BPRA Laguna Chapter 2

7/23/2019 BPRA Laguna Chapter 2

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1

Process Management and

Process OrientedImprovement Programs

Chapter 2

Business Process Modeling, Simulation and

Design


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2

Overview

Process Management and the Power ofAdopting a Process view

Six Sigma Definitions

!ost and revenue rationale "ramewor#

$e% success factors

Business Process &eengineering 'hat is it(

Brief histor%

'hat processes should )e reengineered, and when(

Suggested framewor#s

*volutionar% vs+ &evolutionar% !hange


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Process Management

Principles of managing, controlling and improvingprocesses

'or#flow orientedhow -o)s flow through an organi.ation

/mportant elements in managing processes

Process design

!ontinuous 0incremental improvement

!ontrol s%stems

People management

!hange management

rigins in the field of 3ualit% management

Process control is a fundamental component

4istoricall% strong manufacturing focus

*3uall% valua)le in services


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5

The Power of Adopting a Process View

'ea#nesses of the functional org+ and division of la)orparadigm

"ocus on s#ills and resource utili.ation rather than wor# output

&eward s%stems tailored for the functional unit not the overall firm

6roup )ehavior and cultures fostering an 7us versus them8 mentalit%

Decentrali.ation7firms within the firm8 with their own agenda

Strengths of a process view

!reates focus on wor# output reduced ris# for su)9optimi.ation

:eads to transparenc% of how contri)utions of individual wor#ers fit

into the 7)ig picture8 encourages involvement and empowerment 4elps )rea# down )arriers )etween departments

!reates a sense of lo%alt% towards the process to )alance the lo%alties

within the functional units


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Principles for Successful Process

Management

Assign

process

ownership

Perform

feed)ac#

< control

Develop

!larif% the process scope Determine who will ta#e responsi)ilit% for the process

Process ownership

?eed someone in charge to ma#e things happen

&esponsi)ilities of a process owner Accounta)ilit% and authorit% for process operations and improvements

"acilitate pro)lem solving and ma#e sure corrective action is ta#en

Mediate )etween line managers with overlapping authorities

6uidelines for assigning process ownership Manager with most resources or most wor# invested in the process

Manager that is most affected if the process fails

Process owner must have high enough position to see how the processfits into the 7)ig picture8, needs clout to solve functional )ic#ering


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Phase I: Initialiation

Anal"ing Process #oundaries and Interfaces Process Boundar% defines the process entr% and exit points

where inputs flow in and outputs flow out

Provides a clear picture of the process scope

Defines the external interfaces /nternal interfaces

4and9off points within the process )oundaries

Most critical where the process crosses functional or organi.ational

)orders

Most process inefficiencies are related to insufficient

interface communication 0 lac# of coordination

/mportant to identif% critical interfaces earl% on


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The Customer$Producer$Supplier %CPS& model

Cseful approach for resolving interface related pro)lems

Appl%ing the !PS model to all critical interfaces adopt a view ofthe process as a chain of customers !oordination achieved )% understanding internal < external customers

/nvolves negotiation and agreement )etween all parts

Producer

P'OC(SSCustomerSupplier Input Output

Customer Requirements

Producer Requirements

Output Interface

Input Interface


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Phase II: !efinition

)-ective>

Cnderstand and document the process wor#flow "acilitate communication and understanding of process operations

!efine the process

Documentation of wor# content in individual activities Csuall% in terms of ver)al descriptions

perating procedures or Standard perating Procedures 0SP

Documentation of process flows Csuall% a flowchart )ased method

!om)ination of ver)al and graphical description !ommon information gathering techni3ues

/nterviews with people wor#ing in the process 0group or individual

Anal%tical o)servation

&eview of relevant documentation


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1E

Phase III: Control %I&

)-ective>

*sta)lish a s%stem for controlling the process and providingfeed)ac# to the people involved

(sta)lish Control Points

!ontrol points are activities such as

/nspection, verification, auditing, measuring, countingF Csuall% considered )usiness value adding

'ithout control points and a control s%stem the onl% wa% ofassessing process performance is customer feed)ac# Ghe process ends up in a reactive mode

Poor 3ualit% is discovered too late

:ocation of control points is determined )% !riticalit% impact on customer satisfaction

