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IT Investment and Business Process Performance ECAR Research Study 4, 2005

8
Examining the Future of
Business Process Performance
There may come a time when “good enough” simply isn’t.
—Richard N. Kat
so far, this study has examined the ways in
which colleges and universities approach
ad-ministrative business processes and how
they use technology to support those
processes. This chapter examines the
administrative processes as at risk. Only 16
approaches and technologies institutions
have adopted to improve business process percent of respondents indicated diminishing
performance, and then discusses some returns, meaning that processes work well
emerging cross-industry trends and how enough and efforts at improvement were not
these may impact future efforts to improve worth the expenditure. This suggests further
process performance in higher education. that institutions still have significant room for
improvement.
Today’s Approaches This doesn’t mean that colleges and uni-
An organization can undertake business versities have ignored process performance.
process improvement to achieve a number of Many institutions have been through one or more
different results. These include, but are not waves of business process reengineer-ing; total
limited to, the results described in Table 8-1. quality management, Six Sigma, or other process
In this study, we learned that on the whole, improvement initiative. Others have taken a
higher education organizations have not technology-driven approach, choosing to use the
optimized their administrative business implementation of a new technology, such as an
processes. Most institutions that responded to ERP system, to instigate process change. These
our survey indicated an acceptable, but not initiatives have yielded mixed results. Process
exemplary, level of performance. In many improvement programs can render encouraging
cases, the decision to settle on good enough is results, but when im-plemented without
a rational decision, as some processes do not, accompanying technology improvements, these
by their nature, require above-average results can be difficult to sustain. A technology-
performance. However, many institutions have based approach can introduce an overwhelming
not optimized important processes, and degree of change to the organization, and it can
numerous institutions ranked some of their be expensive and time-consuming. As we learned
in ECAR’s study of ERP implementations, (Kvavik
et al., 2002) many organizations experienced a
loss of productivity for up to a year after the sys-
tem was introduced, as staff slowly adapted

©2005 EDUCAUSE. Reproduction by permission only.

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

Table 8-1. Results of Business Process Improvement

Desired Result Definition Example


Doing the same thing cheaper or Reducing the time to process a
Efficiency
faster financial aid application
Doing the same thing better,
Reducing the number of errors during
Effectiveness introducing higher quality or higher
financial aid processing
value
Reducing risk to the institution, Reducing financial exposure by tightly
Risk avoidance such as through better management integrating budget and financial
information or better controls Systems
Doing things that make students, Introducing self-service capabilities
Customer satisfaction faculty, staff, and other constituents for common student and employee
happier with institutional services Transactions
Designing processes to scale without
Cost avoidance Doing things that allow the institution the need to add employees, often
to avoid future expenditures through the use of technology
Allowing a student to handle any
Adding new services that were not student services transaction at any
New capabilities
available before the improvement student-facing office, rather than
having to go to multiple places

to the change introduced. Even when Another common target of shared services,
such an approach succeeds, it can be both internally and externally, is the IT func-
difficult to introduce additional change tion. A case study written in conjunction with
later without significant time and expense. the ECAR ERP study profiled several shared
Some institutions have implemented al- approaches to implementing ERP. (Caruso and
ternative organizational models with good King, 2002) One case study investigated the
result. One such model is shared services, in well-known common management systems
which a single center is established to service project run by the California State Univer-sity
multiple customers. Shared services can be system for its 23 campuses, an internal
deployed internally in a large, com-plex shared-service function that provides hosting
organization, or they can be set up to cross and shared management of the university’s
organizational boundaries, allowing multiple PeopleSoft applications. (Caruso and King,
organizations to share resources, costs, and 2002) Another ECAR case study written in
benefits. Examples of internal shared services conjunction with the outsourcing study, profiled
organizations include one-stop student the Associated Colleges of Central Kansas
services centers, which colocate and cross- (ACCK), a consortium created by six small
train student services departments (such as colleges in 1966 (Hassett and Kancheva,
the offices of the bursar, registrar, and financial 2002) to share the cost of developing IT ser-
aid) to provide high-quality customer service, vices. IT shared services functions, whether
often with improved ef-ficiency. Such centers internal or external, provide a number of
are in place at many institutions today, and are benefits to their member organizations, in-
often supported by self-service, ERP, and cluding reduced costs, introduction of new
customer relation-ship management (CRM) capabilities, risk avoidance, and increased
technologies. effectiveness. As a part of this study, specific

