BPM’s consists of four main steps:
- Process modeling
- Process automation
- Process analysis using key performance indicators (KPI’s)
- Process optimization
In this article, we will discuss key performance indicators (or KPIs) for BPM.
Analyzing performance of a process, consists of the following:
- Establishing KPI’s that determine whether the process is running as expected or are there any deviations to address.
- Defining indicators for various time periods. This divides the KPIs mainly into two main types: long-term indicators (e.g. last year, six months ago, etc.) or short-term indicators (e.g. last hour, last day).
- Setting up predefined values and allowable ranges for every indicator. If the results fall out of that allowable range, we need to take action.
Process analysis is an important (which is forgotten usually) step in BPM since it provides objective information (instead of predefined perceptions) that helps to recognize improvement opportunities within the organization.
This kind of indicator uses long time frames (usually one year or six months). Long-term KPI’s are generally based on Business Intelligence (BI) Technology, which provides many advantages. For instance, the user can create his/her own reports, browse through the information, can divide data into many small parts, export it and finally analyze it as per the requirement.
Examples of long-term KPIs for BPM include:
- The number of instances of each process. It is useful to analyze information as per the month of the process, the user who created it, etc. This KPI allows “seasonality” analysis (that allows us to know when more processes are created) or identifying the number of documents processed in each step. In a sales process example, this kind of indicator shows fundamental information such as no. of commercial opportunities per vendor per month.
- Average time needed to finish a process instance. We might want to filter the information available as per the process type or based on month created or other relevant variables. This indicator is very much useful to meet service level agreements (SLA’s) and to check whether we have exceeded the deadlines.
- The average time that each step of the process requires. It is useful to identify bottlenecks and analyze the probable causes. This Information would complement the earlier examples, allowing us to study each step in detail to check where the major delays are.
This kind of indicator provides a short-term analysis (generally one minute, hour or day back), so they are also called “real-time indicators”.
The information provided by these indicators is based on BAM (Business Activity Monitoring) Technology and it is displayed on a BSC (Balanced Scorecard). Moreover, these tools allow us to set alerts so that when an indicator exceeds the allowable levels, the user knows it’s time to take some necessary action.
Examples of short-term KPIs for BPM include:
- The number of process instances generated in the last hour. This kind of information allows us to predict whether a system will overflow or not.
- Time needed for a specific step.
Generally, one indicator doesn’t provide complete information for decision-making, and it’s mandatory to compare it with others. Further deep analysis can accept or reject the hypothesis derived from the first indicator.
Example: If an indicator shows that the total time required to complete a process is higher than established, we might conclude that our team’s productivity is low because our employees don’t work as fast as expected. However, this indicator should be complemented with the no. of instances generated and if we discover that there are multiple instances, the real cause for the delay is not productivity.
In general, the indicators give us very little information, which reflects situations that are important to detect early. But before coming to any conclusions we should complement the results with other KPI’s as well.
We can’t optimize what we can’t measure
Key performance indicators (KPIs) are crucial to measure and later improve business processes in an organization. It is essential for a BPM suite (BPMS) to provide tools which automatically measure these indicators. Additionally, the information must be displayed in an instinctive and easy way. Before drawing conclusions, compare results with other indicators to accept (or reject) the initial hypotheses.