FOUNDATION

oWHY DO WE NEED PROCESSES? oDEFINITIONS oPROCESS LEVELS oNAVIGATING THE CLUTTER

• • THE BPM METHODOLOGY oBPM TOOLS oSYSTEMATIC APPROACH

•BPM SAMPLE CASE

• PROCESS WITH A PURPOSE •BPM APPLICATION & ISSUES/ CASES FROM CURRENT EVENTS • •DESIRED BPM INTERVENTION RESULTS • • 10/22/09 • PROCESS WITH A PURPOSE

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Why Do We Need Business Process? A business process is the method that an employee follows to perform some work-related task. If a business process isn't documented & taught, then employees invent their own processes to do their work. Most managers don't take the time to properly determine what the most efficient processes are or they don't take the time to communicate these processes to those who need them most. The absence of systematic processes generally results in a fiasco, usually at the worst possible time. And as the organization grows, the potential for miscommunication, catastrophes, inconsistency and inefficiency increases exponentially. Al Einstein ---- Insanity: doing the same thing over and over again and expecting different results. ØIf ØIf ØIf ØIf ØIf

PROCESS A PURPOSE you do a lot of firefighting, you might be aWITH process wreck you have lousy work quality, you might be a process wreck you have morale issues/ overtime, you might be a process wreck your customers are not happy, you might be a process wreck your boss is not happy, you might be a process wreck

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BPM FOUNDATION

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DEFINITIONS oPolicy --- Documented set of principles and guidelines o oProcess --- An activity that converts inputs to outputs with added value that are

then inputs to the next process --- or are the end state o oProcedure – Step-by-Step method(s) used to convert inputs to outputs within

the process o oAlignment – Linking improved processes to achieve an organization’s goals

PROCESS WITH A PURPOSE BusinessProcess ProcessManagement Management(BPM) (BPM) systematicapproach approachto tohelp help Business isisaasystematic organizationselevate elevatethe theeffectiveness effectivenessofoftheir theiroperating operatingprocesses processestoto organizations improveinternal internalcontrol controland andoperating operatingperformance performanceacross acrossthe theEnterprise. Enterprise. improve

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PROCESS LEVELS EXAMPLE Level One: Mission, Objectives & Strategy

Revenue RevenueCycle Cycle

(POLICIES)

Sales Sales Contact Contact

Book Order Book Order

Deliver Deliver

Invoice Invoice

Bill Bill

Collect Collect

Mail Mail

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Level Two: High Level View of Key Processes

(POLICIES & PROCESSES)

Level Three: Top of Working Level Processes (Processes)

Level Four: Functional Processes …. Work being done Level Five: Functional Sub Processes … steps of work being done Level Six: Procedures/ Detailed Work Instructions

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The Business Mgmt System Clutter EXCELLENCE PROGRAMS

QUALITY CIRCLES

LEAN

ORG. EFFECT. ISO 9000

TL9000

SIX SIGMA

KAIZEN

CSQP

TQC/ TQM

BALDRIGE BMA

SDLC

COSO FRAMEWORK (SOX 404)

IF IT LOOKS LIKE A DUCK ALL ARE QUALITY SYSTEMS

PROCESS WITH A PURPOSE Based on work & concepts = SYSTEMATIC Of Edward Deming APPROACH BPM FOCUSES ON PROCESS SUCCESS & DRAWS FROM OTHER SYSTEMS 10/22/09

COMMON COMMONELEMENTS ELEMENTS-----Standards/ Standards/framework/ framework/data data

•ISO •ISO––PRICIPLES PRICIPLES&&QUALITY QUALITYMANUAL MANUAL •BALDRIGE •BALDRIGE------ATTRIBUTES/ ATTRIBUTES/ASSESSMENT ASSESSMENT •SIX •SIXSIGMA SIGMA------DMAIC DMAIC •SOX --- COSO FRAMEWORK/ COMPONENTS/ ASSESSMENT MATRIX •SOX --- COSO FRAMEWORK/ COMPONENTS/ ASSESSMENT MATRIX PROCESS WITH A PURPOSE

