Business Performance Management - Literature review Example

BUSINESS PERFORMANCE MANAGEMENT Name: ID: Date: Table of Contents 1.Introduction 3 1.1BPM defined 3 1.2Scope of BPM 4 2.Business Intelligent (BI/BA) and Business Performance Management (BPM) 5 2.1Role of BI in BPM 6 2.1.1Relationship between BI and BPM 6 2.1.2Actionable BI 8 Conclusion 10 References 12 1. Introduction Success or failure of a business process is described by how far the business has attained its desired goals. This, therefore, is a measure of the business performance. How far the business achieves the goals is simply determined by how well or otherwise the business management manages performance towards the desired goals. This brings about the concept of business performance management, hereinafter referred to as BPM, and is the core subject addressed by this paper. First it is important to note that in this competitive world, all businesses want to have a better competitive advantage otherwise chances are, the business can easily face competition problems. This, therefore, means that all companies want to know how they are performing and therefore try to find solutions to their problems, if at all there are any. This, in the simplest logical understanding, the businesses must manage their performance in order to remain relevant in the business. Before looking at any intrigues of the subject, it is good to understand what BPM is and what it actually encompasses. What therefore is BPM? 1.1 BPM defined There are many definitions and perspectives by several people towards understanding of BPM. This paper just explores them as put forward by Elbashir, Collier & Sutton (2011). From the said reference, one definition has it that BPM is a narrow concept that applies to planning, scheduling and budgeting practices in business. Another postulation goes that it is the process of assessing progress towards achieving predetermined goals (this definition invokes particular interest). Others include a definition by Kimberly (2015) that describes BPM as a holistic approach to fully manage performance through informed and proactive decision-making. There are those definitions that can be described as formal. BPM standards group, for example, describes BPM as a set of integrated, closed-loop management and analytic process, supported by technologies that address financial and operational activities. BPM researchers, however, describe it as the methodologies, metrics, processes and systems which are used to monitor and manage business performance (Sturdy 2012). Popovic, Turk & Jaklic (2010), on the other hand, define BPM as a series of processes and applications designed to optimize the execution of business strategy; not just about improving performance, improving it in the right direction (business value, long-term health). The last definition of consideration in this paper is the conceptualization by Veljković & Kaličanin (2016), which describes that BPM to encompass all the processes, information, and systems used by managers to set strategy, develop plans, monitor execution, forecast performance, and report results with a view to achieving sustainable success no matter how success may be defined. All these definitions, formal and otherwise alike, give the conceptual framework of BPM with a few important points to bear in mind. The first point to note is aspect of predetermined goals. The second is strategies and the third is to measure and monitor. All the definitions above capture at least one of these basics thus making them all valid perspectives of BPM. On one occasion or so, contents of either of the definitions will be referred to in this paper. With this conceptualization of goals, monitoring performance and, of course, strategies towards optimizing the performance gives the scope of BPM. 1.2 Scope of BPM The aspects described above define the scope of BPM. Consider the first aspect to be the set goals. This means that BPM must have initial goals (big or otherwise) against which to measure the performance. That will be visited later. Take the second aspect which is the strategies to monitor, forecast, analyze; or simply put, to understand the business situation. This gives the whole idea of business intelligence (BI) or business analytics (BA). This forms one of the most important aspects of BPM because, in order to manage the performance, then it is necessary that the business situation is understood; certainly achieved through BI/BA. The final aspect to consider is the strategies to implement in managing business performance. Getting to description of the three aspects, the first one involves comparing the business performance verses the intended performance. Of course there are aspects considered to be measures of performance. The comparison is done on what is called a scorecard, which simply displays how far or otherwise the business performed towards achieving its goals for the selected period. The second one involves the BI methodologies that give the most current situation, for the said comparison, that is, methodologies to establish the current situation for the performance indicator under consideration. The third simply shows the strategies displayed on a map, the concept of strategy maps. This paper, therefore duels on these three aspects, that is, BI, the scorecard and the strategy maps in BPM. The scorecard and the strategy map are simply presentations of the BPM. This paper presents the BI only. Another report, BSC and strategy map, in this very series of the BPM presents an understanding of the balanced scorecard and strategy maps presented as hypothetical cases. 