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

process improvement endeavors at Iowa tion) continue to manage their own payroll
State University and The City University of functions. If higher education chooses to fol-
New York have been written about in low the trends begun in other industries, func-
depth in separate case studies. tions such as call center management, benefits
Shared services can be one effective way to administration, and financial aid processing
reduce costs, lessen risk, and provide services may be turned over to outside providers. The
that might be unattainable by an individual University of California, for example, recently
department or institution. This approach is not hired a private firm to manage retirement plan
without challenges. First and foremost is that in account administration. But this approach is
order to implement a shared services model, not without risk. In today’s environment, it is
consensus must be reached on the business difficult to seamlessly incorporate such external
model and processes that will be used, as well as services into an institution’s opera-tions, and
the financial model, the supporting technologies, difficulties resulting from systems integration
and the staffing. And once the shared service has and unaligned processes can degrade
been implemented, strong governance is customer service.
necessary to keep it operating effectively. The Higher education has also introduced a
consensus nature of shared services does not number of administrative technologies in an
lend itself to agile business performance, because effort to improve the performance of business
it is difficult for one member to request changes processes. The most significant of these is
without impacting—perhaps negatively—the utility ERP systems. Implementing ERP sys-tems
of the service for other members. As this study provided significant benefits to many, although
reveals, business processes that invoke broad not all, colleges and universities. ERP systems,
political engagement and low strategic impact provide a common repository for administrative
tend to not be great candidates for reform. data; speed the process-ing of transactions;
allow the distribution of tasks to individual
Another strategy available to institutions employees, and allow in-tegration of data
is business process outsourcing (BPO). In across multiple parts of the organization. ERP
this approach, selected business functions systems (or homegrown systems with similar
are turned over to an external provider to functionality) serve as the foundation of today’s
man-age, either to provide a cost advantage administrative organizations in higher
or because the provider has greater education. However, ERP systems are in some
expertise in managing that function than the ways limiting. At installation, they allow
institution. Higher education has traditionally flexibility in configura-tion, but once in place,
used BPO in selected areas such as food making changes is a difficult and expensive
services, facili-ties management, and proposition. Similarly, customizing ERP
bookstores, areas in which such companies systems to conform to an institution’s business
as Aramark, UNICCO, and Barnes & Noble processes generates significant expense both
have been enlisted to manage these during the imple-mentation and over the
processes on campuses around the country. ongoing life cycle of the product, causing many
However, higher education has tradition-ally organizations to conform their processes to the
been reluctant to outsource its administra-tive way the software works. Also, ERP systems
processes. Even in areas like payroll, where many are, at their core, transaction processing
businesses have outsourced to providers like systems, and higher education, for the most
ADP, many colleges and universities (partly due part, is not a transaction-driven business.
to the complexity of faculty compensa-

