UC Finance and ROI - Recent Threads

Subscription Based Licensing

dean.higgins — Sun, 11 Apr 2010 05:07:48 GMT

What companies are offering subscription based licensing regarding their IP solutions? If I understand it correctly, I can purchase an IP PBX core system and instead of buying user/phone/extension licenses - I can "rent" them through subscription based licensing. It sounds interesting - though a bit confusing. Would it not make more sense to rent the entire system via hosted voice solutions?

Business Value of UC

admin — Tue, 23 Mar 2010 23:03:58 GMT

Brenda Perea

Posted: Tuesday, June 16, 12:18 PM

Joined: 12/11/2007
Posts: 6

Samantha

Posted: Tuesday, June 16, 12:34 PM

Do you agree with some of these stats? Are we using BVI in our discussions?
Thanks Samantha

According to a T3i Group primary research study of nearly 300 business decision-makers, the percentage of enterprises (businesses with 500 or more employees) reporting bottom-line gains from UC is expected to jump significantly this year.

The study, entitled: InfoTrack for Unified Communications: The Business Value of UC, used survey results to develop a “Business Value Index” (BVI) to determine quantitatively which market segments were farther ahead in achieving business value from UC apps. Among enterprises, the percent beginning to achieve measurable business value is projected to jump from 14% in 2008 to 43% in 2009. Small and medium businesses (SMBs) are expecting a smaller increase, from 9% to 22%.

This research also compares the BVI of companies based on their preferred vendor of UC applications. The vendors whose users had the highest BVI were Microsoft, IBM and Cisco.

Marty Parker

Posted: Tuesday, June 16, 12:38 PM

Joined: 6/16/2009
Posts: 3

Hi, Samantha,

Impossible to know whether to agree or not, since there is no definition of BVI in the message.

I did some digging and find that my long-time analyst friend, Terry White, is the creator of the BVI metric. It seems to be a growing technique among analyst firms to define leaders and laggards then assign probabilities to their future actions. In the attached TOC of the study, it seems that companies with a higher BVI are more likely to increase their UC spending (or, restating the axiom: high ROI drives more investment…).

I have not talked with Terry about this yet, but Russell said that this was an assessment of the value obtained from UC investments. Perhaps Terry will share the methodology or algorithm and then it will be possible to say whether there’s agreement or not. If there is, then it may be worth supporting the concept to help customers that don’t like “ROI” to have another way to justify UC investments.

Anyway, there’s a response, for now.

Thanks, Samantha, for asking.

All the best

Michael Finneran

Posted: Thursday, July 9, 11:56 AM

Joined: 3/21/2008
Posts: 3

So can we get CXOs to invest in UC on this basis? IT seems the things that are selling this year are ones that can show a clear ROI like reductions in conferencing service costs, reduction in long distance fees and the like.

Should we be pitching productivity gains as the front line justification or the "icing on the cake"?

Jim Barker

Posted: Thursday, July 23, 2:30 AM

Joined: 5/25/2009
Posts: 1

We have seen more success in positioning UC and gaining acceptance from our business clients using the ROI model than anything else. We do, however, service a smaller business - usually one with 25 to 500 employees. You can see more about what worked for us at www.unified360.com/blogs.

Pam Avila

Posted: Monday, August 3, 9:43 AM

Joined: 7/16/2008
Posts: 17

OK - pretend that I'm a customer. Really, how can I get the financial benefits of UC that I was trying to achieve when we deployed it?

Rick Chin

Posted: Monday, August 3, 9:48 AM

Joined: 4/20/2009
Posts: 5

Everyone wants to receive some financial benefit from deploying UC since you’re taking multiple activities and centralizing them into your communications system. Perhaps you gain a little more value by enabling smartphones to listen and forward voice mail, slightly increasing the time savings and lowering response times. However, after that, where are the financial benefits?

Could you justify an upgrade or migration based on those productivity gains? The benefits of UC are real, but quantifying the impact is a tough job. It means measuring aspects of work that we consider insignificant or somewhat intangible.

