23 Apr 2012
How cost centres can be revenue producing: Optimising KPIs and SLAs in BPM
by GLiNTECH
We believe the answer is ‘yes’ – as long as you know how to put your BPM system to better use.
According to Gartner’s BPM Survey Insights: Business Process Management Matures as Process Change Becomes More Ad Hoc (2011), ‘while organisations that undertake BPM initiatives are yielding significant business benefits, they still have a way to go in establishing process measures that are good Key Performance Indicators of their desired business results’. From that comment, it could be argued that because it results in benefits the current attitude isn’t necessarily indicative of flawed thinking. However, quite equally, it must be acknowledged that it also isn’t fulfilling true potential.
We believe the key to reaching true potential, in terms of using cost centres as a source for revenue production, is the establishment of KPIs, SLAs and reporting from the initial stages of BPM implementation so that possible improvements can be better monitored and utilised. Those initial stages of development for a BPM system offer all manner of possibilities further down the track – possibilities that will have further benefits on that all-important bottom line.
Most BPM suites have standard KPIs but will allow for custom KPIs. Those custom KPIs and custom metrics can be developed to measure performance and a system like IBM BPM can dynamically add them without the need for the involvement of an IT department. Such a system can offer intuitive solutions, ones that perform rich on-the-fly KPI creation, set alerts and predict future trends.
To set this within the previously mentioned example, in order to improve the Accounts Payable process an organisation will most likely elect to implement a process that pays suppliers before the due date – that is, after all, a sensible idea and one that would bring immediate benefits. However, true benchmarking looks not only at those immediate benefits, but beyond them and towards other improvements. In addition to paying suppliers on time, custom KPI measures and reporting could be used to track things like interest on funds retained in the bank, creditor days, late payments incurred, discounts lost/utilised, purchase order to invoice matches/exceptions and further exception/resolution reporting.
From there the reporting could be linked to show Service Level Agreement (SLA) tracking as well, allowing management to identify issues outside the processing team. For example, Accounts Receivable debtor days linked to interest on funds retained in the bank, or an external document management provider’s activities linked to their SLA (or even bench-marked to industry standards) with triggers and ongoing tracking of violations.
In BPM, SLAs can be created based on those standard and custom KPIs. SLAs enable the establishment of a condition for one or more activities that triggers a consequence. For example, an SLA could be created that causes IBM BPM to send an email notification when a particular activity takes longer than expected to execute. SLAs enable simple reporting on violations, as well as helping to understand the trend in violations over time. All this can be done using real-time scoreboards which provides clear visibility for work in progress and enables corrective action as and when necessary. By using visual heat map overlays, businesses have the ability to detect bottlenecks and performance thresholds. This empowers them and gives them greater control.
In order to take advantage of a process like this, it is extremely beneficial to understand the potential as much as possible prior to implementation. This leads to less rework and true optimisation of processes can begin once in production. The information is at hand and these are genuine possibilities – all that needs to be done is to harness it in the right way.
It is easy to provide a satisfactory resolution to a problem at hand – the real challenge is in finding ways of improving it. KPIs based on revenue streams fit into that category and can transform a cost centre.
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For further info and tutorials on IBM BPM KPIs, please click here.
This post written by Desma