The Insiders’ Guide to BPM: 7 Steps to Process Mastery 11 - Six...has outlined in his popular...

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The Insiders’ Guide to BPM: 7 Steps to Process Mastery Special eBook Edition with Instructional Guide and Templates

Understand and Embrace your Goal

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2 STEP | The Insiders’ Guide to BPM: 7 Steps Instructional Guide and Templates

Process Mastery Step 1: Understand and Embrace your Goal

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Foreword We are presented with many challenges in successfully operating our organizations. Sometimes those challenges are reflected in our financials (as commercial organizations) and other times they stem from the services we provide as government or non-profit agencies. The economic challenges we have been facing for some time now certainly increase our awareness of these challenges, forcing us to sharpen our perceptions and take actions that directly address these challenges—now. Yet only by changing how we do work can we achieve productivity, efficiency and financial goals that lie outside of our grasp today. Reaching our goals rests squarely in the work we do and how we do it. It is our responsibility to change that for the better. The most important observation I can share with you is that it is us, the people in our organizations, that either meet these challenges…or don’t. And we can meet these challenges. We can change how we do work. We can align and optimize our organizations to deliver against almost any challenge. We just have to do it. But it’s also true that we often don’t know how to tackle this challenge. We struggle to get started, we struggle to drive our way to our goal, and we often find that we come up short of what we hoped to gain. These can be daunting challenges. That’s why we’ve with engaged Terry Schurter to bring this Practical Guide to you, to help you address the challenges he has outlined in his popular book—The Insiders’ Guide to BPM: 7 Steps to Process Mastery. Now you not only have a vision of what you should do, you have the tools to help you get started doing just that. Kamran Kheirolomoom OpenText General Manager, Business Process Solutions



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About the eBook Series BPM big wins have been limited to a small cadre of process masters…but not anymore. Now everyone is just 7 steps away from process mastery. We’ve all heard those stories of BPM success that influenced the bottom line, driving increases in revenue or EBITDA. We’ve all heard those compelling cases of 50%, 60% even 70+% reductions in process cost and labor with hard ROI payback in 12 months (or less). We have heard them and they are very compelling… Yet it seems that for many of us, those kinds of results remain elusive, a mystery. Why is that so? Perhaps it is because no one has taken the time to distill the essence, in simple terms, of just how to achieve such results. That is what this book is intended to do. We’ve put our heads together to draw out the 7 steps that can best help you master your processes, regardless of what mastering means to you. This book is your guide – the insiders’ guide – to making BPM work for you. We know BPM can make a big difference for almost any process goal. We know BPM can make a difference with almost any process. We know that everyone can be successful with BPM. But we also know that process mastery has, to date, remained an unfilled promise for far too many people. Whether you’re seeking the insights to achieve goals with BPM consistently, looking to move yourself from moderate success to big wins, or wanting to be certain you can keep hitting those process home runs, this eBook is for you. From the book The Insiders’ Guide to BPM: 7 Steps to Process Mastery this eBook series presents each of the 7 steps from the book as its own eBook along with a How-To Guide including Templates to make each step actionable. The how-to guide and template come directly from the accompanying Master Class that has already been proven to be one of the simplest and most successful ways to drive process improvement and produce exceptional results. The approach is simple and it is successful—and it is designed to be used by anyone that desires to achieve meaningful process improvement. All you need to start taking control of your own process mastery is here for you in this special eBook series. All you have to do is put it to work for you. Learn more about the 7 eBooks in The Insiders’ Guide to Process Mastery series at http://www.opentextbpm.com/GuidetoBPM



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7 Steps to Process Mastery

STEP 1: Understand and Embrace your Goal

Process goals are defined and discussed including how to setup process goals that accurately reflect your real goals, drive the process improvement activity, establish a clear “current state” baseline and validate improvements completed.

STEP 2: Build an Elegant Design

Building an elegant design requires that the work and complexity of a process be reduced by process improvements. In this step, we craft the perspective (model) of a process that creates the correct observational perspective and then assess the real value of proposed process improvements.

