The Intelligence of Business Performance Management

0515NealArtWikipedia states that the goal of business intelligence is to allow for the “easy interpretation of large volumes of data. Identifying new opportunities and implementing an effective strategy based on insights can provide businesses with a competitive market advantage and long-term stability.”

Outsourcing is a profession. Increasingly, service providers and clients believe that as a profession, the business impact of outsourcing services should be subject to the same rigorous analysis of results, observations and tools that are applied to many other business processes. Business performance management (BPM) offers that rigorous analysis within a systematic approach that can ultimately help drive business process and workflow improvement. This article spotlights how BPM is increasingly being applied to outsourced services and how surprisingly effective this application is.

I’ll spotlight the role of the balanced scorecard in the BPM framework, how BPM can work practically in organizations with their wide variety of workflows, and a BPM case study.

By analogy, the goal of BPM is to create a health check diagnostic for business performance. Just as a physician and patient can view a blood pressure readout as one key indicator for health, managed service providers should be able to view and evaluate key business performance indicators in real time, or close to it. That gives the service provider and client important data about the fitness of the business. In this sense, BPM can provide “prescriptions” for keeping the enterprise healthy.

A few critical requirements

To meet this goal, effective BPM in outsourcing involves fulfilling a few critical requirements. These include agreeing on strategic performance objectives; identifying key processes within an engagement that promote those objectives; pinpointing important variables in those processes; classifying acceptable performance levels at each variable; crafting a service level agreement (SLA) that specifies processes, the key performance indicators (KPIs) and the targets; monitoring those key performance indicators in real time or nearly so; and finding solutions when quality is not meeting expectations.

These requirements add up to a lot of data. That’s why a good BPM methodology utilizes a Balanced Business Scorecard that, returning to our healthcare analogy, indicates the organization’s overall fitness. The scorecard considers short-term financial performance as well as customer satisfaction, human resource development and refinement of best practices.

Each of these four categories in the scorecard – financial, customer, HR and operations – comprises activities that take place in support of strategic objectives within those categories. These activities are what a BPM system monitors. Every important BPM metric will ultimately affect the scorecard. This scorecard and the activities that drive it also comprise a BPM dashboard. The BPM dashboard is a Web-based computer interface that both clients and outsourcing service providers can use to monitor the current performance of the business, from a single, very granular process to the extremely broad view of a given service, or even an entire enterprise.

Consider the example of a company outsourcing accounts payable services. The cost-per-invoice might be one of five KPIs in a service level agreement between the client and service provider. That SLA may be one of five SLAs in the financial performance quadrant of the scorecard. These relationships between processes, KPIs, SLAs and scorecards are embodied in the structure of the BPM dashboard that complements the BPM methodology. The four-quadrant scorecard could be the top-level homepage view. If a manager sees invoice processing costs rising, he can drill down through that quadrant into the SLAs and KPIs to discover the root of the problem – the process, location and workflow defects. Actually, he would have been alerted to the problem, in this case perhaps a longer-than-acceptable cycle time for processing invoices.

A major benefit of thinking in terms of the Balanced Business Scorecard is to understand that any process in any division – internal, outsourced or both – should find its place in this framework. If not, the organization is just creating new, separate processes that will have to be integrated later.

We have implemented BPM programs and software systems for clients over many years. Our outsourced services span areas including mail, print/copy/fax, records, accounts payable services, electronic discovery and traditional office services. Document process management is an area that benefits heavily from BPM. All enterprises have a document processing challenge, and for most it’s a growing one. In addition to standard operating documents, every business is potentially subject to document-intensive legal action, and most are under increasing pressure to respond more quickly and precisely to one regulator or the other. These may include the SEC, Commerce Department, EPA, FDA, Labor Department, Health and Human Services or the Energy Department.

BPM in action

Let’s look at how BPM approaches and tools can work effectively in the real world via a couple of brief case history examples. One of the world’s largest insurance organizations is a leader in property casualty, mortgage and life insurance as well as retirement services. The firm outsourced its mail and records management activities to us and through our ongoing partnership the company was able to leverage our powerful Web-based performance management system to achieve significant benefits. These include reducing costs and better managing operational performance in real time.

The firm originally implemented our system to measure mail and records management activities in order to ensure that we were meeting agreed-upon service level agreements. Working closely with our team during a two-year period, the company was able to make better business decisions. This included the ability to decrease the cycle time between reduction in activity volume and the corresponding reductions in labor. This drove improved operational efficiency and cost savings of more than $1.2 million.

Another case in point is a healthcare provider that leveraged our Six Sigma and BPM expertise to continually improve production mailing workflow processes and print center operations. Our team mapped existing processes and identified areas where potential problems might occur. Based on the project’s findings, we provided recommendations that the healthcare provider adopted. These include implementing technology management processes and a reporting system, all designed to prevent mailing errors and equipment malfunctions and create end-to-end accountability.

In the third case example, a large international law firm with a FORTUNE 1000 portfolio outsourced records management to Canon. Our BPM system was used to establish KPIs for timeliness, accuracy and file volumes. Recognizing the opportunity for improvement, our client manager requested an onsite Kaizen event. (A Kaizen event is a project designed to improve a specific process in a short time period while establishing an approach to deliver incremental improvements over the long term.) The attorneys consequently received correct, complete files faster and more reliably without further need to maintain duplicates—all with a full time staff much smaller than the industry average. The result was justification of the firm’s administrative staff head count.

Whether the goal is to survive, thrive, increase market share or drive shareholder value, an organization can achieve significant benefits by confronting its business challenges by leveraging the latest BPM approaches. And though any outsourcing service provider can take on a project, a service provider with a comprehensive BPM approach can provide a sound foundation to help ensure that those outsourcing decisions pay off.

This article originally appeared in the May 2015 issue of Workflow.