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17ECONOMIC SCIENCES
THE MODUS OF EFFICIENCY ASSESSMENT OF THE ENTERPRISE BUSINESS PROCESSES
Bashuk I.
Kyiv National Economic University named after Vadym Hetman ORCID: https://orcid.org/0000-0003-3261-9302
Abstract
The author's view on the groups of indicators that characterize the efficiency of business processes is considered in the article. It is noted that the performance indicators of business processes are subject to certain requirements that provide a holistic, from a certain point of view, the reflection of the business process. The SMART-approach is used to reflect the requirements for business process performance indicators, taking into account their quantitative or qualitative vector of direction. A six-criteria approach to evaluating the effectiveness of business processes has been formed. The main tools and methods of business process evaluation are highlighted. Taking into account the developed requirements for business process indicators and in combination with the methods of their evaluation, we developed our own model for evaluating the effectiveness of the business process.
Keywords: business process, SMART approach, business process efficiency indicators, process modeling, business process evaluation, process-oriented management.
Problem definition. The aggressiveness of the enterprises business environment requires continuous improvement of the management process that necessitates the research on innovative and progressive management paradigms providing for the competitiveness of economic entities in the target market. However, before effectively managing something, one should evaluate it in a certain way (modus - from the Latin modus - measure, limit, method, rule) and than justify the specific goals to be achieved, based on the analysis.
The modus of efficiency assessment of business processes should be regarded as a method for determining their key parameters in a remote space-time environment, taking into account their interactivity with each other as well as the external impact factors. The process approach to management is based on business processes that represent a dynamic picture of how an enterprise creates a product (service). Nowadays, the dynamics of business processes is dramatically increasing influenced by market needs, the orientation of goods and services to the individual needs of customers, the continuous improvement of technical and technological capabilities and so on. That is why the diagnosis of the level of business processes efficiency has become one of the priority problems to be solved in research as well as in business. The application of models for efficiency assessment of business processes enables their alignment with the business strategy, which provides for the choice of performance indicators, depending on the type of enterprise and its specific economic activity.
Alignment between the enterprise's priorities and business process goals is the indispensable condition for effective and forward-looking development. The enterprise management process should be based on sound and conscious management decisions, which will enable the rationalization and updating of its system. The specificity and measurability of goals require the introduction of certain quantitative indicators, through which the processes can be monitored and measured, as well as the overall organization performance can be assessed.
Based on the foregoing, the analysis of existing approaches to and methods of efficiency assessment of economic entities' business processes using certain indicators is highly relevant and requires comprehensive research on this issue.
Analysis of recent research and publications. Both foreign and domestic scientists provided analysis on the process approach. The following scientists significantly contributed to the study of this approach: Richard L. Daft, Peter Ferdinand Drucker, Michael E. Porter, W. Edwards Deming, Thomas H. Davenport, David P. Norton and others. Systematization of knowledge in the field of modelling, management, planning and evaluation of business processes, and description of existing methods of business process modelling are devoted to the work of Yefym Hryhorovych Oikhman, Yevhen Vasylovych Popov, Dougie Brim-son, Shvydanenko Henefa Oleksandrivna, W. Edwards Deming, Robert S. Kaplan, David P. Norton and other.
Object of the study: assessment processes of the business performance.
Subject of the study: a set of theoretical and applied principles of assessment the efficiency of the enterprise business processes based on certain indicators.
The purpose of the study: to develop modus of efficiency assessment of the enterprise business processes based on the results of theoretical research approaches to process management and business processes.
The correct definition and selection of indicators with the help of which it is most advisable to assess business processes is the basis for the development and effective application of the modus of evaluation of the latter, accordingly possible groups of indicators inherent to each business process in varying degrees should be explored. In order to define the main characteristics of business processes more precisely, they should be evaluated in two ways of forming performance indicators, depending on the required input information, ways to collect it and decision-making methods [9]:
- allocation of indicators into qualitative and quantitative;
- separation of indicators that characterize the business process as a whole, and those that assess individual components: product, resources, customer, etc.
It should be noted that a number of recommendations should be followed in establishing a common system of indicators for assessing business processes, namely:
- the number of indicators should be limited, but sufficient for complete management of the business process;
- each of the indicators should be measurable;
- the cost of measuring the business process should not exceed the management effect of its use.
