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 been responsible for reducing cost and cycle time by as much as 90% while improving quality by over 60%.

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 1980’s 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 C_pk 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^[2] 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^[3] 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:

• Defining the organization's strategic goals and purposes (Who are we, what do we do, and why do we do it?)
• Determining the organization's customers (or stakeholders) (Who do we serve?)
• Aligning the business processes to realize the organization's goals (How do we do it better?)

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.

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.

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 to define the customer and business objectives the organization needs to achieve in order to be successful. This process includes overseeing the development of the organization’s mission, vision, and values.

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.

The responsibilities of the business leaders follow the PDCA (plan, do, check, and act) cycle.

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 to communicate 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 the person who is responsible to design 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.

The responsibilities of the process owner follow the PDCA (plan, do, check, and act) cycle.

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 product 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 to create improvement actions to address the 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 to bring the resources and processes together to achieve the objectives of the business plans that are created by the business leaders.

The responsibilities of the operational manager follow the PDCA (plan, do, check, and act) cycle.

Plan: The operational managers - in collaboration with each Process Operator, create 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 to teach 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 to create 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 to learn and perform the processes (work) necessary to achieve the objectives of the business plans that are created by Business Leaders.

The responsibilities of the process operator follow the PDCA (plan, do, check, and act) cycle.

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 to learn 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).

BPI: 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 is 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.

Methodology of BPI

• Carrying out BPI is a project, so all principles of project management apply. This ensures, for example, that improvement processes do not conflict with each other (such issues would be addressed as part of risk planning).^[4]

• The first step in BPI is to define the existing structure and process at play (AS-IS).

• Then, the BPI process owners should determine what outcomes would add value to the organization's objectives and how best to align its processes to achieve those outcomes (TO-BE).

• Once the outcomes are determined, the organization's work force needs to be re-organized to meet the new objectives, using the variety of tools available within the BPI methodology.

Rummler-Brache methodology

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

Implementing BPI

Most resistance to BPI comes from within an organization. Managers often do not wish to change existing structures. 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:

• Start with a small process that can be completed in a short time frame.
• Set clear timelines.
• Do not spread resources thinly and focus on the short term payoff.
• Management and primary stakeholders must be involved, or else even a limited implementation will fail.

See also

• Business process discovery
• Business process interoperability
• Business process management
• Business process mapping
• Demand chain
• PDCA
• Process improvement
• Project management
• Project planning
• Supply Chain
• Hoshin Kanri

References

1. ^ ^{a b} Business Process Improvement (ISBN 978-0070267688)
2. ^ Ernst & Young Technical Report TR 90.006 HJH 8/1990
3. ^ The The Business Process Improvement Workbook: Documentation, Analysis, Design, and Management of Business Process Improvement (ISBN 978-0070267794)
4. ^ "Project Management Approach For Business Process Improvement". The Project Management Hut. http://www.pmhut.com/project-management-approach-for-business-process-improvement. Retrieved April 28, 2010.