BPMS - Business Process Management Systems

The BPMS paradigm is a framework for integrated business process management, from the strategic
business management to the concrete execution and evaluation of business processes.
The BPMS paradigm is regarded as a process itself and can be subdivided into five "subprocesses":

• Strategic Decision Process:

o The company's overall strategy, target markets, products and the means of reaching
these objectives are defined within this process.
• Reengineering Process:
o Here the major goal is to design new and/or optimise existing business processes. You
begin with collecting and structuring information, then model, analyse and design the
business processes. More details in the Core Activities of the Reengineering Process.
• Resource Allocation Process:
o Having decided on a new (or optimised) business process, it must now be brought to life.
This process includes both IT implementation and human resource allocation.
• Workflow Process:
o The business process is executed within this process.
• Performance Evaluation Process:
o By gathering information on the performance of the processes in real time, targets from
the strategic decision process and the reengineering process can be checked. The
information collected can be used to redefine goals, processes, and realisation methods.
Repeating these tasks regularly or on special occasions leads to a cyclic continuous
reengineering model.

Contents of the Strategic Decision Process:

Within the Strategic Decision Process of the BPMS paradigm, strategic decisions at the top management
level of a company are made. These include the selection of business areas, products, target markets, etc.
Planning models, management information as well as decision support systems provide the technical means
for supporting these senior management processes.

"The Core Activities of the Reengineering Process"

The BPMS paradigm identifies tasks, so-called core activities, which are common to most BPR methods.
Specific methods are characterised by the procedural composition of the core activities and the techniques
applied to fulfil them.

The core activities consist of:

• Core activity 'Criteria selection':

o Derived from the goals of the strategic decision process, project-related specific goals are
defined. Criteria selection includes the organisation of project management of which the
customising of ADONIS® is a subtask.
• Core Activity 'Information acquisition':
o Once the goals have been defined, the information sources must be accessed and the
relevant information collected. Structuring the information sets the starting point for the
modelling of business processes and organisational structures.
• Core Activity 'Analysis':
o Analysis of the acquired business processes results in the detection of bottle-necks,
design weaknesses, critical paths, and benchmarks. Frequent techniques applied are
specific queries, simulation, animation, and metrics.
• Core Activity 'Design':
o Taking into account the results of the analysis, various alternative optimisation measures
are examined resulting in a new or optimised business process.
• Core Activity 'Evaluation':
o The alternatives, the as-is and should-be process models are evaluated according to the
goals of the strategic decision process and the criteria selection of the reengineering
process. Both qualitative and quantitative (times, costs, profit-analysis, etc.) evaluations
should be taken into consideration.

The core activities can be executed iteratively. In most cases, however, the sequence of execution is the
one displayed above.
The reengineering process should result in the determination of a new or optimised business process which
then is passed on to the resource allocation process for implementation.
 What is the Balanced Scorecard?

A new approach to stategic management was developed in the early 1990's by Drs. Robert Kaplan
(Harvard Business School) and David Norton (Balanced Scorecard Collaborative). They named this system
the 'balanced scorecard'. Recognizing some of the weaknesses and vagueness of previous management
approaches, the balanced scorecard approach provides a clear prescription as to what companies should
measure in order to 'balance' the financial perspective.
The balanced scorecard is a management system (not only a measurement system) that enables
organizations to clarify their vision and strategy and translate them into action. It provides feedback around
both the internal business processes and external outcomes in order to continuously improve strategic
performance and results. When fully deployed, the balanced scorecard transforms strategic planning from
an academic exercise into the nerve center of an enterprise.
Kaplan and Norton describe the innovation of the balanced scorecard as follows:

"The balanced scorecard retains traditional financial measures. But financial measures tell
the story of past events, an adequate story for industrial age companies for which
investments in long-term capabilities and customer relationships were not critical for
success. These financial measures are inadequate, however, for guiding and evaluating
the journey that information age companies must make to create future value through
investment in customers, suppliers, employees, processes, technology, and innovation."

The balanced scorecard suggests that we view the organization from four perspectives, and to develop
metrics, collect data and analyze it relative to each of these perspectives:

• The Learning and Growth Perspective

• The Business Process Perspective
• The Customer Perspective
• The Financial Perspective

The Balanced Scorecard and Measurement-Based Management

 The balanced scorecard methodology builds on some key concepts of previous management ideas such
as Total Quality Management (TQM), including customer-defined quality, continuous improvement,
employee empowerment, and -- primarily -- measurement-based management and feedback.

Double-Loop Feedback

In traditional industrial activity, "quality control" and "zero defects" were the watchwords. In order to shield
the customer from receiving poor quality products, aggressive efforts were focused on inspection and testing
at the end of the production line. The problem with this approach -- as pointed out by Deming -- is that the
true causes of defects could never be identified, and there would always be inefficiencies due to the
rejection of defects. What Deming saw was that variation is created at every step in a production process,
and the causes of variation need to be identified and fixed. If this can be done, then there is a way to reduce
the defects and improve product quality indefinitely. To establish such a process, Deming emphasized that
all business processes should be part of a system with feedback loops. The feedback data should be
examined by managers to determine the causes of variation, what are the processes with significant
problems, and then they can focus attention on fixing that subset of processes.