- it is advisable to develop a set of indicators to assess all aspects of the business process (financial, technical, run-time, quality, structure);
- it is advisable to form an integrated indicator for a comprehensive efficiency assessment of business processes;
- the generalized system of indicators should be thoroughly structured in order to determine which part of the business process contains a problem after interpreting the value of the integrated indicator and its components.
Quantitative indicators of business process are subject to a number of requirements, the implementation of which provides a clear idea of the assessed component of the business process. In the authors opinion, the best disclosure of the above-mentioned requirements is the SMART-goals developing methodology [6], which can be transformed and used in order to select the resulting performance indicators of the business
process (in terms of "goals" to be achieved during the business process or its result (output) in the form of finished goods (services) for the business process client), namely:
Specific. The indicator used to assess a business process must be specific so that its target value is clear to all participants.
Measurable. Only the numerical expression of the performance indicator avoids subjective assessments and misinterpretations obtained due to the lack of formality.
Attainable. The interest and motivation of business process participants directly depends on the degree of attainability of its targets.
Relevant. This criterion regarding the business processes efficiency is relevant since it indicates the importance of a certain business process in terms of achieving the enterprise's main goal:
- complete satisfaction of customer demand;
- maximization of economic benefits for the enterprise;
- ability to create consumer value by business process.
Time based (time parameters). Any indicator must be determined in time, since time is a limiting factor in the value of the actual or target measure of business process efficiency.
In accordance with the determined criteria for the selection of business process performance indicators, Table 1 shows their main characteristics, taking into consideration their assessment vector.
Table 1
Characteristics of business process efficiency indicators according to SMART requirements
Quantitative cross-section
S Clearly defined with the ability to assess their dynamic changes Clearly defined with a complete understanding of their attainability by the enterprise The indicator should reflect the level of goal attainability Clearly defined time frame for attaining a certain indicator
Ability to expertly measure clearly defined indicators M Limit values of indicators should be attainable with optimal use of enterprise resources The change in the indicator should reflect the level of goal attainability Ability to determine and measure the indicator at any time
Clearly defined with a complete understanding of their attainability by the enterprise Limit values of expert indicators assessment should reflect the maximum attainability of the result with optimal use of enterprise resources A Ability to attain goals Time limit on attainig goals
The indicator should reflect the goal attainability The change in the indicator should correlate to the level of goal attainability Ability to attain goals R Ability to attaim performance indicators within specific time frames
Clearly defined time frame for attaining a certain indicator Ability to conduct an expert assessment at any time Time limit on attainig goals Ability to attain goals within specific time frames T
Qualitative cross-section
Source: adapted by the author based on [6]
Pursuant to the above-mentioned requirements for business process indicators, we propose to conduct the assessment in accordance with the established six-criteria method:
1) the efficiency of the process. Assessing the efficiency of the business process is of fundamental importance and includes measuring the amount of input resources and resources consumed during the optimal process in accordance with the established standards (norms, regulations).
Pursuant to this requirement, each business process should contain the following elements to determine its efficiency on an elemental basis:
- purpose (determining the target client and his/her need to be met);
- a unique way of resource combinations to attain a given goal;
- target profitability of the enterprise.
2) the effectiveness in providing the necessary resources. This element determines the enterprise's ability to fully provide the business process with the necessary resources within specific time frames. If the process cannot be resource-intensive, it will lead to the resulting data asymmetry.
3) the cost of the product resulting from a specific business process. This indicator provides an opportunity to assess the total cost of production and supply of goods to the process customers. The cost related to the goods sold is determined for a business process, regardless of whether it is involved in the production of certain goods directly or indirectly. The cost of goods sold includes:
- cost of input materials;
- the cost of transformation within a certain process;
- additional costs associated with maintaining the core business process.
4) the productivity of resources involved in the business process. This element enables the determination of the ratio between the value of goods produced and resources consumed by the process, including tangible or intangible resources, labor costs and other types of resources consumed in the business process.
5) the time required to complete one process cycle. It is characterized by the time interval between input (mobilization of resources), their transformation and obtaining the required result.
6) adaptability of the process. It is characterized by the correspondence of a certain process with the target client needs within specific time frames (compliance with certain standards for quality, environmental friendliness, safety, regulations).
