Small business needs to continually grow and evolve. Every business needs to look at its internal business processes and determine a strategy that includes continuous improvement and development. It also needs to determine how to measure that improved process performance.
Typically, businesses using the balanced scorecard, determine their goals and objectives from both the customer and financial perspectives before they determine their intent from the business process perspective. Determining the objectives in this sequence provides the advantage of aligning their business process improvement and process capacity building to support their customer and financial objectives.
So how/what do you measure when it comes to business processes?
First, take a look at the cues your customers are providing. By looking at the types of things that your customers are complaining about, or are shopping for but not finding, you can determine where your focus needs to be in terms of measuring performance. Examples are:
* Product Cost
* Perceived Value
* Quality of Product
* Quality of Service
* Cycle times
* Fulfillment and Delivery Cycle Time
Next, take a look at your financial cues. Examine your financial measures and break them down to measure the performance of each of your business processes, and in so doing, expose the role they play in your overall profitability.
* Manufacture Costs
* Process Yield
* Process Time
* Fulfillment Process and Delivery Cycle
Using the Business Process Value Chain as a Guide
While each business has its own unique set of processes for creating value for customers, Kaplan and Norton, have identified a generic model that businesses can customise. This value chain is an excellent way to break down your business process model into manageable, measurable chunks.
The value chain is broken down into three main areas of concern.
3. Post Sale Service
The Innovation Process
The innovation component of the value chain, includes the research of the emerging needs of your customers and the subsequent development of products and services to meet these needs.
Research and development is not usually considered ‘important’ by small business owners. But those businesses who embrace being efficient, effective and timely, at this stage, often find competitive advantage early in their life stages and go on to survive and thrive.
Possible measures include:
* Percentage of Sales from New Products
* Improved manufacturing process capabilities
* Time to develop next generation of products
* Break Even Point
The Operations Process
The operations process is the next step in the value chain. This is, traditionally, where organisations have focussed their performance measurement activities. This process focusses on efficient, consistent, and timely delivery of existing products and services.
Traditional measures include:
* Standard Costs
* Budget Variations
* Labour Efficiency
* Machine Efficiency
* Purchase Price Variations
* Product Quality
* Cycle Time
* Waste Management
* Energy efficiency
Post Sales Service
The post sales service process concentrates on those activities that occur after the sale or delivery of the product and service and usually include support, service and warranty processes.
Possible measures include:
* Number of complaints
* Speed of response
* Cost of Post Sales Services
In measuring your business’s performance you need to ensure that you have a balanced set of measures. Focussing on the traditional financial measures can skew your results and dramatically alter your business’s direction. The balanced scorecard approach, by Kaplan and Norton, is just one way to ensure that your business performance is a well balanced, well thought out, aligned approach which will put the reins of business firmly in your hands.
Examine your business today to determine how you start to effectively measure your performance from the business process perspective!
Karen L. Paiyo – Karen L. Paiyo is an Australian Small Business Counsellor, supporting and nurturing the spirit of entrepreneurship in the Asia Pacific Region. Karen empowers small business …
Business process modeling