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BPM METHODOLOGY

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BPM TOOLS & BUILDING BLOCKS oENTERPRISE OBJECTIVES/ EMPHASIS are used in process design --- ensure that processes support the enterprise’s direction and that policies are properly aligned. o oBUSINESS RULES define how a particular transaction or activity will be executed within the process --- process change may require a rules change --generally built into an automated portion of the process. o oPOLICIES AND PROCEDURES are the key building blocks for process success. Procedures define the operations within a process --- activities that convert the input into an output. o oPROCESS METRICS provide the level of process effectiveness generated by the process/ procedures --- derived from Business Intelligence PROCESS WITH A PURPOSE o oVISIO, SMARTDRAW or other process mapping tools that are used to depict WORKFLOWS and connections between workflows --- show manual & automated steps --- enable view of critical process steps, control risk points, duplicated work & process/ work constraints. If you can’t draw a picture ---o 10/22/09 11 o PROCESS WITH A PURPOSE

BPM SYSTEMATIC APPROACH

WHAT IFS/ WALKTHROUGHS/ SIMULATE VARIABLES PRIOR TO EXECUTION

IMPLEMENT DESIGN: •TRAIN •CHANGE MGT •TEST •GO LIVE

PROCESS OBJECTIVES/ AS IS AND FUTURE PROCESS STATES

USING PROCESS METRICS TO FINETUNE AND FURTHER IMPROVE THE DESIGN

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MEASURE EFFECTIVENESS: •INDIVIDUAL PROCESSES •AFFECTS ON OTHERS •COMPARED TO PLAN

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APPLYING THE BPM METHODOLOGY Aligns w ith N ext level up ?

YES

Aligns w ith N ext level up ?

NO

NO

M eet w ith m anagem ent to Identify c ritic al goals/ objec tiv es / s trategies

M eet w ithproc es s ow nersto ex plain the projec&t identify goals & objec tiv es

T es t theoretic al proc es s w ith v ariables/ w hat-ifs & w alk through w ith operators

E x ec ute / Im plem ent the new proc es s--c om plete proc es s doc s, train s taff , tes t& go liv e

YES

Aligns w ith N ext level up ?

YES

P R O C E S S O W N E &R O S PE R A TOR S IN V O LV E D IN A LL S T E---PESX P E R T S

NO

M eet w ith proc ess operatorsto dis c us s projec&t interv iew for des ign inform ation

M onitor proc es s res ults--- ac t on les s than ex pec ted m etric /sobv ious is s ues

C reate theoretic al T O-B E proc es s that addres s es ris k&s ineffic ienc ies --identify required doc um entation & c reate P roc es s M etric s

M ap A S-IS proc es s from end-to-end, identify inputs, doc um ents , proc edures,w eak nes s es & opportunities

O ptim iz e the proc es s--- followup on c ontrol ris k s & effic ienc y opportunities

M ov e on to the nex t proc es s tes ting outputs from c urrent one N ex t P roc es s

NO D oes design need m ods or start -over?

PROCESS WITH A PURPOSE YES

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BPM SAMPLE CASE Assignment is to help an enterprise identify and resolve billing issues Assume that Initial meetings with management & staff have been completed and we are ready to begin the process assessment PROCESS WITH A PURPOSE

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SAMPLE TOP LEVEL FLOW Revenue RevenueCycle Cycle

Sales Sales Contact Contact

Book Order Book Order

Deliver Deliver

Invoice Invoice

Collect Collect

REVENUE CYCLE OBJECTIVES: oPROVIDE AN HIGH LEVEL OBJECTIVES

EXCELLENT EXPERIENCE FOR THE CUSTOMER PROCESS WITH A PURPOSE oMEET/ EXCEED PROFITABILITY COMMITMENTS oPROVIDE A SATISFYING WORK ENVIRONMENT FOR EMPLOYEES o

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Billing Objectives are to: •Bill on a timely basis --- CSAT & & profitability •100% invoice accuracy --- CSAT & collections (cash flow) •Increase throughput efficiency to allow more analysis time for staff

Invoice Invoice Process Process “As “As Is” Is” Sales Staff Order Input I/ FACE Billing/ Receivab les System

ERRORS?