STEP 3: Improve Personal Productivity

Process participants often perform detective work, switch between software systems, repeat data entry, chase missing artifacts, and work with complex forms or documents - additional work that ferments dissatisfaction. In this step we identify and eliminate the biggest culprits of these productivity “robbers.”

STEP 4: Orchestrate for Real Time Demand

Most processes do not empower process participants and managers to adapt their work practices to context. Yet these contextual demands exist in almost every process. In this step we identify the majority of the orchestration capabilities participants and managers need to further improve our process design.

STEP 5: Keep Your Process in Tune

The moment a new process design comes into existence it starts becoming obsolete. Process designs are static - they don’t change until we change them. Yet the context around us is constantly changing, slowly and rapidly. In this step we identify the measures that will tell us when our process design is degrading (change has occurred) so that we can protect process success.

STEP 6: Create Transparency

Process transparency is driven by presenting metrics to each person working with a process that are a) meaningful to that person and b) provide insights against a common goal. In this step we use the goals we defined in Step 1 to describe meaningful process metrics for the managers and participants in the process.

STEP 7: Design, Manage and Deliver the Customer Experience

Delivering a desirable customer experience is the key to customer retention and brand excellence. In this step we review our process improvements to determine how they affect the customer and to gain a better understanding of what the real customer experience is that our processes create.



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Contents

Foreword by Kamran Kheirolomoom, OpenText, General Manager, Business Process Solutions…2 About the eBook Series…3 Overview of the 7 Steps…4 SECTION 1: Understand and Embrace your Goal…6

Financial Goals…7 Revlon – BPM that Drives EBITDA…8 Master Key Performance Indicators (KPIs)...10 KPI Variant – Customer KPIs for Goals…11 The 8 Elements of Goal Setting and Delivery…12 Process Goal Setting Requirements…12 Critical Goal Drivers…13 Examples from Actual Process Improvement Projects…14 Goal Setting Key Takeaways…15

SECTION 2: How-to Guide with templates and instructions that help you put this step into action…16

SECTION 3: Additional BPM resources to help you create business processes that produce exceptional results… 18

About the Author…19



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SECTION 1 – Understand and Embrace Your Goal “Give me a stock clerk with a goal and I'll give you a man who will make history. Give me a man with no goals and I'll give you a stock clerk.” - J.C. Penney

The first step in mastering your business processes is to understand and embrace your business goal. Do you have a goal you are seeking to achieve? Of course you do, otherwise why would you even bother? Goals define our purpose, and the type of goal we have helps us focus on the kind of improvement actions we must take, along with establishing metrics to determine our degree of success. The one perspective on process that we didn’t specifically call out is you, and understanding your goal is definitely part of your personal perspective on process. When we start talking about goals, you are also part of the strategist group. So what is your goal? Oh, and if you have don’t think you have a goal, but instead had a mandate, think again. A mandate or other motivation that requires you to do something with process still means you have a goal because you are expected to do something, something that produces a result. For example, your goal may be to meet your organization’s expectations of you so you can keep your job and perhaps even qualify for a promotion. From where we are sitting, that seems a very admirable process goal.

If you don’t have a specific goal, is it safe for us to say that your goal includes making something about the process better? We should certainly hope so! There are three ways to set process goals that we will cover in this chapter. We will start with financial goals, as this a common goal shared by almost all organizations.



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Financial Goals

Where your goals are financial (cost reduction, increased profit or increased revenue) BPM should be driven by a before and after ROI analysis. In light of that, here is another interesting process observation from a study by Nathaniel Palmer. In this study, over one-third of survey respondents did not use ROI analysis as part of their BPM deployments—one out of three BPM projects did not use ROI analysis. Further, less than one-sixth of respondents performed any ROI analysis after piloting the project, final roll-out, or as an ongoing assessment. That means that one out of every six BPM projects doesn’t have any proof of what the project actually achieved nor has any evidence that gains achieved continued to return the initial degree of benefit over time. Regardless of the reason for this, conducting an ROI analysis of a proposed BPM improvement project is one of the ways we have to set goals for the project. Developing the ROI case and

then identifying the measures by which we can assess our success in achieving that ROI is an essential part of process goal setting. It’s like taking a vacation where we identify our desired destination, plan our route, determine intermediary stops, create a budget and then head off. Can you imagine taking a vacation where you simply got into the car and randomly drive off whichever way happens to catch your fancy? No directions, no planned stops, and a destination that is somewhere a lot nicer than here? Does that sound like the kind of vacation you wish to take? Oh, and what do you think the likely outcome of that approach to vacationing would be? Granted, you might get lucky but chances are you won’t and even poor planning is better than no planning at all.