With today’s focus on quick results and impact on the bottom line, features that contribute more directly to the work process are more valuable, which brings us to what should become UC’s killer app: business process automation.

Think about this: every business could streamline work better. Most businesses can’t afford to implement the current crop of business process automation and management suites. They’re very expensive, hard to program, and difficult to change as business changes. They also require a bunch of extra systems and layers in your infrastructure and they only offer partial visibility into the business process. Lastly, they don’t integrate communications at all, so your UC investment is no better off.

Imagine instead if business process automation was part of your UC applications. It would be ubiquitous, integrated, easy to setup and personalize, connected to your voice and data infrastructure, and reasonable in price.

Let’s say you process documents (accounts payable, sales orders, insurance claims, medical records). We’ll divide those documents into two groups, easy and hard. Easy documents go through the processes without challenge (representing the fastest a document can be processed) and hard documents go through the processes needing additional clarification and supervisor review or approval. Naturally, these processes for hard documents require more time and resources to complete.

(These are example numbers that are based off similar workflows for actual companies)

What the process looks like before automation: 100 documents, 19 steps, 100 reviewed by hand, 40% (40) documents are escalated for review and sign-off by a supervisor. Time for the easy file: 5 minutes. Time for a difficult file: 13 minutes. Total work hours: 13. Average cost per document handled: $3.16

The same process after automation: 100 documents, 16 steps, 80 auto-approved, 20 require further review, 40% (5) documents are escalated for review and sign-off by a supervisor. Time for the easy file: 2.3 minutes. Time for a difficult file: 5.2 minutes. Total work hours: 5. Average cost per document handled: $1.18

Assuming we’re paying people a flat $40,000/year, here are the projected savings from automation:
Daily: $198
Weekly: $989
Yearly: $51,405

Over $50,000 in savings from lightly automating just one process. What if we automated ten, twenty, or a hundred? Maybe we could take the time and money we save and reallocate resources to new opportunities or reduce overhead. If we systematized our employee knowledge and best practices, we’d reduce our risk of losing a key employee.

So, to answer you question, by combining UC and business process automation, you gain these highly measurable financial benefits of UC that you were hoping to see.

Accelerating ROI

admin — Tue, 23 Mar 2010 23:01:42 GMT

Pam Avila

Posted: Monday, August 3, 9:59 AM

Joined: 7/16/2008
Posts: 17

To achieve a larger or faster ROI UC needs to move into daily processes that impact the bottom line.

Pam Avila

Posted: Monday, August 3, 10:02 AM

Joined: 7/16/2008
Posts: 17

How can a customer leverage their UC investment to generate a higher return than we typically see from user productivity (UC-U) applications?

Rick Chin

Posted: Monday, August 3, 10:04 AM

Joined: 4/20/2009
Posts: 5

The benefits of UC have always been that it increases productivity for a wide population of employees and that together, this increased productivity adds up to more than the cost of unified communications. Given enough time, most deployments do payback the investment but it would be desirable see a faster return.

To achieve a larger and/or faster ROI, the benefits of UC must do more than shave a few seconds off incidental activities. UC needs to move into daily processes that impact the bottom line, giving it the significant ROI that makes it a “must have” instead of a “nice to have.”

The best UC candidate for more return is business process automation and management. Traditional business process management suites and tools have been expensive, required lots of consulting, lacked the ability to automate the entire process, and require expensive custom programmers to implement. They are not well integrated into enough enterprise apps, and time it takes to test and deploy a change or an update is lengthy.

Some UC business process automation applications address those limitations. By leveraging UC infrastructures, the process automation can flow throughout the enterprise and integrate with more enterprise applications. Costs to implement and maintain are reasonable, which makes process automaton a viable solution for more businesses than previous more costly solutions. There are no complicated programming methods. Instead, visual design environments that resemble flowcharts are used. Process updates can be done quickly and applied to production.