2. Business Intelligent (BI/BA) and Business Performance Management (BPM) Formally, business intelligence was used synonymously with business analytics (BA). However, there is a slight difference. BI is simply described a set of concepts, methods, processes and systems to gather, integrate and provide data from multiple sources and present it as information to business users to enable and improve operational, tactical and strategic business decisions. This therefore means that BI stops with providing the information. BA on the other hand can be described as an extension of BI because it also involves the implementation of strategies to aid BPM. The essence of analytics lies in the application of logic and mental processes to find meaning in data. Through these mental processes, we create the capacities that define intelligence – abilities to reason, plan, predict, solve problems, abstract, understand, innovate and learn. In analytics verses BI, BI simply gives a view of what is on the track while analytics goes a notch higher to explore, experiment, and discover to devise new or adjust existing plans. In short, this paper, therefore Elbashir et al. (2011), finds relating BI and BPM very valid. Focusing back to the main subject of this paper, with the proper understanding of business analytics, this chapter, which essentially was supposed to be introduced as the role of analytics in BPM, focuses on the relationship between BI/BA and BPM under the umbrella of the role of BI in BPM. 2.1 Role of BI in BPM Sturdy (2012) asserts that Intelligence does not do anyone any good if it remains locked in a box or an office or a database. The key purpose of Business Performance Management tools is to enable businesses to execute strategies based on the revelations that analytics provides for them. From there, such tools help businesses monitor progress, and make necessary adjustments or even U-turns. Because analytics has changed the nature of business performance review from a quarterly to an hourly process, business performance can now be tracked like one’s stock portfolio or one’s heart rate (Kimberly 2015). Earlier chapters of this course give a detailed understanding of BI/BA, which as described above, is finding meaning in data. However, not all meaningful data has meaning to performance. That considered, Veljković & Kaličanin (2016)’s description that BPM uses only a subset of BI is found to be very true. A clear understanding of the role or relevance of BI/BA in BPM is given by a clear understanding of the following subsections of this section with a special reference to Ballard (2006). 2.1.1 Relationship between BI and BPM Note: business analytics enables businesses to access, analyze and use data for decision making. An overall understanding of the BPM and BI relationship is that BPM helps BI cause operational decision-making to become more proactive, timely and support a wide range of business users. A reinterpretation of this statement would be that BPM is an extension of BI into a more proactive phase of business operationalization towards attaining of the goals. It is, however, important to note that for BI, BPM requires a special BI which is almost near real-time so as to actuate timely actions on performance (essence performance management). This means that this BI for BPM is a subset of BPM. Essentially, it’s the initial point of BPM that provides information that determines which action to be taken. Before going far, it is important to have a clue of what the traditional BI is and what BI for BPM is. This gives the rightmost understanding of the role played by BI for BPM in BPM. Table 1: Differences between traditional BI and BI for BPM Source: Ballard (2006). According to Ballard (2006), a company has two performance areas where BI is required. The number one area is business planning where BPM aids the Bi in supporting strategic planning by providing the easy to use dashboards that indicate to the management how actual business performance compares with the predefined goals and consequently helping the management to identify ways of improving long-term performance. The other area is business execution. This area uses tactical and operational BI to aid decision making. A combination of these two areas simply creates the notion that BI aids the decision making process of BPM by providing the necessary information about performance situation. This is in fact a very crucial role played by BI/BA in BPM. Kimberly (2015) explains the BPM impact on business. Business processes must be flexible enough to accommodate rapid and ongoing changes. Businesses use timely information to make its critical business processes more responsive and thus more competitive. BPM extends traditional operational transaction processing by relating measures of business performance to specific business goals and objectives. The integration of business process monitoring with operational BI analytics enables a closed-loop solution. Veljković & Kaličanin (2016) describe that the enterprise data used in managing business performance to include business plans, forecasts and budgets, historical business analytics and metrics, event data