Process Performance Measures "Going beyond Cost and Time Savings"

Look for simple ways to flag specific transactions or activities to provide sample data. Some time back our local bank implemented a program where staff were to use the customer's name and inquire whether there was anything else the customer needed. Signs were posted advising customers that if this wasn't done, the customer should advise the person and the customer would be rewarded. With a minimal investment (assuming the program was followed), the bank was able to track via the payouts whether the program was being followed.

Once you have the inventory of measurements already available or easily made available, you can select which ones have value for your purpose and create a benchmark. This is your initial line in the sand to measure success but the information may not be perfect. You may be using estimates based on partial data or sample surveys of a small number of customers or employees, so there will be some variance but the numeric values will give you more information than no metrics at all.

Finally, monitor the metrics for several months before you make any decisions for implementing more complex and costly reporting methods. These ad hoc information sources may provide you with sufficient information to make more costly reporting systems hard to justify. Take this time to validate that the measures you have selected are in fact reporting what you need to know and make any changes needed. Watch for any variances in the results that can't be explained such as good customer satisfaction indicators yet sales are flat or customer retention is dropping. Look for the source of the discrepancy. Is it being caused by an external factor or is the measurement misleading or even faulty?

Following these steps will help you establish more comprehensive measurements for those soft objectives. In closing, to help you through the steps we just want to touch on four common misconceptions and objections that you may need to deal with:

The first relates to the definition of measurement. Any numeric value whether tabulated, based on a sample or an estimate, is a measurement. Business people in particular have been conditioned to think of measurements only as exact tabulated numbers such as items processed per day so they are less likely to accept the value of estimates and less precise numbers.

A second misconception is the belief that something intangible cannot be measured. It is true that things such as quality mean different things to different people and in different situations but as we discussed, there are indicators for satisfaction without waiting for or incurring the expense of extensive customer satisfaction surveys.

Another misconception is that it is too difficult to determine and attribute results to a specific factor if there are multiple factors that may impact the results which is very common with broad corporate objectives. For example, how do you distinguish whether the increase in sales is due to your recent process improvements versus a marketing campaign or the fact that your competitor dropped the ball or went out of business? This is where well chosen indicators will help you.

Finally, the perception is often that it will be too costly to implement meaningful measurement. By starting with existing measures and selecting the appropriate indicators for the objective, you gain information without significant cost. Once you have it right, then you can consider automating the measurements to provide results for more of the transactions.

The old adage You can't manage what you can't measure is as true today as it ever was and today's BPM tools can assist you in this endeavour. By choosing your measurements wisely and testing them before you invest in the tools, you can reap their rewards.

© BPM3 Inc. September 2009

BPM experts and knowledgeable managers will agree that BPM (business process management) initiatives must be aligned with corporate strategy and objectives. The challenge is developing performance measures for the softer, less tangible aspects of corporate objectives such as improved service or quality. Steering committees often have difficulty approving business cases for initiatives relating to service or quality because they may not have any quantifiable, believable metrics. Effective measures for the softer benefits are critical for project approval and to build a sustainable process improvement culture across the organization.

Companies are continuing to spend money on the implementation of tools such as the Balanced Scorecard and business intelligence software yet most lack the information they need to make these types of business decisions. The problem is not a shortage of information and reports but the usefulness of the information. Most of the metrics are at the task level concerning costs, productivity and turn-around time because those are the easy to measure, i.e. the low hanging fruit. This information is useful in managing day to day operations but provides little insight as to whether a large process improvement initiative will contribute to achieving a corporate objective such as improved quality or service. We won't make you into a statistician but the following practical steps will help you develop measurements that can demonstrate the economic value of your process improvement initiatives beyond the pure productivity and time saving measurements.

The first step in creating measurements that align with your corporate objectives is to fully understand and define the objectives. This is a planning step and is where you should spend at least half of your project time. The key to effective measures is to: understand the problem; clearly define what you want to achieve; and agree on how it is going to be achieved.

Corporate objectives tend to be written at a broad, all encompassing level such as increase market share by being the Number 1 service provider since they need to apply across the organization. When you talk to people in different areas, it is not surprising that each area has their own view of what being number 1 in service is and how to achieve it. Sales may be focused on providing customers with individualized attention and effective sales management tools. The call centre may be focused on more on-line information so that they can answer customer questions quickly and accurately the first time while other areas may have even different views. Each of these areas form part of the end to end process and have an impact on the over-all customer satisfaction. By defining what being number 1 means and what it looks like in real actions across the organization, you will lay the groundwork for identifying effective measures. Too often measures are established without thoroughly performing this analysis, resulting in a variety of information being reported that provides little value or that may even be misleading.

Once you have a consistent view and clear definition of what the objective is, you can begin identifying what information will indicate that you are achieving your objective. How are customers likely to respond to the improved service or quality? Is there likely to be more repeat business, more referrals, more renewals, fewer cancelled orders, fewer abandoned shopping carts on your web site, etc. For quality product objectives, is there likely to be fewer product returns, reduced refunds, reduced calls to customer support, fewer warranty claims, etc.? Look for indicators that reflect the over-all results. For example, if an airline has a problem with late departures, they no doubt have unhappy customers and unhappy staff who have to deal with these customers, and increased expenses. The business case to implement changes to reduce the number of late departures may have sufficient cost savings metrics to sell the business case but it can be made stronger by measuring the soft benefits as well. With improved service are there likely to be more frequent flyers, particularly business flyers, who generate higher revenue and proportionately higher profit, who need to be on-time for appointments, fewer employee sick days, etc.?

Now that you know what you need to measure to validate progress and ultimately success, take an inventory of what is already being measured and what economic value that information provides. Don't be surprised if most of the metrics currently being gathered provide very little information about decisions and the achievement of organizational objectives. In his book, How to Measure Anything, Douglas W. Hubbard points out that "In a business case, the economic value of measuring a variable is usually inversely proportional to how much measurement attention it usually gets."

At this stage, look for what is already available and what you can quickly implement with minimal investment. Do you already track frequent shoppers or your most profitable customers? If not, could you with the existing data, with a minor change to existing systems or by offering some type of loyalty card?