Better business performance

Business performance management is not a new concept, but it is one that is yet to find universal acceptance in the industry. Which is a shame according to Craig Schiff, CEO of BPM Partners a professional services firm with an exclusive focus on BPM solutions. Schiff explained to FST how the enterprise can benefit from implementing true BPM.

FST. To get started, how would you define BPM in terms of the nuts and bolts for the business?
CS. At a high level BPM is really a set of business management processes, both financial and operational that are there to help a company execute on its strategy. It's really the management process that needs to be in place to help the company achieve it's long-term goals. Technology really plays a supporting role to enable that to happen. First you put a plan in place and then you can do performance analysis via a dashboard which looks at key measures through a visual or graphical interface, and a scorecard, which is really a collection of key performance indicators.

FST. And what are the key drivers of BPM adoption, particularly within financial services?
CS. Companies that are forging ahead with BPM, are looking to accomplish a number of different things. One of the key drivers tends to be getting a consistent set of key information easily accessible company-wide. This helps get everyone aligned around the key drivers of the business – just producing lots of reports doesn't accomplish that; BPM has people focused on what are the key measures of success and how are we performing relative to those.

BPM also encompasses budgeting, planning, and forecasting, and fixing that area is usually a priority for many companies who've been using spreadsheet-based processes to accomplish this. Even very large companies are still heavily using excel, and this can be chaotic, unreliable, and labor intensive. So the labor savings related to that is a key element.

The other reason BPM is being adopted is because people are seeing other companies who have advanced with their own performance initiatives and are now seeing the benefits. When you look at a BPM project it's hard to quantify upfront some of the potential benefits, but if you talk to peer companies you will see that they've identified a potential cost savings, they've identified unprofitable customers, they've identified revenue upside opportunities that they would not have seen without a system of this type in place.

FST. Moving BPM forward means it needs to be cost justified so what are the key cost drivers to bring it forward?
CS. The greatest, the most tangible analysis you can do on it is to look at the labor involved in the budgeting process in a company. Particularly if you're coming from a spreadsheet based system or a spreadsheet playing a supporting role with the system you have, a custom solution. If you cost out that labor – everyone in finance creating templates and entering data, through IT supporting it –the cost is tremendous.

And then if you compare your costs to other companies that have done BPM, and we have data to enable this, you'll see that's where you can identify a very tangible ROI. The more exciting and interesting way to do that is simply talk to other companies or attend a conference where there are case studies or webcasts and see what other companies have done. Talk to someone who's done it and see what they've got out of the system.

FST. And what are the key challenges of bringing these kind of projects to fruition within the enterprise?
CS. The first challenge is getting out of the gate – getting buy-in to proceed. It is a significant investment in software, services, and management consulting, to work around the strategy elements. So it's costly and getting the initial buy-in can be very difficult. This is an example where looking at peer groups, looking at case studies really gets the vision out there of what could be accomplished, and then everybody wants in.

Then once you've done that, the next challenge is to get people to follow through with the full capabilities of BPM – if they had a pain in budgeting and all they did was fix budgeting, that's not BPM. Of course it's beneficial, they've saved some money in the budgeting process and probably have a more accurate plan, but that's not BPM. It's not until you pull in the other components, some of which we've already described that you truly have performance management.

Another challenge is in getting the company's strategy down –understanding what it is. In many companies they know that at the top, but the IT group may not know it with the level of detail they need. So part of the challenge is for senior executives to revisit and communicate the company's strategy.

And in some of the larger financial services firms, some of the challenges we see moving forward with BPM quite honestly are bureaucracy, just getting everyone aligned. So there may be a department that sees the value and are looking to do this, but getting that corporate-wide vision is a big challenge. For example, from an IT perspective you might get the attitude of ‘haven't we done this all already with data warehousing?’ And the answer is no, that's just an important piece of this; this builds on that work, this leverages it so to speak. Getting people to envision the full capability upfront is where some of the difficulty comes.

FST. And once people do buy-in and go down the BPM route what are they tending to do with it?
CS. Well, depending on the group in the company that's driving the initiative we see BPM kind of come in through two doors. If the finance group is driving the initiative, they start with budgeting and planning. If IT is driving it then they are looking to give people access to information and you see the focus on the dashboard.