The balanced scorecard incorporates feedback around internal business process outputs, as in TQM, but
also adds a feedback loop around the outcomesof business strategies. This creates a "double-loop
feedback" process in the balanced scorecard.

Outcome Metrics

You can't improve what you can't measure. So metrics must be developed based on the priorities of the
strategic plan, which provides the key business drivers and criteria for metrics managers most desire to
watch. Processes are then designed to collect information relevant to these metrics and reduce it to
numerical form for storage, display, and analysis. Decision makers examine the outcomes of various
measured processes and strategies and track the results to guide the company and provide feedback.
So the value of metrics is in their ability to provide a factual basis for defining:

• Strategic feedback to show the present status of the organization from many
perspectives for decision makers
• Diagnostic feedback into various processes to guide improvements on a continuous
basis
• Trends in performance over time as the metrics are tracked
• Feedback around the measurement methods themselves, and which metrics should be
tracked
• Quantitative inputs to forecasting methods and models for decision support systems

Management by Fact

The goal of making measurements is to permit managers to see their company more clearly -- from many
perspectives -- and hence to make wiser long-term decisions. The Baldrige Criteria (1997) booklet reiterates
this concept of fact-based management:

"Modern businesses depend upon measurement and analysis of performance.

Measurements must derive from the company's strategy and provide critical data and
information about key processes, outputs and results. Data and information needed for
performance measurement and improvement are of many types, including: customer,
product and service performance, operations, market, competitive comparisons, supplier,
employee-related, and cost and financial. Analysis entails using data to determine trends,
projections, and cause and effect -- that might not be evident without analysis. Data and
analysis support a variety of company purposes, such as planning, reviewing company
performance, improving operations, and comparing company performance with
competitors' or with 'best practices' benchmarks."

"A major consideration in performance improvement involves the creation and use of
performance measures or indicators. Performance measures or indicators are measurable
characteristics of products, services, processes, and operations the company uses to
track and improve performance. The measures or indicators should be selected to best
represent the factors that lead to improved customer, operational, and financial
performance. A comprehensive set of measures or indicators tied to customer and/or
company performance requirements represents a clear basis for aligning all activities with
the company's goals. Through the analysis of data from the tracking processes, the
 measures or indicators themselves may be evaluated and changed to better support such
goals."

1. The Learning and Growth Perspective

This perspective includes employee training and corporate cultural attitudes related to both individual and
corporate self-improvement. In a knowledge-worker organization, people -- the only repository of knowledge
-- are the main resource. In the current climate of rapid technological change, it is becoming necessary for
knowledge workers to be in a continuous learning mode. Government agencies often find themselves
unable to hire new technical workers and at the same time is showing a decline in training of existing
employees. This is a leading indicator of 'brain drain' that must be reversed. Metrics can be put into place to
guide managers in focusing training funds where they can help the most. In any case, learning and growth
constitute the essential foundation for success of any knowledge-worker organization.
Kaplan and Norton emphasize that 'learning' is more than 'training'; it also includes things like mentors and
tutors within the organization, as well as that ease of communication among workers that allows them to
readily get help on a problem when it is needed. It also includes technological tools; what the Baldrige
criteria call "high performance work systems." One of these, the Intranet, will be examined in detail later in
this document

2. The Business Process Perspective

This perspective refers to internal business processes. Metrics based on this perspective allow the
managers to know how well their business is running, and whether its products and services conform to
customer requirements (the mission). These metrics have to be carefully designed by those who know these
processes most intimately; with our unique missions these are not something that can be developed by
outside consultants.
In addition to the strategic management process, two kinds of business processes may be identified: a)
mission-oriented processes, and b) support processes. Mission-oriented processes are the special functions
of government offices, and many unique problems are encountered in these processes. The support
processes are more repetitive in nature, and hence easier to measure and benchmark using generic
metrics.

3. The Customer Perspective

Recent management philosophy has shown an increasing realization of the importance of customer focus
and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they
will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus
a leading indicator of future decline, even though the current financial picture may look good.
In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the
kinds of processes for which we are providing a product or service to those customer groups.

4. The Financial Perspective

Kaplan and Norton do not disregard the traditional need for financial data. Timely and accurate funding data
will always be a priority, and managers will do whatever necessary to provide it. In fact, often there is more
than enough handling and processing of financial data. With the implementation of a corporate database, it
is hoped that more of the processing can be centralized and automated. But the point is that the current
emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.
There is perhaps a need to include additional financial-related data, such as risk assessment and cost-
benefit data, in this category.
Definitions of Terms

