Business Process Improvement (BPI) is a systematic approach to help any organization make significant changes in the way it does business. The organization may be a for-profit business, a non-profit organization, a government agency, or any other ongoing concern.
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 organizantion'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).
Unfortunately, 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, did not make significant gains, and 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.
Principles of BPI
Process alignment to Business Goals: An organization's goal should be the key driver for any business process. All process, people and resources should be aligned to business goals. This would facilitate the process changes in line with the organizations goal
Process first: Business process improvement process might result in technological upgradation, automation or staff reduction this not necessariy means BPI always lead to automation / IT budgeting. BPI focuses on incorporating cost effective and goal oriented process.
Customer focus: Changing customer needs emphasis the importance of business process being aligned to higher customer satisfication. The advent of new technology, increaing number boundary less organization, Free trade agreements poses greater challenge of serving different customers with varied preferences across globe
Benchmark regularly: An organization using BPI must continually and frequently determine if the costs of performing a business process outweigh the benefits. Therefore this organization must establish benchmarks, or a set of standards, against which the process must be measured. The benchmarks themselves must be quantifiable, attainable, and realistic.
Establish who owns a business process: Specific people, the process owners, must be placed in charge of a business process, be responsible for the performance and changes in the process, and be responsible for the success or failure of a process. Without personal responsibility, the process may fail.
Build control points into a process: There should be frequent points where the process owners and customers/stakeholders decide if the process is meeting current benchmarks and what they should do with the process. This may include halting the process if it fails to meet realistic benchmarks.
Standardize similar processes: Many organizations rely on an ad hoc approach to business processes. They make them up as they go along and change them without deliberate planning. A standardized system of preparing processes saves time, effort, staff hours, and money.
Make changes now: The change process should be done repeatedly, not merely once. Waiting for a perfect solution would mean no solution.
Use the right measures: Don't waste time taking process measurements if you are not going to use them to improve the process. The process slogan is worth remembering: "No process without measurement, no measurement without analysis, no analysis without action".
Methodology of BPI
Carrying out BPI is a project, so all principles of project management apply.
The first step in BPI is to define the organization's mission, existing structure and processes (AS-IS).
Then the BPI process owners should determine what outcomes would add value to the organization's mission and objectives (TO-BE).
Once the outcomes are determined, the organization's work force needs to be reshaped to meet the new missions and objectives, and a series of benchmarks, including cost metrics, should be put into place. It is during these latter steps that much of the resistance to BPI becomes apparent.
Information Processing and BPI
Although information processing is not meant to be the whole of BPI, it is a significant part of BPI. Successful BPI programs follow guidelines similar to these:
When designing new processes, do not think of existing procedures.
Put information processing power into the real work that produces the information rather than peripheral processes.
Move towards organization-wide data definitions (possibly initially by using gateways between existing systems).
Capture information once, at the source, without duplicating data.
Implementing BPI
Most resistance to BPI comes from within an organization. Managers do not wish to change existing structures; they reached their positions within the current system. 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 report success. To do so, they learned the following lessons:
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.
(All text is available under the terms of the GNU Free Documentation License. (See Copyrights for details.) Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc., a U.S. registered 501(c)(3) tax-deductible nonprofit charity.)
Tuesday, June 24, 2008
What is Business Process?
A Business Process is a collection of interrelated tasks, which solve a particular issue.
There are three types of business processes:
Management processes - the processes that govern the operation of a system. Typical management processes include "Corporate Governance" and "Strategic Management".
Operational processes - these processes create the primary value stream, they are part of the core business. Typical operational processes are Purchasing, Manufacturing, Marketing, and Sales.
Supporting processes - these support the core processes. Examples include Accounting, Recruitment, IT-support.
A business process can be decomposed into several sub-processes, which have their own attributes, but also contribute to achieving the goal of the super-process. The analysis of business processes typically includes the mapping of processes and sub-processes down to activity level.
Activities are parts of the business process that do not include any decision making and thus are not worth decomposing (although decomposition would be possible), such as "Answer the phone", "produce an invoice".
Business Process Modeling Notation can be used for drawing business processes in a workflow.
