Business process improvement

Business process improvement (BPI) is a systematic approach to help an organization optimize its underlying processes to achieve more efficient results. The methodology was first documented in H. James Harrington’s 1991 book Business Process Improvement.[1] It is the methodology that both Process Redesign and Business Process Reengineering are based upon. BPI has allegedly been responsible for reducing cost and cycle time by as much as 90% while improving quality by over 60%.

Process improvement is an aspect of organizational development (OD) in which a series of actions are taken by a process owner to identify, analyze and improve existing business processes within an organization to meet new goals and objectives,[2] such as increasing profits and performance,[2] reducing costs[2] and accelerating schedules. These actions often follow a specific methodology or strategy to increase the likelihood of successful results.[2] Process improvement may include the restructuring of company training programs to increase their effectiveness.[2]

Process improvement is also a method to introduce process changes to improve the quality of a product or service, to better match customer and consumer needs.[2]

Overview

The organization may be a for-profit business, a non-profit organization, a government agency, or any other ongoing concern. This was the first methodology developed that focused away from the production processes to address the service and support process. It was developed within IBM as a result of the IBM president John F. Akers putting out a Corporate Instruction in the early 1980s requiring the rest of IBM operations to upgrade their processes so that they were at least as good as the production processes. At that time the production processes were required to be at a Cpk of 1.4. To measure and meet these performance goals required major improvements in IBM’s business processes. To accomplish this, IBM’s Business Process Improvement methodology was developed. On March 13, 1984 after the Business Process Improvement was under way at IBM, John Akers stated at the American Electronics Association seminar on Quality in Boston, Our studies show that more than 50 percent of the total cost of billing relates to preventing, catching, or fixing errors. This approach was first documented outside of IBM by H. James Harrington while at Ernst & Young[3] and then in Harrington’s 1991 book entitled Business Process Improvement – the Breakthrough Strategy for Total Quality, Productivity, and Competitiveness[1] published by McGraw-Hill. More detailed information about the methodology was documented in Harrington’s 1997 book Business Process Improvement Workbook-Documentation, Analysis, Design, and Management of Business Process Improvement [4] also published by McGraw-Hill.

It should be noted that BPI focuses on "doing things right" more than it does on "doing the right thing". In essence, BPI attempts to reduce variation and/or waste in processes, so that the desired outcome can be achieved with better utilisation of resources.

BPI works by:

The goal of BPI is a radical change in the performance of an organization, rather than a series of incremental changes (compare TQM). Michael Hammer and James Champy popularized this radical model in their book ‘’Reengineering the Corporation: A Manifesto for Business Revolution’’ (1993). Hammer and Champy stated that the process was not meant to impose trivial changes, such as 10 percent improvements or 20 percent cost reductions, but was meant to be revolutionary (see breakthrough solution).

Many businesses in the 1990s used the phrase "reengineering" as a euphemism for layoffs. Other organizations did not make radical changes in their business processes and did not make significant gains, and, therefore, wrote the process off as a failure. Yet, others have found that BPI is a valuable tool in a process of gradual change to a business.

BPI typically involves six steps:

Selection of process teams and leader

Process teams, comprising 2-4 employees from various departments that are involved in the particular process, are set up. Each team selects a process team leader, typically the person who is responsible for running the respective process.

Process analysis training

The selected process team members are trained in process analysis and documentation techniques.

Process analysis interview

The members of the process teams conduct several interviews with people working along the processes. During the interview, they gather information about process structure, as well as process performance data.

Process documentation

The interview results are used to draw a first process map. Previously existing process descriptions are reviewed and integrated, wherever possible. Possible process improvements, discussed during the interview, are integrated into the process maps.

Review cycle

The draft documentation is then reviewed by the employees working in the process. Additional review cycles may be necessary in order to achieve a common view (mental image) of the process with all concerned employees. This stage is an iterative process.

Problem analysis

A thorough analysis of process problems can then be conducted, based on the process map, and information gathered about the process. At this time of the project, process goal information from the strategy audit is available as well, and is used to derive measures for process improvement.

Employee roles

There are four roles within a business Management system: Business Leader, Process Owner, Operational Manager, and Process Operator. The responsibilities of each of these roles are unique, but work together as a system. Some employees in an organization may perform as many as all four of these roles over the course of a day, week, month, or year.

The responsibilities of the roles all follow the PDCA (plan, do, check, and act) cycle.[5]

Business leaders

Business leaders are responsible for creating the business plans (including strategic plans created during the strategic planning process) and associated resourcing plans necessary to cause the organization to be successful.

Senior leaders (corporate) are responsible for defining the customer and business objectives which an organization needs to achieve to be successful. This process includes overseeing the development of the organization's mission, vision (goal), and values. These persons are accountable for meeting customer and business objectives.