Because mere mortals can create a process automation using the visual design application (and mere mortals cost less than custom programmers charge), companies are willing to apply it to automate small and medium processes that could not be touched in the more complex systems. Even modest automation of one common process can save anywhere from $1K-50K annually, making the opportunities for automation increasingly attractive. The savings increase as multiple processes are automated. And there are other benefits like faster completion, quicker response time, ability to focus resources on more markets, or the integration of communications into processes automatically.

Suddenly UC, the system with traditionally soft, intangible ROI, becomes the foundation for business process automation projects and UC gets measurable, substantial ROI out of the deal. Until know UC has been like Clark Kent, just a mild mannered reporter. But just as a phone booth transforms Clark Kent into Superman, when UC combines with business process automation, it becomes UC with a super-ROI.

Cloud-based Communications

admin — Tue, 23 Mar 2010 23:00:30 GMT

Nancy Jamison

Posted: Friday, January 15, 9:05 AM

Joined: 1/13/2010
Posts: 3

Over the last decade we have seen a big increase in the amount of applications that are deployed in either a hosted or SaaS model for numerous reasons. In the past year in particular, economic conditions have spurred the increased adoption of hosting communications platforms in the cloud over spending CapEx money on a premises-based solution. Which is better for you and why?

Nancy Jamison

Posted: Friday, January 15, 9:14 AM

Joined: 1/13/2010
Posts: 3

There seems to be a great debate about the cloud vs. premise solutions. From everything from CRM and email, to storage and data mining. How does communications fit into this debate?

Tim Passios--When people think about communications, they often think just about voice. However, we use so many different types of communications today, it is best to think of it in forms of applications. Emails, Instant messages, SMS, contact center, these are all communication applications used by different organizations. In today’s world of tight budgets, having your communications run in the cloud – known as Communications-as-a-Service – makes a lot of sense with a ton of benefits:

- Little or no capital expenditure

- Predictable monthly costs instead of a large up-front payment

- Less IT overhead

At Interactive we call our hosted offering Communication-as-a-Service. There is a lot of info on our CaaS.com website.

Nancy Jamison

Posted: Friday, January 15, 9:30 AM

Joined: 1/13/2010
Posts: 3

Is it probable, or even possible, that we will see a major shift in the way companies buy and deploy business communications?

Brad Herrington--I think it is already happening and it all started with two events.

- The movement towards VoIP. With packet-based or soft switching, vendors started routing voice over the corporate data network in the late 1990’s. As VoIP picked up steam, along with the wide spread adoption of MPLS networks, it became increasing apparent that you could run your communications system across a wide area network (WAN) without losing audio quality or impacting security.

- The financial crisis. As organizations stepped back to evaluate their spending in light of the economy, they became determined to find better ways to complete their communications projects without spending a lot of money on hardware, software and maintenance contracts. This opened the door for the adoption of hosted-communications solutions or CaaS solutions.

Because of these two events, you will start seeing more and more companies adopting a CaaS model for their communications so that they too can reap the benefits it provides.

Blair Pleasant

Posted: Friday, January 15, 9:48 AM

Joined: 1/2/2007
Posts: 14

Do you see mainly SMBs using cloud based services, or larger companies too? What about the loss of control issue that some larger companies complain about?

Nancy Jamison

Posted: Monday, January 18, 4:15 PM

Joined: 1/16/2007
Posts: 9

Tim,

I do think its the ultimate try and buy, if they choose to start with hosting and then decide they want some or all of it in house. Even if companies start with only a piece or as back up or as a business continuity option. It also depends on what it is you want to host too. For example, with a contact center it is an easy business case choice to use hosting for seasonal overflow, as opposed to deciding to build a contact center for all customer support from the ground up. For UC, hosting certainly provides the option of going all in or just providing capabilities for certain UC functions to specific groups of employees.

John Wesselman

Posted: Wednesday, January 20, 8:41 AM

Joined: 1/6/2010
Posts: 3

I just came across a very powerful article, "Managed service providers: Outsourcing unified communications applications" written by Katharine Trost of Nemertes Research, that presents numbers that indicate that the Unified Communications (UC) boom has only just begun. What was even more interesting is that there is a dramatic increase in organizations considering a UC implementation through a managed service provider (MSP).

