Practical Process: Measuring Business Process Performance

This was the question asked of me recently: “If you separately set KPIs for each of the processes in a process architecture, how do you know that they are properly aligned with the strategic objectives of the organization?” Good question!

Why process architecture?

Before we talk about measuring the performance of processes in a process architecture, we better be clear about the process architecture. I've written about this in other columns and other places, so just a quick summary here. We need to thoughtfully document and actively manage the process architecture because:

  • The only way any organization delivers value to customers and other stakeholders is via its cross-functional processes.
  • The organization chart is silent on the issue of cross-functional management.
  • Traditional management reflects the organization chart, i.e. we manage up and down, while work gets down in collaboration across, the organization. Effectively, we work in one direction and manage in another.
  • A process architecture provides an operational and strategic artifact that can be used to address this significant management flaw. It shows us how we get work done; how we execute strategy.

By adding a process architecture to the management toolbox, we greatly enhance the quality of value creation and delivery, making the organization more resilient, focused, and agile.

A promising start

In building a process architecture, I strongly recommend proceeding in a top-down way, starting with the organizational strategy.

The vision, mission, values (or whatever other format the statement of strategic intent takes) tell us what the organization promises and to whom. Those promises are delivered by cross-functional processes. These processes are documented in the process architecture. That process architecture is a blueprint for strategy execution.

Line of sight

If the process architecture has been carefully developed starting from the strategy, each process in the hierarchy will have a 'line of sight' to that strategy. The strategy says what is promised. The highest-level core processes come directly from the strategy. Each lower level of the process architecture is created by decomposing the higher-level process.

In this way, the contribution to strategy execution of every processes at every level can be clearly traced. There are no orphan or random processes. Developed in this way, the process architecture defines a coherent ecosystem of processes that are creating, accumulating, and delivering products and services to customers and other stakeholders, i.e. executing strategy.

This tight alignment between strategy and processes will be vitally important when it comes to setting process performance measures and targets.

Answering the question

So, back to our question: “If you separately set KPIs for each of the processes in a process architecture, how do you know that they are properly aligned with the strategic objectives of the organization?”

Certainly, there is a need to ensure that process performance measures are aligned with strategy execution. Of course, there is—what we are really doing in measuring process performance is measuring the quality of strategy execution.

The good news is that this requirement has already been met if we are working with a process architecture derived from strategy. When each process in the architecture has line of sight to the strategy, performance alignment is 'automatic'.

JM_Juran_Quote

We can 'simply' consider each process in turn and ask what it is supposed to deliver and how would we best know if that was happening (or not happening). Measurement and strategy alignment relationships are built into the structure of the process hierarchy. Our critical performance question, on a process by process basis, becomes “if this process was working as well as its key stakeholders would like, what would it be doing, and how would we know.” And, of course, as we have long been told by Vilfredo Pareto via J M Juran we are always looking for the critical few measures.

At all levels, the desired outcomes of a process are delivered by its subprocesses. If the process architecture has been properly documented, the process relationships have already been resolved and we 'just' need to ensure that each process is doing what it is meant to do.

Almost every process in our process architecture is a subprocess, i.e. all but those at the very top of the hierarchy. Each subprocess has its own purpose, a purpose that is different to that of the higher-level process. Each process, therefore, has its own measures of performance that are not directly derived from the higher-level measures. Each process is executed by its subprocesses, and each (sub)process has a unique role to play, therefore requiring unique performance measures.

It is often said, or at least implied, that measures (aka KPIs, results etc.) “cascade” down though a hierarchy. I think this is misleading since it suggests a tight relationship between levels, and perhaps even implies some form of arithmetic relationship between measures at different levels.

My experience and analysis suggest that we can usefully forget about cascades and measures alignment if we start first with a properly constructed process architecture.

Designing process measurement

In conclusion, some guidelines for the pragmatic development of an effective process performance management regime:

  • First build a process architecture that is tighly coupled to strategy. When the process hierachy is tightly coupled, the measures will follow.
  • Assess each process in turn:
    • What would be a good RESULT for this process?
    • How can we MEASURE for that result?
    • What TARGET should we set for the measure?
    • Is there a performance (or opportunity) GAP between the actual and the target?
    • Does that gap create an important IMPACT?
    • CHANGE the process to close the gap if the business case is sustained.
  • Always the vital few, not the trivial many (Juran). What if we could only measure, say, three things about the performance of a process, what would they be? There may be more or fewer than three, but we don't want 30. Making a list of 30 measures is not analysis, it's typing.
  • Process performance touch points change over time. Measures may also need to change and, therefore, should be reviewed regularly.
  • Don't bother defining process performance measures unless you intend to collect the related data, actively track performance, and repond apropriately. Defining process measures that are not going to be used is classic process waste.

If we aren't measuring process performance, we aren't managing processes, and we can't know if we are improving them. Process performance measurement is a vital enabler of process-based management. Let's make sure that the related management processes are efficient and effective. Keep it simple. Make it real.

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Roger Tregear

Roger Tregear

As the Principal Advisor with TregearBPM (www.tregearbpm.com), Roger Tregear delivers BPM courses and consulting assignments around the world. Roger spends his working life talking, consulting, thinking, and writing about analysis, improvement, innovation, and management of business processes. His work with clients is in organizational performance improvement and problem solving based on BPM capability development, and business process, analysis, improvement, and management. He helps small and large organizations understand the potential, and realize the practical benefits, of process-based management. Roger is the author of the book Reimagining Management. Contact Roger on +61 (0)419 220 280 or at roger@tregearbpm.com.
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