Lower leader-levels (business unit and functional) are responsible for translating senior leaders' business objectives into business objectives that make sense for their level and that support the accomplishment of the senior leaders' business objectives. These persons are accountable for meeting business unit and functional objectives.

Plan: The business leaders create and own the business performance objectives of the organization. Senior leaders need to first understand the requirements of their customers, stockholders, workforce, suppliers, and communities. They need to understand their competition. They need to understand the environmental, economic, technological, social, legal, and political environments that they do business within. Senior leaders need to consider all of these elements as they design a Business model and business Strategy map that will meet the customer and business requirements. Business Leaders then translate these requirements and business environment issues into business performance objectives. Business Leaders then create business plans and associated resourcing plans that will cause the organization to achieve these business objectives. The Business Leaders establish business performance metrics to measure the business’s capability to meet these business objectives. Many organizations create a Balanced scorecard to organize and communicate business performance metrics.

Do: The business leaders are responsible for communicating to the organization their business plans. As the organization conducts business, the Business Leaders are responsible to build bridges and remove barriers that will allow the business performance objectives to be met. The business performance metric data is produced and collected as business is performed by the organization.

Check: The business leaders periodically analyze the business performance data and use it to visualize the business’s capability to meet business objectives over time (performance trends), compare actual performance against performance targets, and identify performance issues.

Act: The business leaders are responsible to create improvement actions to address the performance issues that are identified during their analysis of the business performance data. These improvement actions are created to ensure the organization is able to achieve their business plans.

Process owner

The process owner is responsible for designing the processes necessary to achieve the objectives of the business plans that are created by the Business Leaders. The process owner is responsible for the creation, update and approval of documents (procedures, work instructions/protocols) to support the process. Many process owners are supported by a process improvement team. The process owner uses this team as a mechanism to help create a high performance process. The process owner is the only person who has authority to make changes in the process and manages the entire process improvement cycle to ensure performance effectiveness. This person is the contact person for all information related to the process. This person is accountable for the effectiveness of the process.

Plan: The process owners create and own the process performance objectives of the organization. The process owner first needs to understand the external and internal customer requirements for the process. This person uses the business plans as a source to help understand the long term and short term customer and business requirements. This person then translates these requirements into process performance objectives and establishes product (includes service) specifications. This person establishes process performance metrics to measure the process’s capability to meet the product specifications and overall process objectives. The set of metrics that are to be reviewed by operational managers and process operators are called key performance indicators (KPIs). The process owner then designs process steps to describe work that when performed will have the capability to produce products that meets the customer and business requirements.

Do: The process owner is responsible to communicate to the operational managers the details of the processes that the operational managers are responsible to execute. As the operational managers and process operators perform the processes, the process owner is responsible to build bridges and remove barriers that will allow the process performance objectives to be met. The process performance metric data is produced and collected as the process is performed by process operators. The process owner is continually involved with the operational managers and process operators as they use kaizen to continually improve the process as they are performing the work.

Check: The Process Owner periodically analyzes the process performance data and use it to visualize the process’s capability to operate within control limits over time (performance trends), compare actual performance against performance targets, and identify performance issues.

Act: The Process Owner is responsible for creating improvement actions that address performance issues that are identified during their analysis of the process performance data. Improvement actions may include the initiation of Lean projects to reduce waste from the process or include the initiation of Six Sigma projects to reduce variation in the process. Improvement actions may include the use of problem solving tools that would include risk assessment and root cause analysis. Risk assessment is used to identify and reduce, eliminate, or mitigate risk within the process. This is the proactive approach to avoid problems being created from the process. Root-cause analysis is the reactive way to respond to problems that occur from the process. Root-cause analysis is used to identify the causes of problems within the process and identify and implement improvement actions that will ensure these problems do not occur again.

Operational manager

The Operational Manager is responsible for bringing the resources and processes together to achieve the objectives of the business plans that are created by the business leaders. This person is accountable for how well the process is performed.

Plan: The Operational Manager - in collaboration with each Process Operator, creates Process Operator performance objectives for the employees they supervise. The Operational Manager needs to understand the performance requirements of the process. They match employees (Process Operators) with the competency and skill requirements of the process to be performed. They ensure that the Process Operators have the budget, facilities, and technology available to them that is necessary to achieve the performance objectives of the processes.

Do: The Operational Manager is responsible for teaching process operators how to perform the processes (work). Process Operator instruction usually consists of classroom and on-the-job training. The Operational Manager oversees the work and ensures Process Operators receive ongoing informal feedback as to their performance. As the Process Operators perform the processes, the Operational Managers are responsible to build bridges and remove barriers that will allow the process and Process Operator performance objectives to be met. Process and Process Operator performance metric data is produced and collected as the process is performed. The Operational Manager ensures that Process Operators are using Kaizen to continually improve the process as they are performing the work.