Some of these definitions were obtained from government agencies such as the Office of
Management and Budget (OMB) or the General Accounting Office (GAO); some were obtained from
other authorities. Links are provided to sites that add more details.
Activity-Based Costing: A business practice in which costs are tagged and accounted in detailed activity
categories, so that return on investment and improvement effectiveness can be evaluated. Implementing
ABC requires proper data structures, and an adequate data reporting and collection system involving all
employees in the activity.
Activity-Based Management: The use of ABC data to ascertain the efficiency or profitability of business
units, and the use of strategic initiatives and operational changes in an effort to optimize financial
performance.
Agency: In most US Federal Government legislation, an organization with a budget of at least $20 million
per year.
Applied Information Economics (AIE): AIE is a practical application of scientific and mathematical
methods to the Information Technology investment process. AIE uses statistical methods to maintain
consistency in decisionmaking in the midst of uncertainty.
Balanced Scorecard: A measurement-based strategic management system, originated by Robert Kaplan
and David Norton, which provides a method of aligning business activities to the strategy, and monitoring
performance of strategic goals over time.
Baldrige Award: A prestigious award, developed by Malcom Baldrige in 1984 to offer an incentive to
companies that score highest on a detailed set of management quality assessment criteria. The criteria
include leadership, use of information and analysis, strategic planning, human resources, business process
management, financial results and customer focus and satisfaction. The award is currently administered by
the National Institute for Standards and Technology.
Benchmarking: The process of comparing one set of measurements to another. This may be done for
various reasons, such as to determine trends in a process over time, or to compare one organization's
efficiency to another's.
Business Process Improvement: A methodology for focused change in a business process achieved by
analyzing the AS-IS process using flowcharts and other tools, then developing a streamlined TO-BE process
in which automation may be added to result in a process that is better, faster, and cheaper. BPI aims at cost
reductions of 10-40%, with moderate risk.
Business Process Reengineering: A methodology for radical, rapid change in business processes
achieved by redesigning the process from scratch and then adding automation. Aimed at cost reductions of
70% or more when starting with antiquated processes, but with a significant risk of lower results.
Capability Maturity Model (CMM): A scale for assessing the degree of built-in documentation and
discipline in a process, in which the scale goes from Level 1, with no formal process, to Level 5, with a
continuous, rigorous and self-improving process. Developed by the Software Engineering Institute of
Carnegie Mellon University, and now being extended to a broader range of applications in management.
Customers: In the private sector, those who pay for products or services. In government, customers
consist of (a) the taxpayers; (b) the recipients of the agency's or unit's products and services; (c) the
sponsors of the agency. There may be several more categories of 'customers'; they should be carefully
identified for maximum strategic benefit.
Critical success factors: See key success factors.
Earned Value Management: Earned value is a project management technique that relates resource
planning to schedules and to technical cost and schedule requirements. All work is planned, budgeted, and
scheduled in time-phased ''planned value'' increments constituting a cost and schedule measurement
baseline. There are two major objectives of an earned value system: to encourage contractors to use
effective internal cost and schedule management control systems; and to permit the customer to be able to
rely on timely data produced by those systems for determining product-oriented contract status.
(http://www.acq.osd.mil/pm/evbasics.htm)
Effectiveness: (a) Degree to which an activity or initiative is successful in achieving a specified goal; (b)
degree to which activities of a unit achieve the unit's mission or goal.
Efficiency: (a) Degree of capability or productivity of a process, such as the number of cases closed per
year; (b) tasks accomplished per unit cost.
EFQM: The European Foundation for Quality Management's Model of Excellence, which provides
benchmarking and self-assessment in a framework similar to that of the Malcom Baldrige criteria.
Feedback: Information obtained from the results of a process that is used in guiding the way that process is
done. There should be feedback loops around all important activities. Strategic feedback (for each strategic
activity) validates effectiveness of the strategy by measuring outcomes (long-term). Diagnostic feedback
tracks efficiency of internal business processes (usually generic across all mission activities). Metrics
feedback allows for refining the selection of metrics to be measured. Measurement feedback allows for the
improvement of measurement techniques and frequency.
Functional Economic Analysis (FEA):An analytical technique for assessing the value added at various
stages or functions in a process. Most relevant in manufacturing industries, where such increments in value
can be readily measured.
Goal:A specific intended result of a strategy; used interchangeably with objective. See also Outcome Goal,
Output Goal, Performance Goal, Strategic Goal.
Improvement: An activity undertaken based on strategic goals such as reduced cycle time, reduced cost,
and customer satisfaction. All improvement efforts should be linked to the strategy. They are either
improvements directly in mission activities (production, design, testing etc.) or in support activities for the
mission. There may be some overlap in these; that is ok.
Indicator: A simple metric that is intended to be easy to measure. Its intent is to obtain general information
about performance trends by means of surveys, telephone interviews, and the like.
ISO 9000: ISO, the International Organization for Standardization, has established a series of performance
and quality management system standards for industrial organizations. Organizations may receive
certification from the ISO Certification body if they are in compliance with the relevant international
standards.
Key Performance Indicators (KPI): A short list of metrics that a company's managers have identified as
the most important variables reflecting mission success or organizational performance.
Key Success Factors (KSF): The three to five broad areas on which an organization must focus in order to
achieve its vision. They may be major weaknesses that must be fixed before other goals can be achieved.
They are not as specific as strategies. Sometimes called critical success factors. (Mark Graham Brown,
Winning Score).
Knowledge Management: "Knowledge Management caters to the critical issues of organizational adaption,
survival and competence in face of increasingly discontinuous environmental change. Essentially, it
embodies organizational processes that seek synergistic combination of data and information processing
capacity of information technologies, and the creative and innovative capacity of human beings."
(http://www.brint.com/interview/maeil.htm)
Measurements: Quantitative or qualitative data collected for feedback. The measurement system is another
layer underlying all the activities of a company. Some measures will be incommensurate outside this unit,
even though they are very significant internally, so they can't be directly benchmarked or interpreted outside.
Other measures will be generic, and they can be aggregated, e.g. cycle time, customer satisfaction, financial
results.
Metrics: Often used interchangeably with measurements. However, it is helpful to separate these
definitions. Metrics are the various parameters or features of a process that are measured. Metrics define
what is measured. Measurements are the data resulting from the measurement effort. Measurement also
implies a methodology, analysis, and other activities involved with how particular metrics are measured.