"easi)ilit% ph%sicall% and economicall% possi)le


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Phase III: Control %II&

!evelop and Implement Measurements /nvolves answering the 3uestions

1+ 'hat is to )e measured and controlled 0*x+ "ed*x(

2+ 'hat is currentl% measured 0availa)le data(

+ !an a )usiness case )e made for a new measurement s%stem(

5+ 'hat is the appropriate sampling method, sampling si.e and fre3uenc%( Measurements should )e meaningful, accurate and timel%

Statistical and graphical tools needed to turn data into information+

"ive measurement categories> Measures ofF

!onformance 0to given specifications &esponse time 0lead9time, c%cle time

Service levels 0degree of availa)ilit%

&epetition 0fre3uenc% of recurring events such as rewor#

!ost 0Hualit%, PA", internal and external failure costs


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Phase III: Control %III&

Performing *eed)ac+ and Control

f critical importance for sta)ili.ing and improving the process

)-ectives of controlIcorrective action are

&egulation to maintain a certain performance level

/mprovement aiming at reducing varia)ilit% or raising the average

performance level

"eed)ac# is an important ena)ler for corrective action

People in the process need to understand how their actions affect the

overall process and its performance

"eed)ac# should )e performed in a constructive not punitive manner

!onstructive feed)ac#

Ma#es people feel that the% matter

*ncourages involvement and commitment


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1

Si, Sigma -ualit" Programs

Six Sigma is originall% a compan% wide initiative at Motorola

for )rea#through improvement in 3ualit% and productivit%

:aunched in 1@

&endered Motorola the Malcom Baldridge ?ational Hualit% Award 1

Ghe ongoing success of Six Sigma programs has attracted a

growing num)er of prestigious firms to adopt the approach *x+ "ord, 6*, AM*J, 4one%well, ?o#ia, Phillips, Samsung, K+P+

Morgan, Ma%tag, DupontF

Broad definition of Six Sigma programs

A company wide strategic initiative for process improvement in bothmanufacturing and service organizations with the clear obective of

reducing costs and increasing revenues!

"ierce focus on )ottom line results


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Technical !efinition of Si, Sigma

&educe the variation of ever% individual process to render no more than +5

defects per million opportunities Assuming the process output is normall% distri)uted with mean and

standard deviation the distance )etween the target value and the closestspecification limit is at least = and the process mean is allowed to drift atmost 1+; from the target

Garget Lalue 0G

./01 ./0/0 2/0

Cpper Specification :imit 0CS::ower Specification :imit 0:S:

31 31

2/0$ + 2/0


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The Si, Sigma Cost or (fficienc" 'ationale

&educing costs )% increasing process efficienc% has an

immediate effect on the )ottom line

Go assure wor#er involvement Six Sigma strives to avoid la%offs

Commitment Reduced Costs

Increased Profits

Improvement proects

C"cle Time 4ield

VariationGhe Six Sigma

*fficienc% loop


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riented around the dimensions of variation, c%cle time 7&eengineering 'or#> DonNt Automate, )literate8, Michael

4ammer,Harvard Business eview, 1E

7Ghe ?ew /ndustrial *ngineering8, Davenport and Short, !loan

Management eview, 1E


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2;

#P' Success Stories and *ailures

Success Stories "ord cuts pa%a)le headcount )% @;

Mutual Benefit :ife improves underwriting efficienc% )% 5E

Jerox redesigns its order fulfillment process and improves

service levels )% @;9@ and c%cle times )% @E with

inventor% savings of Q;EE million

Detroit *dison reduces pa%ment c%cles for wor# orders )% E

*ailures An estimated ;E9@E of all reengineering pro-ects have failed Ghose that succeed ta#e a long time to implement and reali.e


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:ac# of support from senior management

