Some organisations, after straggling to implement Balanced Scorecard Systems (BSC), come to the conclusion that they need to at least map their processes. But then the challenge they face is how to link strategic with process KPIs. Others are practising some sort of BPM but have difficulties demonstrating its contribution to the bottom line. As Anatoly Belychook recently wrote:
business consultants know what should be done eventually but have vague understanding of how strategic goals can be achieved with the help of BPM
There are many ways to do that. One of them, usable in the ‘ordered’ domains, is to include process KPIs in the formula of certain KPI (or ‘KGI’, to conform CobiT’s terminology) of a strategic goal. It’s simple but not so straightforward so let’s first have the bigger picture.
There are basically three types of things in the motivational domain: goals, means and influencers. (If you need to dig deeper, Nick Malik’s EBMM is a good place for that. Interestingly, one of the things that had driven that extension to the BMM was the work of Alexander Osterwalder, one of the authors of the now popular Business Model Generation book) The means to achieve most ends, especially of those belonging to the classic ‘process’ perspective of the BSC, either require certain change to be managed or some parameter(s) to be kept within desirable range or both. Let’s illustrate this by combining it in a single case where a strategic goal is supported by certain process which is no yet implemented. Thus there will be another ‘means’ representing the project to implement that process.
KPIs are either primary or derived. In the example, the strategic goal is measured by a KPI 1 (derived) which is calculated by the value of KPI 1.1 (primary), KPI 1.2 (derived) and some specific attribute of their relations like weighting for example. KPI 1.2 is calculated from the values of the project KPI 1.2.1 and the process KPI 1.2.2. They are in reality more than one for both project and process management. If the project duration is shorter than the control frequency of the strategic goal, then for ‘period 1’ KPI 1.2 will take KPI 1.2.1 and KPI 1.2.2 value times their respective weighting. For ‘period 2’ KPI 1.2.1 will be equal to the value of KPI 1.2.2.
Such an approach needs the support of a repository based tool for modelling and analysis. No matter if its primary focus is EA or BPM, it should support enterprise motivational domain and ideally project and program management.
I like the breakdown of the KPIs and agree to this approach. However, there is a difference in the kind of KPI you are measuring. In a very loose interpretation you might not only have “business KPIs” (e.g. inventory cicle time), but also project KPIs (“success factors”), system KPIs or GRC KPIs – some of them might be conflicting.
The problem now is that a 1:1 transformation of a project KPI is not necessarily possible. What you need is a mixed view of stable business KPIs and “solution” KPIs (similar to the type and the instantiation you see for example in systems or processes). The interesting question now is, how do you visualize these, since at a certain time an enterprise’s performance are measured by a mix of the stable and solution KPIs – e.g. you miss your business KPI because you have to put more effort in a project (or comply with a new regulation) than you planned.
I am looking forward to seeing your suggestion to show this in a repository based tool :-)
Roland,
There is no danger of mixing KPIs because you just combine relative achievements here. Your goal is supported by a bunch of means. Some of them bring some change, others show certain aspect of operations. If you have a target inventory cycle time of 10days but the actual is 12 and the maximum is 20, then KPI achievement is 80% (as evaluation of this KPI is inversely proportional). Then if the project KPI achievement is 60% and both have a weighting of 50%, the achievement of KPI 1.2 will be 70%. This is applicable for a period when both the project and process are functional or, as shown in the diagram, when the strategic goal has to take into account the achievement of the project for ‘period 1’ probably because its effect on the process will be expected in full in ‘period 2’ where only the process KPI will matter.
I’m not sure I got your second point. Both “business” and “solution” KPIs are instances.
You are right with the “technical” part – yes, they are instances but some of them have a longer life than others. I am pretty sure that some KPIs will simply disappear once a project is rolled-out. The question from a modeling approach now is how to show the KPI landscape (and the relative accomplishments) at a certain point in time.
What I would love to see is a similar time based reporting approach that we take for IT lifecycle management – there a report shows the landscape at the time you set as a baseline in the report.