Process Performance Measurement

Table of Contents

Table of Figures

Tables

1. Introduction

2. Performance Measurement and Business Process Management
2.1 Management Accounting
2.2 Performance Measurement (PM)
2.2.1 Performance Measurement’ and ‘Performance Measurement Systems’
2.2.2 Integrated PMS
2.2.3 Balanced Scorecard (BSC)
2.3 Business Process Management (BPM)
2.3.1 Business Process Re-Engineering (BPR)
2.3.2 Business Process: working definition
2.3.3 Process Improvement
2.3.4 Business Process Standards and frameworks
2.3.5 Process Automation and Information Technology
2.3.6 BPM as integrated management approach

3. Process-based Performance Measurement
3.1 Criticism on traditional performance measures for management control
3.1.1 Biases because of wrong allocation bases
3.1.2 Timeliness issues because of lagging measures
3.1.3 Lacking capabilities for Continuous Improvement
3.1.4 Lack of connection to corporate strategy and customer perspective
3.2 Adoption of a process-based PM approach instead
3.2.1 Congruence between organizational structure and the PMS
3.2.2 Measuring the process performance
3.2.3 Aggregation issues
3.3 Approaches for the integration of process information in PMS
3.3.1 Academic approaches
3.3.2 Practical approaches
3.3.3 BSC and process measures
3.3.4 Summary
3.4 IT-driven approaches for process-based PM
3.4.1 Data Warehousing and Business Intelligence
3.4.2 Business Process Management systems (BPMS)
3.4.3 Comparison of ERP, BI and BPMS
3.4.4 IT-enabled Process Performance Measurement
3.4.5 Summary of the presented approaches

4. Conclusion

References

Appendix

Table of Figures

Figure 1: Representation of Kaplan’s and Norton’s original BSC-design

Figure 2: Business process representation (Weske 2007)

Figure 3: Deming-cycle (Harmon 2006)

Figure 4: Points of reference in BPM according to Schmelzer & Sesselmann (2006, p. 7)

Figure 5: CAM-I Basic ABC Model adapted from Kaplan and Cooper (1998, p. 153)

Figure 6: Measures for processes, subprocesses and activities (Harmon 2007)

Figure 7: Computer-based Performance Reporting System at Boing taken from Garretson (2005, p. 8)

Figure 8: BI layer architecture adopted from Gluckowski and Kemper (2006, p. 14)

Figure 9: Nutshell model for BI tools for data usage according to Gluckowski and Kemper (2006)

Figure 10: Business objects in the customer order process according to Legner

Figure 11: BAM decision cycle according to Jeng et al. (2003a, p. 1)

Tables

Table 1: A comparison of functional and process measures from Harmon (2007, p. 149)

Table 2: Comparison between the discussed approaches

1. Introduction

Today’s organizations are confronted with rapidly changing market conditions. A major en­abler in the environment globalization has been identified. Through technological inno­vations, (particularly in information and communication technology but also by improvements in logistics) and melting administrative and political burdens a merging of former separated markets took place. This led to a rise in competition and an enforced shift to more saturated markets where customer satisfaction played a more crucial role and the creation of competitive advantages gained more focus. As one main enabler technological developments made it possible to improve production and manufacturing processes particularly through automation and when information technology became available on a more mature basis, it was also possible to standardize administrative and overhead processes with support of enterprise-wide information systems and workflow technology.

To adopt these changing realities new organizational structures and management approaches were discussed and pushed forward. While a long term divisional subsystem-building was seen as the major way to break down responsibility to local levels and to add management control mechanisms since the 1990’s a process-based view of the organization has again been focussed on.

Where organizations adapted to the environmental uncertainty and the organizational complexity by organizing according to a process-based paradigm, the design of the manage­ment accounting system had to follow (Emmanuel et al. 1990, p. 360). Traditional management approaches that focus on financial figures were considered to be insufficient for effectively steering the organization in a dynamical environment (Hoffmann 2002, p. 2; Melchert and Winter 2004, p. 535) and management accounting systems that provide these mostly financial measures were criticized for being inaccurate, incomplete and non-neutral to deliver managers the information that is needed to effectively control the activities in the company.

