Risk Assessment of Business Process Re-engineering Projects

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1 Open Access Open Journal of Socal Scences, 2014, *, ** Publshed Onlne **** 2014 n ScRes. Rsk Assessment of Busness Process Re-engneerng Projects Boyd A Ncholds, John P T Mo School of Aerospace, Mechancal and Manufacturng Engneerng, RMIT Unversty, Bundoora, Vctora, Australa Emal: boyd.ncholds@rmt.edu.au, john.mo@rmt.edu.au Receved 22 January 2015 Copyrght 2015 Boyd A Ncholds and John P T Mo. Ths s an open access artcle dstrbuted under the Creatve Commons Attrbuton Lcense, whch permts unrestrcted use, dstrbuton, and reproducton n any medum, provded the orgnal work s properly cted. In accordance of the Creatve Commons Attrbuton Lcense all Copyrghts 2015 are reserved for SCIRP and the owner of the ntellectual property Boyd A Ncholds and John P T Mo. All Copyrght 2015 are guarded by law and by SCIRP as a guardan. Abstract Busness Process Re-engneerng (BPR) nevtably nvolves change. However, modern busness organzatons are extremely complex. Settng mprovement targets n BPR too hgh wthout consderng the company s capablty and ts external and nternal nteractons wll have lttle chance of achevng the set targets, whch means project falure. Unfortunately, forecastng of the BPR outcomes s currently a wld guess to management. Ths paper descrbes a rsk model that estmates a process mprovement capablty score and ntegrates wth a performance effectveness functon to assess the lkelhood of meetng performance gan targets from process mprovement projects undertaken by companes. The rsk assessment can assst management to set more realstc performance gan targets for process mprovement projects wth a better chance of success. Keywords Busness Process Re-engneerng, rsk assessment, process mprovement, capablty score, performance effectveness, decson support tool. 1. Introducton Busness process re-engneerng (BPR) for new busness processes or change of exstng processes s not an ad-hoc actvty. It requres a good project management approach to coordnate and decde on a range of factors n a structured manner [1]. However not all BPR projects are successful. Whttaker [2] conducted a large survey of companes and concluded that 45% of mprovement projects dd not delver the expected benefts. How to cte ths paper Boyd A Ncholds, John P T Mo (2015) Rsk Assessment of Busness Process Improvement Projects. *********, *, **-**.

2 Boyd A Ncholds, John P T Mo A successful BPR project depends on the capablty of the company mplementng t. A proper analyss of known success and falure capablty factors can reduce the rsk of falure and ncrease the lkelhood of success. The structured process mprovement framework proposed by Rohleder et al [3] had the potental to smplfy the change mplementaton process and avod falures but ther focus was on nnovaton whch they acknowledged to have a hgh falure rate. Ths paper outlnes a rsk assessment method to assst organsatons re-engneerng ther busness processes n order to acheve the expected performance gans. The nnovaton of ths method s the ablty to estmate the probablty of meetng a desred target performance level at varous ponts n tme. Ths knowledge s most crtcal to decson makers to a) compare dfferent BPR projects and execute the project wth the hghest probablty of success over tme, and b) form the bass for adjustng the scope and performance targets of BPR projects to acheve a realstc chance of success. 2. Lterature Revew Performance measures are characterzed through metrcs. Consoldated sets of performance ndcators are used by company management to ensure attanment of ther objectves and goals lnked to strategy and value creaton for the company. Prandn et al [4] specfed the complexty metrcs that were relevant n the operatons of future ar traffc management system. Marn-Garca and Poveda [5] revewed the success of a medum szed company mplementng change suggestons from the employees. The subjectve approach evaluatng employee suggestons had a competton effect among mult-dscplnary teams n the company. Bourne [6] descrbed three phases of performance measurement system mplementaton and ponted out that senor management commtment was crucal to the success of the project. Bourne et al [7] nvestgated the performance measurement system desgn of ten companes. The study revealed two man drvers for success whch were closely related to the perceved benefts of top management. The problem of settng performance measures has been studed extensvely n the manufacturng sector. Ahmed et al [8] observed that addtonal tangble and ntangble measures were requred to generate suffcent nformaton representng dfferent aspects of performance evaluaton. Llls [9] studed the effectveness of proft centre strategy where performance dmensons relatng to manufacturng effcency and customer responsveness was found problematc. Gomes et al [10] determned predctve value as a prmary factor n the choce and level of usage of performance measures by managers wth ease of data acquston beng subordnate n mportance. In a comparson of eght performance measurement systems (PMS), Garengo et al [11] found a trend over tme that small and medum enterprses changed from focus on strategy algnment alone to a focus on stakeholder satsfacton together wth strategy algnment. Performance ndcators used to measure process mprovement should be lnked to the performance measures otherwse the mportance and relevance of the measured outcome of the project could be questoned at the outset [12]. There s a lack of research to lnk performance metrcs to capablty level of the organzaton workng on BPR projects. 3. Settng Realstc Performance Gan Targets A thorough rsk assessment provdes beneft to decson makers coordnatng changes n BPR to mnmse potental falure and reduce effect of undesrable events. In Fgure 1, the expected performance gan P exp s amed to be acheved at tme t j from the start pont t 0 and performance P 0. Wthout pror knowledge of the rsk level, the decson maker antcpates that curve 1 apples; that s a gan from P 0 to P exp s obtaned and mantaned n the longer-term. However, there may be crcumstances pushng the project to scenaros 2 to 6, each havng dfferent probabltes. It s clear the probablty of achevng the ntally expected gan P exp s somewhat over optmstc wth a probablty of success less than fve percent. Instead, f the expected performance s adjusted to P exp1, the chance of achevng the expected performance s close to half. * Specal descrpton of the ttle.(dspensable) 2