Hence, we may change metrics without changingmeasurements, and vice versa.
Mission activities: Things that an agency does for its customers. For private companies, profit or value
creation is an overarching mission. For nonprofit organizations, the mission itself takes priority, although cost
reduction is still usually a high priority activity.
Mission effectiveness: Degree to which mission activities achieve mission goals.
Mission value: (1) Mission outcome benefits per unit cost; a key metric for nonprofit and governmental
organizations. (2) For a collection of missions within an organization, the relative value contributed by each
mission. (3) The combination of strategic significance and results produced by a mission.
Objective: An aim or intended result of a strategy. See goal.
Organization: The command, control and feedback relationships among employees in an agency, and their
information. The data flow structure for the performance management system generally follows the
organizational structure.
Outcome goal: A description of the intended result, effect, or consequence that will occur from carrying out
a program or activity. (OMB). A long-term, ultimate measure of success or strategic effectiveness.
Output goal: A description of the level of activity or effort that will be produced or provided over a period of
time or by a specified date, including a description of the characteristics and attributes (e.g., timeliness)
established as standards in the course of conducting the activity or effort. (OMB). A tactical or short-term
quality or efficiency indicator for a business process.
Performance-based budgeting: A management process in which performance of various activities in an
organization is measured, and budgets for further work on these activities is adjusted based on their
performance. (Note: this does not necessarily imply that budgets for poorly-performing activities will be
reduced; see the discussion here.)
Performance goal: A target level of performance expressed as a tangible, measurable objective, against
which actual achievement can be compared, including a goal expressed as a quantitative standard, value, or
rate. (OMB).
Performance indicator: A particular value or characteristic used to measure output or outcome.
Performance metric: see Metrics.
Plan: A prescribed, written sequence of actions to achieve a goal, usually ordered in phases or steps with a
schedule and measureable targets; defines who is responsible for achievement, who will do the work, and
links to other related plans and goals. By law agencies must have strategic plans, business plans, and
performance plans. They may also have implementation plans, program plans, project plans, management
plans, office plans, personnel plans, operational plans, etc.
Profit: Financial gain, or revenues minus expenses. Profit is the overarching mission of private-sector
companies. Nonprofit or governmental organizations either operate at a loss or attempt to achieve a zero
profit; for them the overarching mission is a charter for a service, or a goal to be achieved. Therefore, there
is a basic distinction in measures of strategic success between profit and nonprofit or governmental
organizations.
Project management: A set of well-defined methods and techniques for managing a team of people to
accomplish a series of work tasks within a well-defined schedule and budget. The techniques may include
work breakdown structure, workflow, earned value management (EVM), total quality management (TQM),
statistical process control (SPC), quality function deployment (QFD), design of experiments, concurrent
engineering, Six Sigma etc. Tools include flowcharts, PERT charts, GANTT charts (e.g. Microsoft Project),
control charts, cause-and-effect (tree or wishbone) diagrams, Pareto diagrams, etc. (Note that the balanced
scorecard is a strategic management, not a project management technique).
Return on Investment (ROI): Money saved or gained after an improvement minus the cost of the
improvement. An important metric in private-sector companies; it may also be applied in the public sector by
using cost reduction or cost avoidance instead of money gained.
Six Sigma: Literally, refers to the reduction of errors to six standard deviations from the mean value of a
process output or task opportunities, i.e. about 1 error in 300,000 opportunities. In modern practice, this
terminology has been applied to a quality improvement methodology for industry.
Statistical Process Control (SPC): A mathematical procedure for measuring and tracking the variability in
a manufacturing process; developed by Shewhart in the 1930's and applied by Deming in TQM.
Strategic goal or general goal: An elaboration of the mission statement, developing with greater specificity
how an agency will carry out its mission. The goal may be of a programmatic, policy, or management nature,
and is expressed in a manner which allows a future assessment to be made of whether the goal was or is
being achieved. (OMB). The quantifiable aims of strategic activities, including outcome goals and output
goals.
Strategic objective or general objective: Often synonymous with a general goal. In a strategic plan, an
objective may complement a general goal whose achievement cannot be directly measured. The
assessment is made on the objective rather than the general goal. Objectives may also be characterized as
being particularly focused on the conduct of basic agency functions and operations that support the conduct
of programs and activities. (OMB)
Strategic activities: activities or initiatives that a company or agency does for itself, to achieve its overall
strategic goals.
Strategic imperatives: Company values.
Strategic initiatives: Specific activities or actions undertaken to achieve a strategic goal, including the
plans and milestones.
Strategic measures or metrics: Quantifiable indicators of status of a strategic activity.
Strategic targets: Numbers to achieve on each strategic metric by a specified time.
Strategic themes: The general strategy broken down into categories that focus on different perspectives of
the company that can lead to overall success, such as customer satisfaction, reduced cost, employee
growth, etc. Usually general and not quantified.
Strategy: (1) Hypotheses that propose the direction a company or agency should go to fulfil its vision and
maximize the possibility of its future success. (2) Unique and sustainable ways by which organizations
create value. (from Kaplan & Norton). Answers the question, "Are we doing the right things?"
Strategy Map: A 2-dimensional visual tool for designing strategies and identifying strategic goals. It usually
shows the four perspectives of the balanced scorecard in four layers, with learning & growth at the bottom,
followed by business processes, customer satisfaction, and financial results (or mission value in the case of
nonprofits). Activities to achieve strategic goals are mapped as 'bubbles' linked by cause-effect arrows that
are assumed to occur. Sometimes called "strategic map".
Support activities: Internal business activities that enable achievement of mission activities and strategic
activities, but that are permanent and not directly linked to specific goals.
Tactical goal: see Output goal.
Target: A quantitative measurement of a performance metric that is to be achieved by a given time. Both the
metric and the schedule need to be specified for targets. A stretch target is the same thing, but its
quantitative value is much higher, demanding breakthrough performance to achieve.
Total Quality Management (TQM): A methodology for continuous monitoring and incremental improvement
of a supply-line process by identifying causes of variation and reducing them. Originated by Deming in the
1950's, and widely applied in the Federal government, where it was sometimes called Total Quality
Leadership (TQL).
Unit: (1) A functional or business component of an agency, generally with a specified mission or support
activity. (2) A standard basis for quantitative measurements.
Unit cost: A financial metric in which cost is based on the unit of delivery or consumption of a product or
service, such as number of requests processed per day.
Value: Benefit per unit cost.
Values: General guiding principles that are to govern all activities.
Vision: Long-term goal of strategy. Answers the question, 'How would the country be different if your
mission were fully successful?'

