Business process management: a new way to conduct operations.

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Success stories about business process management (BPM) abound. Kent County, Michigan, has used BPM to streamline its accounts-payable and invoice-management processes to the point that invoices now get through the system in as little as one day. The City of Norfolk, Virginia, has used BPM to reduce construction permit turnaround time from 19 days to less than three days. The Supreme Court of Louisiana has used BPM to reduce the amount of time staff needs to issue Certificates of Good Standing to attorneys from between three and five hours a day to just one hour a day Despite these and many other success stories, however, governments are not widely aware of BPM's potential, and even fewer have fully embraced it.

BPM has been defined as "a field of knowledge at the intersection between management and information technology, encompassing methods, techniques, and tools to design, enact, control, and analyze operational business processes involving humans, organizations, applications, documents, and other sources of information." (1) This article describes the basic tenets of BPM, discusses its potential benefits, and provides an overview of BPM software. It also addresses the integration of BPM software with enterprise resource planning (ERP) systems, highlighting a number of governments that have implemented successful BPM projects.

INTRODUCTION

Business process management is a new way of conducting operations. As the name implies, it is about putting renewed emphasis on managing the business process--the sequence of events the organization uses to produce a specified outcome--as opposed to the traditional mode of managing operations primarily within the context of a department or output. BPM's overall focus is on how the work is done. Its distinctive characteristics are:

* End-to-end process perspective--managing across functions and across departments to foster collaborative efforts

* Distinct process ownership--clearly identifying process owners (individuals who coordinate and oversee every aspect of a business process) and empowering individuals to make process improvements

* Data-driven process management--recording and tracking process performance metrics

* Combining process management with software solutions--using technology to improve processes

* Tight integration with enabling technology--use of interdependent software tools such as ERP systems

BPM has produced remarkable results in the private sector. For instance, one information technology (IT) research and advisory firm found that private companies have used BPM to achieve an internal rate of return of at least 10 percent, and some companies have topped 15 percent. (2) In another study, an IT research and consulting firm found that U.S. companies using BPM reported benefits including a 50-70 percent reduction in order-processing time, a 45-65 percent reduction in the cost of customer service, and a 3045 percent reduction in data-entry errors. (3)

Governments can use BPM to achieve similar results. Areas that would be well-suited to BPM include accounts payable, purchasing, license and permit administration, government supply-chain management, citizen self-service initiatives, case management, and other situations in which a government interacts with an external party. (4)

For example, the City of Norfolk, Virginia, has employed many aspects of BPM to pare about 16 days from the amount of time it takes to issue a construction permit. City officials addressed the entire process cycle by allowing online permit applications and online departmental application review and routing. Automation and departmental collaboration have eliminated the need for applicants to visit multiple departments to obtain permit approval, and applicants are notified online whether their permit has been granted or if more information is required. Eliminating and consolidating steps in the process has also reduced the level of staff needed to process construction permits. The city encourages end-users and staff that oversees the procedure to take an active role in process improvement and has expanded its BPM initiative to other areas such as purchasing and vendor tracking. (5)

Similarly, the County of Kent, Michigan, estimates that its accounts-payable BPM initiative will have a return on investment of 40 percent, a payback period of 2.75 years, and a cumulative three-year benefit of $366,000. (6) Using document imaging and electronic workflow and signatures, the county has greatly reduced the amount of staff time required for processing invoices, and images of purchase orders, invoices, and checks are available in real-time for easy retrieval. Some departments now have direct access to these images and are able to search the central repository of payment data by keyword. The county's BPM project reduced data entry;, paper handling, and storage needs. Scanning of invoices reduced the amount of time spent filing and searching for paper invoices, thus improving response time to vendor queries and increasing overall productivity in the accounts-payable department. Furthermore, an invoice can now be scanned and paid in as little as one day, allowing the county to consistently take advantage of vendor discount terms. The county won a 2006 Michigan Excellence in Technology award for these and other improvements.

OVERALL BENEFITS OF BPM

Implementing BPM, both as a management philosophy and through the use of technology, can provide governments with a number of tangible benefits. These include:

* Time savings that allow a government to redirect staff and resources to other initiatives

* Cost savings from using less paper, making more efficient use of staff time, taking less time to complete processes, and other efficiencies

* Improvements in process transparency due to automation and electronic documentation of approvals, rejections, etc.

* Facilitation of regulatory or policy compliance to requirements such as mandated response times to Freedom of Information Act inquiries and adherence to paperwork-reduction legislation

* Improvements in service delivery and responsiveness to citizens and other stakeholders (see the Nevada County example)

* Increased departmental collaboration resulting from an end-to-end process perspective

* Process ownership, allowing end-users and subject-matter experts, rather than just IT staff, to participate in process modeling and automation.