Assessment of these business process criteria provides an opportunity to determine the correspondence between consumer demand and the results obtained by the enterprise.
When analyzing business processes, their internal parameters are the most important, since their analysis makes it possible to form an understanding of the internal enterprise potential, focused on improving the business performance. It is proposed to consider the internal indicators of business process efficiency from four viewpoints, depending on the object (Figure 2).
Since the assessment of the business processes efficiency does not always make it possible to analyze them only using solely quantitative indicators, it happens due to the impossibility of covering several characteristics and results of the business structure. In this case, qualitative indicators are used, the evaluation of which is to some degree subjective, based on expert methods, observations of the business processes implementation and the obtained results. We suggest to consider the model in the Figure 2, in the course of evaluating business processes in order to rely not only on quantitative indicators, but also on a qualitative cross-section of internal indicators of business process efficiency.
Financial indicators reflect the amount of resources used during the process and the result obtained.
Time indicators highlight the efficiency of time use in processes, enable the identification of redundant functions and the determination of the downtime amount.
The indicators of flexibility and adaptability should include those that characterize the features of equipment, technology and available personnel used in the process and their ability to change in accordance with market conditions.
The group of qualitative indicators reflects the compliance level of the enterprise's goods with the reference product expected in the market.
The application of methodological approaches to qualitative analysis of business processes provides a potential opportunity to structure them, to eliminate "bottlenecks" and to determine the order of improvement. Methods of qualitative assessment of business processes are based on comparative characteristics, visual study of processes graphics, as well as on expert assessments of the analyzed economic phenomena. But the existing methods of qualitative analysis are characterized by subjective aspects and a certain "blurring" of the obtained information that does not allow to make balanced strategic management decisions.
1 Business process bandwidth
2. 1 cycle duration of business process
3. Request processing time
4. Query execution time
5. Time efficiency of the production cycle
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1. Execution of sales plans
2. Increasing market share
3. ROI/ROA
4. Margin
5. Profit per 1 customer
Business process efficiency indicators
1. Average number of errors within the business process
2.Ability to integrate into / with other business processes
3. Possibility / number of defect
Qualitative
1. The ability of business process to prompt response to changing conditions
2. Ability to quickly amend the business process without stopping it
3. Ability to integrate with business processes of external entities with the help of IT systems
Figure 2. Direction vectors of internal indicators of business process efficiency Source: developed by the author based on [2]
Contrary to qualitative methods of assessing business processes, quantitative methods avoid subjective assessments and misinterpretations obtained due to lack of conclusion formalization of the experts or business leaders.
Since objectivity of results is an essential aspect of the effective conduct of business process assessment, in our opinion, quantitative methods of business process assessment should prevail, taking into consideration a balanced approach consisting in:
- selection and description of all existing enterprise business processes;
- determination of the economic efficiency of labour, material, financial and other resources;
- determination of a comprehensive business process efficiency indicator;
- comparison of business processes efficiency with similar business processes of other enterprises.
In our opinion, the most important factor for measuring the organization's business processes efficiency is Business Process Management (BPM) [1], which considers business processes as assets to be managed. In particular, the organization can use available resources more effectively, increasing the efficiency and productivity of ways to combine them. At the beginning of its foundation (early 21st century), this system
was presented as a newest approach, the main essence of which was the automation of business processes and their management, with comprehensive consideration of key elements of enterprise policy and business model (strategy, values, culture, organizational structure) .
The main objective of process-oriented management is:
- establishment of a stable mechanism for continuous improvement of the enterprise business processes;
- ensuring optimal use of resources necessary for the efficient business process functioning;
- creating preconditions for sustainable development of the company's business process system.
Further study of this system led to the division of its content into three areas of application of BPI [1, p. 55]:
1) business process improvement (BPI) should be regarded as a one-time initiative (project) aimed at its optimization in accordance with the company's strategy and customer expectations.
2) enterprise process management (EPM) should be regarded as a component of the application of principles, methods and processes of BPM in a particular organization ensuring compliance of the business processes portfolio and their architecture of the enterprise strategy and available resources.
3) optimization is a long-term approach to improving the efficiency and productivity of specific processes based on a continually functioning feedback management system.