The Balanced Scorecard -- Not Just Another Project

Managers in many government agencies have been reared on project management. It is the way they think
about achieving their mission. In the Defense Department, project or program management has been the
framework for development of every system costing from ten thousand dollars to ten billion dollars. There is
a long-established tradition of on-the-job training and experience for young people to learn and be mentored
by experienced project managers. Many guidebooks, manuals, software programs, and other means have
been devised to aid the project manager.
Project management has been in the management culture for decades, and the federal government has
thousands of project managers who are routinely capable of amazingly complex achievements. In fact,
many project managers may have never seen or considered any other way to get things done.
Although it is not necessary here to describe project management in detail, a simple diagram will help to
show its general features.

The figure represents a time line or GANTT chart. All projects (or programs) have a definite start time
(green) and a definite stop time (red) when the final deliverables (products, services, documents, decisions,
etc.) are delivered to the customer. The goal is to meet customer requirements. The initial stage requires
establishment of a precise budget and a plan of action and milestones (POA&M). The work is focused on
the actual mission of production undertaken for the customer. It may be broken down into a hierarchy of
subtasks, called an Engineering Schedule Work Breakdown Structure (ESWBS). Status and review
meetings are scheduled at regular intervals throughout the project. Usually some kind of final report is
written as one of the deliverables. The goal is to reach the end point on time and within budget, since there
are usually other projects that are depending on input from the deliverables of this project. So project
management is the effort to manage work within a finite, clearly scoped, hierarchically-structured, linear
development process with a definite beginning and end.
The balanced scorecard management system is not just another project. It is fundamentally different
from project management in several respects. To illustrate the radical nature of this difference, a diagram is
shown of the BSC performance measurement process, as it would run when installed in an organization.

The first thing to notice is the topology: the balanced scorecard management process, derived from
Deming's Total Quality Management, is a continuous cyclical process. It has neither beginning nor end.
Its task is not directly concerned about the mission of the organization, but rather with internal processes
(diagnostic measures) and external outcomes (strategic measures). The system's control is based on
performance metrics or "metadata" that are tracked continously over time to look for trends, best and worst
practices, and areas for improvement. It delivers information to managers for guiding their decisions, but
these are self-assessments, not customer requirements or compliance data.
People trained only in project management may have difficulty in figuring out how to accomplish the BSC,
simply because it is such a different kind of management paradigm. One of the key practical difficulties is to
figure out how to get the process started in the first place. If this is not a project, where does one begin?
What kind of plan is appropriate for deployment of the balanced scorecard system?
If we want to ride a rotating merry-go-round, we had better not attempt to just hop on. We will probably get
hurt -- and won't get on. The situation is similar with the balanced scorecard. To get on the merry-go-round,
we have to accelerate in the same direction for awhile, then hop on when our speed equals that of the
circular floor. In other words, there needs to be a ramp-up phase, where everyone "comes up to speed."
This includes training or retraining of project managers, and probably focused deployment of pilot efforts
before attempting to cover an entire large agency. Sustained, patient leadership will be needed before the
payoff is attained.

