Operational Transparency

There are two key reasons why companies must closely monitor their value creating business processes. First, companies need more actionable insight and visibility on the critical few operating metrics that underlie value creation. Next, stricter global accounting and corporate governance requirements have placed increased pressure on publicly traded corporations to have greater transparency and accuracy in both financial reporting and managerial control.

While the evolution of Business Process Management Systems (BPMS) offers the promise of delivering operational transparency at the organizational level; generally, it has yet to realize its full potential. Gartner has defined a BPMS as “an integrated collection of software technologies that enables the control and management of business processes,” and a BPMS typically marries BPM software with analytics or Business Intelligence (BI) capability as well as document management features and collaboration tools such as portals and forums.

There have been a few successful attempts deploying BPMS to install operational transparency. There have been more than a few utter failures. Most attempts fall somewhere in between. There are at least five critical mistakes which explain why the deployment of BPMS has failed to realize its full potential in delivering operational transparency at the organizational level.

Mistake # 1: Lack of a Systemic Perspective. The effective application of BPMS for operational transparency requires a systemic view of the end-to-end business processes that create value for both customers and the organization. Far too often, BPMS is applied to address specific points of pain in a specific part of operations frequently in a way that is of limited scope. While this can produce local optima, it can also lead to sub-optimizing organizational performance and failure to enable the monitoring and management of the firm’s end-to-end business processes.

Mistake # 2: Lack of Customer Focus. Companies fail to view operations from the customers’ point of the view – or ‘the outside-in.’ They emphasize the measurement of volume and cost related metrics and ignore the key quality and timeliness metrics that truly matter to customers for each of the key processes in the value chain such as developing, selling and delivering products and/or services.

Mistake # 3: Fragmented or Competing Technologies. Organizations frequently have BI tools as well as a BPMS. Further, due to mergers, acquisitions and strategic alliances, many organizations now have a mix of legacy systems that are connected together with the “bailing wire” of cumbersome interfaces. The lack of integration of these technologies can lead to redundancies, lack of focus and increased costs.

Mistake # 4: Inadequate or Inconsistent Management Attention. Sustained management attention to the critical few metrics that define operation performance is elusive. Management priorities are constantly changing and operations do not have the needed level of crisp definition in a process context. Nor are senior executives incented to pay ongoing attention to operational performance.

Mistake # 5: Too many Metrics. Having too many key performance indicators (KPI) is almost as ineffective as having none. The ‘K’ in KPI stands for key – that means the critical few. Yet, organizations persist in attempting to monitor far too many metrics and fail to have a cascading mechanism that guides leaders to pinpointing root causes for red flags on the high-level, critical operating metrics. In part this is due to a legacy where the definition of key metrics is still dominated by a functional or departmental mindset.

So what must organizations do to successfully develop and sustain operational transparency at the organizational level through the application of BPMS? There are five key steps to consider.

#1 Adopt a systemic perspective. Define the end-to-end business processes that create value in the context of the value chain. Create a shared understanding of the high level process definitions among both the senior management team and the middle management layer. Understand that the application of BPMS to achieve operational transparency is more about monitoring and control than it is about the short-term, small scale, improvement of operational performance. Emphasize that data on organizational performance is information that can inspire action on the performance of end-to-end processes.

#2 View business processes from both the company’s and the customer’s perspective. Identify the critical few metrics for each end-to-end process in terms of volume, cost, quality and time. Include and emphasize metrics that matter to customers such as ‘complete, on-time delivery’ and ‘first time right’ responses to customer complaints/inquiries.

#3 Integrate systems. The ability to integrate the range of systems with disparate applications is one of the keys to operational transparency success. The current business environment demands that companies utilize systems that can deliver up-to-the-minute critical information across the key business processes in the value chain to provide a full view of operations. Focus on end-to-end visibility, flexibility and ease-of-use.

#4 Sustain management attention. Operational transparency demands focused and sustained management attention. It begins with a shared understanding of the value creating end-to-end processes, but the linkage to strategy and financial performance is equally important. Assigning some considerable part of the discretionary component of management bonuses to operational performance in a process context will serve to sustain management attention.

#5 Cascade Metrics. The inherent complexity of the full set of metrics on operational performance, driven by both operating and compliance requirements, calls for simplification. A cascading methodology which identifies the critical few metrics for each core business process, and in the next layer defines the key metrics at the sub-process level can provide the means for the needed focus and completeness.

Operational transparency can assure that the critical aspects of end-to-end process performance are better understood. BPMS can play a key role by making process execution visible and more readily monitored. Success in achieving operational transparency relies upon leadership articulating the connection between transparency an organizational success. It depends equally on collaboration across departments at both senior and middle management levels.

 

Author

Andrew Spanyi’s work in the area of process management is recognized internationally. He has written two books on Process Management: More for Less: The Power of Process Management and Business Process Management is a Team Sport: Play It to Win!

Contact Andrew at www.spanyi.com