Although managers heavily rely on informal sources management accounting systems are considered to be the main source of the management information system. Traditionally these systems work with financial values to model the success of the business. Apart from other critique points it was stated that information comes too late; that the information has an excessive level of detail that managers can’t deal with and an overload of information is the result. These systems were further criticized that the information relies strongly on the past situation and that the information is narrowed down to mostly financial measures. A big part of this criticism addresses directly traditional management accounting systems where especially standard costing has received massive criticism. The main thrust of the dissatisfaction with conventional cost accounting methods, such as marginal costing, is that they are too highly developed and too complex, and furthermore no longer needed in their current form since other tools are now available.

An alternative increasingly being called for is to control through direct activity/process information (quantities, times, quality) for management at local, decentralized levels instead of relying on delayed and distorted cost data. In particular, empirical U.S. research on appropriate variables for Performance Measurement (PM), in the context of continuous improvement and recent managerial concepts, such as Total Quality Management (TQM) and Business Process Management (BPM), are based on this view (Kilger et al. 2004, p. 8).

Today performance improvement and measurement are seen as ongoing tasks on all organizational levels. BPM has been considered to deliver important contributions in raising a company’s performance, as well in form of Business Process Re-Engineering projects as in form of Continuous Improvement (CIP) programs. A lot of companies have in the past run through Re-Engineering projects. Many of these projects included the automation and standardization of business processes through information systems, like Enterprise Resource Planning (ERP) systems, the automation of repetitive business processes through workflow technology and the integration of legacy and state-of-the-art systems through technologies, such as Enterprise Application Integration (EAI) and recently Service-Oriented Architectures (SOA).

Besides the improvement of the operational performance through information systems and cost-cutting often the integration of BPM in a broader view of organizational control and management support has been addressed. The integration of process information in the management accounting system became a topic because new technologies offer capabilities and opportunities for data collection, business process modelling, analysis and simulation, process monitoring and measurement. Therefore the controlling of process performance and the reporting of process information has been highly regarded from the business side as well as from the information systems community.

A lot of particularly big companies are nowadays in the position to measure and provide comprehensive business process information for critical business processes to decision-makers nearly in real-time with low additional efforts. Information about those processes can be traced through information technology, aggregated and analyzed and used for management decision-making. Still these possibilities are not fully recognized and realized. Aim of this work is therefore to examine the thesis that direct activity/process information must be taken into stronger account for management control and that the management accounting system must adopt the changing organizational and environmental realities by developing and implementing mechanisms to model the process perspective and integrating process information . Process information take into account multiple dimensions (quality, time, and costs) and with this they overcome shortcomings of traditional performance measures. The integration of process information enhances continuous improvement by providing up-to-date, and easy to understand and interpret measures on the local level that forces immanent response and leads to actions based on observable derivations from defined process objectives.

The work is structured as following: Firstly, essential definitions about Management Accounting, Performance Measurement, and Business Process Management are given to clarify the scope of this work (chapter 2). Then, criticism on traditional performance measures is presented (chapter 3.1). Further, arguments that underpin the need to change the Performance Measurement system according to the changes that are implied by a process-based view on the organization are given and aggregation issues are discussed (chapter 3.2). Afterwards, concepts for integrated Performance Measurement systems that integrate process information are presented (chapter 3.3). In the last chapter (3.4) the opportunities and threats of information systems for a process-based Performance Measurement in general are discussed, and finally a number of recent approaches in academic research and practice to integrate process information in the PMS are introduced. The work ends with a conclusion on the role of process information in Performance Measurement (chapter 4).

