ASIAN JOURNAL OF MANAGEMENT RESEARCH Online Open Access publishing platform for Management Research

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1 Online Open Access publishing platform for Management Research Copyright by the authors - Licensee IPA- Under Creative Commons license 3.0 Research Article ISSN Review impact of strategic approach to business process management on the performances Mehdi Hasankhani 1, Ali Moghadamnezhad 2, Majid Nazari 3 1- PhD Student in public administration, human resources orientation of Qazvin Azad University, Iran 2- MA Industrial Management at the Centre for Industrial Managemen,, iran 3- MA Business Administration Abhar Azad University, Iran mehdi_hasankhani@yahoo.com ABSTRACT Management Scholars and practitioners have developed different innovations including total quality management, continuous improvement, organizational transformation, and determining appropriate organizational size. The aim all these approaches follow is to change the manner things are performed in order to improve the organizational performance. One of the rapidly widespread innovations in this regard is the business orientation. According to the new business philosophy, the organization must be developed to provide both horizontal and vertical Information flows, as a necessity for the establishment of general organizational goals. Therefore, this paper is to analyze the impact of strategic approaches to the business process management on the financial and non-financial performance. The following results were obtained when the data were analyzed by SPSS 21 software and coefficient of 384 questionnaires collected from sample: (1) strategic approach to business process management has a positive impact on the performance appraisal process; (2) performance appraisal process has positive impact on the non-financial performance; and (3) performance appraisal process has positive impact on the financial performance through the non-financial performance. Keywords: strategic approach; business process management; performance appraisal; financial performance; non-financial performance 1. Introduction In the previous years, many concepts have been developed for the organization s business processes and their related performances. Work processes, and their relationship with the improvement of inter-task interactions provided by Michael Porter about 20 years ago. He introduced all the operational relations within an organization as value chain. Also, through Deming flow diagram, Edward Deming provided the relationships within the organization chain, from customer to the supplier, as a process. Just like any other process, this process may be evaluated and improved. Thomas Davenport and James Shout described process orientation in organizations as a key part in new industrial engineering. They defined industrial engineering as the information technology and redesigning the business processes. Michael Hammer has also considered the business processes concept as the main factor for the success of reengineering attempts (Azar et al, 2006). 2. Statement of the problem and significant of the study 610

2 Business processes management system has paved the way to mechanize the organizational procedures or, in the other words, the work flow of the organization according to these processes. Using this system, managers and planners can define the organization s administrative processes by their own decision and change it at any time they wish. Those responsible for performing the processes may receive all up to date information about the manner they should perform the processes under their responsibility and have an impact on the implementation of any of the processes. Managers can readily have control on the exact procedure of performing the processes in their own organizations. Therefore, by having many templates required by organizations, business processes management can provide an integrated method to define, perform and manage the organizations business processes and thereby minimize the workload of developing informational solutions for organizations (Silver, 2008). In order to be remained in competitive environment, the organization needs to improve its performance. And to achieve better outcomes and higher profit margin, new instruments and technologies is required. Organizations must continuously attempt to improve their performance management practices and performance measurement system. Business processes management would be very useful in this regards (Hernaus, 2011). Performance management and appraisal are among the most important strategic processes and, while improving responsiveness, can determine the extent to which the organization s goals and plans are realized. On the other hand, to improve the productivity is of interest to all the organizations. Although productivity is a function of technological, capital and human resources; many organizations don t seek to improve their productivity through the improvement of their employees performance. The relationship between employees and productivity can be both evaluated and assessed (Saebi and Tousi, 2009). Regarding the abovementioned, the problem is to study the impact of business processes management on the financial and non-financial performance of banks and insurance companies listed in stock exchange. 3. Business processes management The concept of business processes management was for the first time introduced to the academic world in 50 and 60 decades with the purpose of making continuous improvement in the quality management approach. Since the late 1990s, Peter Figner and Howard Smith - the well-known authors in this area - have drawn the attention of trade managers to the processes and workflow management (Figner, 2006). In the previous years, many concepts have been developed for the organization s business processes and their related performances. Work processes, and their relationship with the improvement of inter-task interactions provided by Michael Porter about 20 years ago. He introduced all the operational relations within an organization as value chain. Also, through Deming flow diagram, Edward Deming provided the relationships within the organization chain, from customer to the supplier, as a process. Just like any other process, this process may be evaluated and improved. Thomas Davenport and James Shout described process orientation in organizations as a key part in new industrial engineering. They defined industrial engineering as the information technology and redesigning the business processes. Michael Hammer has also considered the business processes concept as the main factor for the success of reengineering attempts (Azar et al, 2006). 611