from BI infrastructure and event data from business process operations. BI applications use this data in creating actionable information, which enables BPM. The actionable information produced by the BI includes the key performance indicators (KPI), alerts, analytic context reports and recommendations for corrective action. Looking at this actionable information gives a clear understanding of how it’s used in a BI and BPM environment forming our next subtopic, actionable BI. 2.1.2 Actionable BI BPM is concerned with information that indicates business success or otherwise. It therefore just requires subset information of the BI. This subset of information enables the particular organization to focus on the important task for optimization of the business performance. Taking into account the information enlisted above, BI plays a crucial role in BPM based on the information. There are many KPIs, often created as ratios and displayed on dashboards for decision-making. The KPIs are essentially used in managing the business. As an illustration, if the number of product rejects per thousand (as a KPI), is designed on the dashboard for an analyst to monitor the indicator and enable him/her take action whenever an issue arises. This also includes availability of enough context information to understand the cause of the problem and consequently determine the corrective actions required. This forms the goal of a BPM environment, which is to provide a way to change course when a given business operation is not performing in a satisfactory manner. This KPI concept demonstrates the relevance of BI/BA in BPM. For the case of alerts, it suffices to say that there are many BI tools that are used to push alerts to, say, dashboard depending on the trigger mechanisms. It could be a KPI information. The answer to the alert depends on the business requirement. How fast a corrective action is needed to respond to determines how quickly an alert must be delivered. Using our first illustration, for example, learning that the number of product rejects per thousand has risen too high should be reported daily if the issue takes several days or weeks to correct the issue. If the BPM needs to implement a corrective mechanism within a short while, then alerts should be immediate, that is, near real time. That is to say, BPM applications should be designed to deliver right-time information. This description by Ballard (2006) serves as a good illustration of relevance of BI in BPM, for example, BI ensures right-time availability of relevant performance problem on a given KPI (Sturdy 2012). From Elbashir et al. (2011) point of view, putting information in a business context forms an important relationship between BI and BPM. Just an alert on a KPI is never enough. The analyst needs pointers to probable causes of the problem and this forms the basis of putting information into a business context. It involves many analytic reports from which the decision maker chooses the best context information for further analysis and action. The corrective action, which is the critical step, closes the loop thus turning BI/BA into BPM. This clearly demonstrates that BI is the foundation of BPM only when the corrective action is taken to close the BI open loop hence a clear illustration of how relevant BI is to BPM. These demonstrations all show that BI and BPM are much related. In fact, BI can be simply concluded to be the actionable business information for BPM. Below is simple illustration of how BI relates with BPM in form of creating actionable business information. Figure 1. Creating actionable business information Having understood the relationship between BI and BPM, as mentioned earlier in the paper, this paper presents an understanding the concept of scorecards (also mentioned earlier) using a demo company, Lee corporation. This forms the next chapter. Conclusion BPM and BI are very closely related. Whereas most studies explain that BPM is an extension of BI/BA, this paper finds it more convenient to say that BI for BPM is simply a subset of the BPM. BI is an essential and unavoidable part of BPM. BI facilitates the planning phase of BPM through the information analysis of the situation and hence corrects forecasts. It also facilitates monitoring through the analysis of the KPIs. In so doing, BI can be described as to facilitate the actionable business information for BPM. This is a clear demonstration of how relevant BI is to BPM. References Ballard, C. 2006). Business performance management meets Business Intelligence, http:/www.ibm.com/redbooks. Elbashir, M, Collier, P, & Sutton, S 2011, 'The Role of Organizational Absorptive Capacity in Strategic Use of Business Intelligence to Support Integrated Management Control Systems', Accounting Review, 86, 1, pp. 155-184. Nelson, Kimberly. 2015. Business Intelligence, Strategies and Ethics. Hauppauge, New York: Nova Science Publishers, Inc, 2015.  Popovic, A, Turk, T, & Jaklic, J 2010, 'Conceptual Model Of Business Value Of Business Intelligence Systems', Management: Journal Of Contemporary Management Issues, 15, 1, pp. 5-29. Sturdy, GR 2012, Customer Relationship Management Using Business Intelligence, Newcastle upon Tyne: Cambridge Scholars Publishing. Veljković, S, & Kaličanin, D 2016, 'Improving Business Performance through Brand Management Practice', Ekonomski Anali / Economic Annals, 61, 208, pp. 137-167. Read More