BUSINESS PERFORMANCE MANAGEMENT METHODOLOGIES. ITM-761 Business Intelligence ดร. สล ล บ ญพราหมณ

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1 1 BUSINESS PERFORMANCE MANAGEMENT METHODOLOGIES ITM-761 Business Intelligence ดร. สล ล บ ญพราหมณ

2 2...การใช จ ายอย างประหย ดน น จะเป นหล กประก นความ สมบ รณ พ นส ขของผ ประหย ดเอง และครอบคร วช วย ป องก นความขาดแคลนในว นข างหน า การประหย ด ด งกล าวน จะม ผลด ไม เฉพาะแก ผ ท ประหย ดเท าน น ย งเป น ประโยชน แก ประเทศชาต ด วย... พระราชด าร สของพระบาทสมเด จพระเจ าอย ห ว เน องในว นข นป ใหม ๓๑ ธ นวาคม ๒๕๐๒

3 content 3 Overview: business process management Strategize: where do we want to go? Plan: How do we get there? Monitor: how are we doing? Act & adjust: what do we need to do differently? Performance management BPM methodologies BPM architecture and applications

4 4 Business Performance Management (BPM) Overview Business performance management Corporate performance management (Gartner) Enterprise performance management (Oracle) Strategic enterprise management (SAP)

5 5 BPM Defined A real-time system that alert managers to potential opportunities, impending problems, and threats, and then empowers them to react through models and collaboration Business processes, methodologies, metrics, and enterprises to measure, monitor, and manage business performance

6 6 Business Performance Management (BPM) Overview BPM and BI Compared BPM is an outgrowth of BI and incorporates many of its technologies, applications, and techniques BPM is an enterprisewidestrategy that seeks to prevent organizations from optimizing local business at the expense of overall corporate performance BPM is part of the daily work of managers

7 Business Performance Management (BPM) Overview 7 Summary of BPM processes BPM encompasses a closed-loop set of processes that link strategy to execution in order to optimize business performance, which is achieved by: Setting goals and objectives Establishing initiatives and plans to achieve those goals Monitoring actual performance against the goals and objectives Taking corrective action

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10 10 Strategize: Where Do We Want to Go? Strategic planning Tasks common to the strategic planning process: 1. Conduct a current situation analysis 2. Determine the planning horizon 3. Conduct an environment scan 4. Identify critical success factors 5. Complete a gap analysis 6. Create a strategic vision 7. Develop a business strategy 8. Identify strategic objectives and goals

11 11 Conduct a current situation analysis Reviews the company s current situation Where are we? establish a baseline for financial performance and establish a baseline for financial performance and operational performance Determine the planning horizon Traditionally, organizations produce plans on a yearly basis, with planning horizon running 3 to 5 years

12 12 Conduct an environment scan SWOT(strengths, weaknesses, opportunities, and threats) assessment Identifies and prioritizes the key customer, market, competitor, government, demographic, stakeholder and industry factors potentially or actually affecting the company Identify critical success factors Delineate things that organization must excel

13 13 Complete a gap analysis Identify and prioritize the internal strengths and weaknesses in an organization s processes, structures, and technologies & app. Gaps reflect what the strategy requires and what organization actually provides Create a strategic vision Provides a picture or mental image of what organization should look like

14 14 Develop a business strategy To ensure that the strategy is internally consistent The organizational culture is aligned with the strategy Sufficient resources and capital are available to implement the strategy Identify strategic objectives and goals

15 15 Strategic planning Strategic objective A broad statement or general course of action prescribing targeted directions for an organization Strategic goal A quantified objective with a designated time period

16 16 The strategy gap 90 % of organizations fail to execute their strategies successfully Reason Communication Alignment of rewards and incentives Focus Resources

17 17 Communication Small percentage of employees understand the organization s strategy strategy often lacks clarity, so that no one is quite sure whether their actions are in line or at variance with the plan Alignment of rewards and incentives 70% of org failed to link middle management incentives to their strategy

18 18 Focus Often spends time on the periphery of issues rather than concentrating on the core elements Resources Unless strategic initiatives are properly funded and resources, their failure is virtually assured.

19 Plan: How Do We Get There? 19 Operational planning Operational plan Plan that translates an organization s strategic objectives and goals into a set of well-defined tactics and initiatives, resources requirements, and expected results

20 20 Operational planning Tactic-centricplan tactics are established to meet the objectives and targets established in the strategic plan (used by best practices organizations Budget-centricplan a financial plan or budget is established that sums to the targeted financial values

21 21 Financial planning and budgeting An organization s strategic objectives and key metrics should serve as top-down drivers for the allocation of an organization s tangible and intangible assets Resource allocations should be carefully aligned with the organization s strategic objectives and tactics in order to achieve strategic success

22 Monitor: How Are We Doing? 22 A comprehensive framework for monitoring performance should address two key issues: What to monitor How to monitor

23 23 Diagnostic control system monitor organizational performance and correct deviations from present performance standards It has inputs, a process for transforming the inputs into outputs, a standard benchmark against which to compare the outputs Feedback channel to allow information on variances between the outputs and the standard

24 Business strategy Critical performance variables Goals inputs Process outputs Diagnostic Control System 24

25 25 Any information system can be used as a diagnostic control system if it can Set a goal in advance Measure outputs Compare or calculate absolute or relative performance variances Use variance information to feedback to alter inputs and/or processes to bring performance back in line

26 26 Example Balanced scorecards Performance dashboard Project monitoring system Project monitoring system Human resource system Financial reporting system effective diagnostic control system encourage management by exception.