Use of ROI analysis from “A Survey of Business Process Initiatives” by Nathaniel Palmer



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Yet it seems at times that is our strategic approach to process success. But that is not the way to achieve process success, at least not on any consistent or predictable basis. Is ROI analysis the only way to set process goals or are there cases where we don’t need to do that? Sure there are. For example, if the process or processes in a particular part of the organization have already been identified as underperforming and in need of overhaul, then we may not deem it necessary to do that ROI analysis. However, it is not sufficient to say we know a process needs improvement. We still need goals for the simple fact that goals (like those derived from an ROI analysis) force us to assess where we are (the current or as-is state) and where we are going. In effect, goal setting forces us to assess the potential improvement against measures that matter. Revlon – BPM that Drives EBITDA

An internationally recognized brand in cosmetics, skin care, fragrances and personal care products, Revlon had $1.3 billion in revenues and a healthy 18.4% EBITDA in 2008. Not bad. They must be doing something right. Part of what they are doing right is BPM. For example, Revlon has an extremely high claims volume (over 1000 per day). Before applying BPM (with BPMS software) to their claims process, Revlon struggled to keep up with the workload and financial impact was significant with chargeback amounting to fully 20% of gross revenues. Claims processors were over-burdened and were often unable to review low-dollar clams or contest them if appropriate. Another interesting data point was that the document collection process by itself took 30 minutes on average per claim. In implementing BPM, Revlon reduced processing time by two-thirds (66%) which gave them the opportunity to process all claims at a net reduction of employee time of over 50%. Revlon

Revlon reduced processing time by 66% and realized a net reduction of 50% in labor time

resulting in a .5+% increase in EBITDA.



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has not disclosed the reduction in chargeback achieved from their use of BPM but with an optimized and streamlined process in place there is little doubt that total chargeback cost would also be reduced (probably quite significantly). Revlon claimed 18 month break-even and 24 month payback on the project, but what is even more important is the company will reap the cost reduction benefits year after year for many years to come. Direct cost reduction, as a non-discounted or amortized savings, in the Revlon case is estimated to be in the range of $1.2 – $1.5 million per year without factoring in other benefits derived from the BPM improvement. That translates to a minimum half point gain in EBITDA. Now that is the way to leverage BPM. Is reduction in processing time a valid process goal? Sure it is. We can measure it and we can contrast before and after measurements. Reduction in processing time is a different take on financially driven ROI because reduction in process time will reduce the operating costs of the process. This example is important as it shows a use of BPM where reduced operating costs through process improvement made the company more efficient while lowering its operating cost—resulting in a direct impact on the bottom line of the business. So what did Revlon do that made this BPM initiative successful? For one thing they knew their baseline, their challenges and they measured the result of their efforts. While we may not know what Revlon expected to achieve, they certainly achieved success and undoubtedly improved their ability to leverage BPM for future successes with their before and after analysis. Now some of us will shy from doing an ROI or other measurement analysis, especially one that includes before and after measurement, particularly when we aren’t expected to do so. Measurements can be problematic as they will either validate or invalidate our expected results and while validating our results is fine invalidating them is not comfortable for many people. Yet how else will we know, really know, what we achieved? Whether the results are on target, above or below target knowing the results tells us something. It can validate our assumptions, help us adjust our expectations, teach us to capitalize on what really works, and help us improve on what didn’t work as expected.