This approach enables the consideration of business processes as an element that is characterized by certain features of the resource used by the enterprise, namely:
- economic relations - define the relationship between the participants of the business process regarding the transformation of inputs (resources) into outputs (goods) through the chain of production, distribution, exchange and consumption of certain benefits over a certain period of time;
- opportunities - define the enterprise's potential to produce goods and provide services, measured by quantitative and qualitative parameters. At the same time, it is advisable to consider business processes not only as opportunities, but also as constraints. This limitation is relative and characterized by the optimization of the business process. Due to the limitations of a particular business process, the overall business efficiency can also be reduced;
- object of ownership and costs - is characterized by the right of certain entities (enterprises) to use the business process (if it is unique, which provides a certain uniqueness for the company and increase its competitiveness in the market) and the amount of costs for the functioning of this business process as reflected in the resources used in the business process, which can be measured over a period of time;
- object of investment - the release of capital to optimize the business process taking into consideration changes in the external and internal enterprise environment.
- complementarity -the effective business functioning depends on the selection and proper combination of business processes in order to ensure greater effect.
- interchangeability - is characterized by the possibility of replacing the business process with its better version (using modern IT technologies) or a new one to achieve the company's goals.
Like any resource, the efficient use of a business process can be assessed. After conducting the scientific literature analysis [2,8,9], we identified the following methods of assessment the business processes efficiency, which we regard as the most effective in their combination:
1) The most well-known multidimensional model for measuring enterprise performance as a whole, in particular business processes, is a balanced scorecard
(BSC), developed by Robert Kaplan and David Norton [12].
The main difference between BSC and traditional business performance assessment methods is the use of a set of indicators (financial and non-financial), selected to capture all significant (in terms of strategy) aspects of the organization activity reflecting the company's movement to create its future value through investment in personnel and long-term customer engagement. This system applies a four-dimensional approach to assess performance: finance, customers, training and development, internal business processes.
BSC is a universal and flexible tool that enables transformation of the organization strategy into a set of goals for each of the four approaches that meet specific business objectives that can be measured by performance indicators (Figure 3).
The flexibility of this system lies within the ability to be easily and instantly modified or transformed, though this is possible only with the achievement of certain principles of working with basic information to build a system:
- information should be rational, that is, collected to ensure relevant decision-making process, analysed, highlighting only strategically important issues.
- goals should be balanced and adequate, that is, achieving only a certain direction at the expense of others should not be the main task of developing and using this system; each block of this system is closely related to the others. Therefore, focusing on only one direction will distort the analysis results of the potential company' s growth through the use of a balanced scorecard. The indicators included in the system should meet the needs of all users, and the system of indicators should cover all the major processes shaping the state and trends of the enterprise in a market economy, increasing the practical value of predicted information for management.
- indicators of evaluation of each direction (block) of the System must have a measurable basis, that is, a certain quantitative expression enabling the evaluation of this indicator in the dynamics.
A broader view of management provides an objective picture of the state of the company, analysis of opportunities, competitiveness. A balanced system of indicators provides for assessment and management of specific and concrete for every enterprise indicators, which enables the identification and elimination of shortcomings in the enterprise before they result in deterioration of financial performance, as well as provides consideration of the enterprise activity in terms of value creation, resulting in increased competitiveness.
Indicators to assess the "Finance" direction
r
Goal
Finance
Goal
Clients
Indicators to
assess the
"Clients" di-
rection
Goal
Training and development
Business processes
Goal
Indicators to assess the "Business processes" direction
Fig.3 Balanced system of indicators Source: developed by the author based on [12]
2) Functional cost analysis is an auxiliary organizational tool that gives an opportunity to approach the optimal ratios between costs and quality of the business process through consistent, predetermined action algorithms. The basic principle of FCA is the need to determine and eliminate those additional operations within the business process that are not directly functional for the customer, but increase the costs associated with the business process. That is, functional cost analysis of business processes is carried out in order to identify inefficient sequences of operations and find solutions to optimize them in order to increase productivity, minimize costs, improve the quality of goods and services with the help of performing the following types of work:
- analysis of the cost of enterprise's business processes;
- determination of the functions performed by the business process participants with the view to transforming resources into products;
- identification of all functional costs of the business process, particularly inefficient ones;
- conduction of a comparative analysis of cost reduction options by business process type, by reducing the number and optimizing the functions performed by the business process participants;
That means, functional cost analysis provides a representation of the business process (as well as its
components) in terms of the utility that it has or should have.