27 27 Pitfalls of variance analysis The vast majority of the exception analysis focuses on negative variances when functional groups or departments fail to meet their targets Rarely are positive variances reviewed for potential opportunities, and rarely does the analysis focus on assumptions underlying the variance patterns

28 28 Act and Adjust: What Do We Need to Do Differently? Most of strategies depend on new projects Creating new products entering new markets Acquiring new customers streamlining some process

29 29 Project can fail in a number of different ways Considering too few options or scenarios, Failing to anticipate a competitor s move Ignoring changes in the economic or social environment Inaccurately forecasting demand Underestimating the investment required to succeed

30 30 Example: closed-loop marketing model Define Execute Track Evaluate Learn and refine

31 Performance measurement 31 Performance measurement system: Assist managers in tracking the implementations and business strategy by comparing actual results against strategic goals and objectives. Comprises systematic methods of setting business goals together with periodic feedback reports that indicate progress against goals All measurement is about comparisons

32 32 KPI and operation metrics KPI: key performance indicator are multidimensional including Strategy embody a strategic objective Strategy embody a strategic objective Targets measure performance against specific targets Ranges performance range ( above, on or below target)

33 33 Encoding ranges are encoded in software, enabling the visual display of performance (green, yellow, red) Time frames targets are against time frames by which they must be accomplished. Time frame is often divided into smaller intervals Benchmark target is measure against benchmark

34 34 Operational metrics Customer performance Customer satisfaction, speed and accuracy of issue resolution, and customer retention Service performance Service-call resolution rates, service renewal rate, SLA compliance, delivery performance, and return rates

35 35 Effective performance measurement Basic ingredients of a good collection of performance measures Measures should focus on key factors Measures should be a mix of past, present, and future Measures should balance the needs of shareholders, employees, partners, suppliers, and other stakeholders. Measures should start at the top and flow down to the bottom Measures need to have targets that are based on research and reality rather than be arbitrary

36 BPM Methodologies 36 An effective performance measurement system should help: Align top-level strategic objectives and bottom-level initiatives Identify opportunities and problems in a timely fashion Determine priorities and allocate resources based on those priorities. Change measurements when the underlying processes and strategies change

37 37 Delineate responsibilities, understand actual performance relative to responsibilities, and reward and recognize accomplishments. Take action to improve processes and procedures when the data warrant it. Plan and forecast in a more reliable and timely fashion

38 38 Balanced scorecard (BSC) A performance measurement and management methodology that helps translate an organization s financial, customer, internal process, and learning and growth objectives and targets into a set of actionable initiatives

39 39 The meaning of balance BSC is designed to overcome the limitations of systems that are financially focused Nonfinancial objectives fall into one of three perspectives: Customer Internal business process Learning and growth

40 40 Customer Define how the organization should appear to its customers if it is to accomplish its vision Internal business process Specify the processes the organization must excel at in order to satisfy its shareholders and customers Learning and growth Indicate how an organization can improve its ability to change and improve

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42 42 In BSC, the term balancearises because the combined set of measures are supposed to encompass indicators that are: Financial and nonfinancial Leading and lagging Internal and external Quantitative and qualitative Short term and long term

43 43 Aligning strategies and actions Developing and formulate a strategy Planning the strategy Aligning the organization Planning the operations Monitoring and learning Testing and adapting the strategy

44 44 Strategy map A visual display that delineates the relationships among the key organizational objectives for all four BSC perspectives

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46 46 Six Sigma A performance management methodology aimed at reducing the number of defects in a business process to as close to zero defects per million opportunities (DPMO) as possible In Six Sigma, a business process is a set of activities that transform a set of inputs, including suppliers, assets, resources, and information into a set of outputs for another person or process.

47 47 Six Sigma The DMAIC performance model A closed-loop business improvement model that encompasses the steps of defining, measuring, analyzing, improving, and controlling a process

48 48 The steps can be described as: Definethe goals, objectives, and boundaries of the improvement activity Measure the existing system Analyzethe system to identify ways to eliminate the gap between the current performance of the system or process and the desired goal Initiate actions to eliminate the gap by finding ways to do things better, cheaper, or faster. Control by modifying compensation and incentive systems, policies, procedures, MRP, budgets, operation instructions, or other management systems.

49 BPM Architecture and Applications 49 BPM architecture System architecture Thelogical and physical design of a system A BPM system needs three components in order to contribute to the successful implementation of strategy: 1. Database tier 2. Application tier 3. Client or user interface

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51 51 BPM applications: Strategy management Budgeting, planning, and forecasting Profitability modeling and optimization Financial, statutory and management reporting

52 52 Performance Dashboards Dashboards and scorecards both provide visual displays of important information that is consolidated and arranged on a single screen so that information can be digested at a single glance and easily explored

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54 54 Dashboards versus scorecards Performance dashboards Visual display used to monitor operational performance Performance scorecards Visual display used to chart progress against strategic and tactical goals and targets

55 55 What to look for in a dashboard Use of visual components (e.g., charts, performance bars, sparklines, gauges, meters, stoplights) to highlight, at a glance, the data and exceptions that require action. Transparent to the user, meaning that they require minimal training and are extremely easy to use Combine data from a variety of systems into a single, summarized, unified view of the business

56 56 What to look for in a dashboard (cont) Enable drill-down or drill-through to underlying data sources or reports Present a dynamic, real-world view with timely data refreshes, enabling the end user to stay upto-date with any recent changes in the business. Require little, if any, customized coding to implement, deploy, and maintain