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

Many institutions have realized that while less pressure to change faced by
ERP systems are a useful foundation, the organizations in other sectors. That
value is not in the transaction itself, but in situation, however, is beginning to change.
the information provided by the transaction. First, many segments of higher education
These institutions have deployed a variety of have—despite very challenging times—been
analytical environments, including data protected from revenue pressure by favor-able
warehouses; reporting packages; and online demographics (the pipeline) and the
analytical processing (OLAP) tools to preeminence of U.S. colleges and universities
provide their users with the ability to better as “exporters” of higher education. By 2013,
under-stand their business. These tools can demographers forecast the high school gradu-
provide valuable information, and can be ation of the last class of “echo boomers” and it
used for a range of purposes from better is evident that declining demand and rising visa
transactional reporting, to analytics, to restrictions are diminishing the number of
identification of at-risk students. But they too foreign students wishing to study in the U.S.
have issues. Many reporting, modeling, and The changing enrollment dynamics will
decision-support tools are difficult for non-IT increase competition to enroll students intelli-
staff to use. And, there is often a time lag gent enough to complete postsecondary edu-
before information from the institution’s cation, and wealthy enough to pay for it.
transactional systems makes it into the data Another factor driving institutional change
warehouse or OLAP environment, limiting since 2001 is cost pressure. Institutions often
the usefulness and capabilities of these tools react to short-term cost pressures with tools
for real-time man-agement of the institution. like hiring freezes and budget reductions, but
Higher education has been moving for-ward such fixes are not sustainable over the long-
with process and technology changes that term. Some institutions require real, systemic
have resulted in increased efficiency, en- redesign to emerge intact from this sustained
hanced effectiveness, better customer service, downturn. Even once the economy improves,
and other benefits to institutions. However, as cost pressures may persist. Tuition growth has
reported by our respondents, these efforts outpaced inflation for a number of years, and if
have not resulted in optimized processes at prospective students balk at fees, institu-tions
most institutions. And the target continues to may be forced to further reduce costs. What’s
move, even as these efforts continue. needed is for institutions to find ways to sustain
growth and implement necessary changes
The Changing while keeping costs down.
Environment Further exacerbating the situation are two
Historically, higher education has operated relatively new factors driving change: customer
in a slowly changing environment. The core demands and increased competi-tion.
pillars of teaching and research upon which the Incoming students at many institutions are no
institutions were built have not departed far longer the traditional 18-year-old, full time
from their foundation, even as over the years learner. They may be older, have full time jobs
other industries have undergone rapid and and families to juggle, and have different
considerable change. Because of its relatively motivations and needs for their education. Ad-
stable and insulated nature, higher education ditionally, student expectations for the level of
has been able to make steady, incremental service provided by an institution is influenced
improvements in administrative processes, but by what other businesses like banks and on-
it has been spared the relent- line retailers provide, such as 24x7, location-

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

independent, customized services. Addition- and-play fashion, quickly change to meet


ally, many institutions are facing increased business needs. This approach helps an orga-
competition for students, from for-profit nization to continuously tune its processes to
universities focused on business and technical business needs and customer demands. How-
disciplines. Both the changing demands of ever, to be that flexible an organization must
prospective students and increasing choice be able to quickly alter how it does business,
among educational providers, may pressure from both a process and technical perspective.
colleges and universities to make significant Few higher education institutions, with busi-
changes to remain competitive. ness processes structured around ERP
But what is most likely to force sweeping systems, have this degree of flexibility.
changes in higher education is not custom-ers However, an emerging solution, known as
or the economy, but the government. While the business process management system
higher education has adjusted to some (BPMS) promises to bridge the gap between
regulatory changes in the past few years such the relatively inflexible world of traditional ERP
as the Student and Exchange Visitor and legacy systems, and provide the respon-
Information System (SEVIS), it has so far been siveness required to achieve the benefits of the
spared the full brunt of regulatory change. adaptive organization while also delivering a
However, increased focus on rising costs and host of process improvement capabilities.
accountability could put higher education into Just what is a business process manage-
legislators’ crosshairs, and it can prompt ment system? The answer to that question is
introduction of Sarbanes-Oxley-like legislation still evolving. The BPMS is a new type of
that could radically alter the way colleges and technology solution designed for the easy
universities manage their administrative creation, operation, and modification of a
processes. The impact of such legislation could process-driven business. Forrester Research
be tremendous. According to AMR Research, (Harris, with Vollmer, Lawrie, Allen, 2003)
companies will spend close to $15.5 billion on defines business process management as
compliance-related activities in 2005, including “event-driven integration driven by orches-
$6.1 billion on Sarbanes-Oxley alone. AMR trated, application-oriented workflow across
estimates total spending on compliance-related multiple internal applications and/or between
activities will be $80 billion over the next five trading partners.” Giga Information Group
years. (Marlin, 2005) Given the difficulty in (Vollmer, Leaver, Moore & Peyret, 2004)
making even minor process changes in defines it as “the designing, executing, and
existing systems, comply-ing with such optimizing of cross-functional business pro-
regulation could be extremely arduous for cesses that incorporate systems, processes,
many institutions. and people.” BPM software vendor Lombardi
Software (Lombardi Software) defines it as “the
A New Alternative understanding, visibility, and continuous
In the ECAR study of IT alignment in higher improvement of business processes. BPM is
education, we discussed at length the emerg- about delivering improved business perfor-
ing business model known as the “adaptive mance to easily automate processes, measure
organization.” (Albrecht et al., 2004) In this their impact, and upgrade them in response to
model, an organization is redesigned to new ideas or external business events.”
respond rapidly to environmental changes. Gartner (Sinur, 2005) defines it as “a general
Organizational structures, business processes, term for the services and tools that support
and technology are built that can in a plug- explicit process management (for example,