Management Approaches

© Paul Arveson 1998

Government agencies cannot live by project management alone. Congress, in the GPRA, the Executive
Branch in the Reinventing Government initiative, and DoD Secretary Cohen in the Defense Reform Initiative,
are asking us to find ways to increase productivity and efficiency, while maintaining mission effectiveness.
That is where the new management approaches come in -- they are more applicable than project
management to the kinds of internal improvements that are needed.
The table below summarizes comparisons of three different management approaches or methodologies.
The comparisons are shown for several different features. It is evident from this comparison that BPI and the
Balanced Scorecard are quite different in most respects from project management. They have different
purposes and meet different needs.
Business Process
Project Management Balanced Scorecard
Improvement
Age of
Decades Began in DoD 1992 Began in 1990
Approach
Prime Customer External Sponsor Internal Director External IG, Internal Director
Project Requirements,
Goal Definition Cost, cycle time reductions Strategic management system
Mission Needs Statement
Focus Technical Mission Business Processes Multiple perspectives
Scope Specialized unit unit to enterprise dept. to enterprise
Plans Plan of Action & MilestonesProcess Improvement Plan Strategic Plan, Performance Plan
Schedule & Work Breakdown Cross-functional teams, 1-2 yr.
Team directed, focus groups
teaming Schedule, Action Items implementation
Baseline process analysis, to-
Management Team building, Budgeting, Define metrics, collect data,
be process design,
Activities Task Tracking, Reviews analyze data, decide on changes
automation
Microsoft Project, Data collection system,
Tools (see links) TurboBPR, IDEF0
Primavera scorecards
Learning what strategies work;
Measures of Deliverables on time, on Cost reductions minus cost of
improved results on many
success budget BPI effort
metrics
In attempting to implement the newer management methodologies in a traditional project management
organization, there are two possible options:

1. train the managers in the new approaches and techniques;

2. translate the new approaches into familiar project form, and treat them as
conventional projects.

Option 1 is always recommended. The problem with that is that we do not have the time or money to spend
on a lot of training in new techniques.
Option 2 is something that hasn't been suggested before, to my knowledge. I don't know if it is feasible, or
even if it makes sense. But if it could be done, it would save a lot of time in deploying the new initiatives.
Option 2 was actually suggested by the DoD's 1998 Performance Plan, in which one of the top level mission
goals was 'Cost Reduction'. In other words, the DoD management recognizes that this is in itself worthy of
being a strategic goal on the level of its other missions, not just an internal efficiency need.

Selecting a Management Approach

One of the reasons why managers are having such difficulty in applying management methods to
government problems is this: there are many different schools of thought on management approaches, and
each of these schools has its own proponents. Generally, an original proponent makes his or her name in
that particular concept, and becomes an 'expert' and a 'guru' of it. There is little incentive to integrate this
one approach with others.
That job is left to the poor managers who have to figure out how to apply what theory to their business
problems. They have heard something about MBO, TQM, BPR, ISO-9000, CMM, ABC, BSC, and all the
other buzz words and acronyms of management -- but they have received precious little guidance as to what
to select that best fits their business needs, and the top-level requirements such as the GPRA. Usually,
however, managers will tend to use the approach with which they are most familiar, which is probably
project management or program management.
At any point in time, management culture tends to be dominated by one school of thought. Currently an
emerging idea is the 'balanced scorecard'. The book on this theory by Kaplan and Norton is currently one of
the top 10 best sellers in the field. Management consultants and writers tend to adopt the theory that is
currently in vogue, and its popularity thus tends to grow rapidly to a peak, until it is superseded by the next
new idea. The schools come and go approximately every 10 years. A similar phenomenon seems to take
place in other social sciences, such as psychology, sociology, and education.
Thomas Kuhn's book The Structure of Scientific Revolutions analyzed this phenomenon. Although its
conclusions may be taken too far, the general description of the process seems true enough:

1. A revolutionary new idea comes out of the blue, and champions and followers arise to
promote it.
2. A school of thought and literature arises around the subject.
3. The idea becomes so popular that it becomes part of the 'establishment'. Its view is
unquestioned and it dominates the scene for awhile.
4. Anomalies, counterexamples and new ideas emerge that cause the original idea to be
deeply questioned.
5. A period of conflict between proponents and opponents prevails.
6. One of the new ideas takes over the field, except for a few die-hards who have little
but historical influence.
7. The old idea may not be forgotten, but is absorbed into the new idea as a 'special
case' or a 'useful fiction' that may be helpful in certain situations. (This appears to be
the current status of Freudian theory within psychotherapy, for example).

Management Flexibility
A manager who only has experience in one approach, such as project management, may have difficulty in
adapting to changing demands. A manager can be much more effective if he or she is able to select a
management approach that is most appropriate to the desired need or goal. This adaptability or 'eclectic'
flexibility may prove very useful in the changing government management environment.
There is no good reason why managers must follow the latest school of management thought. On the other
hand, just because an idea is new does not mean that it should be dismissed. There are reasons why one
particular approach is better than another depending on the strategic goal or need. The balanced scorecard,
for instance, appears to be a very appropriate technique for meeting the urgent management needs of many
Government agencies, such as their need to comply with the requirements of the GPRA. However, this need
should not blind managers to other, perhaps even more pressing goals of their organization that may require
a different approach.
The following table was developed to aid in selection of a management approach, depending on the
conditions and need of the organization (strategic goal). The conditions will partly determine the best option.
(The terms are defined here.)
Time Horizon Change Technical Risk Recommended
Strategic Goal
(years) Readiness Level Tolerance Option
2-3 GPRA Compliance Moderate High Moderate Balanced Scorecard
>30% cost reductions,
3-6 High High High BPR
survival
1-3 20% Cost reductions Moderate Moderate Moderate BPI
Continuous
Long term Moderate Moderate Low TQM
improvement
Baldrige score Balanced Scorecard +
2-3 Moderate High Low
elevation ABC
2-5 Strategic alignment Low Moderate Moderate Balanced Scorecard
2-5 Marketing credibility Low Low Moderate ISO-9000, incremental
2-5 Increased capabilities Moderate High Low CMM
Note that not all possible combinations of conditions are included in the table. If your conditions are beyond
the levels indicated here (e.g. low risk tolerance when 30% cost reductions are needed), then it is likely that
a 'best option' does not exist for your situation. You may need to gain additional senior management support
and tolerance for risk before conducting strategic activities.

