A Study in the use of BPM to increase profits By David Key, Stephen Justice and Martijn van der Kaaij

i
E Squared UK Ltd
Study in the use of BPM to increase
profits
By
David Key, Stephen Justice and Martijn van der Kaaij
Date: 26/10/2010

Study in the use of BPM to increase profits E Squared UK Ltd
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Contact Details
Please address any questions about this document to:
David Key
E Squared UK Ltd
2 Cathedral Road
Derby
DE1 3PA
Tel: 033 00 88 1950
Mobile: 0781 219 6876
Email: David.key@esquaredgroup.co.uk

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Contents
Introduction ......................................................................................................................................5
Executive Summary............................................................................................................................6
Situation............................................................................................................................................7
Roll Out Programme ..........................................................................................................................8
Phase 1: Process Clarification and Communication..................................................................................8
Month 1 ..............................................................................................................................................8
Month 2 ..............................................................................................................................................9
Months 3 and 4.................................................................................................................................11
Months 5 and 6.................................................................................................................................12
Phase 2: Effectiveness Optimisation.......................................................................................................13
Months 7 and 8.................................................................................................................................15
Month 9 ............................................................................................................................................15
Phase 3: Measure, Improve and Communicate Contract Delivery.........................................................15
Month 10 ..........................................................................................................................................16
Month 11 ..........................................................................................................................................16
Month 12 onwards ...........................................................................................................................18
Results.............................................................................................................................................19
Costs........................................................................................................................................................19
Benefits...................................................................................................................................................20
Net Cash Flow and Return on Investment........................................................................................20
Achievement of Profit Target ...........................................................................................................20
Achievement of qualitative targets ..................................................................................................22
Conclusions .....................................................................................................................................23
Further Help ....................................................................................................................................24
Figure 1: Creation of Design & Development processes using Qmap Studio...............................................9
Figure 2: Qmap Studio portal......................................................................................................................10
Figure 3: Change requests using Qmap Studio...........................................................................................10
Figure 4: Change management using Qmap Studio ...................................................................................11
Figure 5: Top level view of the Value Chain...............................................................................................12

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Figure 6: Top level view of imported HR reference processes ...................................................................13
Figure 7: Process detail showing drop down document link......................................................................14
Figure 8: Opened document link ................................................................................................................14
Figure 9: KPI management using Qmap Performance Manager ................................................................17
Figure 10: Branch & Site reports from Qmap Performance Manager.......................................................18
Figure 11: Qmap costs for the project shown as a proportion of profit generated...................................19
Figure 12: Qmap licence usage managed to meet precise demand...........................................................20
Figure 13: Cumulative net cash generated from the project......................................................................21
Figure 14: Return on investment................................................................................................................21
Figure 15: Achievement of profit target .....................................................................................................22
Figure 16: Sample top-level BPM project plans from the BPM Planning & Modelling service ..................24

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Introduction
One of the most difficult aspects of Business Process Management (BPM) is its sheer breadth of
application. Its ability to improve operational effectiveness, efficiency and agility along with the
subcategories of compliance, quality management, training improvement, operational analysis, data
management and process automation are often its own worst enemy. Many people find this scope
bewildering and scarcely believable.
With this in mind, we have written the following case study. Based very closely on a real life study: a
current client of E Squared and an active Qmap user, its aims are as follows:
 To demonstrate the combined power of BPM methodology and specialist BPM software in
improving operational effectiveness. In this case the particular measure of effectiveness
improvement is a specific profit increase.
 To explain in detail, how a successful business efficiency improvement project can be
structured and managed to achieve both quantitative financial and qualitative behavioural
targets. The financial target is a 15% profit increase; the behavioural target is improved
quality compliance and contract reporting.
 To provide a source of help for you and your organisation should you wish to run such a
project yourself. In addition to the explanation of the structuring of this particular project,
E Squared provides a BPM Planning and Modelling service which can be used to create
highly viable BPM project plans underpinned by detailed cost/benefit analyses similar to
those shown in this study. Details are provided in the final section headed “Further help”.
To protect confidentiality, financial, sectoral and structural details have been changed but the
percentage improvements shown are very representative of real returns seen by the paper’s
consulting contributors in this and similar projects over the years.
The case study is written in three parts. The Situation describes the company and its aims from the
BPM project: profit increase. The Roll Out Programme, which also cover three phases, describes
what actually happened and why. The final part describes the results: in terms of costs and benefits.
As with all the papers in this series, we wish to provide insight and provoke thought in an easily-
digestible form. Due to the detail involved, this paper may take slightly longer than our target 15
minute read-time but we hope you find the additional detail valuable. As usual, it will be supported
by follow up webinars, discussions groups and accessible international expertise provided through E
Squared’s new BPM Knowledge Centre. This, which will be launched after the issue of the final
white paper in this series, will be exclusively available through the E Squared website. Details on its
content and accessibility will be published on our blog at www.bpmblog.co.uk and announced
through our Twitter account www.twitter.com/esquaredgroup .

