VACO CPE SESSION I

8/14/2019 VACO CPE SESSION I

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PROCESS WITH A PURPOSE


VACO CPE SERIESAugust 19, 2009

Benefiting From Business Process Management &Business Intelligence (Performance Management)

Consider that Business in this context = Enterprise

Lawrence E. Lackey

Process Guidance, inc.

Raleigh, North Carolina

1 (919) 606-4988

[email protected]
mailto:[email protected]:[email protected]


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Session Topics Are Complementary

oSession One --- Utilizing Business ProcessManagement Techniques to Identifying and Resolve

Process Issues

oSession Two --- Utilizing Business Intelligence toSustain Improvement and Enable Adaption to

Changes


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BUSINESS PROCESS MANAGEMENT (BPM) SESSION ONE AGENDA

FOUNDATIONoWHY DO WE NEED PROCESSES?oDEFINITIONSoPROCESS LEVELSoNAVIGATING THE CLUTTER

THE BPM METHODOLOGYoBPM TOOLSoSYSTEMATIC APPROACH

BPM SAMPLE CASE

BPM APPLICATION & ISSUES/ CASES FROM CURRENT EVENTS

DESIRED BPM INTERVENTION RESULTS


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A business process is the method that an employee follows to perform some work-related task. If abusiness process isn't documented & taught, then employees invent their own processes to do theirwork.

Most managers don't take the time to properly determine what the most efficient processes are or

they don't take the time to communicate these processes to those who need them most.

The absence of systematic processes generally results in a fiasco, usually at the worst possibletime. And as the organization grows, the potential for miscommunication, catastrophes,inconsistency and inefficiency increases exponentially.

Why Do We Need Business Process?

If you do a lot of firefighting, you might be a process wreckIf you have lousy work quality, you might be a process wreckIf you have morale issues/ overtime, you might be a process wreckIf your customers are not happy, you might be a process wreckIf your boss is not happy, you might be a process wreck

Al Einstein ---- Insanity: doing the same thing over and over again and expecting different results.


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BPM FOUNDATION


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oPolicy --- Documented set of principles and guidelineso

oProcess --- An activity that converts inputs to outputs with added value that arethen inputs to the next process --- or are the end stateo

oProcedure Step-by-Step method(s) used to convert inputs to outputs withinthe processo

oAlignment Linking improved processes to achieve an organizations goals

DEFINITIONS

Business Process Management (BPM) is a systematic approach to helporganizations elevate the effectiveness of their operating processes toimprove internal control and operating performance across the Enterprise.

Business Process Management (BPM) is a systematic approach to helporganizations elevate the effectiveness of their operating processes toimprove internal control and operating performance across the Enterprise.


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PROCESS LEVELS EXAMPLE

Revenue CycleRevenue CycleLevel One: Mission,Objectives & Strategy(POLICIES)

Level Two: High LevelView of Key Processes(POLICIES & PROCESSES)

Level Three: Top ofWorking Level Processes(Processes)

Level Four: FunctionalProcesses . Work beingdone

Level Five: FunctionalSub Processes stepsof work being done

Level Six: Procedures/Detailed Work Instructions

Book OrderBook Order

InvoiceInvoice

DeliverDeliver

BillBill

MailMail

Sales

Contact

SalesContact Collect

Collect


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The Business Mgmt System Clutter

QUALITYCIRCLES

ISO9000

TQC/TQM

BALDRIGEBMA

CSQPTL9000EXCELLENCEPROGRAMS

SIXSIGMA

COMMON ELEMENTS --- Standards/ framework/ dataISO PRICIPLES & QUALITY MANUALBALDRIGE --- ATTRIBUTES/ ASSESSMENTSIX SIGMA --- DMAIC

SOX --- COSO FRAMEWORK/ COMPONENTS/ ASSESSMENT MATRIX

COMMON ELEMENTS --- Standards/ framework/ dataISO PRICIPLES & QUALITY MANUALBALDRIGE --- ATTRIBUTES/ ASSESSMENTSIX SIGMA --- DMAICSOX --- COSO FRAMEWORK/ COMPONENTS/ ASSESSMENT MATRIX

LEAN

KAIZEN

BPM FOCUSESON PROCESS

SUCCESS & DRAWSFROM OTHER

SYSTEMS

= SYSTEMATICAPPROACH

Based on work & conceptsOf Edward Deming

ORG.EFFECT.

