• Business Process Improvement

    This tool distills the concepts behind business process improvement and provides a useful framework for leaders who want to understand the factors behind successful process improvement. This tool is very useful for managers at all levels.

    Hint: This tool is best used in conjunction with “8 Step Process Improvement Plan.”

    Overview

    Business process improvement is appropriate when these factors are in place:

    1. An existing process is widely perceived to be failing.
    2. There is a champion at the top for change.
    3. There is clear articulation of the rationale for change.
    4. People recognize that the costs will initially outweigh the benefits.

    Success typically occurs when people can clearly articulate the Case for Change. The Case for Change has these eight pieces:

    1. It summarizes what is happening to the business or industry, what is changing and what is newly important in the environment.
    2. It states the business problem that is the source of the organization’s concern; e.g., customer needs have led to new performance requirements that our company can’t meet.
    3. Diagnostics makes clear why the company is unable to meet the new performance requirements.
    4. It clearly articulates the desired results – the vision of what will be different and better – and why those results are important.
    5. The costs of inaction are spelled out – the consequences of not changing the process.
    6. Key factors of success are defined: what must be in place and stay in place in order for the organization to overhaul the process successfully.
    7. The champions of change are identified.
    8. Either an internal or external consultant is assigned to manage the process of change.

    Definition

    Business process improvement is the fundamental re-thinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.

    Four key words: Fundamental, Radical, Dramatic, Process.

    Examples:

    • IBM Credit: One person now handles the entire application for credit where dozens did it before in a very fragmented fashion.
    • Ford: It gave its loading dock personnel authority for triggering accounts payable processes.

    Four themes of successful business process improvement:

    1. It is process focused: not restrained by definitions of tasks or organizational boundaries.
    2. It is ambitious: minor improvements are not enough; “we aim for breakthroughs.”
    3. It breaks the rules: assumptions of specialization, sequence and timing are deliberately ignored.
    4. It is creative: especially in the elimination of “choke points” and the use of information technology.

    Fundamentally, business process improvement rejects all the assumptions inherent in Adam Smith’s paradigm: division of labor, economies of scale, hierarchical control, and all other appurtenances of early-stage developing economies.

    The industrial model assumed few skills, little time for training, specialization to break down complex jobs into simple tasks. The problem is that simple tasks require complex processes to weave them together, creating inefficiencies, inconveniences and costs. But until now we’ve been willing to accept those tradeoffs in exchange for simple tasks.

    Improved processes share these characteristics:

    • Several jobs rolled into one.
    • Workers make decisions, eliminating the controllers, the checkers.
    • Steps in process are performed in a natural order.
    • Processes have multiple versions with triage systems to determine which one best fits the circumstances = flexibility.
    • Work is performed where it makes the most sense, e.g., sometimes a customer of a process performs some or all of the process in order to eliminate hand-offs and cut costs.
    • Checks and controls are reduced.
    • Reconciliation is minimized.
    • Case managers provide a single contact point.
    • Hybrid centralized/decentralized operations are prevalent.
    • Jobs change from simple tasks to multi-dimensional work.
    • People’s roles change from controlled to empowered.
    • Job preparation changes from training to education.
    • Focus of performance measures and compensation shifts from activity to results. Performance is measured by value created and compensated accordingly. There is no pyramid of compensation, with promotion equal to greater pay.
    • Advancement criteria change from performance to ability. A bonus is the appropriate reward for a job well done; a promotion is not. “We pay for performance, promote for ability.” A promotion is really just a change. (Note: Keep separate the results review from the development review.)
    • Values change, from protective to productive. Xerox rewards managers based on customer satisfaction.
    • Managers change from supervisors to coaches. Managers have to possess strong interpersonal skills and take pride in the accomplishments of others.
    • Structures change from hierarchical to flat.
    • Executives change from scorekeepers to leaders.

    Where do you look for an opportunity to do this? First, describe all the processes in your company. No company has more than ten. Second, look for symptoms (S) and diseases (D):

    Examples

    S: inventory, buffers and other assets

    D: system slack to cope with uncertainty

    S: high ratio of checking and control to value adding

    D: fragmentation and distrust

    S: rework and iteration

    D: inadequate feedback along chains

    S: complexity, exceptions, and special cases

    D: accretion onto a simple base

    How to fail at business process improvement

    According to Hammer and Champy, authors of “Re-engineering the Corporation”:

    1. Try to fix a process instead of changing it. Improving it seems so much simpler than throwing it out altogether.
    2. Don’t focus on business processes. The authors cite examples of companies telling task forces to recommend ways to address “empowerment, teamwork, innovation, and customer service.” The task forces come back with nothing but reams of platitudes. The underlying problem – poorly conceived process design – was not addressed.
    3. Ignore everything except process redesign. Job designs, organizational structures, management systems, everything associated with the process must be refashioned to maintain a coherent business system.
    4. Neglect people’s beliefs and values.
    5. Be willing to settle for minor results.
    6. Quit too early.
    7. Place prior constraints on the definition of the problem.
    8. Allow existing corporate cultures and management attitudes to prevent the process from getting started.

    View our Leadership Toolbox for over 100 high-quality leadership tools.