KPI's in WebSphere Business Modeler

Business measures are the modeling elements that extend a process model to

create a business measure model. These include situation events, triggers,

counters, stopwatches, metrics, and KPIs.

A business measure is a variable that describes the behavior of a particular

business action that an employee, a process, or a business unit performs.

Identifying and measuring the right variables are at the core of an effective

measurement system. Managers can use this data to lead their organizations

and make informed decisions.

The development of business measures for a process or processes reflects

management's decisions on the design of monitored dashboards (that reflect the

organization’s goals and objectives), as well as the allocation of resources and

the organization of the company. In addition, the design of the business

measures is affected by the design of the business processes. Then, the

management reaction to business measure (monitored) results will affect, in turn,

the redesign of the processes.

KPI's

A key performance indicator (KPI) is just that—an important indicator of how well

a process or an organization is performing. The most effective KPIs are based on

strategic goals. A strategic goal is an executive statement of direction in support

of a corporate strategy. The strategic goal is a high-level goal that is quantifiable,

measurable, and results-oriented. For business measures modeling, the

strategic goal is translated into a KPI that enables the organization to measure

some aspect of the process against a target that they define. KPIs are defined

within the context of the Business Measures Editor of Modeler and evaluated by WebSphere

Business Monitor, comparing the defined KPI targets against actual results to

determine levels of success.

Figure: WBM Business Measure Details

A KPI is associated with a specific process and is generally represented by a

numeric value, based on one or more metrics. A KPI does have a target and

allowable margins (percentage of target), or lower and upper limits (absolute

values), forming a range of performance that the process should achieve. An

example of a simple KPI is average time for response to a customer inquiry, with

a target of less than two days.

KPIs, as well as metrics and counters, can optionally generate situation events

that can cause business actions. An administrator can use the Action Manager in

WebSphere Business Monitor to specify what happens when the situation event

is received, such as an e-mail notification to the appropriate person.

Best practice: When defining KPIs, be consistent in the use of targets and

margins or limits.

Good KPI's

Every company's center of success lies in its ability to provide better products,

services, or both in the shortest time and for the minimum cost. Appropriate

business measurement makes process improvement not only possible but also

continuous. Employees tend to reduce the complexity of these activities, which

leads to decreasing costs while increasing productivity and flexibility.

Thus, it is important to use business measures effectively to drive performance

improvements. A measurement system only provides you with data. It has value

only if the data can be used to make good business decisions and to drive

improvement efforts that translate into appropriate actions and performance

plans.

The development of appropriate KPIs helps to focus on the runtime management

of the process and also guides the directions for improving (remodeling) the

processes, which is a key benefit of the Business Innovation and Optimization

lifecycle.

Best practice: The following are essential characteristics of effective KPIs:

1. Represent the essential few: A successful set of measures contains the vital few key measures that are linked to your success. There may be hundreds, or even thousands, of measures in your organization's database, but no individual can focus on more than a few relevant measures.
2. Combine multiple measures into several overall business measures: a number of organizations struggle with measuring performance by looking at a dozen or so measures. One way of reducing the number of measures is to assign a weight to each measure in a family of measures. You can develop an index, or an aggregate statistic, that represents performance by multiplying each measure by its assigned weight and then adding all such products to arrive at a weighted-average total.
3. Change your strategy as situations change: Sometimes a company starts collecting data on a specific measure because of a specific problem. Once the problem has been solved or the issues that caused the problem have disappeared, collecting, analyzing, and reporting the measure may be unnecessary.
4. Quantify how well processes achieve their goals: A business measure is defined as a quantification of how well the activities within a process or the outputs of a process achieve a specified goal. Quantification is an important part of this definition. To measure something, its attributes must be quantified. Measurement requires the act of measuring and should therefore be reliable and repeatable.

KPI should be put into a context of what the process or organization is trying to

accomplish, which is identified by the goals and targets that have been defined.

Therefore, a good KPI should be designed to help determine whether or not a

goal or objective is being satisfied.

If you work with Modeler, you may know ClipsAndTacks sample project, so we can take that sample scenario with Handle Order process;

i.e. management has decided that the Handle Order process has to be updated so that it can fill orders in a

shorter amount of time. Company management wants to establish an automated

process that shortens order turnaround time, especially for trusted repeat

customers. The planned improvements include a new Web-based ordering

system.

ClipsAndTacks high-level business objectives are to attract more customers,

increase revenue, and reduce costs. Specifically, management wants to achieve

the following goals:

1. Reduce the average time from when orders are received to the time they are shipped to three days. Based on this, a KPI was developed to track the average duration for processing an order, with a target of less than three days.
2. Achieve an order approval rate of 90% or better. Based on this, a KPI was developed to track the percentage of approved orders, with a target of 90%.

Reference:

IBM Redbooks;Best Practices for Using WebSphere Business Modeler and Monitor