3 Processes are the only information technology-based tools which can perform part (but not all) of the business systems. The other part of this cycle is based on the procedural and management theories including: to choose the key appraisal indicators for processes, to determine the strategic preferences of processes to be implemented in tools, to determine mechanism to modify or change the processes and to relate the performance indicators to the organization goal (Wicks, 2007). 4. Performance and business strategy As to the impact of Porter s generic strategies on the performance of organization, a study was performed on the Slovakian organization so that the organizations business strategies were categorized, according to Porter s classification (1980), into cost leadership, differentiation and focus groups and the organization performance was analyzed under such criteria as customer survival skills, operational costs control skills, and total profit growth. The results revealed that the preferred business competitive strategies by organizations have a significant impact on their performance and those organization which have chosen a moderate strategy (a combination of the aforementioned strategies) have better performance than that of the organization which have focused only on one triple strategies (Naebzade, 2009). Competitiveness or competitive capability is associated with all the pillars of a business system, including inputs, processes and outputs. In other words, a business is competitive and has competitive capability only if it is has competitive inputs, processes and outputs. Accordingly, in analyzing the relationship between market orientation and competitiveness, the relationship between market orientation and competitiveness of inputs, processes and outputs of the business system are needed to be considered (Divandari, 2008). 4.1 Performance appraisal Continuous improvement of organizations creates a great synergistic power which can support the plans for organizational development as well as creating opportunities for organizational improvements. Governments, organizations and institutions have made progressive attempts in this regard. Continuous performance improvement is not achieved unless by being aware of the extent to which the organization is improved and achieves its goals; by identifying the challenges faced by the organization; by receiving feedbacks; by becoming aware of the extent to which the formulated policies are performed; and by identifying the cases need serious improvement. None of these states are possible without measurement and appraisal (Rahimi, 2006). Performance appraisal is process to measure, assess, value, and judge the performance during a specific period. Performance appraisal in organizational terms is the synonym of activities effectiveness. By effectiveness, it means the extent to which the organization will achieve its goals and plans as well as the efficiency of activities and operations (Rahimi, 2006). Performance appraisal is the systematic and regular assessment of the individuals work regarding the way they perform their duties and determining their potentials to be developed and improved (Mirsepasi, 2007). 612