2. Performance Measurement and Business Process Management

In this chapter essential definitions are provided and the scope of the work is narrowed. There are a variety of different approaches dealing partial or primarily with the topic of managing or measuring the performance of companies and the topic is closely related to Management Accounting, Performance Management, Business Process Management and Information Systems. To add a process-based view to Performance Measurement is nothing new, but it shifts the focus of how to design and maintain a Performance Measurement system and which managerial control mechanisms to apply.

2.1 Management Accounting

A ccounting in general is characterized as „ systematic action the task of which is to collect and register price and volume figures describing the activities of the firm. The task of accounting also includes the preparation of reports and calculations on the basis of the registered price and volume figures. The aim of these reports and calculations is to help the management, financiers and other stakeholders of the firm as well as public sector agencies in their decision-making concerning the activities of the firm” (Riistama and Jyrkkiö 1971).

The task of management accounting, specially , is to support managerial decision-making and organizational control (Riistama 1971). To do this management accountants collect, pre­pare, aggregate and analyse information and provide it to the management for decision-making. Horvath (2004, p. 144) calls this task the system-integration function of the management accounting. Furthermore, management accountants are responsible for the design and maintenance of the information system itself as a meta-function of the manage­ment (Horvath 2004, p. 144) and for the establishment of suitable coordination struc­tures and processes in the planning and control system (Kilger et al. 2004, p. 8). A handy definition gives the Institute of Management Accountants (IMA) when they define management accounting as the “internal business building role of accounting and finance professionals who work inside organizations. These professionals are involved in designing and evaluating business processes, budgeting and forecasting, implementing and monitoring internal controls, and analyzing, synthesizing, and aggregating information—to help drive economic value.” The role of management accounting differs from that of public accounting, since management accountants work at the “beginning” of the value chain, supporting decision making, planning and control, while audit and tax functions involve checking the work after the fact.

In fact, the task of management control spans a broader area than just decision-making. It also in includes the definition of objectives, also the need to make a decision at all has to be brought to the managerial attention, the decision that was taken must be implemented, and the implementation has to be monitored (Emmanuel et al. 1990, p. 127). Antony (1965, 1985) categorized managerial decision-making and control activities into strategic planning, management control and operational control, where strategic planning is concerned with the “setting and changing of overall corporate strategies and objectives”; management control involves “monitoring activities and taking action to assure that resources were being effectively and efficiently used in accomplishing organizational objectives” and operational control is concerned with “carrying out specific tasks on a day-to-day basis” (Emmanuel et al. 1990, p. 127). Management control is a function that is integrative, because it couples different sub-systems; it involves the whole organization and is concerned with the effective management of the interrelationship between disparate parts (Emmanuel et al. 1990, p. 128).

Because of the requirement of reporting on the performance of important aspects of an organizations activity on a regular and systematically basis, management control is seen as a routine task and management accounting information is thus seen as the major tool to achieve management control (Emmanuel et al. 1990, p. 128). Such information is collected in a standard manner from all parts of the organization and provided to the executive managers in quantitative form, mostly using cost or financial information (Emmanuel et al. 1990, p. 128). In practice, the principal overall control system in most organizations is the budget (Emmanuel et al. 1990, p. 128). Traditionally accounting information has been focussed on financial performance measures. This is, because in the first place profitability in special and shareholder value creation in general are major concerns of investors. Secondly, financial data is seen as the only way of assessing the results of diverse activities in one single dimension, to summarize and to integrate them and to measure the overall performance (Emmanuel et al. 1990, p. 7).

To monitor, analyse, and evaluate the activities of a company, particularly information about the costs of doing business are collected, aggregated and provided by management accountants to the management. Since industrial mass production arose in the 19th century, sophisticated cost accounting systems have been developed to monitor and control the performance of the activities (Kaplan 1984, p. 390). Today cost accounting systems have reached a high level of maturity (Kilger et al. 2004, p. 6). Furthermore, systems for the evaluation of performance and formal budgeting and incentive plans for decentralized operations, like the Return on Invest (RoI) scheme, have been developed. More recent developments have included discounted cash flow (DCF) analysis and (statistical) decision-theory models (Kaplan 1984, p. 390). Management accounting in practice has undergone major changes in recent times. Kilger et al. (2004, p. 8) summarize the recent developments in management accounting as following: “Management accountants increasingly see themselves in a proactive role, participating in the strategic decision-making process at an early stage. In contrast, routine operational management accounting activities are losing their significance. Furthermore, management accounting is increasingly being incorporated into decentralized business processes” (Kilger et al. 2004, p. 8).

