Linking Process and Performance Metrics

1. Linking Process and Performance Metrics Connecting process improvements to organizational performance gains

2. 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 item in grey will be covered in session 8. • Establish the organization’s key goals • Establish KPIs associated with the organization’s key goals, and measure performance in these • Develop and deploy the enterprise strategy to the process level • Establish process measures (if not already existing) • Enterprise KPIs are then recalibrated and aligned with process-level metrics • Once the metrics are aligned at all levels, process improvement projects can be identified • Budget must be allocated aligned with the process improvements needed to achieve the strategic goals. This is why it is critical to align the budgeting process with the strategic planning process BA 553: Business Process Management

3. 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 performanceinvolves 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 BA 553: Business Process Management

4. 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 BA 553: Business Process Management

5. 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 BA 553: Business Process Management

6. 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 BA 553: Business Process Management

7. FEEDBACK LOOPS Providing Clearances Equipment available Equipment working Actual schedule Actual budget Actual work completed Paperwork done Planned schedule Planned budget Planned work scope Outage W/O’s W/O’s with status of equipment to be fixed Planning Outages Doing Daily Maint. Doing Outage Maintenance Creating Work Orders Manpower availability Used parts Managing the Workforce Operating Plant Ordering Parts Materials/ Parts Level of satisfac-tion with contractor Amount of contractor work complete Storing or Disposing of Scrap Managing Contractors Contractors and their work scope FEEDBACK LOOPS Outage Maintenance Example BA 553: Business Process Management

8. Power Plant Process A: Getting parts Outputs Process D: Run the units Process C: Doing daily or outage maintenance Inputs Process B: Writing work orders Input measures In-process measures (collect from internal customers) Process output measures (customers in next process, or external) Plant performance measures Outage Maintenance Example: Connecting Process and Performance Measures BA 553: Business Process Management

9. Power Plant Run the units Equipment working Actual schedule Actual costs Power Planning and doing outage maintenance Work orders Manage the budget Expenses Input measures Number of work orders generated just before outage In-process measures Number of work orders generated during outage Process output measures Performance measures Forced outage rate Capital budget Availability O&M budget Other budget • Equipment working • Amount of equipment fixed • Amount of equip. fixed/replaced that could have been avoided by early detection • Actual schedule • Time length of outage • Actual costs • Cost of expedited parts • O/T costs • Cost of extra contractors/expedited contractors Outage Maintenance Example: ConnectingProcess and Performance Measures (Cont’d.) BA 553: Business Process Management

10. Power Plant Run the units Equipment working Maintenance costs Work orders signed off Power Work orders Perform daily maintenance Manage the budget Parts Expenses Equip. history Input measures Number of parts of various types in warehouse Correct min/max for parts in material management system In-process measures Wait time for parts Number of times parts not available when needed Process output measures Performance measures Forced outage rate Availability O&M budget • Equipment working • Amount of equipment fixed • Work orders signed off • Number of work orders signed off • Maintenance costs • Cost of expedited parts • O/T costs Daily Maintenance Example: ConnectingProcess and Performance Measures BA 553: Business Process Management

11. Process and Performance Measures Template Input measures In-process measures Output measures Perform. measures Process Measures Perf. Msrs. BA 553: Business Process Management