4 Generally, performance appraisal is the process of measuring and assessing organizations performance during a specific period so that the expectations and indicators to be judged for the organization are clear and already communicated to them (Tabarsa, 1999). In 2012, Setamjou conduct a research titled business process management: lost ring in business learning. Although, business process has long been the subject of many formal researches. The results revealed that BPM is of great importance in business training, especially in business schools. Khosravi and others (1998) conducted a research titled the combination of business processes management and service oriented architecture in insurance claim process. They found service-oriented architecture as an important competency in improving the effectiveness of changes in business processes. This architecture promises the organizations to make them more flexible in order to can respond the ever-changing conditions of the market more rapidly. This paper discusses the necessity of integrating and aligning business processes management and service oriented architecture in order to achieve flexibility and effectiveness. By simulating the insurance claim process in ARIS software and comparing it with the claim process after applying modifications, and by considering the service oriented architecture in the organizations, the importance of service oriented architecture in business processes management will be revealed. Azar conducted a research titled designing process oriented business model using interpretive structural modeling approach (ISM). There is extant literature regarding the focus on business processes or the orientation of business processes (BPO) in the organizations. Researchers have addressed any of different aspects of process orientation, while no pervasive model of the aspects and indicators of process-based model and their relations have so far been provided. In this research, first by reviewing the literature, different dimensions and indicators will be determined and then the relationship between the dimensions and indicators of process orientation will be determined and analyzed using a new analytical method known as interpretive structural modeling (ISM). The results lead to designing process oriented business model. The results revealed that the integrated model of process orientation include six dimensions: structure; believes and attitude; framework; operational strategies; performance management; and process productivity. These dimensions are interrelated. Safarizade (2011) analyzed the role of using business processes management system in improving the performance of the organizations. Business processes is key to the success of organizations. Therefore, having a strong business processes management approach is important in the organizations. Organizations have learned through experience that business processes management is a strong investment in facing the rapidly changed environment. Business processes management, having the patterns required by organizations, is considered an integrated and systematic method to design, perform and manage business processes in the organizations. In every process, individuals and systems have a role. As the business processes management system provides opportunities to perform all the organizational processes automatically, all organizations are trying to use the business processes management system as their core system in order to improve their performance. In this paper, all data related to a process are described and then an integrated model is provided to coordinate the data with the business processes management. Finally, the alignment of business processes management and strategic management will be discussed, because formulating an appropriate strategy and, more importantly, its desirable implementation using 613

5 process management may cause the improvement of performance and effectiveness of the organizations as well as the satisfaction of beneficiaries. 4.2 Method In terms of purpose, it is a practical research and in methodological term it is a descriptive survey research. The statistical population include all the managers and experts at high managerial s who at least one of the following requirements: having MA or higher degree; having more than 10 years job experience; being employed in banks and insurance companies listed in the stock exchange. Since the number of middle manager and bank chiefs and also the insurance agents listed in Tehran Stock Exchange was not clear, the population was considered as unlimited. The size sample calculated by Cochran formula with 0.05% error, was 384. A questionnaire was used to assess the variables; this questionnaire contains two parts of general and special questions. As the researcher has made use of standard questionnaires, the validity of the questionnaire was examined by asking some professors and experts in banks and insurance companies to review the questionnaire once more. The final draft of the questionnaire was prepared after making some modifications in the concepts provided in questions. Cronbach s alpha obtained for the final draft of the questionnaire was 0.919; therefore, it can be said that the questionnaire have had a good reliability. Hernaus model 2011 was used in this research. The hypotheses to be examined in this paper are as follow: Strategic approach to business processes management has positive impact on the performance appraisal. Performance appraisal process has positive impact on financial performance. Performance appraisal process has positive impact on non - financial performance. Performance appraisal process has positive impact on financial performance through the non financial one. Figure 1: Performance appraisal 614

6 4.3 Data analysis Durbin Watson test One assumption considered in is the independence of errors (difference between actual values and those predicted by the equation). If the independence of errors assumption is not supported and the errors are correlated with each other, then it is not possible to use and Durbin Watson test may be used to analyze the independence of errors. It a result of this test is betwee 1.5 to 2.5, zero test assumption (no correlation between errors) is supported. Otherwise, the zero test assumption is not supported. Conducting Durbin Watson test and using SPSS the followings were achieved: No 1 Table 1: the results of Durbin Watson test for no correlation between errors Dependent and independent variable Durbin Watson Dependent Independent variable value variable Strategic approach to business processes management 2 Performance appraisal 3 Performance appraisal 4 Performance appraisal process Performance appraisal Financial performance Non-financial performance Financial and nonfinancial performance The assumption that there is no correlation between errors was supported The assumption that there is no correlation between errors was supported The assumption that there is no correlation between errors was supported The assumption that there is no correlation between errors was supported If the value of Durbin Watson test is between 1.5 and 2.5, the zero test assumption (no correlation between errors) is supported. H1: Strategic approach to business processes management has positive impact on the performance appraisal. The results of data analysis with a 95% probability are as follow: The table of H1: Strategic approach to business processes management has positive impact on the performance appraisal Beta coefficient Alpha intercept T Supported 615

