Key Performance Indicators for BPM
Blog: BPM Leader
Let’s recap BPM’s main steps that we introduced in a previous blogpost:
- Process modelling
- Process automation
- Process analysis using key performance indicators (KPIs)
- Process optimization
This post is entirely dedicated to the third step: key performance indicators (or KPIs) for BPM.
Analyzing process performance consists of:
- Establishing key performance indicators that determine if a process is running as desired or that there are deviations to attend.
- Defining indicators for different time periods. This divides the KPIs into two main groups: long-term indicators (one year back, six months back, etc.) or real time indicators (e.g. last hour, last day).
- Setting predefined values and acceptable ranges for each indicator. If the results fall out of that range, something must be done.
The analysis of processes is a major (but often forgotten) step in business process management, since it provides objective information (instead of personal perceptions) that helps identifying improvement opportunities within the organization.
This kind of indicator uses a larger time frame (typically one year or six months back). Long-term KPIs are usually based on Business Intelligence (BI) Technology, which provides several advantages. For example, the user can generate his/her own reports, browse through the information, slice and dice the data, export it and ultimately analyze it as needed.
Typical examples of long-term KPIs for BPM are:
- Number of instances of each process or document. It might be useful to analyze this information according to the month of the process or document, the user who created it, etc. This KPI enables a “seasonality” analysis (when are more processes or documents created) or identifying the amount of documents processed in each step. In our previous sales process example, this kind of indicator would show fundamental information: amount of commercial opportunities per vendor per month.
- Average time required to complete a process instance. We might want to filter the information according to the process type, month in which it was created or other relevant variables. This indicator is useful to meet service level agreements (SLAs), and see if we have exceeded the deadlines.
- Average time that each process step requires. Very useful to identify bottlenecks and analyze the possible causes. This kind of information would complement the previous examples, allowing us to study each step in more depth to see where the major delays are.
These indicators provide a short-term analysis (typically go as far as one minute, hour or day back). That’s why they are also called “real time indicators”.
The information provided by these indicators tends to be based on Business Activity Monitoring (BAM) Technology and displayed in a Balanced Scorecard BSC. In addition, these tools let us set alerts so that when an indicator exceeds the predefined deadlines, the user knows it’s time to take some action.
Typical examples of short-term KPIs for BPM are:
- Number of process instances created in the last hour. This information lets us predict whether there will be a system overflow.
- Time required for a particular step.
Combining key performance indicators
Usually a single indicator doesn’t provide enough information for decision-making, and it’s necessary to compare it to others. This further analysis can prove or disprove the hypothesis derived from the first indicator.
Example: if an indicator shows that the total time required to complete a process is longer than the one established, we might think 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 number of instances created. If we discover that there are too many instances, the real cause of the delay is clearly not the level of productivity.
In general, the indicators always provide partial information, which reflects situations that may be relevant and important to detect early. But before drawing any conclusions we should complement the results with other KPIs.
You can’t optimize what you can’t measure
Key performance indicators (KPIs) are essential to measure and subsequently improve business processes in an organization. It is crucial for a BPM suite (BPMS) to provide tools that automatically measure these indicators. Plus, the information must be displayed in an intuitive and simple way. Before jumping to conclusions don’t forget to compare results with other indicators to prove (or disprove) the initial hypotheses.