Poor understanding of the organi.ation and the infrastructure

/na)ilit% to deliver necessar% technolog%

:ac# of guidance, motivation and focus

"i#inga process instead of changingit

?eglecting peopleNs values and )eliefs

'illingness to settle for marginal results

Huitting too earl%

Allowing existing corporate cultures and mgmt attitudes to prevent redesign

?ot assigning enough resources 'or#ing on too man% pro-ects at the same time

Gr%ing to change processes without ma#ing an%one unhapp%

Pulling )ac# when people resist change

*tcF

'easons for #P' *ailures


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2@

6hat does it ta+e to succeed with #P'7

4ammer and !hamp% 7Ghe role of senior management is crucial+8

*mpirical research indicatesF

organi.ations which displa% understanding, commitment

and strong executive leadership are more li#el% to succeed

with process reengineering pro-ects+

!ommon themes in successful reengineering efforts

1+ "irms use BP& to grow )usiness rather than retrench

2+ "irms emphasi.e serving customers < compete

aggressivel% with 3uantit% < 3ualit% of products < services+ "irms emphasi.e getting more customers, more wor# and

more revenues instead of downsi.ing


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2

'eengineering and its 'elationships to

Other Improvement Programs %I&

&eengineering 9 what is that(

7Ghe fundamental rethin#ing and radical redesign of )usiness

processes to achieve dramatic improvements in critical,

contemporar% measures of performance such as cost, 3ualit%,

service and speed8 04ammer and !hamp% 1

A num)er of similar definitions )% other authors also exist

&eengineering characteristics "ocus on core competencies or value adding )usiness processes Ghe goal is to achieve dramatic improvement through rapid and

radical redesign and implementation Pro8ects that "ield onl" marginal improvement and drag out

over time are failures from a reengineering perspective


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2

'eengineering and its 'elationships to

Other Improvement Programs %II&

Rightsizing Restructuring Automation TQM Reengineering

Assumptions Staffing Reporting Technology Customer Fundamentalquestioned relationships applications needs

Focus of Staffing, job Organization Systems Bottom-up Radicalchange responsibilities improvements changes

Orientation Functional Functional Procedures Processes Processes

Role of IT Often blamed Occasionally To speed up Incidental Keyemphasized existing systems

Improvement Usually Usually Incremental Incremental Dramatic andgoals incremental incremental significant

Frequency Usually one Usually Periodic Continuous Usually onetime one time time


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E

'elationship )etween !iscontinuous

%'adical& and Continuous Improvement

Improvem

ent

Time

IncrementalImprovement

RadicalImprovement

TheoreticalCapability

StatisticalProcessControl


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#rief 9istor" of #P' %I&

Most agree that Michael 4ammer laid the foundation to the

reengineering approachF

FBut man% factors influenced the )irth and h%pe around BP&

Ghe origins can )e traced )ac# to a num)er of successful pro-ects

underta#en )% management consulting firms li#e Mc$inse% in the ENs

GHM had )rought the notion of process improvement onto the

management agenda

Ghe recession and glo)ali.ation in late 1ENs and earl% 1ENs

stimulated companies to see# new wa%s to improve )usiness

performance

Programs often aimed at increasing flexi)ilit% and

responsiveness

Middle management under particular pressure


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2

#rief 9istor" of #P' %II&

Articles and )oo#s )% 4ammer, Davenport, Short, !hamp%

etc+ legitimi.ed and defined the reengineering approach

*arl% success stories were heavil% pu)lished in the popular press

Man% consultantsIvendors launched their own versions of BP& All t%pes of change programs were la)eled reengineering

6ave BP& a )ad name

#ut man" factors influenced the )irth and h"pe around #P'

Ghe Productivit% Paradox 0Stephen &oach Despite powerful mar#et and service innovations related to /G and

increased computer power in the 1ENs there was little evidence that

/G investments improved overall productivit%

rgani.ations were not a)le to utili.e the capa)ilities of the newtechnolog% Automating inefficient processes has limited impact on

productivit%


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Ghree forces are driving companies towards redesign0Ghe three !Ns, 4ammer < !hamp%, 1 Customers

are )ecoming increasingl% more demanding

Competition has intensified and is harder to predict

Change

in technolog%

constant pressure to improveO design new products faster

flexi)ilit% and a)ilit% to change fast are re3uirements for

survival

6hen Should a Process )e 'eengineered7 %I&


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5

Cseful 3uestions to as# 0!ross et al+ 015 Are customers demanding more for less(

Are %our competitors providing more for less(

!an %ou hand9carr% a -o) through the process much faster than

the normal c%cle time 0ex five times faster(

4ave %our incremental improvement efforts )een stalled(

4ave technolog% investments )een a disappointment(

Are %ou planning to introduce radicall% new productsIservices

or to serve new mar#ets(

Are %ou in danger of )ecoming unprofita)le( 4ave cost9cutting programs failed to turn the ship around(