7 Model Sum of F Freedom degree Mean Regression As it can be seen from the table, equation Y1 = * is high and significance leve 0.00 is less than error. Therefore, in 0.05 error, the hypothesis is supported and zero hypothesis is not supported. That is, Strategic approach to business processes management has positive impact on the performance appraisal. H2: Performance appraisal process has positive impact on financial performance. The results of data analysis with a 95% probability are as follow: Table of H2: Performance appraisal process has positive impact on financial performance. Beta coefficient Alpha intercept T Supported Model Sum of F Freedom degree Mean Regression As it can be seen from the table, equation is Y1 = * and significance 0.00 is less than error. Therefore, in 0.05 error, the hypothesis is supported and zero hypothesis is not supported. That is, Performance appraisal process has positive impact on financial performance. H3: Performance appraisal process has positive impact on non - financial performance. The results of data analysis with a 95% probability are as follow: Table of H3: Performance appraisal process has positive impact on non - financial performance. Beta coefficient Alpha intercept T Supported 616

8 Model Sum of F Freedom degree Mean Regression As it can be seen from the table, equation is Y1 = * and significance 0.00 is less than error. Therefore, in 0.05 error, the hypothesis is supported and zero hypothesis is not supported. That is, Performance appraisal process has positive impact on non - financial performance. H4: Performance appraisal process has positive impact on financial performance through the non financial one. Table of H4 (part 1): the process of financial performance appraisal on non-financial performance Beta coefficient Alpha intercept T Supported Model Sum of F Freedom degree Mean Regression Table of H4 (part 2): the process of non-financial performance appraisal on financial performance. Beta coefficient Alpha intercept T Supported Model Sum of F Freedom degree Mean Regression

9 As it can be seen from the table, equationsare Y = * and Y = * and significance 0.00 is less than error. Therefore, in 0.05 error, the hypothesis is supported and zero hypothesis is not supported. That is, Performance appraisal process has positive impact on financial performance through the non financial one. 5. Conclusion First hypothesis: the results of this hypothesis were in agreement with Hernaus et.al s results in They showed that there is a positive relationship between the strategic approach to business processes management and the improvement of business processes management and adopting new methods of appraisal performance has an impact on the process of performance appraisal. Second hypothesis: the results of this hypothesis were in agreement with Hernaus et.al s results in They showed that performance appraisal process has an impact on financial performance. Third hypothesis: the results of this hypothesis were in agreement with Hernaus et.al s results in They showed that performance appraisal process has an impact on non-financial performance. Fourth hypothesis: the results of this hypothesis were in agreement with Hernaus et.al s results in They showed that performance appraisal process has an impact on financial performance through the non-financial one. 5.1 Suggestions for future studies 1. To analyze the relationship between strategic approach to business processes management and other organizational variables such as performance, effectiveness, etc. 2. To identify the inhibitors to successful performance of business processes management in the organizations of public sector in Iran. On financial performance through the non financial one. 6. References 1. Azar A, Karimi B, (2008), The core business model of interpretive structural modeling approach, Journal of Technology Management, 1(1), pp Divandari A, Nikokar.GH, Nahavandian.M, Aghazadeh H,,(2007), Market orientation and business performance in Iran, Business Management,1(1),pp Finger P. Smith H, (2006), Business Process Management:The Third Wave, Paperback October 15, ISBN: Hernaus T, Pejić Bach, Vesna Bosilj V, (2012), Influence of strategic approach to BPM on financial and non financial performance Baltic Journal of Management, 4(7), pp

10 5. Naiabzadeh SH, (2010), To examine the relationship between business strategy and manufacturing strategy and consistency Saipadizel company performance, Journal of Management, 17(7), pp Rahimi Gh, 2005, performance evaluation and continuous improvement of the organization, management magazine, 73(17), pp Schuler, Rand Al S., Shimon.A, (2009), Management and human resources staff, Published by Institute for Research and Training Management and Planning,(1). 8. Seethamraju R, (2012), Business process management: a missing link in business education, Business Process Management Journal, 18(3),pp Weske M, (2007), Business Process Management: Concepts, Languages, Architectures, Germany, Springer. 619