Linking Process and Performance Metrics

Connecting process improvements toorganizational performance gains

Aligning Strategy with Process Metrics

This is a process for ensuring alignment among the organization’s performance measures, strategic plans, improvement projects, and budgets. The items in blue were covered previously, and the items in grey will be covered in later class sessions.

BA 553: Business Process Management 2

1. Establish the organization’s key goals

2a. Develop and deploy the enterprise strategy to the process level

2b. Establish KPIs associated with the organization’s key goals, and measure performance in these

3. Establish process measures (if not already existing)

4. Recalibrate enterprise KPIs and align them with process-level metrics

5. Once the metrics are aligned at all levels, identify process improvement projects

6. Allocate budget aligned with the process improvements needed to achieve the strategic goals. This requires that the budgeting process be scheduled after the strategic planning process

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How Processes Impact Performance

The performance of any company depends upon the efficiency and effectiveness the work processes used to produce the product or service

Improving performance involves improving the work processes used to get work done

An important step in improving performance is identifying and defining the key work processes associated with producing the organization’s products and services

This was described earlier in this course in the presentation on identifying the value chain

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Process Networks

Often, problems in a process are caused by issues that occur before the process begins, in earlier processes

These earlier processes are sometimes referred to as “upstream” processes, indicating that the problems flow out of them and continue downstream, impacting the process being studied

In some cases, what starts out as a minor issue can build into a serious problem by the time it arrives downstream

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Linking In-Process Measures toProcess Output Measures

It’s important to link your in-process measures to process output measures to show the results of your improvements

However, you must establish process output measures in such a way that not too many items will influence your measure: otherwise, your process improvements may not show up

For example, if you improved the production process and then measured cost per unit built, you might not see the effect of your improvement, because the cost of raw materials or supplier parts could have risen

It would be better to measure the reduction in rework, or the number of parts coming off the line per day per worker

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Linking Process Output Measures andPerformance Measures

In order to justify the cost of your improvement efforts, it is important to show the effect of the improvement on the bottom line of the organization

To do this, the improved in-process measures must first be connected to process output measures, as discussed previously

Once improvements are measured in process outputs, they must then be connected to improvements in organizational performance measures such as profit or return on investment

This connection (cause and effect) is sometimes difficult to establish

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Outage Maintenance Example

FEEDBACK LOOPS

Equipmentavailable

DoingOutage

Maintenance

Providing Clearance

s

Manpoweravailability

Managing the

Workforce Ordering

Parts

ManagingContracto

rs

Contractorsand their work scope

Materials/Parts

W/O’s with status ofequipmentto be fixed

Creating Work Orders Planning

Outages

Planned schedule

Planned budget

Planned work scope

Outage W/O’s

EquipmentworkingActual schedule

Actual budget

Actual workcompletedPaperwork done

Amount of contractor work complete

Used partsLevel of satisfac-tion with contractor

Doing Daily Maint.

Operating Plant

Storing or Disposing of Scrap

FEEDBACK LOOPS

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Outage Maintenance Example: Connecting Process and Performance Measures

Process C:Doing dailyor outagemaintenance

Process D:Run the units

Inputs

Outputs

In-process measures(collect from

internal customers

)

Inputmeasures

Plant performan

ce measures

Process output measures(customers in next

process, or external)

Process A:Getting parts

Process B:Writing work

orders

Power Plant

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Outage Maintenance Example: ConnectingProcess and Performance Measures (Cont’d.)

Planning anddoing outagemaintenance

In-process measuresNumber of

work ordersgenerated

duringoutage

InputmeasuresNumber of

work ordersgeneratedjust before

outage

Performance measures

Forced outage rate

Capital budget

Availability

O&M budget

Other budget

Process output measures

Work orders

Equipment working

Actual schedule

Actual costs

Equipment working• Amount of equipment fixed • Amount of equip. fixed/replaced that could

have been avoided by early detectionActual schedule• Time length of outageActual costs• Cost of expedited parts• O/T costs• Cost of extra contractors/expedited

contractors

Run theunits

Managethe budget

Power Plant

Power

Expenses

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Daily Maintenance Example: ConnectingProcess and Performance Measures

Performdaily

maintenance

In-process measuresWait time for

parts

Number of times parts not

available when needed

Inputmeasures

Number of parts of various types

in warehouse

Correct min/max for parts in

material management

system

Performance measures

Forced outage rate

Availability

O&M budget

Process output measures

Work orders

Equipment working

Maintenance costs

Work orders signed off

Equipment working• Amount of equipment fixed

Work orders signed off• Number of work orders signed off

Maintenance costs• Cost of expedited parts• Overtime costs

Run theunits

Managethe budget

Power Plant

Power

ExpensesParts

Equip.history

Example: Linking Process Measures to KPIs

Process Measures KPIsInput In-process Output BSC measures

Number of parts of various types in warehouse

Wait time for parts

Amount of equipment fixed

Forced outage rate (EFOR), availability

Overtime expense

O&M (non-Capital) budget

Correct min/max for parts in material management system

Number of times parts are not available when needed

Amount of equipment fixed

Forced outage rate (EFOR), availability

Cost of expedited parts

O&M (non-Capital) budget

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Process and Performance Measures Template

Input measures In-process measures Output measures Perform. measures

Process Measures KPIs