The benefits of BPM are driven by the "Four Rs of Process:" (7)

* Roles--establishing a set of defined user roles that will not change with employee absences or departures

* Relationships--identifying the interactions necessary to complete a process

* Rules--developing a fixed set of process steps that will be followed in most situations

* Routing--electronically transferring forms and documents for review, approval, etc.

BPM techniques and software emphasize the four Rs in process design and management. For example, a major cause of process failure is "dropped hand offs"--when a document or task is lost between participants due to paper shuffling, lost documentation, or poor communication. Using BPM to address the four Rs guards against dropped hand offs by establishing roles and relationships that clarify and streamline the movement of work among individuals. Adherence to defined roles and rules will allow for smooth process flow and ease the transition when employees are absent or staffing changes occur. Finally, routing is handled electronically, through defined processes, increasing the speed with which work is transferred and decreasing incidences of lost documentation.

FEATURES OF BPM SOFTWARE

BPM software supports business process management by providing electronic capabilities for:

* Process modeling and simulation, allowing users (rather than just IT specialists) to graphically design the processes they want to automate

* Systems integration, allowing other information systems to be fully linked to the process and thus orchestrating the exchange of information between systems

* User interaction and collaboration, providing Web forms and other means for allowing user input and intervention in the process

* Process execution and monitoring, allowing work to be routed through process steps as well as allowing generation of electronic notifications and tracking of key indicators of process performance

BPM software has improved and matured over the past several years. (8) Without requiring users to write computer code, today's BPM software supports the complete process-implementation lifecycle, including interactive tasks such as creating centrally managed business rules, developing flexible forms and portals, and providing feedback for continual process and performance improvements.

The top three areas in which governments are likely to use BPM software are process modeling, automation, and tactical management. (9)

BPM software often allows users to develop processes using "drag and drop" modeling (allowing users to click on an icon or some other virtual element and drag it to another location). The software can then automate, control, and record new processes as well as manage the assignment of resources to different steps. Through modeling, BPM software facilitates the roles, rules, and routing related to business processes.

Automation drives many of the software's benefits, such as reduced staff time for repetitive, paper-based processes and improved service to citizens, staff, and external stakeholders. Automation includes electronic routing of approvals; use of electronic forms, which reduce paper-based work; and the ability to put multiple technology applications together. For example, the Supreme Court of Louisiana uses BPM software to automate a certificate issuance process, generating a savings of two to four staff hours in daily processing time (see box).

BPM software addresses tactical management by providing "the right information, to the right person, at the right time, and in the right format." (10) It records process performance metrics to track how long each stage in the process takes, the number of items waiting to be processed, and the total length of time it takes to complete the process. The software can also generate e-mail alerts, provide flexible dashboards (user interfaces that present information in an easy-to-read format), track anomalies such as bottlenecks at a particular step, and deliver data and information for decision making.

BPM AND ERP

BPM software and ERP systems are not mutually exclusive technologies, and BPM software does not require replacement or overhaul of existing ERP products. In fact, the two interact and complement each other, with ERP working at the functional and informational level and BPM software working at the enterprise level. ERP systems do not address all process-management needs, but the front-end tools and interfaces supplied by BPM software supplements and enhances ERP.

For example, in the City of Fresno, California, an interface between the city's ERP system and BPM software allows employees to make leave requests electronically. Employees can then use the BPM software to view the status of their requests at any stage and receive notification of acceptance or denial. These functions had not been available through the city's ERP system.

The invoice-imaging BPM software used by Kent County, Michigan, interfaces with the county's financial ERP system. Upon electronic approval, invoice information (vendor name, invoice number, invoice date, etc.) is transferred to the General Ledger system for payment. Then, payment information from the General Ledger system--such as the check image, check/EFT number, and payment amount--is imported back into the BPM software for storage and retrieval as needed.

BPM software does not simply duplicate the workflow of ERP systems, however; the BPM technology goes beyond workflow mechanisms found in most ERP packages. BPM software integrates processes across multiple applications. ERP workflow automation, on the other hand, is usually limited to just the ERP application. (11) In addition, BPM software is designed to record process performance metrics and to track all resources required to complete a process--employees, citizens, equipment, software, etc.--while ERP workflow does not tend to record process metrics, generally focusing only on tasks that require human intervention. So, while ERP workflow is useful, BPM software takes workflow management to the next level, allowing for organizationwide process integration and automation.