Are operations )eing merged or consolidated(

Are the core )usiness processes fragmented(

6hen Should a Process )e 'eengineered7 %II&


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Processes 0not organi.ations are reengineered

!onfusion arises )ecause organi.ational units are well defined,

processes are often not+

"ormal processes are prime candidates for reengineering

"ormal processes are guided )% written policiesO informal

processes are not+

G%picall% involve several departments and man% emplo%ees+

More li#el% rigid and therefore more li#el% to )e )ased on

invalid assumptions+

6hat Should )e 'eengineered7 %I&


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Screening criteria

1+ D%sfunction

'hich processes are in deepest trou)le

0most )ro#en or inefficient(2+ /mportance

'hich processes have the greatest

impact on the compan%Ns customers(

+ "easi)ilit% 'hich processes are currentl% mostli#el% to )e successfull% reengineered(

6hat Should )e 'eengineered7 %II&


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S"mptoms and diseases of )ro+en processes

!"sfunctional or #ro+en Processes

Symptom Disease

1 Extensive information Arbitrary fragmentationexchange, data redundancy of a natural process

and re-keying2 Inventory, buffers and System slack to cope with

other assets uncertainty

3 High ratio of checking and Fragmentationcontrol to value-adding

4 Rework and (re)iteration Inadequate feedback alongchains

5 Complexity, exceptions Accretion onto a simple baseand special cases


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Assessed )% determining issues the customers feelstrongl% a)out and identif%ing which processes most

influence these issues

Importance

Customer Issues

Product CostOn-time DeliveryProduct Features

After-sales service

Market

Processes

Product DesignOrder ProcessingProcurementCRM

Company


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Determined )%> Process Scope, Pro-ect !ost, wner!ommitment and the Strength of the &edesign Geam

:arger pro-ects offer potentiall% higher pa%offs )ut lesser

li#elihood of success

*easi)ilit"

Process

Feasibility

Process Scope Project Cost

Team StrengthOwner/Corp.Commitment


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5E

Ghe process paradox refers to the decline and failure of)usinesses that have achieved dramatic improvements

through process reengineering

Go avoid getting caught in the process paradoxcompanies must

;


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Suggested *ramewor+ for #P' %I&

/n general, #e%words for successful BP& are creativit% andinnovationF

F)ut BP& pro-ects also need structure and discipline,prefera)l% achieved )% following a well thought9outapproach+

#P' *ramewor+ due to 'o)erts %>>.& Starts with a gap anal%sis and ends with a transition to

continuous improvement+

Ghe gap anal%sis focuses on three 3uestions>/ The wa" things should )e

2/ The wa" things are

?/ 9ow to reconcile the gap )etween and 2


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'o)ert@s *ramewor+ for #P'

Opportunityassessment

Current capabilityanalysis

Process Design

Risk and impactassessment

Transition plan

Pilot test

Infrastructuremodifications

Implementationand transition

Tracking andperformance

Continuous improvementprocess

S d * + f #P' %II&


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5

#P' *ramewor+ due to owenthal %>>.& !onsists of 5 phases

/ Preparing for change ?/ !esigning for change

2/ Planning for change ./ (valuating change

Phase 1 6oals

Building management understanding, awareness and support for change Preparing for a cultural shift and ac3uire emplo%ee 7)u%9in8

Phase 2 Assumption rgani.ations need to adopt to constantl% changing mar#etplaces

Phase 9 Method Go identif%, assess, map and design A framewor# for translating process #nowledge into leaps of change

Phase 5 Means *valuate performance during a specified time frame

Suggested *ramewor+ for #P' %II&


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owenthal@s *ramewor+ for #P'

Preparing for

change

Planning for

change

!esigning

change

(valuating

change

Phase I Phase II

Phase III

Phase IV

S t d * + f #P' %III&


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5;