Measurement-Based Management -- And Its Excesses

© Paul Arveson 1998

Henry Mintzberg is a widely-respected professor of management at McGill University in Montreal. He wrote
an article called "Managing Government, Governing Management" for Harvard Business Review in May-
June, 1996. In it, he said:

"Next, consider the myth of measurement, an ideology embraced with almost religious
fervor by the Management movement. What is its effect in government? Things have to be
measured, to be sure, especially costs. But how many of the real benefits of government
activities lends themselves to such measurement? Some rather simple and directly
delivered ones do -- especially at the municipal level -- such as garbage collection. But
what about the rest? Robert McNamara's famous planning, programming, and budgeting
systems in the U.S. federal government failed for this reason: Measurement often missed
the point, sometimes causing awful distortions. (Remember the body counts of Vietnam?)
How many times do we have to come back to this one until we finally give up? Many
activities are in the public sector precisely because of measurement problems: if
everything was so crystal clear and every benefit so easily attributable, those activities
would have been in the private sector long ago."

As we begin to embark on a comprehensive measurement-based management program, what are we to

make of this critique? Certainly the excesses of the "Whiz Kids" of the 1960's present a notorious example of
the failings and unintended consequences of previous measurement systems. This critique has to be
confronted directly lest we be doomed to repeat history.
In the context above, it is clear that Mintzberg is talking about outcome as opposed to output measurements.
This is an important distinction. Briefly, outputs are productivity or efficiency metrics such as the number of
reports written per month, the number of widgets manufactured per day, etc. They also might include service
metrics such as the number of customers visited per month, the number of help desk calls resolved, etc.
Outcomes, on the other hand, deal with long-term effectiveness or results of a mission or function. One
generic example of an outcome metric is "customer satisfaction". In private companies, this is a leading
indicator of future profitability, growth and increased market share: all outcomes indicating success.
However, in the case of government, it is difficult to define outcomes adequately. Since government is a not-
for-profit organization, financial results are not relevant as outcome metrics. Growth and market share are
also not applicable. "Customer satisfaction" is somewhat relevant, but who is the customer? The
government user of a process? The civilian user? The taxpayer? The sponsor or administrator? Congress?
The OMB? It could be all the above.
Probably the only generally applicable outcome metric for government is "mission effectiveness". The
missions of government are undertaken for the public good, not for gain. But that 'good' is defined differently
depending on the agency's mission. Sometimes it is feasible to measure. For example, a police
department's outcome would be the overall crime rate in its district. But how would you define the outcome
for a military base? Number of wars won? What about a basic research lab, whose inventions might
revolutionize technology 20 years from now? It becomes infeasible to measure outcomes in many such
cases, and attempts to do so may turn missions astray, as Mintzberg says they did in Vietnam.
So I will grant that in the context in which he writes, Mintzberg is correct. We should be very careful about
establishing metrics for government mission outcomes, and in some cases not even try.
But for output measurements, it seems that the situation is quite the opposite. Government offices,
warehouses, bases and facilities have much the same support services and user needs as any private
company's. So we should expect to find degrees of efficiency of operating and support processes that can
be measured, benchmarked and improved. This is the appropriate function of a measurement program, and
its goal is simply to improve productivity and efficiency, i.e. reduce the cost and cycle time of internal
processes. In all conceivable cases, such reductions will please customers, whoever they are, and probably
result in improved outcomes.
Therefore, I believe there is an appropriate place for a measurement system in government agencies,
although its emphasis should be on measuring outputs (such as process cycle times) and only the outcomes
that are short-term and relatively easy to measure, such as self-reported customer satisfaction from several
classes of customers. Such a system will, I believe, meet the letter and the spirit of the Government
Performance and Results Act while avoiding excessive agonizing over metrics definitions.