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

process analysis, definition, execution, business processes to be modeled using


monitoring, and administration), including a standard language. The system can be
support for human and application-level used to execute and monitor the business
interaction. One key differentiator between process, utilizing existing systems such as
workflow and BPM is the application-level ERP to complete transactions, and
interaction.” manual processes such as the interaction
Sound confusing? It is. In an attempt to between a call center representative and a
analyze the BPMS market, META Group customer. The BPMS system can be used
found over 140 vendors selling BPMS-like to integrate processes across areas of an
products. To make matters more perplex- enterprise that do not share common
ing, major consulting firms and industry systems, while ensuring repeatability. It
associations present BPM as a management can also be used to share processes
discipline enabled by the BPMS system. across organizations, enabling easier
At its heart, BPM is a concept of man- connection with customers and suppliers.
aging an organization through a process, “The idea is to build a process tier above
rather than a functional orientation, and it is your existing systems,” says author and
about extracting optimal performance out of BPM expert Peter Fingar. (Haapaniemi,
those processes. This is hardly a new idea. 2005) “That’s where you play the game of
For years management pundits and creating and modifying business processes.”
business schools have been espousing the With many of today’s BPMS technologies,
merits of a process-oriented management says Fingar, “you can manage the entire life
approach. But, actually achieving true pro- cycle of a process—from the discovery of
cess oriented management can be difficult. It process, where you are analyzing how your
is no easy task to acquire the real-time data company currently works, to the de-sign or
needed to effectively manage processes, modification of new processes, to
and changing processes in response to the implementing or enacting that process, to
data is time-consuming and difficult when getting feedback from that process so you
busi-ness processes are embedded in can optimize it.”
transaction processing systems. Each BPMS vendor has a different ap-
The intriguing aspects of BPMS, and the proach, but the common benefits of the
features that differentiate them from other BPMS concept include:
systems such as workflow, enterprise ◆ Process abstraction. By using the BPMS as
applica-tion integration (EAI), and process the “trusted source” for business pro-
modeling tools, is that BPMS systems: cesses in the organization, these processes
◆ Abstract the business process out of can be stored and executed independently
the application and run it at a higher of application software, and can reach
level inside the BPMS across disparate systems and incorporate
◆ Have a standards-based way of describ- both human and system-driven tasks. This
ing and executing a business process, so allows rapid modification of business pro-
the business process is portable across cesses, without the need to customize or
enterprise boundaries and will work reconfigure underlying applications. It also
across different technology platforms allows organizations to design processes
(BearingPoint, Inc.) that best meet their needs, rather than
In essence, the BPMS system is a middle- having to conform to a process model
ware layer that allows an organization’s dictated by a software vendor.

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

◆ Enforcing process rules: By serving as the development of best practices libraries;