Executive Summary
A medium sized construction company needs to increase profit by 15% and initiates a business
improvement programme, focusing on processes to do so.
The programme is broken down into three phases of: process clarity, effectiveness optimisation and
performance management. In this case study we follow the programme over an 18 month period
and report the results, which are:
 Profits rise relatively steadily and reach the 15% improvement target in month 16.
 By month 18, the programme has generated £1.9m of new net cash
 The internal rate of return on the programme levels out at an ongoing rate of 76%.
In this case study we look in detail at these results and how they were achieved.

Situation
A £400m turnover national construction company which employs 350 staff in 4 regional branches
and a number of customer sites needs to improve its profits by 15%. The Operations Director
recognises that despite a number of previous initiatives to improve effectiveness, there is still a huge
way to go and profits are in single figures. Whilst the company is good at winning sales, project
delivery is poor. All too often vital procedures are not followed and customers complain that there
is little consistency across the organisation: each team does it their way and that often leads to
costly delays and mistakes.
The Operations Director decides to initiate a business improvement programme. Its aims are to:
 Clarify and communicate the operationally critical processes so that everyone in the
organisation works in a consistent, coherent and operationally aligned way;
 Optimise effectiveness so that every employee has all of the relevant information he or she
needs to do their job, right at their fingertips;
 Measure, improve and communicate contract delivery so that at any point in time the
company’s management and its customers are working to a single version of the truth.
The business improvement programme is rolled out in several phases. Qmap Studio is chosen as the
tool to capture, improve and manage its processes and to provide a common point for performance
reporting.

Roll Out Programme
Phase 1: Process Clarification and Communication
In this phase, the company:
 Maps out all of the processes and sub-processes across its Value Chain in 6 months;
 Uses Qmap Studio to capture processes in 50% of the time and with 50% fewer staff than
they expected using Visio.
 Enables business experts from across the organisation to validate and amend the processes
without having to attend meetings or leave their place of work.
Month 1
The project starts with a pilot to capture the current Design and Development process as it is run at
each of the four branches. Two Process Authors are appointed per office: one to convert existing
Word-based procedures and Visio diagrams into process maps and the other to create any additional
or missing processes from scratch. The Branch Manager at each office is given the responsibility of
approving the processes for accuracy and validity, a task which he initially delegates to his Foreman,
asking for comments and amendments on each process created.
The team discover that the process breaks down into 182 sub-processes. Based on their previous
experience of using Microsoft Visio, the team expect these to take at least 30 days to create and 2
additional staff in each office; 8 in all, are put on standby to speed up the work. However once the
team start to use Qmap Studio and they find that procedures and Visio diagrams can be converted
to processes with one click, they realise that the additional staff will not be required. The first drafts
are completed in just 5 days and with approvals from the line managers coming in at a rate of 15 per
day, the whole of the pilot, including final amendments, completes in just 3 weeks.

Figure 1: Creation of Design & Development processes using Qmap Studio
Month 2
Having created the Design and Development processes the team now wish to engage the staff in
their validation and use, which they do using the Qmap Studio portal.

Figure 2: Qmap Studio portal
25 key members of staff involved in the Design and Development process are equipped with Qmap
Studio and asked to review a number of sub-processes for accuracy. They do this using Qmap
Studio’s Change Management function; submitting change requests to the process authors who then
prepare revised draft processes for formal approval (or rejection) by the line managers.
Figure 3: Change requests using Qmap Studio

Figure 4: Change management using Qmap Studio
The result is an agreed, complete and detailed Design and Development Process ready for use across
the organisation.
Months 3 and 4
The work done in Month’s 1 and 2 is repeated for the four other processes which together with the
Design and Development process, form the operational core of the company’s value chain. They
are: Opportunity Identification, Implementation, Handover and Post-Project Evaluation. With the
knowledge and experience gained from the design and development pilot, the work on each of
these processes is run in parallel, so that they all complete within two months.