Here are some of the important facts that she presents:

Leaner IT departments - "67% of organizations are decreasing their IT staffs, by an average of 17%."
Increased adoption of UC - "In 2007, just 17% of organizations were deploying UC, meaning they were using at least one unified communications application. By 2008, that figure increased to 47%. This year, that number has grown to 60%."
Considering an MSP for UC deployment - "65% of organizations are using, or evaluating, some flavor of managed services at one or more of their locations. That's quite an increase from the 46% we saw in 2007, and 27% in 2006.
Switching to an MSP after challenges of self-deployed UC - "Generally telecom staffs use an MSP after finding IP telephony more difficult to manage than expected, especially on a 24 × 7 basis."

I have some more insight into the MSP effect on UC in my blog: http://blog.smoothstone.com/bid/29920/Ready-for-the-Managed-UC

But there is clearly an increaseing amount of consideration given to Managed Service Providers.

John Wesselman

Smoothstone IP Communications

Nancy Jamison

Posted: Monday, January 25, 1:02 PM

Joined: 1/16/2007
Posts: 9

So, particularly in the area of UC, which is just starting to see more of in a hosted environment, what are some of the more compelling reasons to check into communications-as-a-service?

Tim Passios

Posted: Tuesday, January 26, 8:05 AM

Joined: 2/14/2007
Posts: 3

Nancy Jamison wrote:

So, particularly in the area of UC, which is just starting to see more of in a hosted environment, what are some of the more compelling reasons to check into communications-as-a-service?

Sure thing, Nancy. Here are a few.

Cost, complexity, staff - In the past, the barrier to entry for UC for some companies has been the cost of switching out their current communications infrastructure. With CaaS, the monthly costs are predictable and easy to budget, with minimal (or no) capital expenditures and far less IT overhead than on-premise data centers require.
Trial time - Some companies are even going with a ‘toe-in-the-water’approach and carving off a certain department or group of people to try the features that CaaS offers. This allows for the measurement and evaluation of certain features to see where they can realize the greatest value without having to disrupt their current operations.

Tim Passios

Posted: Tuesday, January 26, 8:19 AM

Joined: 2/14/2007
Posts: 3

Blair Pleasant wrote:

Do you see mainly SMBs using cloud based services, or larger companies too? What about the loss of control issue that some larger companies complain about?

Hi Blair,

These are great questions. Let me see if I can address them for you:

SMBs vs Large Companies - Over the past 2 years, the interest shown by these two groups have grown closer together. Initially for CaaS, the interest was mainly relegated to the SMB space as they were looking to cut costs and gain in features. Deploying a CaaS solution provided a way to do just that - get all of the features of an expensive communications solution without the capital expenses. This remains true today for the SMBs.

As for the larger companies, they initially showed little interest in CaaS offerings for several reasons, including the feeling that the feature set lacked what they could get with their premise-based solution as well as the whole issue surrounding security and the trust needed to host communications or data outside their network. For those larger organizations that did consider a CaaS solution, they mainly used it either as a way to trial a solution (kick the tires) or as a way to provide small departments or branch offices a solution when they needed something up and running quickly.

This has changed dramatically as larger organizations are now rolling out their entire enterprise communications on a CaaS solution. With goals to minimalize IT staff and associated training costs, along with the need to drive capital expenses down, larger organizations are actively seeking CaaS solutions as a way to achieve those goals.
As for the concern of larger customers losing control, I think this still remains an issue and may even be a sticking point for many companies considering moving to a CaaS solution. However, while there are many ways to overcome those issues, many organizations are finding the control issue to be far less important than cutting IT costs and capital expenditures and are willing to lose some of that control. And in many organizations, they are more then willing to give up that control for the same reasons as mentioned in the point above - they just don't want to maintain an IT staff and the costs associated with it.