engine that drives the organization’s busi- deployment of common processes
ness processes, BPMS standardizes the across large organizations; and process-
processes and ensures adherence to the level integration with external entities
processes. This can greatly ease regula- such as customers and suppliers.
tory compliance issues, since all processes ◆ Leveraging existing investments. BPMS
are inherently documented and executed systems act as a middleware layer to
consistently, and can increase an organi- connect other systems in a structured
zation’s efficiency and effectiveness while way. They can be installed in conjunction
reducing risk. with an organization’s ERP systems,
◆ Real-time measurement. Most BPMS CRM systems, business intelligence
sys-tems also include the capability to systems, or other existing technologies.
moni-tor process performance in real- They in-crease the flexibility and
time. By providing management with responsiveness of these systems, while
dashboard views of their organization’s leveraging them to perform the functions
processes, BPMS systems can help for which they are designed.
identify problems as they occur and ◆ Flexible implementation. An organization
trigger responses, and can also be used can choose to deploy a BPMS in just one or
to identify areas for fur-ther improvement. two high-volume processes where the
◆ Process modeling. Many BPMS systems capabilities are most needed, or the BPMS
allow managers to run models of their can be deployed as the operational
processes under different scenarios, foundation of the organization. A BPMS can
such as increased workload; smaller also be implemented incrementally, moving
employee base; or modified process. By one process at a time across the
understand-ing the performance of the organization.
process under these different conditions, While stand-alone BPMS systems are
managers can experiment to find optimal relatively new to the market, the benefits
settings and run what-if scenarios that achieved by their customers are generating a
can assist with future planning. strong interest in these products. In one
◆ Continuous improvement. BPMS systems example, “a major financial institution was able
provide the mechanism to support true to reduce the amount of time required to
continuous improvement initiatives. By develop new products for its wholesale
helping managers identify issues and customers from an average of 28 days to less
providing the means to rapidly update the than five minutes. This was accomplished
processes within the system, organi-zations using BPM technology that orchestrated the
can continually make adjustments to required steps in the operation, enabling
optimize the performance of their busi-ness parallel processing of tasks when feasible and
processes. These improvements are minimizing the delays caused by multiple
sustainable, since they are integrated into human interactions through the implementa-
the organization’s core systems. tion of workflow features that managed the
◆ Sharing process components. Because escalation of decision making when needed.”
BPMS systems model business processes (Vollmer et al., 2004)
according to set standards, organizations BPMS systems can help organizations
can share process components, both in- achieve many of the qualities of an adaptive
ternally and externally. This allows for the enterprise. By allowing business processes to

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

be changed, both in systems and in practice up or down as needed. If desired, the out-
without requiring large IT initiatives, organi- sourcer’s own systems could be
zations can rapidly modify their processes to incorporated into the process, allowing the
meet shifting business conditions and improve organization to leverage their provider’s
process performance. One BPMS customer best practices into their own process.
“has deployed seven major end-to-end pro- The BPMS can also enhance the delivery
cesses with over 500 subprocesses. They of shared services. It could be used to allow
release new processes every quarter, and organizations to come together and leverage
continue to evolve their existing deployments expensive components such as ERP systems,
every six to eight weeks.”(Lombardi Software) while retaining ownership and execution of
This flexibility would not be possible with their own unique business processes. Con-
traditional applications. versely, the BPMS could be used to allow
Another important way that BPMS helps orga-nizations with disparate information
improve process performance is by providing systems to create shared functional service
real-time monitoring of key performance indi- centers that execute a common business
cators (KPIs). KPIs can be built into the process while continuing to use each
process models created in the BPMS, and then organization’s own back-end systems.
they can be tracked as processes are As the BPMS market evolves, the ben-efits
executed. By monitoring these KPIs, and shortcomings of BPM systems will become
management gets an accurate view of how more apparent, and their role in the overall
processes are perform-ing, and is able to architecture of the enterprise will become
reallocate resources as needed to optimize clearer. For organizations that are early
performance. Since pro-cesses can easily be adopters of such systems, success will be
changed, this approach allows organizations to dependent upon the same factors critical in any
quickly “sense and respond,” another key tenet systems implementation: having strong
of the adaptive organization. sponsorship; having a clear idea of the busi-
Also important to the adaptive organiza-tion ness problem being solved; addressing the
is the ability to plug-and-play different people, process, and technology aspects of the
organizational, process, and technology implementation; and performing effective
components as needed to scale operations to project and change management.
meet demand. One example is the use of
outsourced call center representatives to BPM and Higher
supplement internal staff at peak times. As Education
discussed earlier in this chapter, in a traditional While BPM systems offer tremendous
model one pitfall of this approach is that the promise, they have not, to the best of our
lack of integration between the organization knowledge, yet been deployed in a higher
and the outsourcer will become apparent to the education environment. However, the new
customer, resulting in poor customer paradigm they represent does have the poten-
satisfaction. The BPMS has the capability to tial to address some of the key issues raised in
overcome this barrier. By providing the this and other ECAR studies. These include:
outsourcer’s employees direct access to the ◆ Improved ability to react to change. The
organization’s customer service processes, BPMS gives the organization the ability
both procedures and systems, the outsourcer to quickly and cost-effectively react to
is seamlessly integrated into the organization’s change, whether instigated by govern-
process, which means they can easily ramp ment regulation, changing business

