Approaches to the Performance Management

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1 POSTER 2013, PRAGUE MAY 16 1 Approaches to the Performance Management Radek Hronza Dept. of Economics, Management and Humanities, Czech Technical University, Technická 2, Praha, Czech Republic hronzrad@fel.cvut.cz Abstract This paper discusses a motivation of institutions for the implementation of performance management. Some approaches and tools for managing performance are briefly described. Paper is focused mainly on what benefits could bring business process management into performance management. The meaning of the business process management and its basic benefits are described for better illustration. Further attention is paid to introduce possible benefits of business process management on a practical example from real project "implementation of BPM at the FEE CTU". Finally, some characteristics and benefits of automated business process, which is life cycle of the grant project, are introduced. Keywords Performance management, performance improvement, approaches to the performance management, business process management, case study, FEE CTU in Prague. 1. Introduction [1, 2, 3] Performance improvement should be at present the primary interest of every institution. The main aim is to succeed on a global market. In order to fulfill this goal they have to constantly improve their knowledge and accelerate the process of decision making. Competitive environment is based on perfect performance. For this reason institutions are typically motivated by external and internal economic pressures. Due to this fact much more institutions are interested in performance management (PM) which is considered as a competitive advantage. PM is a term that refers to a holistic approach how to improve an organization management performance at all levels. As shown in Figure 1, PM integrates operational and financial data from individuals departments into one decision-making and planning framework. The scope of PM is very broad. That is why PM must be viewed at an enterprise wide level. Fig. 1: Purpose of the performance management [3] Due to the complexity of PM there is no uniform consensus in understanding and approach to institution performance management. There are many of approaches and tools for managing performance. It can be a sophisticated theory (sometimes in practice difficult to use) or partial technological tools to address only a partial part of PM. It can be for example: Balanced Scorecard (BSC) Activity Based Management (ABM) Value Based Management (VBM) Business Process Management (BPM) Business Intelligence (BI) Etc. o Analytics o Data mining o Big data o Etc. This paper brings very brief description of some approaches and tools for managing performance, description of BPM and demonstration of the benefits of BPM for PM on practical example at FEE CTU in Prague.

2 2 RADEK HRONZA, APPROACHES TO THE PERFORMANCE MANAGEMENT 2. Description of approaches and tools for managing performance As mentioned above there is no uniform consensus in understanding and approach to institution performance management. Within following text will be briefly described approaches and tools for managing performance. 2.1 Balanced Scorecard (BSC) The characteristic of the BSC is the presentation of a mixture of financial and non-financial measures each compared to a 'target' value within a single concise report (dashboard). Thanks to BSC is created structure between strategic goals and operational activities of the institution with emphasis on performance measurement. An important advantage of the BSC is that pursues not only financial indicators, but also non-financial indicators (focused on customer, business processes and employee). 2.2 Activity Based Management (ABM) The characteristic of the ABM is identifying and using multiple cost drivers and performance measures to manage an activity. It is essence for business processes reengineering. ABM focuses on managing activities to reduce costs and improve customer value. 2.3 Value Based Management (VBM) The characteristic of the VBM is maximizing value consistently in all aspects of the business. VBM comprises three elements: 1. Value creation - design, planning, and implementation of methods and processes to maximize value. 2. Value management - implementation of leadership, structure, policies, strategies, and processes that maximize value. 3. Value measurement - assessment of value levels and whether performance reaches value objectives. 2.4 Business Process Management (BPM) BPM is often referred to as management by business processes. BPM is a set of activities related to the planning and performance monitoring of business processes. BPM uses various SW tools and techniques to define, visualize, measure, monitor, inform and improve business processes so that they can successfully and thoroughly fulfilled customer requirements of processes. It is argued that BPM enables organizations to be more efficient, more effective and more capable of change than a functionally focused, traditional hierarchical management approach [4]. 2.5 Business Intelligence (BI) BI is a set of theories, methodologies and technologies that transform raw data into meaningful and useful information which can be used for decision making. BI provides historical, current and eventually predictive views of business operations. Common functions of BI technologies are reporting (historical and current views). Common functions of BI are very often expanded by analytics (predictive analytics), data mining, big data, etc Analytics Analytics is method for discovery of meaningful patterns in data. It relies on the simultaneous application of statistics, computer programming and operations research to quantify performance Data mining The goal of the data mining is to extract information from a data set and transform it into an understandable structure for further use (decision making, advertising campaign, etc.). It can be said that data mining is the automatic or semi-automatic analysis of large quantities of data to extract previously unknown interesting patterns such as groups of data records (cluster analysis), unusual records (anomaly detection, fraud detection), dependencies (association rule mining) Big Data Big Data applies to information that can't be processed or analyzed using traditional processes or tools in a reasonable time. Therefore, it is necessary to handle big data through exceptional technologies which can efficiently process large quantities of data within tolerable elapsed times. Suitable technologies for handle big data could be for example: association rule learning, cluster analysis, data fusion, machine learning, neural networks, pattern recognition, anomaly detection, predictive modeling, regression, etc. 3. Business Process Management As mentioned in chapter 2.4 BPM is management by business processes. Better business processes produce lower cost, higher revenues, motivated employees, and happier customers. Therefore, the BPM is an approach that s designed to produce better business processes. BPM is one of possible approach to PM (not only one or the best way). BPM is focused mainly on pursuing nonfinancial indicators (focused on customer, business processes and employee). BPM consist of three recurrent stages. First stage is creation of static business process model of an institution. In particular, it is description of the AS-IS situation of institution using process diagrams. Second stage is based on the static business process model of an institution (description of the AS-IS situation of institution). Thanks to this model it can be made optimization for improvement performance of processes. In the last stage are used outputs of previous stages. The idea is to create (thanks to computerization) an automated process.