Tim Passios

Posted: Tuesday, January 26, 8:21 AM

Edit Delete

Joined: 2/14/2007
Posts: 3

John Wesselman wrote:

Here are some of the important facts that she presents:

Leaner IT departments - "67% of organizations are decreasing their IT staffs, by an average of 17%."
Increased adoption of UC - "In 2007, just 17% of organizations were deploying UC, meaning they were using at least one unified communications application. By 2008, that figure increased to 47%. This year, that number has grown to 60%."
Considering an MSP for UC deployment - "65% of organizations are using, or evaluating, some flavor of managed services at one or more of their locations. That's quite an increase from the 46% we saw in 2007, and 27% in 2006.
Switching to an MSP after challenges of self-deployed UC - "Generally telecom staffs use an MSP after finding IP telephony more difficult to manage than expected, especially on a 24 × 7 basis."

------------------------

John -- great post. These stats are right on target with what we continue to see in the market today!

Thanks for the stats.

Tim

Nancy Jamison

Posted: Tuesday, January 26, 8:32 AM

Joined: 1/16/2007
Posts: 9

Tim Passios wrote:

"As for the concern of larger customers losing control, I think this still remains an issue and may even be a sticking point for many companies considering moving to a CaaS solution. However, while there are many ways to overcome those issues, many organizations are finding the control issue to be far less important than cutting IT costs and capital expenditures and are willing to lose some of that control. And in many organizations, they are more then willing to give up that control for the same reasons as mentioned in the point above - they just don't want to maintain an IT staff and the costs associated with it."

Tim, normally I would say something like "it goes without saying", but in this case not. I think it needs to be said that part of the issue of control is that any company that is concerned about security and loss of control just needs to vet out the company that they are thinking of doing business with. Hosting providers should be able to prove their track record with security, as well as give a customer a really good sense of good the people are that will be running their communications/contact center etc.

Also, one of the pro and cons for hosting versus premises is that if you develop and maintain your own applications and systems you have to also attain and retain the talent to run them. A good hosting provider has that talent, and can also bring new capabilities to their clients often quicker than premises-based customers.

Blair Pleasant

Posted: Tuesday, January 26, 10:12 AM

Joined: 1/2/2007
Posts: 14

Tim: I think you left out another point about the value of a hosted service - customers don't have to constantly upgrade to the latest release of a product - the service will automatically ensure that the customer has the latest and greatest, with no upgrade costs or hassles.

Nancy Jamison

Posted: Tuesday, January 26, 12:05 PM

Joined: 1/16/2007
Posts: 9

So what about the con side of pro and con (and where did that come from anyway?). Kidding aside, besides the perception of loss of control or security issues, are there any cons to employing communications-as-a-service?

Brad.Herrington@inin.com

Posted: Wednesday, January 27, 1:58 PM

Joined: 8/3/2009
Posts: 3

Nancy

Any company looking to move functions of their contact center to the cloud needs to make sure they have the flexibility to address their future needs, and not just the next 12 months. Make sure the CaaS offering will scale to meet their growth plans, and even allow for the eventual transition of all the CaaS features to be brought in as a full on-premise solution, if their business model dictates the need.

And while size is a simple problem to address, control is also important. When looking at a CaaS solution, one set of features doesn’t work for everyone. Companies need to have options as to how much or little control they want over something as basic as the audio path for a call, having the flexibility to offload all audio to the remote site or the security of keep audio local, while maintaining the same set of features is a big advantage for companies looking for a CaaS solution. The most glaring pitfall is being locked into something that does not meet future needs.

Brad

Nancy Jamison

Posted: Monday, February 1, 12:59 PM

Joined: 1/16/2007
Posts: 9

Brad,

That is an interesting point that maybe some hosting vendors would jump in on. Obviously Interactive provides this, but where will customers go to get CaaS services?

