The overlooked power of business process management
Francis Wade, sunday business COLUMNIST
Have you ever wondered why it often takes so long to get a simple refund? The reason is sometimes simple: the organisation's process is broken and it needs to be re-engineered.
While the term 're-engineering' has lost the cachet it once had, many local companies would benefit from the power of the idea. Recessionary times are pushing firms to streamline and focus on their core processes, improving them even as they continue to run them on a daily basis.
It's not a new problem. As a young re-engineering consultant in the early 1990s, my colleagues and I focused on a handful of processes that were pre-targeted for improvement.
Today, a much larger opportunity exists to improve the way in which entire companies create value for customers using their processes.
At the heart of every company lies an open secret: only a handful of core processes create fundamental value for customers - or stakeholders, in the public sector. These processes, which have a start, an end, and a number of steps in between, are executed by people or computers. They differ based on the industry.
For example, for a typical ice-cream store, these processes might include: buying raw materials, creating ice cream, selling products and managing cash receipts. Without these core activities, there would be no business to run. In a very small business, one person wears different hats to do several of these tasks.
Non-core activities such as advertising, human resources and accounting support these processes.
They are non-core because they support the company, but they don't actually deliver value directly to customers.
Unfortunately, most companies aren't set up to manage core processes or promote process awareness. Instead, they are divided into departments that operate as silos.
Most companies' core processes run through several silos; for this reason, seemingly small tasks, such as refunds, take longer than they should. It also explains why a refund might get lost between departments and why companies can make terrible mistakes - for example, the
man who recently logged into his PayPal account to see a 92 quadrillion-dollar refund.
To prevent these kinds of errors, companies need to make the following improvements.
1. Establish Process Ownership
As most companies grow, they create departments or units that group employees with similar skills. As growth continues, the departments expand in size, exacerbating the silo problem. The first remedy is to identify core processes and assign ownership to individual managers. If process owners do their jobs well, they take accountability for a process' execution and future improvement.
2. Launch Process Teams
Process owners may not have formal authority, but they can form teams from different silos to start improving core processes. This takes some political skill: even with the explicit backing of top executives, it's easy for managers to stay stuck in what they have always done and ignore cross-department initiatives.
3. Define Core Processes
The team's first task is to define the process. Even if the tasks within the process have been executed for decades, this step enlightens the entire team, bringing them to a common understanding for the first time. It's common to see improvement opportunities jump out at even the most sceptical participants as they begin to see the process as a whole, not just their individual roles.
4. Measure, Improve and Automate
The old mantra 'You can't improve what you can't measure' holds true in process management re-engineering. Savvy process owners apply the generic measures of unit cost, cycle time, quality and customer service to capture current performance. Then, they try to improve this performance by making changes to their core process. The ice-cream shop, for example, might track the cost of making a single cone, the time it takes to serve a customer, the number of broken cones served, and the number of times an unhappy customer returns a purchase.
Process owners must take an experimental approach, trying various improvements, including training or software/hardware automation, to see what makes the biggest difference.
On one level, this is common sense, but the four steps are anything but easy to take. The reason? Most companies are made up of competing silos, and it's difficult to get managers to subordinate their interests to those persons who benefit from core processes - the customers.
That's why your refund takes so long, even when everyone agrees that you deserve it.
Francis Wade is president of Framework Consulting and author of 'Bill's Im-Perfect Time Management Adventure'. Send feedback to email@example.com