3 POSTER 2013, PRAGUE MAY 16 3 One of the primary benefits of BPM is the possibility of computerization of business process, which brings significant efficiency. Especially reducing the time required for execution of business process, eliminating of paperwork and reducing of operating cost (printing cost, transport cost, etc.) 1.1 In any organization exists strong inertia of human factor and certain unwillingness to changes. 2. Unwillingness of employees to share their knowhow 3.1 Benefits of BPM 1. Standardization 1.1 Clarification of competence and responsibilities of employees. 1.2 Definition of correct classification of processes into the organizational structure. 1.3 A clear definition of process flow. 1.4 A clear definition of the expected process inputs and outputs (mitigation of misunderstandings between the departments). 2. Effectiveness 2.1 Real knowledge of the processes rather than intuitive (know-how of institution). 2.2 Employees know what is expected of them (way of work and clear definition of outputs). 2.3 Reducing the time required for execution of business process, eliminating of paperwork and reducing of operating cost, etc. 3. Possibilities of controlling 3.1 Definition of performance targets. 3.2 Definition of process performance measurement system (management knows whether the outputs are delivered in the required quantity and time). 3.3 The ability to detect potential problems. 4. Agility (transparency of organization) 4.1 Quick response to any problems. 4.2 Rapid modification of processes according to the customer's need. 5. Continuous improvement 5.1 Based on real knowledge of processes can be effectively carried out reengineering 3.2 Disadvantages of BPM Given the nature of BPM, it cannot be used in its entirety in all institutions. It is always necessary to evaluate the advantages and disadvantages of BPM for specific institution. But BPM can be used only for sub-parts of the institution. The main disadvantages of BPM are: 1. Difficult transition to new way of managing of institutions. 4. A practical demonstration of benefits of BPM Within following text will be described some benefits of BPM as one of approaches for managing performance of institution. Some benefits will be shown on a practical example from real project "implementation of BPM at the FEE CTU". Specifically it will be the automation of life cycle of the grant project (one of the main processes at the FEE CTU). A practical demonstration of benefits of BPM will be described in next subchapters. Implementation of BPM at the FEE CTU started at Since that time it was created static business process model of an FEE CTU (description of the AS-IS situation) [7]. This was the necessary condition for the start of the next phases of BPM and performance improvements at the FEE CTU. These outputs were followed by Ondřej Kubera (one of the interns of the Centre for Knowledge Management at CTU FEE [6]) at the end of Initialization phase of automation of life cycle of the grant project At the turn of 2011 and 2012 Ondřej Kubera performed as part of his diploma thesis analysis of the situation and suggested list of suitable processes for optimization. After consultation with the registrar of the FEE, the process of life cycle of the grant project was chosen to optimization. At that time it was the most pressing issue that needed to be deal with. Problems identified by key users (especially from management of the FEE) [5]: 1. Lack of any evidence necessary for financial management and increasing of success challenges in grant projects. a. There is no overview of applications in individuals grant agencies and feedback of their success. b. There is no evidence of reasons why grant agency rejected application. Therefore any corrective action cannot be made. c. There is insufficient data for the prediction of funds for grant projects. 2. Huge amount of time and administration is needed during life cycle of the grant project. a. Departments are complaining of identifying redundant information from the Dean's Offices.

