Business Process Management San Francisco Public Utilities Commission

Agenda Process 101: What is BPM? BPM Drivers: What can BPM do for my organization? Interfacing Professional Services EPC 5: Product Demonstration

Process 101: What is a Process? Simplest Process Definition: Organized group of related activities that together create a result of value to the customer Finance: Credit Authorization Budgeting Auditing Legal: Contracts Human Resources: Hiring HR Development Performance Evaluation Operations/Logistics: Purchasing Invoicing Shipping Banking: Straight Through Processing Account Provisioning Loan/Credit Processing Energy: Short Term Trading Long Term Trading Strategic Planning Manufacturing: Product R&D Product Engineering Quality Assurance Production

Simplified Processes Input Output Preparing the breakfast Process flow Input Output Bacon Eggs Breakfast Preparing the breakfast Expense Report Expense Slips Producing an expense report Position Requisition New Employee Hiring an employee

Process 101: The Construct Inputs /Outputs Resources Organization Suppliers Knowledge Applications Metrics Results Boundaries Client Owner Instances Components of a process

What is BPM? Business Process Management Business Process Modeling Business Process Monitoring Business Performance Management Business Performance Monitoring So many acronyms around us

BPM = Transformation BPM Provides Organizations with: Transparency Agility Compliance Performance Management Collaboration Alignment Knowledge Management Communication Fluidity Process visibility – end-to-end across functions and hierarchies all the way to the client

The Process Maturity Model BPM can help your organization achieve process maturity. Process Maturity Model Level 1 Initial Processes are Ad-hoc and chaotic Level 2 Repeatable Small Scale processes Understood & repeatable Level 3 Defined Level 4 Managed Level 5 Optimized Processes Documented & Standardized Across Org are measured & controlled Continuous Improvement via Feedback & Collaboration What is process maturity? Operational Consistency Culture of Collaboration & Knowledge Sharing Clarity/Transparency Distribution of Policies & Standard Procedures Cost Avoidance Maximize Value to Customers Internal & External (Customer) Confidence Accountability & Efficiency Across All Ranks

Analyst Predictions Gartner -  “BPMS will grow from $1B this year to $2.6B in 2011.” (2007)   Forrester - “…grow from approximately $1.6 billion in 2006 to $6.3 billion by 2011.” (2007)   IDC - “…to reach $5.5 billion in 2011, a 44% five-year compound annual growth rate (CAGR).” (2007)   WinterGreen Research  -  “…markets at $1.3 billion in 2007 are expected to reach $4.6 billion by 2014.”    Purpose of slide: To illustrate that BPM technology is seeing rapid growth as corporations in virtually every industry adopt it Source: http://bpmfundamentals.wordpress.com/2008/11/21/bpm-adoption-and-delivered-value-market-research-and-analysis/  

Roadblocks to Successful BPM Implementation Company culture Silo effect Improperly maintained processes Unclear process ownership Lack of process knowledge sharing One-time product syndrome Lack of awareness of potential gains Roadblocks One time product syndrome = idea that BPM is just a one time product, when in actuality it is a lifelong program for a company With the help of the Enterprise Process Center (EPC), organizations easily overcome these obstacles.

Business Process Improvement = ROI Expectations: 30 – 45% Greater BPM Drivers Why does my organization need BPM? Compliance / Standards / Regulations ISO Improve Organizational Management Best Practice Initiatives: Quality / Performance / Productivity ITIL APQC’s Process Classification Framework Business Process Improvement = ROI Expectations: 30 – 45% Greater Process Infrastructure: 10-15% Total Opportunity Process Optimization: 10-15% Process Definition: 10-15% source: Gartner Group Research, 2002

Why BPM is Critical to Compliance Clear Process Framework Transparency from the top Visibility of Key Processes Drill down, Transparency to lower levels Clarity of Roles & system Ownership Accountability Matrix: Who/what is Responsible for what Visibility of Control Points, KRI Ensure Risk Management clarity throughout the Enterprise Visibility of Process Review State, Traceability Be ready at any time to Internal Audits Discussion Forums, All Users Input Collaboration, Maturity Culture, Issues/Corrective Actions