Figure 5: Top level view of the Value Chain
Using Qmap Studio’s hierarchical structure enables all of the process detail at every level to be
checked and where common processes exist, cross links to be created. The next stage is to add the
support processes.
Months 5 and 6
Qmap Studio contains a range of reference processes for common organisational functions such as
Finance and Human Resources. The company decide that the simplest, fastest and most cost-
effective way to map these functions is to purchase these reference processes and customise them
as required. This it does: the processes are uploaded to the company’s secure Qmap Studio
database and customisation takes just over a week, using the same change management principles
adopted earlier.
In parallel, work starts on the remaining support processes: IT, Legal and Commercial and QHSE.
They complete within 6 weeks.
The result is that in six months, the company’s operational value chain along with its support
processes is mapped and ready for active use. The next stage is to optimise it so that every
employee has all of the information they need to conduct their job effectively, right at their
fingertips.

Figure 6: Top level view of imported HR reference processes
Phase 2: Effectiveness Optimisation
Qmap Studio is a powerful document and data management tool which enables any activity-specific
documents, files, training materials and data sources to be made securely available to each user and
controlled at the point of need. The company recognise that this combination of control, security
and ease of use linked directly to individual process instructions can be used to rapidly improve its
operational effectiveness. So in the second phase of the programme, it utilises this functionality
across the board in the following ways.
In this phase the company:
 Brings together all of the data, documentation and work instructions required by each
employee and delivers it to them on their PC desktops or their mobile devices, including
iPads;
 Uses individual process activities in Qmap Studio to control access to the company’s ERP and
CRM systems, so that information is available with just one click.

Figure 7: Process detail showing drop down document link
Figure 8: Opened document link

Months 7 and 8
The company appoint a manager to oversee the effectiveness optimisation project and 12 Process
Owners - one for each top-level process in the value chain. Using Qmap Studio as the common
means to communicate all process information the project manager organises a one day workshop
for the Process Owners at the company’s head office. The aim is to layout, understand and agree
the requirements for process and data linking so that the Process Owners can delegate the task of
creating the data and document links to their teams. This they then do.
The data and document linking takes 6 weeks to complete.
Month 9
With all of the relevant data and documents now linked directly to the process activities to which
they apply, the company approves the changes and makes them available to all staff. It does that in
two different ways.
Firstly, for the 250 staff with access to a PC or iPad, it purchases Qmap Studio Viewer licences. Then,
for the remaining 100 staff which are all based on client construction sites, the company provides
secondary access to the process information through Qmap Studio’s unique process to project
conversion functionality: the Project Management module. Each of the three Site Manager’s Qmap
Studio Author licence is extended to include the Project Management module so that compliant
baseline project plans can created from their relevant processes and printed off for use on site.
Phase 3: Measure, Improve and Communicate Contract Delivery
In the final phase of the project, having provided each employee with accurate, clear and concise
information on how to do their job and having supported that with links to relevant additional data
and documentation, the company now move to measure and manage its impact on performance.
They do this by:
In this phase the company:
 Creates Key Performance Indicators so that performance measures for the critical process
activities are put in place;
 Crucially installs live reporting of progress against each process activity. In this way
compliance becomes dynamic and measurable for each client contract.
 Enables every member of the management team to receive specific, relevant and live
progress and risk reports on the performance of their own team, so that proactive risk
management can be undertaken to prevent major issues developing.

Month 10
To do this the company purchase Qmap Performance Manager and configure it to measure
performance against the following criteria
 Each stage of operational value chain (i.e. the Level 1 operational processes)
 Each key task (KPI) within each process
 Each resource responsible for delivering the process
 Each of the four company branches
 Each customer contract.
Input feeds are then created between the process and the reporting system and the system is
tested.
Month 11
Live performance reporting starts.