#P' *ramewor+ due to CrossB *eather5"nch %>>.&

/ Anal"sis /n depth understanding of mar#et and customer re3uirements

Detailed understanding of how things are currentl% done

'here are the strengths and wea#nesses compared to the competition

2/ !esign Based on principles that fall into six categories

& Service -ualit" relates to customer contacts

2& 6or+flow managing the flow of 8o)s

?& 6or+space ergonomic factors and la"out options

.& Continuous improvement self sustaining

0& 6or+force people are integral to )usiness processes

3& Information technolog"

?/ Implementation

Gransforming the design into da% to da% operations

Suggested *ramewor+ for #P' %III&


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Cross et al@s *ramewor+ for #P'

CustomerRequirement analysis

Designspecifications

High-level design

Detailed design

Pilot newdesign

Transform the business

Baselineanalysis

Currentprocess review

Design options

Model/validate

new design

Build in CI

feedback

Designprinciples

AnalysisPhase

DesignPhase

ImplementationPhase

' l ti ( l ti Ch


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5@

Ghe reengineering movement advocates radical redesignand rapid revolutionar% implementation and change

A revolutionar% change tactic Gurns the whole organi.ation on its head

4as potential to achieve order of magnitude improvements

/s ver% costl% 4as a high ris# of failure

Go reduce ris#s and costs of implementation man%companies end up with a strateg% of radical redesign andevolutionar% implementation tactic

/mplementing the feasi)le plans given current restrictions

Implemented process is usually a compromise between theoriginal process and the ideal! blueprinted process design

'evolutionar" vs/ (volutionar" Change

' l ti ( l ti Ch


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5

Ghe critical element in choosing )etween a revolutionar%and evolutionar% approach is time

/f the firm is in a reactive mode responding to a crisis a

revolutionar% approach ma% )e the onl% option

/f in a proactive mode an evolutionar% tactic might wor#

'evolutionar" vs/ (volutionar" Change

(lement (volutionar" change model 'evolutionar" change model

:eadership /nsiders utsiders

utside resources "ew, if an%, consultants !onsultant led initiative

Ph%sical separation ?o, part time team mem)ers es, 7off9campus site8

!risis ?one Poor performance

Milestones "lexi)le "irm

&eward s%stem Cnchanged ?ew

/GIprocess change Process first Simultaneous process and /G change

*lements of evolutionar% and revolutionar% change theories


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5

Basic principle People directl% affected )% or involved in a change process must

ta#e active part in the design and implementation of that change

&eal change is achieved through incremental improvement over

time

!hange should come from within the current organi.ation

Should )e carried out )% current emplo%ees and leadership

Should )e adapted to existing resources and capa)ilities flexi)le

milestones

Should )e )ased on open and )road communication ?ew processes and procedures are implemented )efore

introducing new /G s%stems

The (volutionar" Change Model %I&


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;E

Advantages of an evolutionar% change tactic compared to arevolutionar% approach :ess disruptive and ris#%

/ncreases the organi.ationRs a)ilit% to change

Disadvantages Ga#es a long time to see results

Does not offer the same potential for order of magnitudeimprovements

Lision must )e #ept alive and ad-usted over time as external mar#etconditions change

The (volutionar" Change Model %II&

Th ' l ti Ch M d l %I&


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;1

Based on the punctuated e3uili)rium paradigm &adical change occurring at certain instances

:ong periods of incremental change in )etween

&evolutionar% change 4appens 3uic#l%

Alters the ver% foundation of the )usiness and its culture Brings disorder, uncertaint%, and identit% crises

?eeds to )e top driven

&e3uires external resources and new perspectives

/nvolves tough decisions, cost cutting and conflict resolution

Ghe change team is small and isolated from the rest of theorgani.ation Avoid undue influence from current operations

!ommunication with people in the process is on a 7need to #now8 )asis

The 'evolutionar" Change Model %I&

The 'e ol tionar Change Model %II&


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Advantages with a revolutionar% implementation approach Drastic results can )e achieved 3uic#l% /f successful, the ideal 7)lueprinted8 design is put in place

Disadvantages with a revolutionar% change tactic

Ler% strenuous for the organi.ation

4igh pro)a)ilit% for failure

Diverts top management attention from the external mar#etplace

6oes against core values of man% organi.ations

*mpowerment

Bottom9up involvement /nnovation

Secrec% creates uncertaint% a)out the future roles of individual

emplo%eesresistance to change

The 'evolutionar" Change Model %II&

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