BPM3MeasureandControl

Topic3.Businessprocesscontrolling1.BalancedScorecardandKeyPerformanceIndicators2.Criticalsuccessfactorsandbusinessprocessprioritization3.Businessprocesscontrol4.ActivitybasedcostingBalancedScorecardandKeyPerformanceIndicatorsBusinessperformanceassessmentisimportantbecause:•Ifyouaretryingtocontrolsomething,youshouldbeabletomeasureit.Aslongassomethingisnotmeasured,nobodypaysattentiontoit•Employees’behaviorisorientedonassessmentBalancedScorecardandKeyPerformanceIndicators•Grosssales•EBIDTA•Netprofit•ROIC•ROA•ROEFinancialapproachSetofindicatorsIntegralindicatorBalancedScorecardandKeyPerformanceIndicatorsEconomicValueAdded:EVA=NOPAT–WACCxCENOPAT–NetOperatingProfitAfterTaxWACC–WeightedaveragecostofcapitalCE–CapitalEmployedCapitalEmployed=TotalAssets−CurrentLiabilitiesBalancedScorecardandKeyPerformanceIndicatorsTraditional(financial)managementcontrolsystemhasthefollowingdisadvantages:-Lackofrelevanceofinformationfordecisionmaking;-Thetaskoffinancialcontroliscontrarytothetaskofstrategicplanning;-Emphasisoninformationreceivedintheaccountingsystemthatcorrespondswithlegallyestablishedrequirements;-Anincorrectinformationaboutcostdistributingandcontrolofinvestments.Traditionalcostcontroldoesnotanalyzethecausesforcostsoccurrence;-Providingincompleteinformationtoemployees.Mostemployeesdonotseethecloselinkbetweencompanyfinancialperformanceandresultsoftheirwork;-Insufficientattentiontotheenvironmentoftheenterprise;-Focusoncurrentperformance-Value-producingactivitieshindering.BalancedScorecardandKeyPerformanceIndicatorsBalancedScorecardandKeyPerformanceIndicatorsBalancedScorecardCollaborativeprovidesthefollowingdata:•Only5%oftheworkforceunderstandsthestrategyofthecompany.•Only25%managersreceivecompensationdirectlyrelatedtothestrategy.•60%oforganizationsdonotlinkbudgetstostrategy.•86%ofleadershipteamsspendlessthananhouramonthtodiscussstrategyBalancedScorecardandKeyPerformanceIndicatorsStrategy-executionPyramidEXECUTIONStrategy-executiongapBalancedScorecardandKeyPerformanceIndicatorsThebalancedscorecard(BSC)isasystemofbusinessperformancemanagementandmeasurementinareasthatarecrucialtoitssuccessBalancedScorecardandKeyPerformanceIndicatorsBSCFrameworkBalancedScorecardandKeyPerformanceIndicatorsPerspectiveBSCtaskLearninganddevelopmentCompetenciesandskillsthatweshouldobtain,developandmaintain,which...willenableustodevelopamodeloforganizationalculturethatwillmotivateusto...Internalprocessesperformourprocessesforcreatingandprovidingproductsandserviceswhich...Customerswillsatisfyourcustomersfor...Financerevenueandprofitgrowingtomeetourshareholders’interestBSCperspectivesconnectionBalancedScorecardandKeyPerformanceIndicatorsBalancedScorecarddesign:BalancedScorecardandKeyPerformanceIndicatorsBalancedScorecarddesign(continuation):BalancedScorecardandKeyPerformanceIndicatorsBSCCause-and-EffectDiagramwithARISBalancedScorecardandKeyPerformanceIndicatorsTheBalancedScorecardexampleBalancedScorecardandKeyPerformanceIndicatorsFinancialobjectivescandifferconsiderablyateachstageofabusinesslifecycIe:•Growth•Sustain•HarvestBalancedScorecardandKeyPerformanceIndicatorsGrowthbusinessesareattheearlystagesoftheirlifecycle.Theyhaveproductsorserviceswithsignificantgrowthpotential.Tocapitalizeonthispotential,theymayhavetocommitconsiderableresourcestodevelopandenhancenewproductsandservices;constructandexpandproductionfacilities;buildoperatingcapabilities;investinsystems,infrastructure,anddistributionnetworksthatwillsupportglobalrelationships;developcustomerrelationshipBalancedScorecardandKeyPerformanceIndicatorsProbablythemajorityofbusinessunitsinacompanywillbeinthesustainstage,wheretheystillattractinvestmentandreinvestment,butarerequiredtoearnexcellentreturnsoninvestedcapital.Thesebusinessesareexpectedtomaintaintheirexistingmarketshareandperhapsgrowitsomewhatfromyeartoyear.BalancedScorecardandKeyPerformanceIndicatorsSomebusinessunitswillhavereachedamaturephaseoftheirlifecycle,wherethecompanywantstoharvesttheinvestmentsmadeinthetwoearlierstages.Thesebusinessesnolongerwarrantsignificantinvestment–onlyenoughtomaintainequipmentandcapabilities,nottoexpandorbuildnewcapabilities.BalancedScorecardandKeyPerformanceIndicatorsForeachofthethreestrategiesofgrowth,sustain,andharvest,therearethreefinancialthemesthatdrivethebusinessstrategy:•Revenuegrowthandmix•Costreduction/productivityimprovement•Assetutilization/investmentstrategyBalancedScorecardandKeyPerformanceIndicatorsRevenuegrowthandmixrefertoexpandingproductandserviceofferings,reachingnewcustomersandmarkets,changingtheproductandservicemixtowardhigher-value-addedofferings,andrepricingproductsandservices.Thecostreductionandproductivityobjectivereferstoeffortstolowerthedirectcostsofproductsandservices,reduceindirectcosts,andsharecommonresourceswithotherbusinessunits.Fortheassetutilizationtheme,managersattempttoreducetheworkingcapitallevelsrequiredtosupportagivenvolumeandmixofbusiness.Theyalsostrivetoobtaingreaterutilizationoftheirfixedassetbase,bydirectingnewbusinesstoresourcescurrentlynotusedtocapacity,usingscarce