Boosting Business Performance: Measuring ROI in BPM

[RobertT]

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The essence of every business investment is found in the value it generates. Success in business is often determined by how well a company leverages its resources to maximize returns and minimize loss. Perhaps, a place where this notion rings most true is in Business Process Management (BPM). BPM, a systematic approach to streamlining company operations, offers a pathway to efficiency and has become an integral part of modern business management strategies. However, how do you capture the value of your BPM initiatives? How do you quantify value and report it to upper management?

The answer lies in measuring the return on investment (ROI). Now before you get all “ROI….yeah yeah we need ROI. I know that.” Understand that this may not be as easy as you think since many people tend to think of ROI only in terms of dollars. So how do you calculate and quantify (or “Calculify”) return on investment for BPM initiatives.

Understanding and Calculifying ROI in BPM

ROI, a significant performance measure for any investment, puts the profit or loss from an investment into perspective by comparing the gain from an investment to its cost. In BPM, ROI provides a framework to measure the productivity of BPM initiatives.

The essential formula for ROI is:

ROI = (Gain from Investment — Cost of Investment) / Cost of Investment.

However, BPM initiatives can be more intricate to measure as they often impact multiple areas of a business. Therefore, determining the gain from a BPM initiative may require a comprehensive look at the various metrics influenced by the initiative.

Some of the areas you may need to evaluate include:

1. Cost savings: Did the BPM initiative lead to a reduction in costs?
2. Revenue improvement: Did it lead to an increase in revenue?
3. Quality improvement: Were there any improvements in accuracy, customer satisfaction, or error reduction?
4. Operational efficiencies: Did the BPM initiative lead to efficiencies in time, resources, or productivity?

You will notice that not all of these involve hard dollar savings. In some (or many) cases, the ROI may be felt (or quantified) in improvements in the quality of work, customer satisfaction, or efficiencies in resource or production time. Though the saying “time is money” is not completely wrong, so if you can define time savings, you may put some level of monetary value to that.

Unfortunately, many groups or managers stop here. They define the value for themselves but fail to share those successes with upper management or executives. This would the same as a author sitting down to pen his best novel, but then never publishing it. So how do we tell the story.

Showcasing BPM ROI to Upper Management

Once you’ve calculated the ROI of your BPM initiatives, it’s essential to effectively communicate these results to upper management and executives. Here’s how:

1. Align BPM ROI with business objectives: Ensuring that the outcomes of BPM initiatives align with overarching business goals will help sell their value to upper management. Remember, the executive may not be familiar with your level 4 business process, but they keenly aware of their goals and objectives. How does this improvement help them acheive those targets?
2. Quantify the results: Numbers matter. The key value of ROI is its numerical nature, which provides concrete evidence of success or improvements.
3. Highlight the non-financial impacts: Remember, while BPM has a strong financial component, non-financial impacts, like improved customer satisfaction or streamlined operations, are equally important.
4. Use graphs and charts: We have all heard the saying “a picture is worth a 1000 words”. Visual representation of data often speaks louder than numbers. Using graphs and charts can better showcase improvements.
5. Clearly articulate the future value of the process: Remember, BPM is not a project, it is an ongoing initiative to find and improve your business processes. Likewise, its ROI isn’t just about immediate gains — it also involves projecting future benefits.

The Bottom-Line

Incorporating a rigorous method of “Calculifying” ROI for BPM initiatives validates them as a strategic tool for business improvement. It not only helps prove their value internally to upper management and executives, but also externally to shareholders or potential investors. Remember that the success of any venture lies in the perceived value that it brings. Therefore, effectively showcasing this value through concrete ROI measurements will undoubtedly consolidate the standing of BPM as a critical strategic business tool in your organization.

Lastly, understand that as with every good business strategy, BPM is an investment.

So, let’s harness the power of ROI to ensure that our BPM initiatives are not just cost-efficient but value-adding strategic tools, because in business, the real measure of success is in the value we bring.

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