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Master Key Performance Indicators (KPIs)

For those cases where financial ROI is not a valid means of goal setting we have other ways to establish a baseline, set goals and measure our success. One of those ways, the second approach to setting process goals, is to use Master KPIs. Master KPIs accurately reflect what we want to improve about the process. This could come from a mandate, a compliance requirement, a service initiative or even a specific process outcome that we can clearly see is undesirable (i.e. what we don’t want). Mandates could be improvements in measures such as error reduction, meeting government regulations, business partner requirements, defect reduction, response time improvement, etc. These motivations for improvement often arise from a sense of dissatisfaction—what we term an undesirable outcome. As in the case of ROI analysis, identifying the metrics that describe the nature of the undesirable outcome gives us a baseline of comparison. From that baseline we can define the KPIs we need for goal setting and the metrics to assess the degree of success we expect to achieve from our process improvement efforts. In this case we are defining the current (or as-is) process state by its underperforming metrics and we will be describing our goals by improvement targets against that same set of metrics. Like financial goals, this gives us the means to: 1. Be rigorous in our assessment of what we can achieve 2. Establish a clear deliverable that we can hold ourselves accountable against 3. Measure our success against our expected results The undesirable outcome can also be related to enterprise or stakeholder dissatisfaction (or the increasing of satisfaction). We often see this reflected in profit or revenue strategies, where executive leadership is concerned or focused in elevating value. Again, using master KPIs gives us the means to assess where we are, where we are going, and then to judge how well we deliver on our goals.



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KPI Variant – Customer KPIs for Goals

The third way to set goals is a variant on the KPI approach for goal setting. It comes from focusing on our customers by acknowledging that the customer experience we currently provide may be lacking in what we could or should deliver to our customers. For companies that are seeking to excel in service value or for whom customer loyalty is of high value—this approach may be the one taken. In this scenario we identify customer KPIs for starters. Customer KPIs represent what our customers care about and are an external perspective of our processes (commonly termed an outside-in perspective). As with the discussion on master KPIs, we must identify what customer KPIs are and what we are currently delivering against them to create the baseline. From there it becomes a matter of establishing our goals against customer KPIs followed by assessing our success after improvement is completed by measuring them again. Here once more we have the means to be rigorous in our assessment of what we can achieve, establish a clear deliverable that we can hold ourselves accountable to, and measure our success against our goal or expectation. Any of these methods—financial ROI, Master KPIs or Customer KPIs—enable us to develop an understanding of where we are, where we want to go, and when we get there. Assuming we have our goals in place the next step is to process mastery is to build the process that will deliver on those goals.



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The 8 Elements of Goal Setting and Delivery

1. Identify what needs to change 2. Translate that need to a goal 3. Identify metrics for measuring the goal 4. Measure them now, to establish the baseline 5. Set the target, thereby defining success 6. Measure metrics when complete, to assess our success 7. Learn from the results 8. Continually improve our goal setting skills

Note: A template is included in Section 2 to help set process improvement goals. Process Goal Setting Requirements 1. Documenting your motivation 2. Identifying metrics that represent that motivation 3. Establishing the baseline for those metrics – the current state of the process 4. Determining the goal – or target – you wish to achieve 5. Documenting the base units of measure of the metrics 6. Calculating the goal as a percentage of change



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Critical Goal Drivers The most effective process improvement is driven by goals that represent an improvement through REDUCTION of one or more goal metrics…i.e. reduce cost, time, activity, movement, etc. When process goals seek to reduce something, the likelihood of achieving real process improvement goes up exponentially.

Goal Relationships – Explicit Linking By approaching process goals by reducing a process metric, we actually improve the process “across the board”. A percentage improvement on a targeted goal metric produces a similar degree of improvement in other process metrics. Therefore, if you reduce costs by 30% you will also reduce time to completion by 30%, increase productivity by 30%, improve performance by 30%, and so on – even including enhancing customer satisfaction by 30%.