Nancy

Brad.Herrington@inin.com

Posted: Monday, February 1, 1:32 PM

Joined: 8/3/2009
Posts: 3

Nancy,

Companies are likely to begin looking at CaaS solutions by turning to their existing communications vendor if they are happy with them. However, the few vendors who do offer CaaS solutions today provide a wide variety of services and service levels, so most companies issue a RFP (Request for Proposal) to receive bids. When developing a list of RFP candidates, most companies will research competitors or rely on consultants to develop a list of CaaS candidates.

Some companies may consider turning to one of the major telecom providers. The problem is that the telecom providers offer a hosted telephone system. They bought some vendor’s phone system and are trying to resell and share that system while making it fit your business. But they are selling a service, not a product. Because it’s not really their product, they don’t know it as deeply and can’t offer the wide range of feature updates and latest releases, or provide the in depth support that can be offered by a orginal vendor. For example, at Interactive Intelligece, we make our software and offer it up as a CaaS solution. We know the product inside out, and our experience with 3500 companies in 93 countries gives us a great starting point to create a deployment that works and thinks they way you need it to, not like what is best for the majority.

Brad

You know how a home owner always makes sure everything works great and invests in things for the future good of the home while the renter just uses the property? We’re the home owner; the telecom companies are the renters. Who would you rather deal with?

Art Rosenberg

Posted: Tuesday, February 2, 1:11 PM

Joined: 6/16/2009
Posts: 3

UC is More Than Person-to-Person Voice

There are several operational and strategic drivers ( besides simply cost savings) for planning UC as a hosted or managed service rather than a premise-based, in-house technology. These include, the growth of wireless mobility using multimodal "smartphones, " the complexity of developing proactive, multimodal, self-service business applications, and enabling customer/end user flexibility in accessing their choice of available live (real-time) assistance. However, we need to separate the sourcing of the networking facilities required from that of developing application software for servers and endpoint clients differently than in the past. This will be especially important in dealing with mobile customer/consumers who will be choosing their own devices and communication services for interacting with everyone.

This should really mean the end of the "walled garden" approach of the carriers who supply the public wired and wireless communication connections, as well as increasing the need for interface/device-independent application software, and flexible and end-user choice of mobile devices and "smart-phones." That's a future to plan for, while at the same time still supporting the voice applications or the past. We are, after all, in the middle of a transition from siloed to open and converged software-based communications, not only for person-to-person contacts, but also between people and automated self-service applications (inbound and outbound). Real-time contacts can be now include 2-way instant text messaging (IM) as well as as immediate notifications via SMS. (Don't forget social networking too!) With presence-based "click-to-contact," efficient real-time contacts can be made on-demand, rather than traditional "blind" telephone call attempts.

Clearly, the burden of making it all work will require the IP network capacity to support and manage flexible UC traffic demands. However, the bigger challenge will be to design, implement, and manage the various kinds of business applications that will make up that communication traffic. So, now, who will you trust to be able to do that for the many different business applications and for both voice and visual interfaces?

Nancy Jamison

Posted: Friday, February 5, 9:43 AM

Joined: 1/16/2007
Posts: 9

Brad and Art,

Both good points. I like Brad's comment about the homeowner versus the renter. There are some obvious benefits to owning the stack as not only can you provide seamless integration of the business apps, but also add new releases, or even new release versions as soon as they are available, rather than waiting for a third-party to develop something you then plop onto your service offering.

I think that having ownership of a CaaS offering from one vendor is also good for the vendor, and ultimately the customer because you get an endless feedback loop on the apps that you put out there. OK, so there is some risk in "trialing" an interim release of a product on a CaaS customer, but its light years ahead of the way we used to do it, which was to have 18 month product development cycles, ending in a big release of a product, in which we hoped for the best.

But Art makes a good point too. We still have the outside service providers to contend with because no one owns the entire thing.

Nancy

Nancy Jamison

Posted: Friday, February 5, 9:44 AM

Joined: 1/16/2007
Posts: 9

How about turning this in a different direction, since this is a UC site. Does CaaS help or hurt the UC movement?

