Creating Winning Businesses Deming’S System Of Profound Knowledge
A Formula For Calculating The Roi Of Bpm
1. A Formula for Calculating the ROI of BPM
Automation and standardization has benefit, but vague
references to the possible value of Business Process
Management (BPM), isn’t enough for your management
team.
You need hard figures. So how do you get them?
Consider some of these facts:
There is no clear formula or mathematical model available for exact mapping of cost
associated with BPM/Dependent projects and ROI. Benefits are multi dimensional
compare to single direction.
ROI is a critical factor for any larger corporation/ senior management to know before
approving any BPM related investment as it is not in the critical path of company success.
Major corporations/companies understand the needs/benefits of optimal strategies for
operating models to save cost. But don’t want to invest on BPM due to unknown ROI.
There are initial up-front costs associated with BPM installation and adopting this model.
To determine the Return on Investment & Net Present Value for BPM you need to track
both the direct benefits - in terms of cost saving for short term (1 year) and long term (5
years) period – and the In-direct Benefits in terms of cost saving.
Examples of Direct Benefits:
Improvement to operating structure/efficiency due to BPM
Reduction in day to day breaks, failures, rework compared to previous year
Optimized staffing model consist of reallocation of roles and responsibilities (globally or
low cost area) as Business Process Modeling exercise
Reduction in risk exposure with more control points determined with help of BPM
Standard and enhanced End – 2 – End detailed process maps to reflect companies’
policies and procedural (Direct saving on External/internal audits & Time spend on audits
with reduced exceptions)
Examples of In-direct Benefits
Ease of change management of future enhancements due to more standardized
documentation and process mapping
Centralized location of Policies & Procedures with details end-to-end mapping for cross
reference
Direct contact and interaction with IT and business staff due to seamless integration.
Ease of onboarding news clients and developing new strategies to accommodate need of
clients.
Centralized Business analysis & Project Management efforts with more control.
Expansion of BPM model to other department with minimal efforts and reduced external
expertise.
Regulatory and compliance benefits and support to compliance certifications.
2.
3.
4. The ROI example presents a
comprehensive view of rate of
return on investment by
incorporating BPM with business
and operation. Here it clearly
shows that “Direct Impact" or
savings are greater in both time
and strategy when you
incorporate BPM in addition to “in
– direct benefits”. The overall
approval for any company/
department can be quantified /
justified based on above
calculation by plugging in their
numbers.
Adoption and Best Practices
Once you’ve calculated the ROI of BPM, what’s the best way of adopting it?
Incrementally, is the answer!
The biggest obstacles to BPM adoption are culture, resources and funding because in
large organizations, multiple divisions need to coordinate on the initial roll-out. So, it’s
always advisable to incorporate BPM technology by taking an “incremental approach” at
enterprise level. This has been the approach taken by many financial organizations, for
instance, when adopting BPM strategies. Financial businesses are complex and
distributed, and if you start small it is much easier to see and measure the impact.
Additionally, BPM modeling can provides a very quick and direct visual perspective of
any gaps and issues that may be a reflecting of problems within larger financial
processes. This helps managing business planning, reporting, integration and activities
associated through closed loop.
Sample Business Architecture
Model
Once you’ve calculated the ROI of
BPM, and identified the areas where
you will adopt it, here’s an example of
what a business architecture model
could look like:
5. References & Assumptions
* ROE: Rate of Error
* 1 – % saving in terms of HRS converted to approximate per month distribution.
* 2 – Saved Time per Year approximate resource saving (Considering standard 40 -50
Hrs/week)
* 3 – 1 FTE – Approx salary nearly 80K /Year
* 4 - BPM Licenses( Multiple) approx 4 K (Enterprise level could be cheaper)
* 5 – BPM FTE Cost from vendor for installation and training (Approx 30 -40 Hrs/Week)
* IRR - Normally its 6 % - 8 %
* Used google.com – Web Search for secondary information
* Article reference http://www.bpminstitute.org/articles/article/article/future-with-bpm-cost-
vs-benefits-strategies.html
About Vinod Jain
Vinod Jain, Transformation strategist (VP) for Financial Market Treasury
services and responsible for handling business and operational
strategies, optimization and transformation projects. His expertise
includes security servicing like Tri Party Repo, OTC Derivatives, Trade
settlement and custody business.
Vinod holds M.B.A in Finance and Marketing from Fordham University, NY, M.S in
Computer Sc. From FDU. NJ, PMP and other awards. He recognized by "Omicron Delta
Epsilon" (American & International Honor society in economics) and Who's Who among
American Universities. Please note my writing expresses my personal opinions and does
reflect the views of my employer. Vjain_99(@yahoo.com
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