Statistics: (5495 Views) (1 Comments) Print Posted: Monday, August 02, 2010 Categories: Business Process Management (BPM), General Business Analysis, Decision Management

This short article provides the business analyst an analogy on how process owners manage value chains by monitoring leading and lagging metrics. The article highlights the need for business analysts to provide process owners with these metrics. These metrics provide indications of positive and negative process and business risks. Examples of the traditional risk response types of accept, avoid, mitigate, transfer, exploit, enhance, and share are provided.

The article starts with a sport’s discussion. In this case, familiarity with the game of baseball is needed. Note the following analogy:

• Baseball team manager – Process owner

• Game (nine or more innings) – Process (value chain)

• Game situations – Process and business risk events

• Changes in game strategy – Risk responses

• Game statistics and inning box score – Leading metrics

• Final box score – Lagging metric

Baseball

Game Strategy

When baseball team managers feel their win is either at risk or can be assured, they call “time” to the umpire. During this stoppage, the team managers are allowed to change their game strategy based on the game situation, game statistics (e.g., batting records, base runner speed, and pitches thrown) and/or the inning box score. For instance:

• Game strategies for negative game situations (threats) may be to

  • Avoid – e.g., walk the next batter to remove the possibility of a slugger getting an odds-on-hit

  • Mitigate – e.g., advise the pitcher how to pitch to the next batter to lower the probability of a hit

  • Transfer – e.g., relieve the pitcher with someone from the bullpen

• Game strategies for positive game situations (opportunities) may be to

  • Exploit – e.g., give a “steal a base” signal to a base runner to take advantage of the opposition’s slow windup delivery of a pitch

  • Enhance – e.g., change the batter for a pinch hitter to increase the probability of a hit or change a base runner with a pinch runner that is faster to increase the probability of “stealing a base”

  • Share – e.g., show team commitment by protesting a bad umpire call (perhaps get thrown out of a game)

Note that the team manager can just accept a game situation and do nothing.

Business Process

Figure 1. Process Example showing Leading and Lagging Metrics

Process Strategy

Process owners monitor process and business risk events. Process leading metrics have an expected value range set by the process owner. When they indicate a significant deviation outside that range, it indicates a negative process risk. The leading metric deviation points to where the problem exists and that there is a threat in accomplishing the lagging metric goal. Process owners then analyze the cause of the deviation and determine the appropriate risk response. At the same time, the business may present positive risks or opportunities. For instance:

• Risk responses for negative process situations (threats) may be to

  • Avoid – e.g., stage higher workloads to maintain a steady work pace

  • Mitigate – e.g., add staff to handle additional workload

  • Transfer – e.g., outsource additional workload

• Risk responses for positive business situations (opportunities) may be to

  • Exploit – e.g., implement new technology to eliminate task errors or quicken the process

  • Enhance – e.g., certified workers become available to further ensure compliance to standards

  • Share – e.g., obtain supplier commitment via a partnership to share success or offer a worker a bonus for process improvement suggestions

Note that the process owner can just accept a process and/or business situations and do nothing as a risk response.

Summary

Just like baseball team managers monitor game situations, process owners monitor process and business risk events. Specific to the process, they use leading metrics to determine if process adjustments are needed in order to continually achieve the lagging metric. Each leading metric has an expected value range. So long as the leading metric is within the range, process owners can remain confident that the lagging metric goal is achievable. Note that the lagging metric by its nature cannot alert the process owners to risk. The lagging metric is at the end of the process (value chain). Essentially it’s history – the game is over.

Author: Besides having coached soccer and baseball, Mr. Monteleone holds a B.S. in physics and an M.S. in computing science from Texas A&M University. He is certified as a Project Management Professional (PMP®) by the Project Management Institute (PMI®), a Certified Business Analysis Professional (CBAP®) by the International Institute of Business Analysis (IIBA®), a Certified ScrumMaster (CSMTM) and Certified Scrum Product Owner (CSPOTM) by the Scrum Alliance, and certified in BPMN by BPMessentials. He holds an Advanced Master’s Certificate in Project Management (GWCPM®) and a Business Analyst Certification (GWCBA®) from George Washington University School of Business. Mark is the President of Monteleone Consulting, LLC and can be contacted via e-mail – mark.a.monteleone@sbcglobal.net.