Performance Measurement Based Process Modelling

Transcription

1 Performance Measurement Based Process Modelling Dr. Christian Aichele Abstract: Performance Measures and performance measurement systems are the basis of quality and quantity-related generation and control of business objects like organizational units and business processes. The enhancement of current process modeling methods with possibilities to model performance measures allows companies to create a prospective company controlling. Therefore it is necessary to visualize the strategic objectives linked with the key strategic measures and integrated with the performance measures of the business objects. This paper points out the use of process modeling extended with strategic and operational performance measurement for organizations of all branches. 1 Demands placed on process modelling and performance measurement The increased opening up of markets has, in almost all branches of industry, led to increased competition. Cost reduction, shorter order processing times and faster product development are, with quality remaining the same, important factors for success in achieving the survival of a company. The overall objective of business object based indicator systems (indicators ore performance measures related to business processes and/or organizational units and/or data objects) is to analyze and control the optimum situation of a company in a standardized, consistent and, above all, comprehensible way. Only organizational models including performance measurement indication and integration which fulfill these requirements can be applied to the optimization of business processes for enterprises like producing companies and public services etc. An optimal performance measurement considers the enterprise strategy with the derived strategic objectives. Therefore the strategic measures which monitor the

2 success in achieving the strategic objectives have to be linked with the key performance measures of the enterprise business objects like the different organizational units and the core business processes. 2 Process Modelling with performance measurement integration Information, criteria, indicators and points of orientation will play an important role in economic life in the years to come. In an economic system based on competition, it is vital to make out the future economic situation as early and as clearly as possible in order to take one's chance as soon as it presents itself. It is therefore a matter of great concern for vital companies to have methods and systems at their disposal with the help of which statements about future combinations of important core competencies can be made. The management of a cooperation needs indicators or performance measures to be able to distinguish - with the number and complexity of business processes being high in each cooperation - what is important and relevant from what is unimportant and irrelevant, and to be able to obtain aggregated information from a mass of disordered data; in order to think in a relational way rather than according to the monetary quantities of profit and costs and to pay more attention to productivity than to production; to see causal connections, cause and effect, and the interplay of positive and negative factors; to know the company's own position as a competitor on the market as well as the strengths and weaknesses of the company in comparison with the competitors, so that it is in a position to react timely to changes and new developments on the market, to be equipped with an instrument of management for targeted thinking and action, and

3 as an instrument to monitor and optimize the operationalized strategy of the company. The indicator systems which have been developed so far are either incomplete, i. e. quantitatively important task areas of the management are left out of consideration, or their structure is not sufficiently logical. In the past, the management normally used financial metrics like economic profit and variable production costs in order to measure the performance of their company, whereas non-financial measures like e. g. customer service level, market shares, order processing times, production lead times etc. were not considered in a strategic context or were hardly considered at all. On the basis of a business object oriented performance measurement system, processes can be speedily analyzed and evaluated through process models taking into consideration the enterprise vision, business strategies and corporate objectives as well as the factors of performance linked with them. The correlation of the individual indicator analysis with the business objects like organizational units, data objects and business processes makes it possible to proceed to a subsequent targeted optimization of the organization structure and business process architecture of the company (Figure 2.1 shows an extract of modeling methods or modeling types which are required for a Performance Measurement based Process Modeling integrating the strategic and operational performance measures). The relevant indicators of the strategic objectives linked with the key performance measures of the core business objects provides a performance measurement system which allows proactive and prospective enterprise controlling and management. Every change in business object related performance measures are now related to the strategic objectives of the enterprise and therefore supports the key management task in prioritizing activities, initiatives and projects for the achievement of the business strategy.