Compliance: ISO ISO compliance is often seen as being synonymous with Quality Management. The Enterprise Process Center makes ISO compliance manageable. ISO 9000: Quality Management ISO 14000: Environment Management ISO 20000: Technology Management The EPC aids ISO initiatives by: Mapping, distributing and maintaining key processes. Supporting change Automating audit process – ability to track corrective actions Enhancing transparency Embedding business rules within processes Beyond achieving compliance, the EPC achieves process improvement. ISO 9000 - Quality Management ISO 9000 is rapidly becoming the most important international standard because it ensures quality, saves money and helps your company satisfy client expectations. ISO 9000 provides a quality management system for improving and controlling the quality of your products and services. It also reduces the costs associated with inferior quality management processes, making your organization more competitive. ISO 14000 - Environmental Management ISO 14000 ensures that a company minimizes the effect its activities have on the environment by implementing specific controls at the process level. ISO 14000 enables companies to reduce the penalties and fines conferred when environmental laws are breached. Furthermore, the adoption of ISO 14000 reduces waste, cutting down overhead, and ensuring the efficient use of materials. ISO 20000 - Technology Management ISO 20000 is an IT governance initiative intended to standardize IT policy by adopting standard best-practice processes in IT service. IS0 20000 is quickly becoming integral to modern business, as IT and business become more and more reliant on each other. By attaining compliance under ISO 20000, your company can increase efficiency in its delivery of IT services by providing a solid technology framework.

Royal Australian Air Force Aeronautical Information Systems (RAAF AIS) ISO Success Story: RAAF Royal Australian Air Force Aeronautical Information Systems (RAAF AIS) BPM in support of ISO 9001

Case Overview: RAAF AIS Mission To provide the Australian Defence Force with tailored, accurate and current aeronautical information. Their Challenge Obtain ISO 9001 Certification. Starting Point All processes were described in Word & Excel documents. Employees would not update their processes because doing so was extremely cumbersome. Internal Auditors had a hard time understanding the company’s processes.

Quality System Requirements Document core processes & related tasks Demonstrate process control Document duties of personnel Document Control Requirements Decide who will write the procedures and when will they be reviewed Records Control Manage Corrective & Preventive Actions Control Nonconforming Product(s) Run Internal Audits Remain flexible Integration with other business management tools Be transportable for use with other media, such as PDF, Word, etc Outline the boundary of the Quality System Document duties and roles of personnel Document core processes & related tasks Define process owners Perform records management and archiving Perform document management Show interactions of process performers

Results Obtained ISO 9001 Certification. No corrective actions assigned by the external auditors. Overtaken the HQ group in Adelaide and their QMS, which has been in place for over 5 years. “The EPC allowed our people to show their processes in an easy to understand format.” “It fit- perfectly with the ISO process approach.“ “Auditors understood the method very easily.” Warren Harrison, Business Improvement Manager Royal Australian Air Force Make sure to get across the point that these results could not have been achieved without the expertise of RAAF, but that the EPC was a supporting tool

Best Practices: Overview Best Practice programs help improve processes for greater efficiency and standardization. Creates a standard for benchmarking. Enable swift process improvement and deployment. BPM helps increase overall project success when handling a best practice initiative.

Best Practice: ITIL ITIL (the IT Infrastructure Library) is the most widely accepted approach to IT service management in the world. ITIL provides a cohesive set of best practices, drawn from the public and private sectors internationally. Goal: increase the integrity of corporate IT architectures and to manage the service lifecycle. BPM aids in ITIL compliance by: Managing the standardization of IT processes. Performing a gap analysis. Mapping computer assets to process activities.

Best Practice: APQC PCF The American Productivity and Quality Centre (APQC) is a non-profit organization focused on best practices, benchmarking, and knowledge management Process Classification Framework (PCF) helps organizations find ways to improve their processes PCF includes process specific KPIs BPM and PCF go hand in hand: They ensure that processes are executed efficiently. They help improve overall operational efficiency.

Succeeding with BPM Keep it Simple Create Process Framework across the Enterprise, Multiple levels Tie in Policies, Procedures, Resources and Responsibilities Create the Culture Ensure Compliance means Performance Implement Active Life Cycle Manage Change

Process Management What can process management do for my business? Increases Customer & Financer Confidence Brings Operational Consistency Improve Knowledge Management Creates a Culture of Knowledge Sharing Provides Clarity (operational/strategic) Minimizes Human Error Reduces Costs & Increases Cost Avoidance Ensure & Maximize Value to Customers Overall Accountability & Efficiency

Process Management ROI Knowledge Management BPM retains company knowledge (alleviates Baby Boomer retirement stress on organizations) Allows for easy training with existing knowledge Time/Cut Costs Creative/Innovative Process Changes Timely Access to Information Timely Executions Talk about knowledge management – it’s important to SFPUC Direct IMPACT on your BOTTOM LINE = Σ all ROI above