4 4 RADEK HRONZA, APPROACHES TO THE PERFORMANCE MANAGEMENT b. Lack of sharing information between participants of process (applicant hasn't continuous information where the application is). c. The entire administration should be considerably simplified and shortened. i. Waste of time arising from too many administrative steps which could be effectively reduced thanks to automation. One of the results of the diploma thesis in streamlining the process of life cycle of the grant projects is proposal of automation (electronization of the process). This diploma thesis was followed by Centre for Knowledge Management at CTU FEE (CKM) and automation of the process started at The project team had to deal with indefinite scope and missing concept of the future functionality of electronical process applications. At first was made analysis of functional requirements and determine the scope of the process. Due to the huge scale, the realization of the project was divided into three phases. For automation of process will be used BPM platform IBM BPM v8.1. In first phase will be automated sub-process "Approval of the application". In second phase will be automated subprocess "approval of grant contract" and "update of information about the grant project". In third phase will be automated sub-process "solving of the grant project." and "finishing & closing of the grant project". Fig. 2: life cycle of the grant project 4.2 Current state of automation of life cycle of the grant project At present is ongoing realization of the first phase of the project. It isn t an easy task, though. Thanks to intensive communication with key users we, achieved, that almost automated sub-process (approval of the application by management of the FEE CTU) are ready to be deployed in the pilot run on one department (Department of Telecommunication Engineering). In few weeks is expected that second phase will start. Almost all necessary documents and functional requirements for the second phase are ready. Therefore automated sub-processes from second phase will be tested during pilot run together with sub-processes from first phase. Based on the continuously outcomes from the pilot run, the process will be modified and as soon as possible deployed in real use within FEE CTU. 4.3 Future Outlook The short or medium-term goal of the project is to deploy automated process to real use within FEE CTU, collect real data and improve performance during life cycle of the grant project. Besides of that, we can use this experience and best practices for automatization of other processes. Interesting mention is that at the FEE CTU is ready for automation other several processes (organization of meetings of dean s collegium, organization of meetings of gremium and change management). 4.4 Expected benefits of automation of the life cycle of the grant project From pilot run is expected analysis and evaluation of the real benefits in the performance improvement. At this moment we can expected that automatization of process provides us an interesting potential to: exchange the information more effectively, provide faster and more efficient administrative support from the dean's office, improve the availability of consolidated data and eliminate heterogeneity of information sources, o o sufficient data for the prediction of funds for grant projects, overview of applications in individuals grant agencies and feedback of their success. On that base can be made any corrective action. Above mentioned benefits are only partial. Much more benefits can be expected after implementation of whole BPM concept into FEE CTU. 5. Conclusion As mentioned on the beginning of this paper a lot of approaches to performance management exist. One of them could be surely BPM. We have shown expected benefits in performance management (thanks BPM) in one part of real project - implementation of BPM at the FEE CTU. Possibility to achieve the expected benefits will be surely confirmed after pilot run. Already at this time we can say that it is highly probable that benefits in performance improvements will be greater in comparison to the current situation. This is confirmed by Ondřej Kubera in his diploma thesis [5] and experiences (based on internal simulations and conversations with key users) gained by project team from CKM.

5 POSTER 2013, PRAGUE MAY 16 5 It can be said that project of the implementation of BPM at FEE CTU is on the beginning and still continues. We believe it brings an example showing the BPM as a possible way how to improve the performance of an institution. The current project outputs and responses across FEE CTU show that BPM in higher education has its place. CKM confirmed it built up competence in the implementation of BPM. It confirms the growing trust of faculty management with the project outputs (demand for ad-hoc modeling of new or missing processes or requirements for the automatization of processes). Besides this, the growing demand for CKM services has been noticed. There has been a cooperation with the Ministry of Education, Youth and Sports in Czech Republic or with University of West Bohemia in Pilsen in area of BPM as one of approaches to the performance management. About Author Radek HRONZA was born in Jindřichův Hradec in He received his Ing. degree in 2011 from the Faculty of Electrical Engineering of the Czech Technical University in Prague, specializing in Economics and Management in Electrical Engineering. Currently he is a Ph.D. student at the Department of Economics, Management and Humanities at the Faculty of Electrical Engineering of CTU in Prague. His interest is mainly in performance management and business process management. He is part of Centre for Knowledge Management at CTU FEE since Acknowledgements Research described in the paper was supervised by Prof. Ing. Oldřich Starý, CSc.. Supervisor, FEE CTU in Prague. References [1] CENTRUM VÝZKUMU KONKURENČNÍ SCHOPNOSTI ČESKÉ EKONOMIKY. Ročenka konkurenceschopnosti České republiky: vyd. Praha: Linde nakladatelství, s.r.o., ISBN [2] RAYNER, Nigel., et al. Magic Quadrant for Corporate Performance Management Suites: Gartner RAS Core Research Note G [online]. 25 January 2010, [cit ]. Available at: [3] HRONZA, Radek. Performance Management in an Academic Environment. Prague. POSTER th International Student Conference on Electrical Engineering, ISBN [4] A computer scientist's introductory guide to business process management (BPM). Crossroads [online]. 2009, Issue 4 [cit ]. Available at: =ACM [5] KUBERA, Ondřej. Analysis and Optimization of Faculty Processes. Prague, Diploma thesis. Faculty of Electrical Engineering at the Czech Technical University in Prague. Supervisor: prof. Ing. Oldrich Stary, CSc. (in Czech) [6] Centrum Znalostního Managementu [online] [cit ]. Available at: [7] AS-IS process model of the FEE CTU. Faculty of Electrical Engineering at the Czech Technical University in Prague. [online] [cit ]. Available at: (only for employees and student of the FEE CTU)