Making the Most of Metrics
Exposing Value with Metrics
Sometimes the toughest question to answer sounds very simple – “How are you doing?” When this question is asked of a CEO or CFO, the answer is usually a reflection of the financial state of the organization. However, when this same question is asked by the CEO to line of business leaders about initiatives and processes within the organization, it brings into play a complex set of interrelationships and dependencies.
Many organizations use metrics to answer to these questions. Metrics help monitor progress toward goals and expose inefficiencies in business processes. Metrics also become the catalyst for improvement and change. Properly implemented metrics that are well-defined and tracked on an ongoing basis can provide valuable insights at all levels of the organization – especially when they are aligned to business objectives and enterprise strategy. This insight can help accelerate time to value across both strategic and tactical projects and instill an overall comfort level with regard to corporate governance.
What’s in a Metric?
Many organizations start a process toward measurement without understanding what should be measured, why it should be measured or how the collected data will be used. Though launched with the best of intentions, this approach often leads to more confusion and can diminish the value of the measurement initiative.
There are three types or levels of metrics across an organization: strategic metrics, performance metrics and operational metrics. A balance of these metrics provides the most complete and accurate picture of the health of organization at any point in time. This becomes a repeatable framework for the implementation of projects and processes – creating consistency and governance that accelerate the recognition of value and an environment that supports agility, quality and productivity.
Strategic metrics possess a direct link to the strategy and goals of the organization. These metrics are often high-level, easy to understand and aimed at the executive management or shareholders of the organization. They usually include financial measures and also encompass matters such as customer retention, market share and time to market.
Performance metrics decompose the strategic metrics to a lower level that can be used to measure business contributions to the strategy. Examples of performance metrics include customer satisfaction, productivity and quality.
Operational metrics measure the day-to-day tactical operation of the business and business processes. These metrics provide insight to line managers and individuals on how the business is actually running, and they become the basis for business activity monitoring. Operational metrics are specific to a business process but should be related to the overall goals of the organization. Examples of operational metrics include total cycle times, percentage of successful customer interactions, average calls per hour or number of new products delivered to the market.
More Than a Number
While there may be no single set of metrics that will fit all situations, to be valuable to the organization, metrics must be more than just a set of numbers or statistics. The metrics and measures put into place should be a combination of the three types of metrics. They should reflect the objectives of the business. And they should be balanced, taken from both financial and nonfinancial sources to truly reflect the full scope of the enterprise. Valuable metrics will evolve as the goals and objectives of the business change over time. When the use of metrics becomes part of the fabric of the business, it enhances agility, spurs transformation and is the basis for continual optimization of the business and its processes.
Accelerating Time to Value
The implementation of a measurement process that is insightful, yet simple and agile should be the goal of any organization. Using metrics to close the gap between strategy and execution increases the speed by which an organization can realize goals and react to change. This in turn increases value, as well as improves the rate at which value is realized. The question becomes: How can an organization implement the right metrics, as well as effectively collect, understand and react to the results?
By following a few simple best practices for developing and implementing metrics, an organization can ease the transition and create an environment for success. Some of these best practices are:
- Define metrics based on business goals and objectives that relate to the organizational strategy.
- Implement metrics in a way that invites use and reuse by using the right tools.
- Monitor metrics at regular intervals based on the type of metric – strategic, performance or operational.
- Evaluate and adjust goals and objectives based on the results of monitoring.
- Evaluate and adjust metrics based on changes to goals and objectives.
- Continuously communicate and involve all levels of the business.
Realizing the Value of Metrics
Enterprise architects and business architects have an opportunity to elevate their value to the organization by helping the business understand the enterprise and align metrics directly to strategic goals and objectives. Utilizing the capabilities and tools of enterprise architecture for strategy, business process analysis for definition, and business process management for execution, enterprise and business architects can model, analyze and leverage the depth and knowledge of the business processes, systems, information and people necessary to define and implement metrics quickly and efficiently.
The goal of an EA tool is to develop the complete view of the enterprise linking strategy to execution graphically. The picture that is created depicts the whole of the organization – processes, relationships, people, information and systems. This view provides the ability to link the business strategy to all of the layers of the enterprise, immediately understand the impact of the strategy and define metrics that are driven by the strategy and goals.
Enterprise and business architects utilize EA and business process analysis methodologies to understand and model the business processes that support the strategy defined at the enterprise level and operationalize the business goals into practice through well-defined processes. Business process analysis and BPM tools provide the capability to model the business architecture, simulate business processes and then automate these processes for execution, speeding the implementation of the strategy defined by the business and enterprise architects.
Metrics become the gauge for measuring success – and knowing where things stand relative to objectives is a key success factor in accelerating time to value from EA, business process analysis and BPM initiatives. The success of these disciplines is intertwined, and the ability to align the three in a cohesive fashion is critical to both the level of value realized and the ability to govern the enterprise as a whole.
Business process analysis defines the business processes in both their current state and future state. The current state process can be linked to metrics and key performance indicators to expose the inefficiencies and areas that require improvement in the process. Based on this output, future state processes can be modeled and these what-if scenarios can be tested prior to actually making any physical change to the process, the technology, the resources or the strategy.
Simulation capabilities within business process analysis and BPM tools allow users to simulate resource impact, the influence of peak volumes, and other factors that may affect the performance of business. From this simulation, both business and IT analysts can see potential bottlenecks, process durations, costs incurred and net throughput. By testing changes to the models and metrics through simulation, potential issues can be understood so that the processes are optimized before being implemented to the executable environment. Time to value is expedited and recognition of business value is increased.
Executable business process models are automated by BPM technology. Metrics are captured automatically during the execution of the process. These metrics are traced back to the business architecture models as feedback, which reflects actual versus expected. This feedback closes the loop and provides critical information for the next round of business improvement using simulation and process analysis capabilities.
By using the data captured during execution, an accurate and immediate view of the change’s impact on the achievement of the business goals is available and can be mapped back to the EA and business process analysis models for further analysis and optimization. This visibility closes the loop, unifying strategy, analysis and execution.
Metrics in Real-Time
When processes are executed using BPM technology, both process and business metrics are collected in real time for use in process monitoring and optimization. Real-time monitoring or business activity monitoring is accomplished through the use of dashboards and reports that graphically display the KPIs and metrics defined in the business process during analysis and design.
These dashboards provide managers the ability to monitor how the business is running by aligning business data with process metrics for BAM – thus creating process intelligence. Process intelligence makes it possible to see where immediate changes should be made to the operation of the business by adding resources or rerouting work to remove bottlenecks.
Real-time feedback on metrics provides important insights into the value being delivered and enables people to continuously fine-tune models, simulation assumptions and process variables to achieve the desired results and accelerate benefits to the business.
Make It Happen
Implementing metrics in the enterprise is not a one-time operation. The true value of metrics lies in the ability to use the data collected to drive continuous improvement and optimization of business processes as internal and external organizational changes occur over time. Aligning EA, business process analysis and BPM disciplines with the appropriate set of integrated metrics that unify strategy through execution will deliver true business value, accelerate time to value and allow enterprises to get the most out metrics.