Something else they need to do early on is consider as they move forward with BPM, that it's not just about the data, it's not just about reporting, it's about tying back to the strategy and measuring how successful you're executing on that strategy. You need to consider what methodology you will be using to do that and that is something you should be thinking about upfront, not really after the fact.

FST. And once its established, what other areas do you see BPM expanding into and really adding value in the enterprise?
CS. Once the pain points are addressed, what BPM can then is really go beyond what they've been looking at and tracking in the past. So people can get into profitability analysis, by customer, by product, by sales region, by salesman. They're able to analyze easily that level of detail. These systems are multi-dimensional. They can slice and dice the data in ways they never could before to see how the company is really performing, so it's not just a static report but has the ability to query and analyze the information.

Something that's just being delivered by the software vendors is predictive capabilities – predictive analytics. And what that really is is complex mathematical algorithms hidden beneath the surface that enable you to look at the probability of results. You can take a look at your past performance, you can take a look at external factors, economic factors, and put that all together with what you have as your current forecast and the system can tell you the likelihood of that forecast coming to pass. So this brings an understanding of the probability of potential outcomes into focus and that's an area many companies are looking to implement next.

FST. And after that kind of capability, where else could BPM go?
CS. The vision is – and a lot of companies haven't gotten to this yet – that you can take the scorecard and dashboard down from the corporate level, down to the departmental level, and take it right down to the employee level. Ultimately you could tie compensation to that performance and truly create a performance culture. We're not there yet though.

More from a capability standpoint companies are looking at enterprise risk management – taking a risk adjusted look, which is something financial institutions have been doing for quite a while. As these companies make investments, understanding the risk aspects of those investments is crucial, and BPM supports that.

Equally important companies are looking at their compliance needs – they’ve met the requirements of the various government regulations out there, but they're looking to automate that process to reduce cost involved in compliance. While the company is complying today there's still a lot of manual processes around the edges to accomplish that. So you see BPM systems today more and more are offering governance, risk and compliance modules as part of the solution.

There’s also an element that you can get a more consistent view of your customers as well. It doesn't replace a CRM system, which is kind of the transactional version of this for customers. But certainly on the customer profitability side, looking at everything that goes into acquiring and supporting a customer begins to tell a company where they should focus their efforts, and so that type of analysis is often done as part of BPM.

FST. What does the technology landscape look like for those thinking of going down a BPM route?
CS. In the early days you really had to build these solutions yourself – certain pieces existed and you had to tie them together and work off of that. What's available today are prebuilt applications where a lot of domain expertise is built-in – some vendors even offer industry specific applications, particularly for financial services, so there’s a lot more out of the box capability. The message today is you don't need to build it from scratch.

Today due to the merger and acquisition activities there are ERP vendors that offer everything from the transactional system all the way through the performance management system. So you can get your entire solution from one of the these vendors, and they is less data integration work to do, and you know other challenges go away. However those are pretty large solutions both in terms of cost and complexity, so they're really best suited for the largest companies to look at.

FST. Going forward what would you like to see? What would you like to see kind of developments from vendors or companies?
CS. I think we need to make BPM lower cost, and I think that's beginning to happen. With vendors like Microsoft entering this space with a very competitive price model, with the larger vendors battling it out for market share. I think we are seeing price competition and therefore reduction in cost. And as more becomes packaged, you need to do less custom work that reduces the consulting bill as well.

I'd like to see more companies give BPM priority. In our annual surveys there's about 50 to 55 percent of the companies that are engaged in BPM, and that's across all industries but the greatest movement is still in financial services. But there’s still room for many more companies to move forward with BPM. And more vendors need to better integrate their solutions. This space has so many components and its difficult as a vendor to be expert in all of them, so they often acquire the missing pieces. Lower costs and more seamless solutions from vendors is what we need.

Key steps to a successful BPM project

• Exeuctive sponsorship. Somebody senior needs to set the cultural tone, have the vision, of what the company's trying to do with BPM. They also act as a tie breaker when you’re trying to standardize processes between departments.
• Cross functional team. This is a company-wide initiative and ultimately will affect everyone, so you need representation from all areas. This encourages teamwork, and buy-in across the organization.
• Roadmap. This lays out long term plans for BPM, and avoids the project from stalling once the initial pain that drove the project is addressed
• Outside expertise. This is a high visibility, mission critical project. It has to be right the first time, so drawing upon experience, best practices, and the independence of a knowledgeable third party can pay dividends.