Check: The Operational Manager periodically analyzes the key performance indicators (KPIs) during the production cycle to evaluate the work group’s ability to achieve the process and process operator performance objectives. This data is used to visualize the process and process operator capability to meet business plan objectives over time (performance trends), compare actual performance against performance targets, and identify performance issues. They review this performance data and sort out process operator performance issues from process performance issues. Many organizations use a war room concept to post performance data. Within the war room, the operational manager conducts periodic review and analysis of this performance data.

Act: The Operational Manager is responsible for creating improvement actions to address the performance issues that are identified during their analysis of the process and Process Operator performance data. They address Process Operator performance with ongoing feedback to the Process Operator and/or by using an employee performance management review process. They communicate process performance issues to the Process Operator(s) and the Process Owner.

Process operator

The process operator is responsible for learning and perform the processes (work) necessary to achieve the objectives of the business plans that are created by Business Leaders. This person is accountable for performing the requirements of the process.

Plan: The process operators - in collaboration with their Operational Manager, create and own their performance objectives. Process Operators are responsible to understand the performance objectives of the process they are to perform and the specifications of the product they are to produce.

Do: Process operators are responsible for learning the processes (work) that they are to perform. They ensure the processes are performed to meet the process performance objectives and produce product that meets specification. As the Process Operators perform the processes, they are responsible to communicate to their Operational Manager (supervisor) the bridges that need to be built and the barriers that need to be removed to allow the process and Process Operator performance objectives to be met. Process and Process Operator performance metric data is produced and collected as the process is performed.

Check: The process operator periodically reviews the Key performance indicators (KPI’s). The Process Operator makes adjustments to their work based on their actual performance compared to KPI targets. The Process Operator is responsible for identifying and reporting any performance issues and stopping production if necessary.

Act: Process operators practice kaizen to continually challenge the process and communicate improvement suggestions to their operational manager (supervisor).

Key considerations

Processes need to align to business goals An organization's strategic goals should provide the key direction for any Business Process Improvement exercise. This alignment can be brought about by integrating programs like Balanced Scorecard to the BPI initiative. e.g. When deploying Six Sigma, identification of projects can be done on the basis of how they fit into the Balanced Scorecard agenda of the organization.

Customer focus Fast-changing customer needs underscore the importance of aligning business processes to achieve higher customer satisfication. It is imperative in any BPI exercise that the "Voice of Customer" be known, and factored in, when reviewing or redesigning any process.

Importance of benchmarks BPI tools place a lot of emphasis on "measurable results". Accordingly, benchmarks assume an important role in any BPI initiative. Depending on the lifecycle of the process in question, benchmarks may be internal (within the organization), external (from other competing / noncompeting organizations) or dictated by the senior management of the organization as an aspirational target.

Establish process owners For any process to be controllable, it is essential that there be clarity on who are the process owners, and what constitutes success/failure of the process. These success/failure levels also help establish "control limits" for the process, and provide a healthy check on whether or not a process is meeting the desired customer objectives.

Methodologies

Process-Oriented Architecture

Tristan Boutros and Tim Purdie defined a fresh approach in the industry when they created their 2013 book [7] The Process-Oriented Architecture (POA) defined within was developed beginning in 2005 and forms the base level taxonomy for their systematic and best in class method for driving effective business outcomes while driving high levels of employee engagement and satisfaction. The POA was originally developed to illustrate the interdependence of process design and successful business outcomes to aid the workers faced with necessary change a simple to understand map to drive them safely through the improvement lifecycle. Throughout the following years the POA became a platform for significant employee performance boost, and effective business processes that market-ably turned out high yield financial results.

Rummler-Brache methodology

Rummler and Brache defined a comprehensive approach to organizing companies around processes, managing and measuring processes and redefining processes in their 1990 book.[8] This is a systematic approach to business process change and ideas first introduced in this book have been influential on other, less comprehensive approaches. This book draws heavily from the basic approach laid out in Improving Processes.

The Helix Methodology

The Helix Methodology (Helix) was developed by Michael R. Wood beginning in 1979. Helix was originally developed to help small to medium businesses to replace manual and outdated business practices and processes with automated solutions. Throughout the 1980s and 1990s, Helix was expanded to become a complete Enterprise (Value Delivery) Improvement and Business Process Analysis (HEI/BPA) methodology. The Business Process Improvement component of Helix has been published in a series of two books.[9][10] HEI/BPA provides a method for aligning business processes and IT systems with organization strategies, goals and objectives. In addition, HEI/BPA provides the metrics and performance measures needed to support MBO and performance score card programs.[11]

Implementation

Most resistance to BPI comes from within an organization. Managers often do not wish to change existing structures because they feel threatened by changes to their organization or power.[12] The labor force may resist BPI because of fears of layoffs; however, an organization using BPI on a regular basis, argue many proponents, will already have the proper work force to meet existing business challenges.