COSOFRAMEWORK

(SOX 404)

IF IT LOOKS LIKE A DUCKALL ARE QUALITY SYSTEMS

SDLC


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BPM METHODOLOGY


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BPM TOOLS & BUILDING BLOCKS

oENTERPRISE OBJECTIVES/ EMPHASIS are used in process design --- ensurethat processes support the enterprises direction and that policies are properlyaligned.o

oBUSINESS RULES define how a particular transaction or activity will beexecuted within the process --- process change may require a rules change ---

generally built into an automated portion of the process.o

oPOLICIES AND PROCEDURES are the key building blocks for process success.Procedures define the operations within a process --- activities that convert theinput into an output.o

oPROCESS METRICS provide the level of process effectiveness generated by

the process/ procedures --- derived from Business Intelligenceo

oVISIO, SMARTDRAW or other process mapping tools that are used to depictWORKFLOWS and connections between workflows --- show manual & automatedsteps --- enable view of critical process steps, control risk points, duplicated work &process/ work constraints. If you cant draw a picture ----o

o


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PROCESS OBJECTIVES/AS IS AND FUTUREPROCESS STATES

WHAT IFS/ WALKTHROUGHS/SIMULATE VARIABLES PRIOR

TO EXECUTION

IMPLEMENT DESIGN:TRAINCHANGE MGT

TESTGO LIVE

MEASUREEFFECTIVENESS:INDIVIDUAL PROCESSESAFFECTS ON OTHERSCOMPARED TO PLAN

USING PROCESSMETRICS TO FINE-TUNE AND FURTHERIMPROVE THE DESIGN

BPM SYSTEMATICAPPROACH


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APPLYING THE BPM METHODOLOGY

Meet wi th

management to

Identi fy cri t ical

goals/ objectiv es/

strategies

Meet wi thprocess

ownersto explain

the project&

identi fy goals&

objectives

M eet wi thpro ce ss

operatorsto discuss

project& interview for

design information

M ap A S-IS proc ess from

end-to-end, identif y

inputs, docum ents,

procedures, weaknesses

& opportuni ties

Create theoretical

TO-BE proces s that

addresses risks&

ineff ic iencies---

identify required

documentation&

create Process

Metrics

Aligns withNext level up?

YES

NO

Aligns withNext level up? YES

NO

Aligns withNext level up?

YE S

NO

Test theoretical

process wi th

variables/ what-ifs

& walk through

with operators

Optimize the

process--- follo w-

up on control r isks

& eff ic iency

opportunities

Move on to the

next process

testing outputs

from current one

Monitor process

resul ts--- ac t on

less than expected

metrics/ obvious

issues

Execute/

Implement the new

process---

complete process

docs, train s taff,

tes t& go l ive

Does design needmods or start-over?

N O

YES

Next Process

P R O C E S S O W N E R S& O P E R A T O R S

INVO LVED IN ALL ST EPS- - -EXPERT S


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BPM SAMPLE CASE

Assignment is to help an enterprise identify and resolvebilling issues

Assume thatInitial meetings with management & staff havebeen completed and we are ready to begin the processassessment


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Revenue CycleRevenue Cycle

Book OrderBook Order

InvoiceInvoice

DeliverDeliverSales

Contact

SalesContact Collect

Collect

SAMPLE TOP LEVEL FLOW

REVENUE CYCLE OBJECTIVES:oPROVIDE AN EXCELLENT EXPERIENCE FOR

THE CUSTOMERoMEET/ EXCEED PROFITABILITY COMMITMENTSoPROVIDE A SATISFYING WORK ENVIRONMENTFOR EMPLOYEESo

HIGHLEVEL

OBJECTIVES


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Invoice Process As IsInvoice Process As Is