In many companies, product costing has lost its dominant position as the main application of cost accounting tools. This is partly because of increasing levels of computer-controlled automation in modern production facilities and further because of the rising level of outsourcing. It is argued that the inflexibility of highly sophisticated cost accounting structures tends to decrease the ability of the production organization and production control to adjust to such new situations (Kilger et al. 2004, p. 8). On the other hand, in the service sector and in the indirect areas of manufacturing companies there is still potential for the application of highly-developed management accounting systems, such as marginal costing (Kilger et al. 2004, p. 8).

However, some of the classical applications of management accounting have begun to lose their significance. In the last years traditional performance measures and traditional management accounting systems have increasingly been criticized for being inadequate for the management and control of an enterprise (Kaplan 1989; Kaplan 1990; Hayes and Wheelwright 1988; Kaplan 1998; Legner 1999). Since, the mid-1980s, standard costing has come under intense criticism (Sulaiman et al. 2005, p. 110). Marginal costing approaches have being criticized that at their current level of detail, such tasks are neither necessary nor does their perceived pseudo accuracy furthers the goals of management (Männel 1995; Kil­ger et al. 2004, p. 8). The main thrust of the dissatisfaction with conventional cost accounting methods is that they are too highly developed and too complex, and furthermore they are no longer needed in their current form since other tools are available. Calls for increased use of cost management tools, investment analysis and value-based tools frequently associated with criticism of the functionality of current cost accounting approaches as management tools (Kilger et al. 2004, p. 8). An alternative increasingly called for is to control costs through direct activity/process information (quantity, times, quality) for cost management at local, decentralized levels instead of relying on delayed and distorted cost data. In particular research on appropriate variables for performance measurement in the context of continuous improvement, especially from Kaplan, is based on this view (Kilger et al. 2004, p. 9). While top management benefits most from financial success indicators that it examines in monthly or longer intervals and that can consist of multidimensional aggregate figures, lower management must necessarily be concerned mainly with nonfinancial, operational, and very short-term data at the day-to-day or shift level (Dhavale 1995, p. 54; Kilger et al. 2004, p. 10). In concrete terms, measures in the categories of time, quantity, and quality – such as equipment downtime, lead time, response time, degree of utilization (ratio of actual output quantity to planned output quantity), sales orders, and error rate – are becoming increasingly significant for controlling business processes (Günther and Pampel 2000, p. 300 – 306; Kilger et al. 2004, p. 10).

2.2 Performance Measurement (PM)

Organizations keep track of its performance and it is a major task of management accounting to provide the management the information that is necessary to fulfil this task. It is widely held that performance information is a key differentiator and that organizations that can obtain and use information about their markets and their processes in a timely manner can perform better. Thus, companies developing Performance Measurement systems (PMS) to determine what is taking place, sometimes in real-time, while most companies track a wide variety of measures and review them at the end of each week or month (Harmon 2006, p. 139). A PMS aims to describe and explain the company’s performance and support the management for decision-making (Neely et al 1995, p. 1225).

2.2.1 Performance Measurement’ and ‘Performance Measurement Systems’

According to Neely et al. (1995, p. 1225) a PMS is defined as “the set of metrics used to quantify both the efficiency and effectiveness of actions” (Neely 1994, Neely et al. 1995, p. 1225), and a single performance measure is defined as “a metric used for this quantification” (Neely et al. 1995, p. 1228).