Interfacing Professional Services San Francisco Public Utilities Commission

Interfacing Service Products Business Process Management Framework Deployment Quick Start Program. Installation Configuration End User Training Admin Training Process Modeling Training Modeling Principles Modeling Business Processes Process Readiness Assessment Process Discovery Readiness Executive Level Commitment Process Readiness vs. Company Goals Framework Design Process Orientation Content Structure Design Organization, Resource Library design Accountability Structure Design Guidelines and Good Practices Process Framework Audit Framework Design Review Sample Process Audit Deployment Program Execution Review Audit Report & Recommendations Solution Design Sarbanes-Oxley ISO 9000 ITIL Other Regulatory Compliance Monitoring and Improvement Process Automation Review Goal Review, KPI & Dashboard Design Process Portfolio Management Process Improvement Workshops

6 Phases For Successful BPM Program

Process Maturity Matrix Continuous Process Improvement via Feedback & Collaboration, In-Depth Analysis & Review, Automation & Monitoring Risk Management Organizational Innovation & Deployment Causal Analysis & Resolution Processes are Measured, Maintained & Controlled Quantitative Process Management Software Quality Management Organizational Process Focus Organizational Process Definition Organizational Training Implement Best Practice Frameworks/Methodology Integrated Teaming Integrated Supplier Management Decision Analysis & Resolution Processes Standardized & Reused Across Organizational Units Requirements Managed Process/Product Planning Project Monitoring & Control Measurement & Analysis Efficient Planning & Proposals Product & Process Quality Assurance Small Scale Processes are Understood & Documented Ad-hoc & Chaotic - Knowledge is Stored Only in Employee Computers Design Develop Integrate Test 27

Mapping & Data Gathering Workshop Interfacing Employs a 10 Step Process Workshop Methodology: 1. Identify the process “as you know it” that will be modeled. 2. Pinpoint the corresponding process (or processes) in the Best Practice Framework (BPF). 3. Review & customize the sub-processes under this BPF process, and select which ones to model. 4. Define the SIPOC for each sub-process to set the scope. 5. Identify the process details: activities, the performer(s) and the material flow. 6. Simplify the flow by merging activities. 7. Determine whether to group activities into sub-processes. Review the materials (inputs, outputs). Attach relevant documentation: policies, procedures, forms and reference files. 10. Validate the processes!!!

Using Best Practice Frameworks & Methodologies Process Maturity & Benchmarking Matrix APQC’s Process Classification Framework SIPOC Six Sigma – DMAIC ADKAR – Change Management Industry Specific Best Practice Methods: eTOM – Telecom Framework ITIL – IT Framework SCOR – Supply Chain COSO & COBIT – Control Management

APQC – Process Classification Framework

APQC – Process Classification Framework Key Performance Indicators (KPI) : Recruit, Select, and Hire Employees Average days to fill open positions Average days between opening and fill Ratio of acceptances to hires Ratio of acceptances to offers Ratio of qualified applicants to total applicants

Developing and Managing Human Capital

SIPOC Exam Results: [passed] Candidate: [fulfills job requirements] Candidate: [short-listed]

Process Swimlane As is - to be This slide illustrates a poor process – even though the first process is mapped properly, only having face to face interviews will clog the system with poor candidates. Instead, use a phone interview first to filter out unqualified candidates. (second picture) Even though the second process has more tasks, it is still more efficient in the end result.

ADKAR – Change Management Model ADKAR is a goal-oriented change management model that allows change management teams to focus their activities on specific business results.  The model was initially used as a tool for determining if change management activities like communications and training were having the desired results during organizational change. The model has its origins in aligning traditional change management activities to a given result or goal.

ADKAR: Helping Your Business Manage Change

Process Improvement Methodology Keys to success: Start with a small process that can be completed in a short time frame to gain experience and confidence. Start with non-strategic processes where you have the authority to carry out proposed changes. Set clear and realistic timelines and expectations. Focus on the short term payoff. Do not spread resources thinly. Build your team so that you have all the necessary skills within it. Consider bringing in an outsider to gain a fresh perspective. Management and primary stakeholders must be involved, or else even a limited implementation will fail.

Define an Area for Improvement Identify the cause of the problem & how it impacts: customer satisfaction employee involvement financial returns What are the potential risks in doing the project? in not completing the project? Ensure alignment across all areas of the company. Improving isolated processes leads to frustration and does not benefit customers, employees or shareholders. Obtain the commitment and visible involvement of top management. Create cross functional teams.

Measure Performance Key Performance Indicators (KPIs) must be linked to the company’s strategy & goals reflect what’s important to the company’s customers be quantifiable be specific KPIs should include a balance of result metrics: measure the output quality process metrics: help in predicting the process output Track only the most important KPIs. Keep things simple and clear. Set realistic targets. Roll-up KPI metrics into meaningful dashboards. KPIs must be revisited and fine-tuned periodically. Communicate KPIs to all employees! Link employee performance to KPIs.