4 Hierachy Return on investment Organisation Structure - Earnings as a percent of sales Turn-over Earnings Total investment Process Chain Process starting event ERM - Data Data cluster cluster - Data cluster yes / no or condition ramification Data cluster In between result/event Key attribute Foreign Key attribute Attribute Financial Perspective Linkage Model F1/3 economic profit Reduce costs F4 F2 asset utilization / operating productivity performance sales C1 C2 Customer/ Supplier Perspective Customer relationship Supplier relationship End result End result Strategy - Objective - Internal BP Perspective I1 I2 I3 Optimize supply chain performance Productivity Quality L1 L2 L3 L4 Stragegy Stragegy Strategic Issue Learning & Innovative Perspective Upgrade staff competencies VBM/BARD culture Transfer Best Practice culture Access to strategic information Objective Objective Objective Objective Balanced Scorecard- Cause and Effect Objective Objective Perspektives Objective Strategic Measure ( Lag indicators ) Meet Shareholder F1 Expectations EVA Performance Measure ( Lead indicators ) Target EP > 4% Initiative Objective Objective Financial Operation F2 Performance Achieve Proftability F3 Growth Asset F4 Utilization / Productivity EP Velocity VP / PPC Assets Velocity=1,0 Global Supply chain activities Customer C1 Customer relationship Lead time Customer Service Level CSL: 80%-> 95% integration project Bonus system Customer/ Supplier C2 Supplier relationship Supply reliability Lead time Lead time reduction SF Qualification program I1 Optimize Supply Chain Performance Internal BP I2 Productivity Production lead time Supply chain efficiency Supply Chain optimization I3 Quality Expenses / ratio Supply chain breaks Lead time reduction Production lead time project Upgrade Staff L1 Competencies Knowledge Factor Optimize IT Incentive program Learning Access to Strategic L2 Information Staff productivity Training per employee knowledge SCM education Fig Process Modelling integrated with strategic and operational performance measurement

5 3 Tasks and benefit of indicator systems Companies and organizations, and above all, their management must be in a position to obtain rapidly, from few, but instructive pieces of information, a precise picture of the situation within and outside the company. Information about cost structures, capacity utilization, production programs, volume of orders, operating position and liquidity is essential for the survival of especially a company and/or organization. The strengths and weaknesses of a company and/or organization in comparison with competitors in the same branch of industry have to be synthesized. s which are well thought-out and carefully evaluated supply the tools for rapid answers to these complex questions. The formation of indicators is the most important way of condensing information. It is therefore necessary to provide information systems in company and/or organization which supply relevant information for decision-making in a concentrated, aggregated and concrete form. systems or reference models with indicator systems are such information systems. 4 Performance Measurement based Process Modelling Well-established graphic forms of description are used for the representation of business objects (business processes, business functions, data objects, organizational units) related to performance measures. s are hierarchically grouped in function trees, organization charts are used for the organization view. To describe the data view, the Structured Relationship Model (SERM) is utilized. The SERM is regarded as the description method which is, at present, best suited for describing data structures, as its graphic form of presentation and its clear definitions make it especially user-friendly. The representation of the control and process views is mainly done through a derivate modelling method of the extended Event-Driven Process Chain (eepc) called Performance Measurement Process Chain (PMPC). For describing the business strategy and the strategic objectives with the linked strategic measures adapted

6 modelling methods of the Balanced Scorecard approach like the Strategy- Objective diagram, the linkage model and the cause-effect relationship are used 1. The required modelling methods are: - Performance Measurement Process Chain - hierarchy - chart - Structured Relationship model - hierarchy - Balanced Scorecard Linkage Model - Balanced Scorecard Cause and Effect Relationship All modeling methods are containing the object indicator (Figure 2.1. shows the modeling methods). Figure 4.1. emphasizes on the integration of the enterprise strategy and the linked strategic measures with the enterprise business objects with the linked operational performance measures. 1 Compare Kaplan, R.S. / Norton, D.P. (KN01)

7 Business Strategy Business objects: Business Process e.g. Supply Chain Business Process Business Supply Process Chain Supply Chain Market Market shares shares Company target hierachy Primary requirement Primary planning requirement planning PPC PPC Material Capaicty requirement Material requirement Capaicty planning requirement planning requirement planning planning Order release Order release Production Production products customer service service Provide new new products Shorten delivery delivery times times reliability Supply Supply chain chain quality quality Target based indicators Business object based indicators Supply Chain Ind 1 Ind 2 Ind 3 Ind 1 Ind 2 Ind 3 Ind 1 Ind 2 Ind 3 ERP Fig Structure of a Business Object & Balanced Scorecard Performance Measurement System 5 Strategy related Performance Measurement System for the Specialty Chemical Industry A Swiss based Specialty Chemical Industry company started a major initiative in order to increase quality produced, market share, customer satisfaction and above