“When you can measure what you are speaking about and express it in numbers, you know something about it, and when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind” (Harrington 1991, p. 168, Neely et al. 1995, p. 1228). PM aims to provide deeper insight by finding ways to operationalize the performance of an organization. Performance measurement is “the process of quantifying action, where measurement is the process of quantification and action leads to performance, in terms of efficiency and effectiveness “(Neely et al. 1995, p. 1228). In a market-based view effectiveness refers to the extent to which customer requirements are met, while efficiency is a measure of how economically the firm’s resources are utilized when providing a given level of customer satisfaction (Neely et al. 1995, p. 1228). Popularly both terms are defined as: Doing things right (efficiency) and doing the right things (effectiveness).

To monitor and analyse all possible measures would make little sense because too much information is as confusing as too little and the process of measurement is cost- and time- intensive and ties organizational resources. Also measurement activities can decrease the performance of the operational processes. Therefore, it is often suggested to concentrate on a few important measures (Harmon 2007, p. 139). In opposition to the routine measures these measures are often called Key Performance Indicators (KPI’s).

In order for companies to ensure achievement of their goals and objectives performance measures are used to evaluate, control and improve processes. Performance measures are also used to compare the performance of different organizations, plants, departments, teams and individuals, and to assess employees. The concept is broad for the reason that PM is accompanied by the provision of decision-support information, the management of business units, and the use of incentive systems (Kilger et al. 2004, p. 10).

The developments in PM can be divided in two major phases. Traditional PM was primarily based on (financial) management accounting systems and put a strong emphasis on financial measures such as return on investment, return on sales, price variances, sales per employee, productivity and profit per unit production (Ghalayini and Noble 1996, p. 63; Legner 1999, p. 113). A rethinking started in the late 1980s as a result of changes in the world market. Companies began to lose market share to competitors who were able to provide higher-quality products with lower costs and more variety. To regain a competitive edge companies not only shifted their strategic priorities from low-cost production to quality, flexibility, short lead time and dependable delivery, but also implemented new technologies and philosophies of production management, such as computer integrated manufacturing (CIM), flexible manufacturing systems (FMS), just in time (JIT), optimized production technology (OPT), and TQM. The implementation of these methodologies and techniques revealed that traditional performance measures have major limitations and the development of new performance measurement systems is required for success (Ghalayini and Noble 1996, p. 63).

2.2.2 Integrated PMS

There have been a variety of approaches for integrated PMS in science and practice, such as the Quantum Performance Measurement Matrix from Arthur Andersen (Klingebiel 1996, p. 66), the Performance Factors approach from Booz, Allen & Hamilton (Klingebiel 1996, p. 75), the Key Performance Indicator Tree from British Rail/Network SouthEast (Gouillart 1995, p. 89), the PM questionnaire (Dixon 1990; see Ghalayini and Noble 1996, p. 74f.), and the ‘SMART’ system (Cross and Lunch 1988; see Ghalayini and Noble 1996 p. 73). Further see Tan et al. (2007, p. 474f.) for a variety of different recent approaches for integrated PMS. While these approaches provide valuable hints for the design of PMS in general, they will not be examined in greater detail, because they are not primarily aligned to a process-based view of the organization.

2.2.3 Balanced Scorecard (BSC)

Perhaps the best known and most widely-adopted Performance Measurement and Management framework is Kaplan and Norton’s (1992) Balanced Scorecard. In the strategic dimension, the Balanced Scorecard – which links financial and nonfinancial indicators from different strategically relevant perspectives including cause-effect-chains – is the main proposal under consideration for PM (Kilger et al. 2004, p. 10). The BSC periodically reports measures in different perspectives derived from strategic objectives. In the basic form it comprises simple tables clustered into four sections (see Figure 1):

- How do we look to our shareholders (financial perspective)?
- What must we excel at (internal business or business process perspective)?
- How do our customers see us (customer perspective)?
- How can we continue to improve and create value (innovation and learning perspective)?