Analyze Cleanse your data to ensure integrity. Look for recurring patterns. Averages can be misleading. Move past the symptoms to reveal the root cause of issues. There are tremendous amounts of data within any company, some of it conflicting,” says Gavin Boyd, the Johannesburg-based head of the Balanced Scorecard Collaborative African Unit. The collaborative, a Palladium Company, has advised some 2,500 companies worldwide on implementing business information systems and technology. Boyd uses the example of a water utility client. At the utility, each department had different ways of measuring such common values as billing, cost centers and customer service. Standardizing information into a common format will help companies better integrate and analyze the data. That standardization process usually requires some deft mediation between departments. To do that, Corbett says companies must assign a strong executive sponsor to keep the inevitable internal conflicts to a minimum. Bringing in an outside facilitator may also help break deadlocks. “An outsider can help depersonalize conflict between different groups, help each understand their position and take conflicts to the executive sponsor for resolution,” he says.

Analyze & Benchmark Collaborate: Identify, share, and leverage knowledge and best practices: Across your organization With other organizations Benchmark regularly against other companies: Measure the process against a set of established benchmarks. Build control points into a process: process owners, customers, & stakeholders should be able to decide if the process is meeting current benchmarks.

Improve Create To-Be processes and simulate. Automate manual tasks Re-organize the workforce Eliminate duplicate or unnecessary activities When designing new processes, do not think of existing procedures – Be Creative! Performing process improvement is a project, so all principles of project management apply. Measure twice, but cut once: Be clear about the impact on other processes before rolling out changes that affect others.

©Prosci. Used with permission under terms of license agreement. Manage Change Tools to manage change Phases of change Communications Sponsor roadmap Coaching Training Resistance Management Awareness Desire Knowledge Ability Reinforcement ADKAR is based on basic human truths that are present even in the absence of change. Awareness of surroundings and self. The need to have control over our life. A quest for growth and knowledge. A hope to make a meaningful contribution. The need to be recognized and appreciated. ADKAR consists of five phases that occur when change impacts us: Awareness of the need for change (why). Desire to support and participate in the change (our choice). Knowledge about how to change (the learning process). Ability to implement the change (turning knowledge into action). Reinforcement to sustain the change (celebrating success, and celebrating early). ©Prosci. Used with permission under terms of license agreement.

Control, Review & Adapt Establish who owns a business process. Without personal responsibility, the process will fail. Processes are living and breathing entities, evolving over time. They should be reviewed and audited every 3 to 12 months. Standardize similar processes: Leverage best practice processes within your own organization.

Benchmarking Maturity Matrix

The Benefits of Risk Management Risk management allows business owners to include risks in their business strategy, allowing them to: Achieve Compliance (SOX, ISO, Basel etc) Easily provide audit trails Enhance visibility and transparency Prioritize risks - divide and conquer Improve reliability Decrease breakdowns and downtime Increase product quality

Risk Management – A Business Imperative Identifying Risk Virtually Every Business Process Has Associated Risks

Risk Management Identify Risks. Implement Controls to Mitigate those Risks.

Risk/Control Matrices Controls Name Objective (point) Owners Description Activity Linked To ID# COSO Man/Auto P/D Key Control Consult Better Business Bureau Ensure Valid Vendor Accounts Payable Clerk Consult better business bureau to conduct background check and ensure vendor competency Enter Vendor Into System BV238 R M D Y Require 3 References From Vendors Request 3 reference letters to ensure business etiquette of vendor DJ937 I P Compare P.O. to Price List Ensure Genuine P.O. Details Compare P.O. to price list to ensure pricing and quantities are valid Verify that P.O. Has Been Entered Into System DK438 Orders >50K Require Management Approval Process Ensure Genuine Order - Increase Accountability Accounting Manager Send orders >50K through management approval process to ensure maximum accountability Approve Invoice LC929 A Risk Name Type Impact Likelihood Gross Risk Associated Control(s) Net Impact Net Likelihood Net Risk Effectiveness of Controls Priority Fraudulent Vendors Entered Into System Financial 5 3 15 Reference Check/Consult Better Business Bureau 4 1 73% Very Low P.O. Fraud 20 Compare P.O. To Price List/Management Approval 2 17 15% High

Formalize Company Policies Business Rules Formalize Company Policies Key Benefits Enforce company policy through standardized rule objects Model operations, definitions, and constraints Manage change more efficiently Maintain rules separately from processes

Best Practice: ITIL V3 Service Delivery Service Support ITIL V3® - Information Technology Infrastructure Library Provides Best Practice IT Service Management Processes. Service Delivery Service Support Security Management Source: iET Solutions, 2008.