8 all to increase the economic profit. More than 35 parallel projects should deliver a quantam jump in the enterprise performance. For that a prerequisite was to develop a performance measurement system which aligns the core business strategy Sustainable profitable growth with the key performance indicators of the corporate projects (see figure 5.1. Strategy Objective hierarchy). Revenue (Market Shares) Customer Relation Customer Service Process Sustainable profitable growth Market Share profit Cut costs Strategy Objectives Measures Velocity Economic Value Added Economic Profit Fig Strategy Objective hierarchy Figure 5.2. points out the integration of projects like Production Lead Time reduction, Supplier Management, Global Demand Flow Management, Customer Integration and AR initiatives with the corporate strategy described by applying the balanced scorecard approach. With that instrument the management is able to identify and prioritize core projects according to the extent of added value to the business objects.

9 Custome r O M T I Financial Learning and Growth O M T I Obje ctive s Measures Targets Initiatives O M T I Internal Business Process O M T I Furthermore the cause-effect relationship of the business object performance measures to the strategic targets can also be evaluated. Projects / Iniatives view Lead Time Supplier Management Customer Integration Demand Management Product Definition A/R initiatives... Business Target view Supply Chain Process view s view Target Hierarchy Wirtschaftlichkeit Wirtschaftlichkeit Kosten Umsätze / Erlöse Kosten Umsätze / Erlöse senken senken Marktanteile Marktanteile neue Märkte erschließen neue Märkte erschließen Management Materials management Produkte Produkte Liefer-/Bereitstellungszeiten verkürzen Liefer-/Bereitstellungszeiten verkürzen Kundenservice Kundenservice Liefertermintreue Liefertermintreue neue Produkte bereitstellen neue Produkte bereitstellen Qualität der Kundenauftragsabwicklung Qualität der Kundenauftragsabwicklung Balanced Scorecard Hierarchy Earnings Return on investment Earnings as a percentage of sales L Turn-over CIBA Total investments Products produced Products per worker per day Present workers Performance Measurement System Disposition Fig Integrated Performance Measurement System The objective is to identify and generate transferable best practice to reduce the overall effort and development time as well as to increase efficiency and implementation benefits. In this respect single projects are carried out only or mainly in one unit. The experience and know-how is then transferred to other organizational units. The management is monitoring and supporting the projects and ensuring that the results are in line and in balance with the global supply chain vision and divisional velocity targets. The described modeling methods have been used on the one side for the development of the performance measurement system and in order to reduce the

10 manual effort of data collection and data aggregation on the other side as a specification for the generation of an IT based performance measurement system (see figure 5.3. Top Management Information System). Fig Management Information System with organizational analysis, balanced scorecard related analysis and a management decision support system

11 Literature Aichele, Christian / Kirsch, Jürgen Geschäftsprozeßanalyse auf Basis von Kennzahlensystemen, in: Management & Computer. 3. Jg., 1995, Heft 2, (CA01) Aichele, Christian Kennzahlenbasierte Geschäftsprozeßanalyse, Gabler Verlag, 1997, (CA02) Aichele, Christian / Böhning, Sebastian BPR and Benchmarking with ARIS-based Industry-specific Reference models, in: Proceedings of the 4 th International Conference, Computer Integrated Manufacturing, page , Springer, Singapore 1997, (CA03) Aichele, C. / Elsner, T. / Thewes, K.-J. Optimierung von Logistikprozessen auf Basis von Referenzmodellen, in: Management & Computer, 2. Jahrgang, Heft 4, 1994, S , (Optimierung von Logistikprozessen), (CA04) Kaplan, R.S. / Norton, D.P. The Balanced Scorecard, 1996, (KN01) Scheer, August-Wilhelm Wirtschaftsinformatik, Referenzmodelle für industrielle Geschäftsprozesse, Springer Verlag 1994, (SAW01) Tiemeyer, Ernst / Zsifkovitis, Helmut E. Information als Führungsmittel, Computerwoche Verlag GmbH Edition 1995, (TZ01)