The explosion in the availability of data and analysis tools provides increasing opportunities for improved business decisions. Processes, measures and analytics create an important view of an organisation and its performance.
Whilst process efforts typically focus on workflow and automation, often too little attention is given to quantifying process performance - to measure and monitor it - and using resulting data and information for better decision making.
Organisations that use data analytics to measure business processes can get impressive results, and gain increased visibility of performance, risk and control. However, process analytics is not all about analytics tools.
Effective analysis is about linking measures to process improvement initiatives, using analytics outputs to drive day to day activities, and applying business insight.
Get the framework right
A framework is key to realising measurable business benefits as it provides clarity of objectives, ownership, and responsibility.
A typical process measurement framework will include three main areas. Firstly initiatives, covering strategic, financial, operational and compliance initiatives. Second, capabilities, covering reporting, monitoring, analysis and prediction capabilities. Third objectives, covering performance, risk and control.
Select the right processes for measurement, and the right measures to meet your objectives.
Any process that generates high transaction volumes (such as procurement) lends itself to measurement by data analysis. Once a process is selected, analytics can be designed to support the objective of the process measurement initiative. For example, the procurement process may be analysed with the aim of improving performance as part of an operational improvement initiative.
Measures and outcomes
It is essential to create strong links between process measures and desired outcomes. One way to do this is to integrate a set of tangible measures into the performance of employees.
In the simple procurement example, if the head of procurement is measured, in part, by the proportion of complete purchasing transactions processed to incomplete transactions, then he or she will be more likely to monitor and act on measures such as "Percentage of purchases without purchase orders". Sustainability of the measurement initiative is achieved by answering the question: "What is in it for me?"
Effective implementation of process measures and analytics helps organisations answer these simple but critically important questions: what happened why did it happen what will happen what is the best that could happen?
Just as processes change over time, so should the measures that are used for decision making. Process measures should be focused on helping decision-makers understand progress over time, quantify the impact of issues or opportunities, and identify root causes and potential solutions.
In the procurement example, if purchases without purchase orders are consistently identified, the head of procurement may change the procurement management system, making purchase order numbers a requirement for payment to be released.
Executives should look to process measurement to:
- Improve business performance by increasing liquidity, reducing costs, improving compliance and contract management.
- Identify and manage risk such as compliance, fraud, litigation, money-laundering, financial statement close, marketing and contract issues.
- Enhance controls, helping to bolster financial transparency, raise stakeholder confidence and increase market value
Erol Mustafa is a technology security and risk services partner at Ernst & Young