Some organizations have implemented BPI on a smaller scale and reported success, by doing the following:

Process improvement and management

Identify, analyze and improve the Key Processes

An organization is only as good as its processes. To be able to make the necessary changes in an organization, one needs to understand the key processes of the company. Rummler and Brache suggested a model for running a Process Improvement and Management project (PI&M), containing the following steps:[13]

  1. Identify the process to be improved (based on a critical business issue): The identification of key processes can be a formal or informal exercise. The management team might select processes by applying a set of criteria derived from strategic and tactical priorities, or process selection is based on obvious performance gaps. It is important is to select the process(es) which have the greatest impact on a competitive advantage or customer requirement.
  2. Develop the objective(s) for the project based on the requirements of the process: The focus might be on quality improvement, productivity, cost, customer service or cycle time. The goal is however always the same; to get the key process under control.
  3. Select the members of the cross-functional team: A horizontal (cross-functional) analysis is carried out by a team composed of representatives of all functions involved in the process. While a consultant or in-house staff person can do the job, the quality of the analysis and the commitment to change is far greater with a cross-functional team.
  4. Document the current process by creating a flowchart or "organization map.": Describe the process regarding the Organizational level, the Process level and the Job/Performer level according to Rummler.[14] Develop a cross-functional process map for the process.
  5. Identify "disconnects" in the process: “Disconnections” are everything that inhibit the efficiency and effectiveness of the process. The identification should be categorized into the three levels: The Organizational level, the Process level and the Job/Performer level.
  6. Recommend changes (organizational, in the process or in its execution): Categorize and prioritize the main problems and possibilities, evaluate alternative solutions. Develop a cross-functional process map for the recommended process.
  7. Establish process and sub-process measures: The process measures should reflect the objectives of the project.
  8. Implement the improvements.

The elements of a successful implementation effort

This model for process analysis is just as useful for smaller processes as for larger and more complex processes. Completion of Steps 4-7 can take from three days to three months, depending on the complexity of the process and the extent of change required to remove the disconnects. Some of the benefits of this cross-functional team approach to process improvement are that the participants learn a tremendous amount about the overall business and their role in it. People earlier seen as unskilled might suddenly understand what is required from them, and will start behaving according to this. The increased understanding of the process will also increase the learning from additional formal training initiated, but also reduce the amount of training needed. When the organization finally understand what their key processes are they will more easily feel committed to the implementation of improvements.

Ongoing Process Improvement and Management (PI&M)

Ongoing Process Improvement and Management can be introduced by:

The system framework of PI&M can be used both to improve the flow of a specific process and at the organizational level to examine general management issues. By introducing PI&M as a standard for continuous improvement, employees are given clear guidance as to how they are expected to behave. By this she would create clear values for a company that will have a good chance of being accepted by the whole organization.

See also

Methods and examples

References

  1. 1 2 Business Process Improvement (ISBN 978-0070267688)
  2. 1 2 3 4 5 6 Cook, Sarah (1996). Process improvement: a handbook for managers. Gower Publishing Ltd, et al. Retrieved February 4, 2012. ISBN 0-566-07633-0
  3. ↑ Ernst & Young Technical Report TR 90.006 HJH 8/1990
  4. ↑ Harrington, H.J. (et al.) (1997). Business process improvement workbook : documentation, analysis, design, and management of business process improvement. McGraw-Hill. Retrieved March 16, 2012. ISBN 0-07-026779-0
  5. ↑ Pascal, Dennis (2007). Lean Production Simplified. ISBN 978-1-56327-356-8.
  6. ↑ "Project Management Approach For Business Process Improvement". The Project Management Hut. Retrieved April 28, 2010.
  7. ↑ Tristan Boutros and Tim Purdie. The Process Improvement Handbook: A Blueprint for Managing Change and Increasing Organizational Performance. ISBN 978-0071817660.
  8. ↑ Geary Rummler and Alan Brache (1990). Improving Performance. ISBN 978-1118143704.
  9. ↑ The Helix Factor - the key to streamlining your business processes. ISBN 978-0965980937.
  10. ↑ The Helix Factor II - the implementer's guide. ISBN 978-0965980920.
  11. ↑ http://www.projectmanagement.com/content/attachments/helixman_060809081921.pdf
  12. ↑ Frank Parth. "Successful Process Projects". PMI EMEA Global Congress Proceedings, Madrid, 2006.
  13. ↑ Rummler, Geary A. and Alan P. Brache. 1991 “Managing the white space in the organization chart”, Supervision; May91, Vol. 52 Issue 5
  14. ↑ Rummler, Geary A. (Jun 1996). "Redesigning the organization and making it work". CMA Magazine 70 (5).

Further reading

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