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

needs, or the desire to become more substantial if these maintenance


adaptive in doing business. By activities are reduced in scope.
disasso-ciating the business processes ◆ Allow competitive advantage at reason-able
from the transactional systems, the cost. As we learned in the ECAR ERP
processes can be changed as needed study (Kvavik et al., 2002) 87 percent of
without the time and expense of major institutions had a strategy of implement-ing
systems modifica-tions or upgrades. their enterprise systems with as few
◆ Maintaining satisfactory process perfor- customizations as possible. While this
mance. As we learned in this study, higher approach helped to reduce implementa-tion
education’s approach to business process and maintenance costs, the downside was
performance is one of satisficing, or cre- that institutions adopted a generic business
ating processes that are good enough process that did not differenti-ate the
without being exemplary. However, pro- institution significantly from its competitors.
cess performance is not a static target. As By removing the linkage between the
regulations, the business environment, and transaction system and busi-ness
constituent demands change, institu-tions processes, institutions can selectively
that do not continue to improve their choose to implement customized business
processes may see their processes fall processes where they feel uniqueness
back into at-risk status. BPM systems makes sense, allowing them to better serve
provide process owners within institutions their constituents or better differen-tiate
the necessary information and tools to themselves to prospective students and
improve their processes continuously and faculty. For those processes that are
in a way that can be sustained, without the considered to be commodities, institu-tions
need for expensive system customiza-tions. can take advantage of the common
They also enable the institution’s modeling language of the BPMS to share
management to monitor process perfor- processes among one another, purchase
mance in real-time, allowing intervention in them from vendors, or outsource them
poorly performing processes before the to an external provider.
institution is at significant risk. Business process management systems,
◆ Lower maintenance costs. As we dis- while not a panacea, appear to offer some
covered in the ECAR study of IT funding significant benefits that make them worthy of
(Goldstein, 2004), higher education IT evaluation by higher education institu-tions.
organizations are spending most of their These systems have the potential to allow
budgets on maintenance activities, leaving institutions to leverage their existing
few resources to focus on value-added ac- applications, identify and implement signifi-
tivities like business process improvement. cant process improvements, and change the
BPM systems promise to allow business way business processes are managed. And
owners to directly control the changes because they can be implemented incre-
made to the organization’s processes, mentally, institutions interested in exploring
workflow, and monitoring capabilities. At their capabilities can do so in a controlled,
minimum, this gives process owners new low-risk way. Will we see a push toward a
capabilities without requiring significant IT Wal-Mart level of efficiency in higher
support. In some organizations, par-ticularly education? Probably not anytime soon, but
those that have customized their ERP these new tools provide new capabilities for
applications, the savings in IT can be institutions to make the right level of process

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IT Investment and Business Process Performance ECAR Research Study 4, 2005

improvement for them, in ways not easily ferentiate the institution—the focus will
possible before. likely be on satisficing or providing good
As institutions look to the future and enough rather than exemplary levels of
evaluate how to approach business process service, efficiency, or effectiveness.
performance, the lessons learned from this 3) For processes that can differentiate the
study suggest a three-pronged approach: institution, especially in student-centric
1) Identify and remediate processes that areas, institutions will be more likely to
are at risk. These processes do not push to create high-performing pro-
need to move to an exemplary level, cesses. The BPMS tools discussed
but they do need to reach a above could help institutions interested
satisfactory level of performance. in op-timizing their performance
2) For commodity processes—those that achieve new levels of efficiency,
need to be performed but do not dif- effectiveness, and customer service.

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