Nancy

Brad.Herrington@inin.com

Posted: Friday, February 5, 11:45 AM

Joined: 8/3/2009
Posts: 3

CaaS helps the UC movement. Companies with constraints will find CaaS offers them new hope. If they need to deploy enhanced contact center applications, face limited technical staff resources, are facing a multi-site upgrade from a variety of legacy PBX systems, or need to deploy a consistent solution across their enterprise and contact center, using CaaS can bring those services to them.

Imagine a business with a mobile sales force and perhaps a few regional offices. They could use CaaS to deploy UC to everyone in their office and remote/mobile employees to facilitate conference calls, keep sales and inside sales in closer contact, deliver faxes to mobile devices for review or approval, send voicemails as emails, and everyone being able to see the availability of their co-works at all times. These features would change how quickly and efficiently a business can respond to customer demands.

Brad

Nancy Jamison

Posted: Monday, February 8, 11:32 AM

Joined: 1/16/2007
Posts: 9

Is the contact center unique when it comes to CaaS, or simply part of the bigger picture?

Nancy

Tim Passios

Posted: Tuesday, February 9, 12:13 PM

Joined: 5/7/2009
Posts: 2

Nancy,

Contact centers will often lead the move into CaaS because of the flexibility it offers and the ability to integrate or utilize a rich set of applications into a business’ processes quickly and comprehensively. Contact centers will realize a greater reward and return on investment based upon the number of applications they utilize.

However, many enterprises will also find significant value in CaaS offerings, especially as companies seek to unify their environments, outsource their communications infrastructure, and build a stronger workflow across their organization. Individual returns for companies will be determined by the nature of their business and their business approach to the market. However, for many companies, there are significant savings and operational gains to be recognized.

Tim

Improving Business Performance

admin — Tue, 23 Mar 2010 22:53:35 GMT

Samantha

Posted: Tuesday, June 16, 12:51 PM

By: Stephen G. Smith, President & CEO of Accellenx Partners
Wednesday April 15, 2009

Performance, whether on a stage of theatre or business, is all about “making it happen”. Whether a Shakespearean tragedy or strategic business initiative, the performance of the organizational unit is what produces results. The math is simple: One, someone writes the play (strategic plan). Two, everyone in the group rehearses their parts (departmental and individual performance plans). And three, the troupe orchestrates individual performances into a unified group performance (execution of tactical plans providing goods and services to customers). The result, when done well, is applause from the audience (satisfied customers who vote again for your goods and services with their dollars). Yet, if this concept is so basic, why is it that most companies fail to understand how to manage—much less improve—their performance?

As I’ve noted previously, most organizations are rather skilled at planning for better outcomes. Planning, and its forward-looking nature, is often just as much art as it is skill. So, planning in and of itself is not something that can be easily measured to determine how good it really is. But business performance, rooted in pure execution, is all about action—action that is designed to accomplish the goals defined in the existing plan. Such actions can and should be measured.

However, planning for, then executing, and finally measuring organizational performance does not guarantee delivery of planned performance. Nor does it lend itself to improving upon that performance. That’s because execution in any business exists at multiple levels in the company: namely, at the organizational level of performance, the workflow (process) level and the individual employee level. These three echelons comprise the backbone and infrastructure of performance delivery in every firm.

At first, this concept seems foreign to even the most seasoned operating executives. This is due partly, in fact, to the conventional wisdom offered for decades by many of the world’s most revered business schools. Traditional thinking would have us believe that the performance of the enterprise is exactly equal to the sum of its parts. Therefore, when everyone in the organization “does his or her part” as planned, then the company as a whole realizes its planned performance at the corporate level.

This concept was introduced by Peter Drucker in his 1954 book “The Practice of Management”, in which he launched the idea of Management by Objectives—or MBO. Popularized in the 1960s and 1970s, MBO still had a large base of practitioners throughout the 1980s. While conceptually sound, it falls short in practice as it tends to overemphasize the setting of goals versus focusing on the drivers of business outcomes. These drivers are rooted throughout all three performance levels in the organization, which is why it’s important to understand the three levels and how they are related.