Possible Motivations Possible Measures 1. Cost Reduction 1. $ per unit, $ per department 2. Time to completion 2. Average elapsed time 3. Productivity 3. Production per unit of time 4. Performance 4. One person to Y work (ratio) 5. Efficiency 5. Work over time 6. Quality 6. Rework or return count 7. Customer Experience 7. # Moments of Truth



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Examples from actual process improvement projects

Motivation Metric Baseline Goal Units of Measure

Target (%)

Reduce process time Transaction time 4 2 Hours 50%

Improve quality Exceptions produced 10 2 Exceptions 80%

Reduce manual processing Processing time 40 20 Hours 50%

Reduce case investigation time Investigation elapsed time 40 .1 Hours 99.75%

Reduce complexity People involved in process 5 1 People 80%

Reduce processing time Cost per request $840 $420 Dollars 50%

Improve customer service Response time to Client 12 4 Hours 67%

Improve compliance Fines $10,000 $1,000 Dollars 90%

Reduce costs Costs per Document $50 $10 Dollars 80%

Reduce training time Training modules 7 3 Modules 57%



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Goal Setting – Key Takeaways

1. Build your goal as a form of reduction 2. Identify one or metrics that you can establish a baseline on (current state) 3. Set your target – it will drive the process optimization activity 4. Measure the baseline after optimization – to assess your results But what if we don’t know what optimization (improvement) potential exists?

Find out the answer in Step 2 when I discuss how to develop an elegant process design, including how to assess improvement based on actions we can take to improve a process. Where process targets are not obvious (what is a reasonable goal?) we can discover, evaluate and compare possible process improvements, and then determine our improvement target!



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SECTION 2 – How-To Guide: Templates and Instructions

Instructions for using the template

1. Motivation: Define your motivation (why you are motivated to improve this process). This is a freeform description of the motivation behind improving this process.

2. Metric: Identify what you can measure to best establish a baseline of the current state and then your goal. Make sure

the metric you use will indicate a process improvement if the value (goal) of that metric is reduced (less than) the baseline.

3. Baseline: Enter your baseline. This is the current value of the Metric as a number. The value should come from an

actual measurement. 4. Goal: Set your goal. The goal is the new value of the Metric that represents what we want it to be after improvement. It

sets the scope for what we want to accomplish 5. Units of Measure: Document the Units of Measure. These are the measurement units for the

Metric that apply to the Baseline and Goal 6. Target: Calculate your target. This is the Goal as a percentage change (Baseline – Goal/Baseline)



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Template for Step 1 – Understand and Embrace Your Goal

Motivation Metric Baseline Goal Units of Measure

Target (%)



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SECTION 3 – Additional BPM Resources to Help You Create Business Processes that Produce Exceptional Results These free resources created by renowned BPM industry experts provide additional assistance in consistently achieving and exceeding your organizations’ goals through process improvement. BPM Resource Center We’ve created a resource center with all the information you need in one place. Whether you are just learning about BPM, getting started or determining what the right solution is, you’ll find industry research, expert advice and materials to help. Check out the available resources at www.opentextbpm.com/BPMresources Getting Started with BPM Article Series Six articles co-authored by BPM industry analyst Sandy Kemsley and Global 360 CTO Steve Russell help you:

Pick the Right First Process Gain Business Buy-in for Project Success Ensure User Adoption Understand Structured Versus Unstructured Processes Measure Success Move to Wider Adoption Across the Organization

BPM Primer: People and Processes Experts at Global 360 provide the definition and history of business process management, as well as best practices to follow and pitfalls to avoid based on over 10 years of helping more than 2,000 customers implement process improvement initiatives.



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Get your copy of each of the eBooks (or share this link with a friend) in The Insiders’ Guide to Process Mastery Practical Guide eBook Series at: http://www.opentextbpm.com/GuidetoBPM

About the Series and the Author: The Insiders’ Guide to BPM: 7 Steps to Process Mastery is available at: http://www.amazon.com/Insiders-Guide-BPM-Process-

Mastery/dp/0929652096

For more on the author of the print book and eBook series you can visit: http://www.tschurter.com http://www.slideshare.net/tschurter http://www.youtube.com/user/tschurter http://twitter.com/tschurter

The eBook Series (sponsored by OpenText): http://www.opentextbpm.com/GuidetoBPM

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