Due to increasing demand for and use of BPM software, many top ERP providers are beginning to develop BPM applications to incorporate into their ERP packages. (12) But BPM software provided by ERP companies has several weaknesses, including a lack of integration to cover end-to-end, cross-functional processes at the enterprise level, and no ability to record and provide performance metrics for continual process appraisal and improvement. Until ERP companies are able to provide the complete range of service that defines a true BPM software product, it may be best to use the ERP system to perform the functions it is designed for and run BPM software alongside it to manage the organization's processes. (13)

CONCLUSION

BPM requires "a fundamental change from function-centric (agency or program) to process-centric thinking. Some see it as a key component of transformational service approaches. Hierarchical reporting relationships in a functional area of an organization become less important as attention shifts toward the roles that employees play in the process." (14) BPM software is a valuable tool for improving government operations, but to achieve success with BPM, governments first need to think differently about how operations are managed, how work is performed, and how processes are designed.

Such a shift in focus can be difficult to achieve, but it is not impossible. Many governments have successfully implemented BPM as a management philosophy and are using BPM software as a tool to achieve substantial process improvements and subsequent efficiencies and cost savings. The governments highlighted in this article provide only a small sample of the potential uses and benefits. BPM should be considered a strategic initiative that can be implemented incrementally, process by process, to produce remarkable results.

Nevada County, California

Unable to find a pure customer relationship management (CRM) software package to meet the needs of a small county, Nevada County implemented a BPM software application to address its CRM needs. The BPM software cost much less than other CRM alternatives and provided the right level of utility without unnecessary bells and whistles. *

The county's BPM software directs citizen queries to the proper department, links county Web sites with existing databases, and helps improve service delivery by tracking citizen inquiries and speeding up response times.

BPM allows governments to provide "one-stop shopping" for citizens (and employees), often through Web-based interfaces. Soon, citizens of Nevada County will be able to conduct all business with the county online. Applications to be available in the future include online car registration and tax payments.

* Matt Hines, "California county finds CRM vendors low on functionality, high on price," TechTarget.com, June 4, 2002, http://searchcrm.techtarget.com/news/article/0,289142, sidl 1_gci827359,00.html.

Supreme Court of Louisiana

The Supreme Court of Louisiana uses BPM to automate issuance of the Certificates of Good Standing, which verify that attorneys are licensed to practice and are in good standing with the Louisiana State Bar. Prior to BPM, issuing these certificates was a manual, paper-based, and time-consuming process that took staff three to five hours a day. *

Today, the certificates are issued through an automated process that has reduced staff processing time by two to four hours a day. The court's BPM software responds to online certificate requests, checks court databases to verify attorney information and status, routes the requests to the correct person for authorization, and prints the final certificate, along with a pre-addressed envelope for easy delivery.

* BEA Systems, "Supporting Rapid Resolutions of Legal Issues with a Portal and BPM--Supreme Court of Louisiana Case Study," July 18, 2007, http://www.bea.com/content/ news_events/white_papers/BEA_scl_cs.pdf.

Notes

(1.) W.M.P.van der Aalst, A.H.M. ter Hofstede, and M.Weske, Business Process Management: A Survey, Business Process Management (Berlin: Springer-Verlag, 2003), 4.

(2.) Terry Shutter, Technologies for Government Transformation: ERP Systems and Beyond, ed. Shayne C. Kavanagh and Rowan A. Miranda (Chicago: Government Finance Officers Association, 2005), 235.

(3.) BPM Institute, BPM and Government Research Brief, November 2006.

(4.) Andrea Di Maio, Jeff Vining, Herbert Strauss, et al., BPM for Government (Stamford, Conn.: Gartner Inc., July 2007), from Hype Cycle for Government Transformation, 2007, an online series.

(5.) Hap M. Cluff, director of information technology, City of Norfolk, VA, personal communication.

(6.) Nucleus Research, Kent County OnBase AP Imaging Project, financial analysis report.

(7.) eGovernance: A New Organizational Paradigm, PowerPoint presentation by Hap M. Cluff, November 2003.Available at www.norfolk.va.us/egovernance/downloadppt.asp.

(8.) Bruce Silver, BPMS Watch: Understanding and Evaluating BPM Suites, July 6, 2007, http://www.bpminstitute.org/articles/article/article/bpms-watch- understanding-and-evaluating-bpm-suites/news- browse/3.html.

(9.) Shurter, 238-240.

(10.) eGovernance, ibid.

(11.) Shurter.

(12.) Ibid.

(13.) Shurter, 246.

(14.) McClure.

BRENDA BOYLE is a consultant/policy analyst in the GFOA's Research and Consulting Center. She can be reached at [e-mail].