The top level of performance is the most obvious: the organization level. This echelon represents the business outcomes for the enterprise as a whole. Performance at this level is broad and is typically comprised of revenues, profits and return on investment. It may also include market share, customer satisfaction and new market acquisition.

The base level of performance - the individual performer level - is the core performance delivered by each and every employee throughout the organization. This key driver of business results is grounded in the premise that results are not achieved without the contribution of each employee. Performance at this level is much more granular and varies widely from one employee to the next. It relates to the required, or planned, performance of each individual in order to effectively contribute to overall company goals. Examples of performance at this level are more task-focused and include items such as order pick rates, inbound calls time-to-answer, claims closure rates, etc.

Most organizations easily identify with the top and base levels of performance. After all, the popular MBO approach dictates that you first identify your top level performance goals, then design performance targets at the base level that support your desired top level results. However, it is the middle level of performance - the process level - that is arguably the most important, and most elusive, in today’s business environment.

Why? Because tried and true approaches “proven” by large businesses and business schools alike die hard. We were trained to think about the company and the individual levels of performance, and to tie the two together utilizing the most obvious channels available—the various departments that comprise the inner soul of our company. But the most obvious path isn’t always the most effective. The different functional areas of your company do not deliver your goods and services to your customers. Your business processes do. These critical flows of work—which move across and between your company’s departments - represent the middle and most overlooked level of performance in your organization. It’s this layer of performance that provides the key to alignment across all three levels of performance.

Understanding the three levels of performance in your company is the foundation to improving your organization’s performance. But the real key: alignment across the three levels. And paramount to this alignment is identifying your performance drivers and then linking them from the organization level, down through your business processes and ultimately to each individual performer in the company. The thread that sews your performance plan together in perfect alignment is an authenticated set of performance metrics.

So, what is the most effective way improve business performance? Start with a clear understanding of the three levels of performance in your organization, nail down the drivers of performance at each level, and wrap them in a real set of performance metrics. And remember: ignore the system of your business processes at your own peril, as they are the lynchpin to performance alignment and achievement of your business objectives.

Art Rosenberg

Posted: Tuesday, June 16, 12:54 PM

Joined: 6/16/2009
Posts: 3

Samantha,

Thanks for sending that article on business process and "workflow" performance.

While I agree with the overall perspective of the three organizational "levels," I think the bottom and middle level needs to be updated to include external end users (business partners, consumer customers) as part of workflow performance consideration. This is because web information access and wireless mobility now enables persons outside the organization to also exploit their own UC services and contribute to task completion more efficiently and effectively. With automated business process applications available to all end users involved in an operational task, we no longer should focus only on organizational personnel , but should insure that everyone involved in the task can do their part as flexibly and efficiently as possible, regardless of location or responsibilities.

The enterprise still has its responsibilities for supporting its own employees in work flow performance tools and services, but must now consider that external end users can also contribute more efficiently with similar communication technologies for information delivery and two-way multi-modal contacts (UC, unified messaging, on-line self services, mobile smartphones). What good is it if only the internal staff can access information and communicate between themselves efficiently, when ultimately the major delays in task completion can stem from communicating with external users (both inbound and outbound), particularly with third-party "action takers" and individual consumers (customers)? They too are "performers" in a business process and should be able to increasingly exploit the benefits of Mobile UC for both "person-to-person" contacts as well as "process-to-person" notifications and self-services.

I wrote a piece shortly after the introduction of the iPhone by Apple that talked about "Customer UC" and what would happen if all consumers had an iPhone-like mobile device. What would change for traditional call centers? The writing is on the wall that voice conversations will be a "contextual" option to other forms of information access and person-to-person contacts. While not everyone uses mobile "smartphones" all the time, the business process performance framework should start including their use for improving workflow performance metrics. This is because user contact accessibility is a prerequisite for timely, on-demand automated applications (information delivery, transactions) and communication with available people.

With mobility, Enterprises are not be losing their traditional telephony "daughter," they will be gaining a "UC son-in-law!"

Best regards,

Art