3 Boyd A Ncholds, John P T Mo P exp1 Fgure 1. Possble development trajectory of a project. Fgure 2. The 3PE hgh level archtecture Lowerng expectaton levels s a decson that can be made conservatvely and provdes the short-term beneft of mprovng the momentum of mprovement. Alternatvely on beng made aware the probablty of success s lower than expected a decson can be made to expand exstng capablty to cover the gap. 4. The Capablty Score 4.1. Conceptual Framework In order to ensure success of operatons mprovement mplementaton, the capablty of an organsaton should be at a level that can handle the complexty of the mprovements beng attempted and the performance targets beng amed for. In ths research, the capablty level of an organsaton workng on a BPR project s evaluated as the capablty score S C. Ths measure s calculated as a functon of a set of capablty ndcators X = {X 1, X 2,, X n } where the X ( = 1,, n) are known from pror research such as productvty audt. In ts smplest form, X can be represented as a lnear weghted sum as shown n Equaton (1). = S = f ( X ) w X (1) C These performance ndcators are selected such that they have a causal lnk to operatons performance and contnuous mprovement. A nne level ratng system s used to normalse the extent of capablty for each capablty factor to a comparable bass Capablty Levels To effectvely obtan the capablty score of an organsaton, t s necessary to break down and categorse the ndvdual capablty factors so that more accurate assessment of each of the capablty factors can be made. Ths requres an enterprse archtecture to form the modellng framework. Mo [13] developed an archtecture known as 3PE has been postulated based on the key elements 1) people, 2) process, and 3) product and ther nterfaces, vz, 4) people vs process, 5) product vs people and 6) process vs product. Ths nternal archtecture s changed by external nfluences,.e. envronment. Usng the 3PE enterprse archtecture, S C can be computed as a functon of sx capablty ndcators as shown n Fgure Performance Performance gans are antcpated from a BPR project. These performance gans are measured by a range of ndvdual performance ndcators P = {P 1, P 2,, P m } where the P ( = 1,, m). For the convenence of decson makng, the current performance ndcators P cur s a management defned functon. In practce, a lnear weghted sum s used as shown n Equaton (2). Effort requred to acheve hgher levels of performance often nvolves greater complexty and cost. A performance effectveness functon k P can be defned as a measure of 3

4 Boyd A Ncholds, John P T Mo the perceved effort requred to overcome dffculty and complexty to acheve a partcular level of performance from the current level P 0. Each of these performance outcomes are measured from a performance scale rangng from success (hghest score) to falure (lowest score). = P = f ( P) w P (2) cur The performance of a BPR project can vary between two extremes: A theoretcal performance level P th that can be attaned f all capablty elements are appled n a perfect manner. The capablty elements are not effectve and no mprovement of productvty has been recorded. Ths performance level s represented as P 0. If the project s not mplemented, P cur = P 0. However, the problem of fndng the ntermedate relatonshps between k P and P s mxed wth human judgement. One method s to solct the opnon of the stakeholders nvolved n the operatons mprovement project. The Analytc Herarchy Process (AHP) s appled to consoldate the vector of prorty (VP) over the range of P 0 to P th. To assst n makng consstent decsons, Equatons (3), (4) and (5) are appled n the judgment matrx. For any j = 1 to th (.e. th = 5 n ths llustraton and * s the wld card for the row or column elements), θ *( j 1) θ* j (3) θ ( j 1)* θ (4) j* θ = 9 (5) 05 A parwse comparson judgement process on θ kj wth a scale of 1 to 9 generates ntermedate values of VP j. The performance effectveness factor k P s obtaned over the range 0 to 1 by Equaton (6). k pj VPj VPth = (6) VPth VP 0 Intutvely t s reasonable to expect that havng a hgher level of capablty, the organsaton can acheve greater levels of BPR performance gan closer to the theoretcal maxmum. These curves are obtaned by estmatng the dffculty levels k P n past mprovement projects aganst the ncrease n performance P on a partcular S C. The dervaton of ths functon s based on publshed data [14, 15]. Fgure 4. Determnng the range of performance achevement by the capablty score. 4