To aid clarity and utility according to each perspective of the BSC there are a limited number of performance indicators (KPI’s) that are linked to the strategy to manage the enterprise on the top level. By combining financial and non-financial measures in a single report, the BSC aims to provide managers with richer and more relevant information about activities they are managing than is provided by financial measures alone.

illustration not visible in this excerpt

Figure 1: Representation of Kaplan’s and Norton’s original BSC-design

(Cobbold and Lawrie 2003)

Kaplan and Norton suggest developing the BSC as a holistic instrument for the whole enterprise and to define areas of responsibility. While the main focus lies on Strategic Business Units (SBU’s) the BSC can also be broken down for different functions or organizational roles, including teams, workers or process owners and pay regards to differing information needs of different parts of the organization.

The selection of measures, both in terms of filtering and clustering, are a core activity in implementing a BSC. Kaplan and Norton propose that measure selection should focus on information relevant to the implementation of strategic plans and should be based on a corporate vision (Cobbold and Lawrie 2003, p. 3). More recently the BSC has been proposed as the basis for a strategic management system. A key development concerning the BSC design was to include causality expressed through Strategy Maps (Kaplan and Norton 2004).

2.3 Business Process Management (BPM)

There is no common understanding and usage of the term business process management (BPM) and the various definitions differ in their broadness and scope. BPM is made up of a diverse collection of ideas and traditions (Harmon 2006, p. 17). The term BPM is also used in a very narrow sense, where it refers to the automation of operational business processes through IT, but also in a very broad meaning as integrated management approach that focuses on customer satisfaction through the concentration on value-creating activities. Another line of tradition is grounded in the area of quality control and primarily focuses on the continuous improvement of operational processes.

2.3.1 Business Process Re-Engineering (BPR)

Much of the current interest in BPM can be dated back to the BPR movement. In the early 1990s, U.S. corporations, and subsequently companies all over the world, started to adopt the concept of BPR in an attempt to re-achieve the competitiveness that they had lost during the previous decade. The general approach of BPR is a comprehensive view on an enterprise where business processes are the main instrument for organizing the operations of an enterprise. BPR is based on the understanding that products and services that a com­pany offers to the market are provided through business processes, and a fundamental rethinking and radical re-design, rather than merely continuous improvement of these pro­cesses is the way to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed (Hammer and Campy 1993, Daven­port 1993, Johansson et al. 1993, Weske 2007, p. 43). BPR defines customer satisfaction as the primary target and examines the information technology and operational processes within and between organizations; BPR uses process modelling and analysis as a means to under­stand process performance and to redesign the process in order to reach the targets such as simplification, cost reduction, time, quality and service improvements (Chang and Tsai 2006).

2.3.2 Business Process: working definition

Hammer & Campy (1993) define a business process as “a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer”. Business processes use organizational resources for the transformation (Tumay 1995, p. 55; Gronau 2002, p. 84). This transformation takes time, causes costs and binds organizational resources. Resources include agents that effect a value creation on the business object, for instance organizational units, information systems and machines (Gronau 2002, p. 84). In German cost accounting strategic resources are logically divided in repetition factors^[1] that are converted in the performance process and potential factors ^[2] that supply the capacity to perform the process. In Appendix I a brief overview of the multi-stage performance relation between resources, capacity, process performance and process outputs is given (Pampel 1998, p. 150). In this work a business process is seen as a collection of interrelated activities to convert a business object from an input to an output (see Figure 2). Activities are the smallest useful units for measurement and different levels of abstraction are possible to cluster activities and to compose or assemble a business process^[3], such as a hierarchy of process - sub-process - and activity.