BPM and Risk Management BPM grants your company the ability to visualize and manage the flow of activities that comprises your company operations. For any company there are hundreds of processes that are executed daily. BPM eliminates inefficiencies and bottlenecks that lead to poor company performance and reduced profit. The ability to see the as-is state of your company allows for greater versatility and understanding when planning for risk. Risk can be found at any point in your processes. By combining BPM and Risk Management, you gain the ability to manage risks along the dynamic process dimension. This allows your company to implement specific context-sensitive controls. By managing risks and controls in a process framework, you can ensure that controls are implemented effectively.

with clear guidelines gets results… Set the Strategy and Involve Stakeholders Put Pressure from the top and Get Buy-in from the bottom Give Management Ownership Distribute Accountability to Employees Plan & Implement efficient & effective Workshops Use SIPOC, lay it out as you know it Match with Best Practice Framework Integrate the Knowledge: Policies, Procedures Analyze the current process and examine changes Review with employees to bounce ideas & attain feedback on potential changes Get the buy-in from both management & end-users to a new “to be” process Maintain Collaboration & Open lines of Communication between all levels of the organization & across departments Establish a Process Centric Culture & Long-term ROI effects

Product Demonstration EPC 5: Product Demonstration San Francisco Public Utilities Commission

BPM Positioning & Process Maturity EPC Product Demonstration Agenda Company Overview Service Products BPM Positioning & Process Maturity EPC Modules Overview Clients & Industries EPC Architecture EPC Product Demonstration EPC Web Portal Employee Experience EPC Modeler Building a Model

Interfacing Technologies Corporation Improved MS Visio Process Modeling MS Visio Process Modeling 1997 Business Process Management 2000 2008 Process simulation and analysis 1994 Interfacing has provided BPM Software and services for over 20 years. Established in 1983 Numerous awards Established the FirstSTEP Fortune 500 clients Partnerships Our full range of products bring key benefits to your business: Analyze and correct process inefficiencies. Manage risk factors. Reduce process costs. Improve operational efficiency. Adapt quickly to change. Clarify accountability and ownership. Provide process knowledge across organizational boundaries.

From Chaos to Order

Process Maturity Model From Chaos to Order Optimized Feedback For Continuous Process Improvement Managed Processes are Measured & Controlled Defined Processes Documented & Standardized Across Organization Repeatable Small Scale Processes Understood & Repeatable Initial Ad-hoc and chaotic Level 1 Level 2 Level 3 Level 4 Level 5 Process Maturity Model

Organizational Management EPC Management Modules Organizational Management Resources Roles Assets Organization Processes Documents Risks Rules Services Master Data Business Intelligence - Performance

Business Intelligence - Performance Process Management Order Entry Order fulfillment Notify failure to Client To order fulfillment Enter Order Request Save Order Request Validate Order Request Save Validated Order Notify Success to client Submit Order Request Organization Processes Documents Risks Rules Services Master Data Business Intelligence - Performance

Business Intelligence - Performance Document Management Save Order Request Enter Order Request Validate Order Request Notify failure to Client Save Validated Order Notify Success to client Organization Processes Documents Risks Rules Services Meta Data Business Intelligence - Performance

Risk Management Organization Processes Documents Risks Rules Services Save Order Request Enter Order Request Validate Order Request Notify failure to Client Save Validated Order Notify Success to client Submit Order Request IT Control: Ensure proper redundant systems are in place. IT Risk: Unable to save order request due to corrupt database. Organization Processes Documents Risks Rules Services Master Data Business Intelligence - Performance

Business Rule Management Notify failure to Client Enter Order Request Validate Order Request Save Order Request Save Validated Order Notify Success to client Submit Order Request Organization Processes Documents Risks Rules Services Master Data Business Intelligence - Performance

Business Intelligence - Performance Meta Data Management Notify failure to Client Enter Order Request Validate Order Request Save Order Request Save Validated Order Notify Success to client Order Request Organization Processes Documents Risks Rules Services Master Data Business Intelligence - Performance

Business Intelligence - Performance Services Management Notify failure to Client Enter Order Request Validate Order Request Save Order Request Save Validated Order Notify Success to client Submit Order Request Organization Processes Documents Risks Rules Services Master Data Business Intelligence - Performance

Business Intelligence Organization Processes Documents Risks Rules Services Master Data Business Intelligence - Performance

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