NO

Print Invoices

Sample for Accuracy

Stuff & Mail

YES YES

Customer Info

Customer Master

Price Product Master

PROCESS WITH A PURPOSE Escalate to IT for help

Analyze/ Correct Rejects

NO

ALL COR RECT ED

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“AS IS” Process Metrics OBJECTIVE

Timely Billing

disputes or calls)

Process Objectives

Variance

6

1

(5)

15

0

Awful

(Average

Days after Event)

Invoice Accuracy

July 2009 Results

(#

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Billing Efficiency (% 1st time pass through)

85%

95%

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(10) Pts

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IDENTIFY ISSUES JULY RESULTS

Billing Efficiency (% 1st time pass through)

85%

OBJECTIVE

95%

15

VARIANCE

(10) Pts

Error type analysis & interviews with billing & IT revealed the following: 1.On average, 65% of errors result from sales staff order input mistakes 2.On average, 15% of errors result from customer master not being updated promptly 3.On average, 15 % of errors result from product master not being updated promptly 4.The remaining 5% of errors result from miscellaneous causes PROCESS WITH A PURPOSE

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“TO BE” PROCESS RECOMMENDATIONS SHORT TERM SOLUTION RECOMMENDATIONS: Issues --- Financial management holds billing clerks responsible for efficiency even though most errors occur in upstream processes. The clerks say that they can fix the issues faster than upstream staff. •Billing clerks are “fixing” sales staff errors •Billing clerks are “chasing” and with IT are correcting customer information errors --- sales is responsible for maintaining accurate information in the customer master database •Billing clerks are chasing and with it are correcting product information errors such as current prices --- product management staff are responsible for maintaining the product master database •

Recommendations --- Upstream process owners have no skin in the game. Adjust billing efficiency for upstream caused issues and route errors to owners by email or PROCESS WITH A PURPOSE trouble ticket. Financial management should work with upstream counterparts to include corrections in process owners performance objectives.

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“TO BE” PROCESS RECOMMENDATIONS LONGER TERM SOLUTION RECOMMENDATIONS:

Issues --- Product and customer information exists in the billing system as well as in the master databases. Invoices reject when the data is not in agreement creating the rework done by billing and the upstream processes. These databases have evolved over time using different formats and logic with resulting interface issues. Recommendations --- Management should consider establishing a data warehouse as the single repository for critical information. An integrated ERP system would provide the most benefit. PROCESS WITH A PURPOSE

Next Steps for Shorter & Longer Term Recommendations --- Slide 11

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BPM Applications Business Process Management methodology is applicable for all enterprises that can benefit from process improvements: oCommercial oNon-Profit oMedical oGovernment oEducation oMilitary oReligious

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Current Process Issue Examples State Government: vState Employee Insurance Shortfall vParole System Controls vDHHS Medicare “Accounting Error” v

DEFER UNTIL SESSION TWO PROCESS WITH A PURPOSE

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WHAT PROCESS IMPROVEMENT LOOKS LIKE oStrengthened Internal Control and Risk Management oQuality & Efficiency at Higher Levels oCustomer Satisfaction Enhanced oEmployee Morale Improved oEmployees Trained in BPM Techniques --- Sustaining

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SOME CLOSING CONSIDERATIONS CHANGE MANAGEMENT

ØProcesses are owned and managed by people but many times, individuals become the process. A consistent, sustainable process by definition is person neutral. A process is tailored to meet enterprise objectives, not to fit the owner. In the absence of direction, individuals will invent their own processes +ØThe BPM advisor must be prepared to add change managemen elements to the BPM project plan. REQUIRED FOR SUCCESS

ØProcess improvement requires “tops down” support to PROCESS WITH A PURPOSE

be successful + Influence process owners/ add to objectives + Visible management priority + Provide resources 10/22/09

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END OF SESSION ONE

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