Objections to a Performance Management System, and Responses

© Paul Arveson 1998

1. The costs outweigh the benefits. What will we find that we didn't already know?
What is the cost of not proving your value? Our competitors will prove theirs.
Today, our customers expect us to show evidence of progress. They have been through the performance
management training too -- and the law (GPRA) requires it.
Web sites can enable and automate much of the work. This is a new method that is easy and inexpensive to
implement, relative to the tools we had a few years ago.
Performance measurement has been demonstrated to be a 'best business practice' in terms of improving
the bottom line in all kinds of companies (e.g. Motorola, Mobil, Cigna, the Coast Guard, Minn. Dept. of
Revenue, the City of Charlotte (NC), Veterans Admin., Rockwater Energy, FMC, a bank, and an insurance
company.)
2. But some tasks will be labor intensive: metrics definition, software development, data collection.
It's true that defining metrics is time consuming and has to be done by managers in their respective mission
units. But once they are defined, they won't change very often. And some of the metrics are generic across
all units, such as cycle time, customer satisfaction, employee attitudes, etc. Also, software tools are
available to assist in this task.
Software development efforts should be kept to a minimum by using COTS products to the maximum. There
are now companies that specialize in this kind of product, but most agencies can probably just leverage the
existing financial data warehouse to support this system.
Data collection will be supported in many cases by using web-based forms. Manual work such as collecting
customer data, telephone interviews, etc. can be supported by broadening the work of the existing 'financial
assistants' to non-financial metrics.
3. We have only limited control over results. Why should we be held accountable for things we can't
control?
With our strategic initiative of customer service, we must take responsibility for our mission effectiveness; we
have to improve customer relationships; there is no alternative. Our customers will understand our
limitations if they are in a close partnership with us.
4. The results will be used against us.
The results can also be used for us. What has been hurting us more is not having any results to show.
What better way to gain resources from the sponsor than to clearly show them the consequences of the
present situation.
We can't see our own blind spots. We need someone else to point them out to us. The measurements add
visibility, even if it is painful.
If we excel, it is NOT generally true that successful organizations lose budget.
5. Management will misuse or misinterpret the results. The process will be gamed.
That's why we need a balanced mix of several measures. Inspections such as Baldrige assessments are
done by a variety of dedicated people across the organization. They want to do a good, honest job.
The measurements will be validated by an independent IG team or third party.
It should be emphasized to everyone that the main purpose of the balanced scorecard is not individual
performance, but collective organizational performance. (Another separate system should be used for
individual performance evaluations.) Therefore, results at the lower levels can be aggregated in such a way
that individual employee performance is not reported out. This will eliminate a source of fear that will lead to
gaming or failure to produce the data.
6. They will score us by inappropriate or unfair standards.
We get to define our own metrics, at least the ones that are pertinent to each mission. That's the only way to
define OUR mission effectiveness. And the other metrics, like cycle time and customer satisfaction, are
generic across all organizations.
7. Too much complexity: There are numerous systems and assessment criteria; how will we
combine them all? (ISO 9001, ISO 14000, Baldrige, ABC, EVA, CMM, Balanced Scorecard, strategic
initiatives).
I don't think it is necessary to make such a complex system. What is needed is a minimum basic set of
measurements across various business perspectives and aligned to our strategic plan, as the balanced
scorecard prescribes. We do need to develop ISO certifications when appropriate, but the metrics for them
could be simple, like 'percentage coverage' and 'cycle time'.
After all, the purpose of the system is to clarify our situation for senior managers, not to make it more
complex.
8. It's too big and ambitious and expensive to deploy a performance measurement system in this
entire organization. We can't afford such large-scale efforts.
Agreed. It should not be deployed across the organization all at once. Rather, it should start small, in a
business unit, and be allowed to develop incrementally. Experience will be gained before company-wide
deployment is considered. This reduces cost, risk, and disruption

Business Process Management

UNIWORLD CONSULTING, Inc. has been helping customers elevate their Six Sigma success to breakthrough levels.
Through the launch of Business Process Management (BPMS) initiatives from UNIWORLD, we have provided
customers with a roadmap for achieving quality excellence and market leadership through reengineering of their
business processes in conjunction with Six Sigma project management.

Companies have experienced difficulty in applying Six Sigma to their business processes. Although they have
achieved some success within business functions such as finance, sales and human resources; they have had limited
cross-functional breakthroughs. This is largely because business processes have not been designed around key
customer service issues, which causes important customers to see different and conflicting company faces when they
should see a single face focused on customer success.

Companies such as GE and Bombardier have already accelerated their Six Sigma programs within their business
processes through a BPMS approach, and UNIWORLD is proud to be helping several of our customers integrate
BPMS with their Six Sigma programs today. Our COPISTM roadmap for BPMS provides a practical, fast track
approach, focusing on

1. CUSTOMERS:

a. Determine key customer metrics for the company, division, function or department.

2. OUTPUT:

a. Learn to capture process metrics as the customer sees them, by using the “At the Customer For
the Customer” (ACFC) concept developed at GE.
b. Transfer the key customer measurements into internal metrics with operational definitions.

3. PROCESS:

a. From the key output(s) develop cross-functional maps of business processes that deliver the outputs
needed by the customer.
b. Establish key metrics (time, costs, communication, etc.) across the business processes.

4. INPUTS:

a. Measure performance gaps in the process against customer and company expectations.
b. Prioritize and manage Six Sigma projects that address both effectiveness and efficiency of business
processes.

5. SCORECARD:

a. Establish supplier metrics (internal and external) that correlate to customer-focused performance
improvement.

A vital step in BPMS is the designation of Process Owners. They will have a similar role to Champions, except that
their responsibility is to oversee and manage projects that improve the performance of the key customer requirements.
Through the business process focus, employees cooperate pro-actively across the functional boundaries and are able to
create interdepartmental efficiency and effectiveness breakthroughs.