Billing Objectives are to:

Bill on a timely basis --- CSAT & &profitability100% invoice accuracy --- CSAT& collections (cash flow)Increase throughput efficiency toallow more analysis time for staff

Billing/Receivab

lesSystem

OrderInput

ERRORS? PrintInvoices

NOSample forAccuracy

Stuff & Mail

Analyze/CorrectRejects

YES

ALLCORRECT

ED

YES

NO

Escalate toIT for help

I/ FACE

Sales Staff

CustomerMaster

ProductMaster

PriceCustomerInfo


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AS IS Process Metrics

OBJECTIVEJuly 2009Results

ProcessObjectives Variance

Timely Billing (AverageDays after Event) 6 1 (5)

Invoice Accuracy (#disputes or calls) 15 0 Awful

Billing Efficiency(% 1st time pass through) 85% 95% (10) Pts


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Billing Efficiency(% 1st time pass through)

85% 95% (10) Pts

IDENTIFY ISSUES15

Error type analysis & interviews with billing & IT revealed the following:1.On average, 65% of errors result from sales staff order input mistakes2.On average, 15% of errors result from customer master not being updated promptly3.On average, 15 % of errors result from product master not being updated promptly4.The remaining 5% of errors result from miscellaneous causes

JULYRESULTS OBJECTIVE VARIANCE


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TO BE PROCESS RECOMMENDATIONSSHORT TERM SOLUTION RECOMMENDATIONS:

Issues --- Financial management holds billing clerks responsible for efficiency eventhough most errors occur in upstream processes. The clerks say that they can fix theissues faster than upstream staff.

Billing clerks are fixing sales staff errorsBilling clerks are chasing and with IT are correcting customer information errors --- sales isresponsible for maintaining accurate information in the customer master databaseBilling clerks are chasing and with it are correcting product information errors such as currentprices --- product management staff are responsible for maintaining the product master database

Recommendations --- Upstream process owners have no skin in the game. Adjust

billing efficiency for upstream caused issues and route errors to owners by email ortrouble ticket. Financial management should work with upstream counterparts to includecorrections in process owners performance objectives.


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TO BE PROCESS RECOMMENDATIONSLONGER TERM SOLUTION RECOMMENDATIONS:

Issues --- Product and customer information exists in the billing system as wellas in the master databases. Invoices reject when the data is not in agreementcreating the rework done by billing and the upstream processes. Thesedatabases have evolved over time using different formats and logic withresulting interface issues.

Recommendations --- Management should consider establishing a datawarehouse as the single repository for critical information. An integrated ERPsystem would provide the most benefit.

Next Steps for Shorter & Longer Term Recommendations --- Slide 11


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BPM Applications

Business Process Management methodology is applicablefor all enterprises that can benefit from processimprovements:

oCommercialoNon-ProfitoMedicaloGovernmentoEducationoMilitaryoReligious


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Current Process Issue Examples

State Government:v

State Employee Insurance ShortfallvParole System ControlsvDHHS Medicare Accounting Errorv

DEFER UNTIL SESSION TWO


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WHAT PROCESS IMPROVEMENT LOOKS LIKEoStrengthened Internal Control and Risk ManagementoQuality & Efficiency at Higher LevelsoCustomer Satisfaction Enhancedo

Employee Morale ImprovedoEmployees Trained in BPM Techniques --- Sustaining


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SOME CLOSING CONSIDERATIONS

Process improvement requires tops down support tobe successful

+ Influence process owners/ add to objectives+ Visible management priority+ Provide resources

Processes are owned and managed by people but manytimes, individuals become the process. A consistent, sustainableprocess by definition isperson neutral. A process is tailored tomeet enterprise objectives, not to fit the owner. In the absence ofdirection, individuals will invent their own processes +-The BPM advisor must be prepared to add change managemeelements to the BPM project plan.

CHANGE MANAGEMENT

REQUIRED FOR SUCCESS


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END OF SESSION ONE

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