Figure 9: KPI management
using Qmap Performance
Manager

Month 12 onwards
Active performance management is undertaken using the outputs from Qmap Performance Manager.
Reports are produced for each of the four branches against every site contract and by each site contract
to show activity by key individual.
Figure 10: Branch & Site reports from Qmap Performance Manager

Results
Costs
The costs of the project range from 0.8% to 5.0% of the additional profit generated by it. Over the 18
month period the average cost moves from 1.5% to 1.9% and towards the end of the project it is clear
that costs are stabilising at 0.8% of profit generated. Both actuals and averages are shown in Figure 11.
Figure 11: Qmap costs for the project shown as a proportion of profit generated
One of the ways the company minimises its roll out costs is to use Qmap Studio. Studio’s modular
functionality, scalability, flexible contractual terms and off-the-shelf instant availability mean that user
licences can be flexed to suit the organisation’s fluctuating demand, enabling it to pay for just what it
needs when it needs it.
The extent of the licence variation is shown in Figure 12.

Figure 12: Qmap licence usage managed to meet precise demand
Benefits
Net Cash Flow and Return on Investment
Net (or free) cash represents the capital generated from the project after all cost have been taken into
account, including the cost of capital utilised to fund it. In this case the cost of capital is 5% -
approximately equal to UK Bond rates at the time. So the results shown in Figure 13 show cumulative
cash directly generated from the BPM project, rising to £1.9m after 18 months, with a continual upward
trend.
Looked at another way this represents a rate of return (IRR) which in Phase 3 stabilises out to 76% as
shown in Figure 14.
Achievement of Profit Target
The COO’s aim for the project is to increase profits by 15%. Figure 15 shows the gradual increase in
profit over the three phases of the project and how this reaches the target in month 16, rising to 17%
thereafter.
1
10
100
1000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Monthly Variation in Qmap Studio User Licences
Phase 1: Clarify Phase 2: Optimise Phase 3: Manage
Process Authors Process Viewers Process Approvers

Figure 13: Cumulative net cash generated from the project
Figure 14: Return on investment

Figure 15: Achievement of profit target
Achievement of qualitative targets
At the outset the company stated that it needed to:
 Clarify and communicate the operationally critical processes so that everyone in the
organisation works in a consistent, coherent and operationally aligned way;
 Optimise effectiveness so that every employee has all of the relevant information he or she
needs to do their job, right at their fingertips;
 Measure, improve and communicate contract delivery so that at any point in time the
company’s management and its customers are working to a single version of the truth.
All of these aims have a supporting role to play in the achievement of the 15% profit increase and
broadly each is achieved via the project’s phasing. Phase 1 is about clarification, Phase 2 Optimisation
and Phase 3 management (i.e. measuring, improving and communicating contract delivery).

Conclusions
Using a carefully planned Business Process Management programme which closely manages costs yet
focuses clearly on the achievement of the primary target, the company is able to achieve and exceed its
aims.
The tools clearly play a vital part: this could not be achieved with more simplistic process drawing tools.
Equally given the company’s tight margins, it is unlikely that a fully integrated BPM system would have
enabled it to achieve the same benefits. The required capital outlay would have reduced profit even
further and thus delayed or prevented the achievement of the 15% profit enhancement target.
Most importantly the company knew what it wanted and planned a programme to achieve it. The
phasing not only achieved the qualitative targets the company set but it was also the means to deliver
the quantitative target. The investment made in Phase 1 took 6 months to bear fruit but once it did, it
did so spectacularly. The rate of return of 76% is ongoing: at that rate, profits will continue to increase
for some time.

Further Help
E Squared and Qmap software have a long track record of business process improvement. That is why
since its introduction in 1992, Qmap is used by many of the world’s best organisations, both large and
small.
But as this case study demonstrates: purchasing business improvement software is one thing: knowing
how to gain the most out of it through a carefully planned and managed BPM project is quite another. It
is for this reason that E Squared has recently introduced its new BPM Planning and Modelling service.
This enables detailed and specific BPM project plans to be drawn up and tested for viability using our
comprehensive ROI Modeller, so that when applied on the ground you can be sure the plan will work.
The service starts by looking at the objectives for the project and draws on our library of outcome-
specific plans to help you plan all the detail. Once planned we can help you thoroughly risk test and
model the outcomes so that you have a sound and clear financial case to put to your Board.
Figure 16: Sample top-level BPM project plans from the BPM Planning & Modelling service
If you would like to discuss how this might be used to help your own organisation please feel free to
contact us. We should be pleased to help.

A Study in the use of BPM to increase profits By David Key, Stephen Justice and Martijn van der Kaaij

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