5 Boyd A Ncholds, John P T Mo 5.4. Puttng t altogether The goal of ths research s to predct future performance gan of an operatons mprovement project based on an estmate of capablty for that project. Assumng an estmated S C of 70 for the project (Fgure 4), and by combnng the k P /S C and k P /P curves a predcton s made. From Fgure 4, wth 90% confdence, the performance level at a future tme wll be n the range [2.5, 3.7], wth an average performance level of 3.2. If the target performance s set at 3.7, t s then up to the decson maker to decde whether a rsk of 10% falure s acceptable for the PBR project. 6. Concluson A rsk assessment model has been proposed to assess the lkelhood of meetng performance gan targets from BPR projects undertaken by companes. The method ndcates to companes when and where ther capabltes need to be adjusted to maxmze ther possble outcomes. Ths allevates the problem organsatons have when they embark on BPR ntatves wth an organsatonal setup that lmts ther chance of success. An advantage for companes usng the S C model s ther mprovement ambton level can be set more realstcally based on knowledge of ther estmated capablty. The adjusted performance targets are better matched to organsatonal capablty whch n turn means a hgher ht-rate of successful BPR projects. More success tends to provde postve feedback settng the seeds for sustaned contnuous mprovement. Settng the bar too hgh too early can demotvate a BPR programme and kll t before t even gets gong. References [1] Pestana, G., Rebelo, I., Duarte, N. and Couronné, S. (2012). Addressng stakeholders coordnaton for arport effcency and decson-support requrements, Journal of Aerospace Operatons, Vol.1, No.3, pp [2] Whttaker B. What went wrong? Unsuccessful nformaton technology projects. Informaton Management & Computer Securty, 1999; 7 (1):23-9. [3] Rohleder TR, Slver EA. A tutoral on busness process mprovement. Journal of Operatons Management, 1997; 15 (2): [4] Prandn, M., Putta, V. and Hu, J. (2012). Ar traffc complexty n future Ar Traffc Management systems, Journal of Aerospace Operatons, Vol.1, No.3, pp [5] Marn-Garca JA, Poveda YB. The mplementaton of a contnuous mprovement project at a spansh marketng company: A case study. Internatonal Journal of Management, 2010; 27 (3): ,777. [6] Bourne M. Researchng performance measurement system mplementaton: The dynamcs of success and falure. Producton Plannng & Control, 2005; 16 (2): [7] Bourne M, Neely A, Platts K et al. The success and falure of performance measurement ntatves: Perceptons of partcpatng managers. Internatonal Journal of Operatons and Producton Management, 2002; 22 (11): [8] Ahmed S, Hassan MH, Fen YH. Performance measurement and evaluaton n an nnovatve modern manufacturng system. Journal of Appled Scences, 2005; 5 (2): [9] Llls AM. Managng multple dmensons of manufacturng performance an exploratory study. Accountng, Organzatons and Socety, 2002; 27 (6): [10] Gomes CF, Yasn MM, Lsboa JV. Performance measurement practces n manufacturng frms revsted. Internatonal Journal of Operatons & Producton Management, 2011; 31 (1):5-30. [11] Garengo P, Bazzo S, Bttc US. Performance measurement systems n smes: A revew for a research agenda. Internatonal Journal of Management Revews, 2005; 7 (1): [12] Ghalayn AM, Noble JS, Crowe TJ. An ntegrated dynamc performance measurement system for mprovng manufacturng compettveness. Internatonal Journal of Producton Economcs, 1997; 48 (3): [13] Mo JPT. Performance assessment of product servce system from system archtecture perspectves. Advances n Decson Scences, 2012; 2012:19. [14] Done A, Voss C, Rytter NG. Best practce nterventons: Short-term mpact and long-term outcomes. Journal of Operatons Management, 2011; 29 (5): [15] Bateman N, Davd A. Process mprovement programmes: A model for assessng sustanablty. Internatonal Journal of Operatons & Producton Management, 2002; 22 (5/6):

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