In the last blog we looked at ways of monitoring business processes. In this blog we will look at six different ways in which these processes can be viewed.
Six ways of viewing business processes
Business processes are the mechanism by which an organisation translates inputs – raw materials, knowledge, ideas, etc – into outputs such as products and services for customers. The aim is that these outputs will help the organisation achieve its purpose.
The Operational Activity model we covered in the last blog showed how resources can be associated with outputs for individual business processes, and the kinds of reports that can be produced. However, for planning purposes, this view isn’t sufficient. In our experience, there are six ways in which an organisation’s business processes can be viewed:
Six ways of viewing business processes
Detailed history: This first view looks at past processes and related outcomes. Data will typically come from transaction systems and can include details of income and expenditure. For a commercial company this could be by customer, product, channel; or for a not-for-profit this could be by funding source or type of funds accessed. This view is focused on ‘What happened’ and can be analyzed in minute detail as to the resources that were applied; the outcomes that were generated; the structure of the organisation, the marketing programs that were conducted; and a whole host of other information. Its value is in assessing whether the inputs and the outputs generated were ‘worth it’ given the business environment that existed.
Predict & Optimize: This provides a mathematical model of the organisation’s business processes from which future performance can be predicted. Its focus is on the future and can be used to set targets, allocate resources, try out different management structures and assess the different sources of funds. This may not be a single model, but is most likely to involve multiple models for resource optimization, strategic target setting and forecasting.
Performance Measures: This view of business processes looks at how the organisation is performing from an industry point of view. It consists of Key Performance Indicators (KPIs) that relate inputs with outputs. For example, a commercial company would look at how its assets are being utilized compared to the industry ‘norm’, while public sector departments may consider the quality and accessibility of its services. This view of performance recognizes that organisations do not operate in a vacuum and are in continual competition for resources and customers.
Strategy Improvement: In looking at how performance can be improved or how to meet the challenge of a change in the business environment, management may consider a range of strategic initiatives. These may include changes to existing business processes, the creation of new ones, or the closing down of others. This view looks at how each initiative could impact existing business processes, the cost and how they can be combined for optimum effect.
Management Processes: These are the established management activities over which performance is reviewed, decisions taken, resources allocated, and adjustments are made. They typically encompass the six traditional processes of strategic, tactical and financial planning, forecasting, management reporting and risk management. Although seen as discreet processes, driven by a date on the calendar, increasingly organisations are seeking to perform these as a single continuous and fully integrated activity.
Knowledge: This last view looks at the business processes through they eyes of experience and intuition. It recognizes that measures do not tell the whole story and stored up within management as well as external sources, there is much anecdotal information through which performance can be justified.
It’s important to note that these six views cannot be treated in isolation. By this we mean that no one view can ever provide all the relevant information in the context of the business processes. For example, knowing that an organisation was 10% over budget on resources doesn’t tell you whether that was actually a bad performance. To gauge this you would need to look at past and future trends of the activity to which the resource was assigned, what output was generated, and how other organisations were performing the same task.
To plan and monitor performance, somehow all these different views need to be taken into account, and even then organisations may get ‘lucky’. But that doesn’t mean we can ignore planning. What counts is that all of the relevant information is, as best we can, made available when planning and monitoring performance, as this gives any organisation the best chance in achieving its purpose.
The role of technology
In the confines of this blog we are limited in the amount of detail that we can provide concerning the planning models required by an organisation. These will differ between industries, the complexity of the organisation, and the technology being used. However they follow a general logical view as shown below.
Graphic showing the flow of data between planning models
In the above graphic, the blue boxes represent logical planning models. Depending on the complexity of the organisation and the planning software being used, these models may be combined into just a few physical models. The purpose of these models is:
- Operating Activity Model: To link resources to activity and business processes
- Cash / Funding Model: To show the cash impact of plans and help assess cash sources
- Peformance History Model: To provide detailed information on past performance
- Detailed Forecast Model: To predict likely future performance based on what is happening now
- Performance Measures Model: To provide results and forecasts in the context of the prevailing business environment
- Target Setting Model: To help set long-range goals
- Strategy Improvement Model: To help develop initiatives that bridge the gap between forcasts and long-range goals
These models are linked – i.e. they act as a single model through which management can view and manage performance. Within this blog we don’t have space to describe each model, however our white paper ‘Rethinking the planning process’, has a description of each, which can be downloaded from here.
In the next blog we will look at one of the models – the Strategic Improvement Model – whose purpose is to plan and manage change.