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Figure 2: Business process representation (Weske 2007)

2.3.3 Process Improvement

Process Improvement refers to “relatively minor, specific changes in existing business processes” in small steps (Harmon 2006, p. XXXVI). Process Improvement is grounded in the Total Quality Management (TQM) thinking that is based on the belief that an in-depth understanding and the continuous improvement of the business process are the driving force behind the effective management of costs. There have been a variety of significant efforts aiming at improving business process performance such as Plan Do Check Act (PDCA), Initiating-Diagnosing-Establishing-Acting-Learning (IDEAL), Quality Improvement Paradigm (QIP), and the Capability Maturity Model (CMM) (Tan et al. 2007, p. 474). These approaches are primarily focussed on the improvement of operational processes (Harmon 2006, p. 17). For instance PDCA, also know as Deming-cycle, describes a generic iterative four-step problem-solving process used in quality management and quality control. The cycle is depicted in Figure 3 and is also referred to as Plan-Do-Study-Act (PDSA).

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Figure 3: Deming-cycle (Harmon 2006)

In Six Sigma programs, the PDCA cycle is used in similar form as Define-Measure-Analyze-Improve-Control-cycle (DMAIC). Six Sigma is a systematically method to optimize process chains through mixed teams of process and method experts and it is applied not only in production processes but also in administrative processes. While the single methods, such as the Failure Mode and Effect Analysis (FMEA) are not new, the combination and appli­cation of the tools in a systematically and stage-based manner let Six Sigma become an important de-facto standard in practice on the process level (Bergbauer 2002a, 2002b, 2002c, 2002d, 2002e, 2002f; Harmon 2007, p. 519).

2.3.4 Business Process Standards and frameworks

Besides Six Sigma a variety of other (de-facto) standards are established in the area of BPM. Because of their relative importance a few of these standards will be mentioned in short. Harmon (2007, p. 517 – 524) gives an overview of different standards and groups them in the area of enterprise level standards, process level standards, and implementation standards. Especially enterprise level standards are important here, because they are used by executives and senior business managers to help to organize their overall understanding, evaluation, and management of business performance (Harmon 2007, p. 519). In addition, BPM groups that report to executive committees used these standards as tools to do managers evaluations and to prioritize process interventions. Probably the most widely used de-facto standard on the enterprise level is the BSC (see section 2.2.3). Another important standard is the Supply Chain Council’s SCOR^[4] framework and methodology, which is used to build and evaluate multi-company supply chain processes and has been generalized to serve as a standard for defining, benchmarking, and evaluating the entire value chain (Harmon 2007, p. 519). In Europe, with EFQM a quality standard for organizations doing process architecture work is in place (Harmon 2007, p. 520). Further, the Capability Maturity Model Integrated (CMMI) is in use by many companies to evaluate the performance of their IT processes, but is partly also used to evaluate all their business processes to determine how the entire organization is evolving (Harmon 2007, p. 520).

2.3.5 Process Automation and Information Technology

Common anchor point for BPR and CIP is that information technology (IT) is a major contributing factor for achieving process improvements and many of the approaches in BPM are driven by IT. Particularly Enterprise Resource Planning (ERP) systems and Workflow Management Systems (WfMS) pushed a process-based reorganization and a redesign of business processes forward. These systems often replaced formerly separated, departmental systems and were designed to integrate different organizational units. Today, business processes are highly implemented in information systems (Junginger et al. 2000). In the 1990’s vendors began to organize their application modules so that they represent business processes. With ERP systems an organizational integration was achieved through the implementation of cross-departmental business processes in software. This emerging of off-the-shelf software applications led to a standardization and harmonization of business processes. Recently, the integration of new systems and legacy applications were focussed on and systems that coordinate the information flows between different, heterogeneous applications have been developed and implemented using approaches such as Enterprise Application Integration (EAI) and more recently Service-oriented Architectures (SOA). Further, the evolving of the internet and e-business created new possibilities to rethink business processes but also increased the competition.

[...]

^[1] Examples are assembly parts, components, raw materials and utilities, energy etc. (Pampel 1998, p. 150)

^[2] Potential factors can be divided into human, immaterial, and object-related factors (Pampel 1998, p. 150)

^[3] See Schmelzer and Sesselmann 2006, p. 67 for a selection of different business process structures

^[4] for more information about the SCOR framework see Harmon (2007, p. 93 – 101)