Early Results From Standardization

As a first deliverable, in March 2004 the BPM Standards Group developed a common definition of BPM that provides an appropriate context for performance management. The definition includes three primary principles. First, BPM is a set of integrated, closed-loop management and analytic processes, supported by technology, that address financial as well as operational activities. Second, BPM is an enabler for businesses in defining strategic goals and then measuring and managing performance against those goals. And third, core BPM processes include financial and operational planning, consolidation and reporting, modeling, analysis, and monitoring of key performance indicators (KPIs) linked to organizational strategy.

A few points in this definition are worth highlighting. One is that the overarching summary is focused on integrated, closed-loop management and analytic processes. Technology supports these core processes, but technology does not drive BPM on its own. Another is the point that BPM is not just financial in nature; its drivers are both operational and financial. To maximize its impact in the company, BPM requires support across all departments within the enterprise. Finally, the definition includes a sample of the core processes that drive BPM. These are not viewed as exclusive, but are a representation of processes that can help organizations define, measure, and manage performance against a set of strategic targets.

The BPM Standards Group's second deliverable is the BPM Framework document, which is intended to provide a structure for BPM implementations. It encompasses the three pillars that enhance BPM success: core processes, strategic content, and enabling technology.

Core processes. Successful performance management initiatives require delineation of the organization's core BPM processes and specification of the technology that is necessary to support them. The core processes in most performance management systems are setting a strategy, planning, monitoring and analyzing performance results, and taking corrective action.

Establishing a clear strategy is at the heart of executive management in every enterprise. The process of defining that strategy enables senior managers to set the direction for the rest of the organization, identify value drivers, and select unique measures for comparing the business with its peers. Strategy maps are now in vogue as a method to manage the strategy development process, and many organizations have successfully deployed portal technologies, scorecards, and other collaboration technologies to distribute strategy work to departmental managers.

The second core process, planning, is the means by which managers in divisions and departments throughout the organization set goals, devise and model what-if scenarios, develop programs, and define budgets to support the business strategy. Budgeting, forecasting, and process modeling are all components of an integrated planning process.

Of course, monitoring progress toward goals is crucial to success. A company's performance information needs to be consolidated from a myriad of sources throughout the organization, and then it needs to be presented to managers and employees in a consistent format that incorporates the appropriate context and alerts managers to performance that is outside a preestablished range. Analytic technologies can help identify anomalies and support the performance analysis process.

In addition, organizations must have processes for taking corrective action whenever a performance concern is identified. Dashboards, threshold alerts, and automated message delivery technologies can aid departmental managers in quickly addressing variances from plan as they emerge.

Strategic content. Key content for a BPM initiative includes the metrics that the organization will use to compare its actual performance with plan, as well as with benchmark data for its peers. Many industries have established ratios that address performance from an overall governance perspective, including high-level formulas for return on equity, return on assets, and earnings per share.

An appendix to the BPM Framework includes metrics tied to business processes, complete with inputs and outputs for each metric and a summary listing of the business benefits for some of them. Organizations should recognize that the unique characteristics of their industry may require them to adopt variants of the generic measures in the BPM Framework. However, the framework's perspective in areas of corporate governance, finance, customer (segmentation and revenue), supply chain, and human resources might stimulate organizations to consider metrics that would be most effective for their circumstances.

Enabling technology framework. A breakthrough supposition of the BPM Framework is that organizations cannot "get" BPM solely by investing in technology tools. Tools are the enablers for a strong process-driven focus. That said, the technology framework is critical in enabling BPM to scale throughout an organization. The BPM Framework provides a technology architecture that highlights the enabling technologies and provides an overall perspective of how components integrate source data, core processes, and end users (see exhibit 1 below). Inclusion of data warehouses, datamarts, business intelligence software, and collaboration tools in the technology framework is intended to provide guidance for executives looking to tie together their business and technology programs.