FCA is a process of collecting and processing information allowing the object to be considered as a set of functions that it must perform. Pursuant to that, the main stages of information collection have been identified [1, p. 61-62]:
- building a functional business model. This stage is characterized by a collection of information about the processes of the enterprise, construction and approval of the functional model;
- forming of information support for processes. This stage is characterized by a construction of the enterprise organizational structure, the definition of cost items and the distribution of expenditures in conformity with the organizational structure;
- transfer of values to the functional model. There is a coordination of organizational structure with the functional model of processes. This stage is also characterized by the definition of function cost;
- analysis of results and development of recommendations. The analysis of the information obtained at the previous stages on processes improvement is carried out.
The main purpose of this analysis is to identify reserves of costs reduction through the development of efficient production options and a better ratio between the consumer value of the product and the cost of its manufacture (Fig. 4).
Figure 4. Algorithm for conducting FCA enterprise business processes Source: adapted by the author based on [3]
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Therefore, this method can be used to study different directions of the enterprise and provides an opportunity to structure the functional tasks of the business process, which considerably facilitates the research and detection of redundant functions.
3) Ranking by key success factors (KSF). The efficiency of the business process system can be assessed with the help of a system of key success factors, which are the elements ensuring efficient and focused business management [9]. Precisely by them you can check whether the processes meet the defined needs of the company and lead to the achievement of its strategic goals. This method is aimed at developing indicators
that reflect the qualitative state of the business process system by introducing qualitative indicators, based on the decisions of experts.
The combination of these methods enables the development of SMART-indicators of business process efficiency in the process of assessment such an efficiency (Figure 5)
The obtained description of efficiency indicators, in its turn, enables evaluation of the business process indicators and drawing of conclusions about existing problems in the business process system, based on their evaluation.
Figure 5. Model of efficiency assessment of business processes and its improvement
Conclusions
The study identified a number of performance requirements for business process, the implementation of which provides a clear picture of the evaluated component of the business process, namely: specificity, meas-urability, attainability, relevance.
It was determined that the most important element during the conduction of business process analysis is its
internal parameters, the analysis of which enables formation of an understanding of the enterprise internal potential aimed at improving the business efficiency.
An important aspect of effective business process evaluation is the objectivity of performance, so we believe that quantitative methods of business process evaluation should prevail. The identification and selection of quantitative indicators can be achieved through a combination of methods for efficiency assessment of
business processes: a balanced scorecard, functional cost analysis and analysis of key success factors.
The author's approach (modus) of efficiency assessment of enterprise business processes and their improvement was developed, on the basis of the conducted study.
The purpose of further research is to develop an improved methodological approach to the evaluation of business processes that will enable a comprehensive analysis of companies' business processes, regardless of the scope and specificity of their activities.
References
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СПЕЦИФИКА ИСПОЛЬЗОВАНИЯ ГРАВИТАЦИОННОЙ МОДЕЛИ МЕЖДУНАРОДНОЙ ТОРГОВЛИ ДЛЯ ОЦЕНКИ ЭФФЕКТИВНОСТИ ИНТЕГРАЦИОННОГО ВЗАИМОДЕЙСТВИЯ В
СФЕРЕ УСЛУГ
Вашкевич Ю.Б.
Ассистент
Белорусский государственный экономический университет
GRAVITY MODEL OF INTERNATIONAL TRADE: ASSESSING THE EFFECTIVENESS OF
INTEGRATION IN SERVICES SECTOR
Vashkevich Y.
assistant
Belarus State Economic University
Аннотация
Гравитационная модель международной торговли является одним из ключевых инструментов анализа и прогнозирования международных торговых потоков. Она активно используется для анализа торговли товарами и оценки эффектов интеграционных процессов в товарном контексте. Вместе с тем, растущая роль услуг как объекта мировой торговли и многочисленных интеграционных соглашений ведет к необходимости адаптации гравитационной модели для оценки последствий интеграции в сфере услуг. Специфика модификации и использования модели в этих целях выступает ключевым предметом данной публикации.
Abstract
The gravity model of international trade is one of the key tools for analyzing and forecasting international trade flows. The model is actively used to analyze trade in goods and to assess the effects of integration processes