Definition
In the early 1990s, US corporations, and subsequently companies all over the world, started to adopt the concept of reengineering in an attempt to re-achieve the competitiveness that they had lost during the previous decade. A key characteristic of Business Process Reengineering (BPR) is the focus on business processes. Davenport (1993) defines a (business) process as
”a structured, measured set of activities designed to produce a specific output for a particular customer or market. It implies a strong emphasis on how work is done within an organization, in contrast to a product focus’s emphasis on what. A process is thus a specific ordering of work activities across time and space, with a beginning and an end, and clearly defined inputs and outputs: a structure for action. ... Taking a process approach implies adopting the customer’s point of view. Processes are the structure by which an organization does what is necessary to produce value for its customers.”
This definition contains certain characteristics a process must possess. These characteristics are achieved by a focus on the business logic of the process (how work is done), instead of taking a product perspective (what is done). Following Davenports definition of a process we can conclude that a process must have clearly defined boundaries, input and output, that it consists of smaller parts, activities, which are ordered in time and space, that there must be a receiver of the process outcome- a customer - and that the transformation taking place within the process must add customer value.
Hammer & Champy’s (1993) definition can be considered as a subset of Davenport’s. They define a process as
”a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”
As we can note, Hammer & Champy have a more transformation oriented perception, and put less emphasis on the structural component–process boundaries and the order of activities in time and space.
Rummler & Brache (1995) use a definition that clearly encompasses a focus on the organization’s external customers, when stating that
”a business process is a series of steps designed to produce a product or service. Most processes (...) are cross-functional, spanning the ‘white space’ between the boxes on the organization chart. Some processes result in a product or service that is received by an organization's external customer. We call these primary processes. Other processes produce products that are invisible to the external customer but essential to the effective management of the business. We call these support processes.”
The above definition distinguishes two types of processes, primary and support processes, depending on whether a process is directly involved in the creation of customer value, or concerned with the organization’s internal activities. In this sense, Rummler and Brache's definition follows Porter's value chain model, which also builds on a division of primary and secondary activities. According to Rummler and Brache, a typical characteristic of a successful process-based organization is the absence of secondary activities in the primary value flow that is created in the customer oriented primary processes. The characteristic of processes as spanning the white space on the organization chart indicates that processes are embedded in some form of organizational structure. Also, a process can be cross-functional, i.e. it ranges over several business functions.
Finally, let us consider the process definition of Johansson et al. (1993). They define a process as
”a set of linked activities that take an input and transform it to create an output. Ideally, the transformation that occurs in the process should add value to the input and create an output that is more useful and effective to the recipient either upstream or downstream.”
This definition also emphasizes the constitution of links between activities and the transformation that takes place within the process. Johansson et.al. also include the upstream part of the value chain as a possible recipient of the process output.
Summarizing the four definitions above, we can compile the following list of characteristics for a business process.
Definability: It must have clearly defined boundaries, input and output.
Order: It must consist of activities that are ordered according to their position in time and space.
Customer: There must be a recipient of the process' outcome, a customer.
Value-adding: The transformation taking place within the process must add value to the recipient, either upstream or downstream.
Embeddedness: A process can not exist in itself, it must be embedded in an organizational structure.
Cross-functionality: A process regularly can, but not necessarily must, span several functions.
Frequently, a process owner, i.e. a person being responsible for the performance and continuous improvement of the process, is also considered as a prerequisite.
There are three types of business processes:
Management processes - the processes that govern the operation of a system. Typical management processes include "Corporate Governance" and "Strategic Management".
Operational processes - these processes create the primary value stream, they are part of the core business. Typical operational processes are Purchasing, Manufacturing, Marketing, and Sales.
Supporting processes - these support the core processes. Examples include Accounting, Recruitment, IT-support.
A business process can be decomposed into several sub-processes, which have their own attributes, but also contribute to achieving the goal of the super-process. The analysis of business processes typically includes the mapping of processes and sub-processes down to activity level.
Activities are parts of the business process that do not include any decision making and thus are not worth decomposing (although decomposition would be possible), such as "Answer the phone", "produce an invoice".
Business Process Modeling Notation can be used for drawing business processes in a workflow.
Definition
In the early 1990s, US corporations, and subsequently companies all over the world, started to adopt the concept of reengineering in an attempt to re-achieve the competitiveness that they had lost during the previous decade. A key characteristic of Business Process Reengineering (BPR) is the focus on business processes. Davenport (1993) defines a (business) process as
”a structured, measured set of activities designed to produce a specific output for a particular customer or market. It implies a strong emphasis on how work is done within an organization, in contrast to a product focus’s emphasis on what. A process is thus a specific ordering of work activities across time and space, with a beginning and an end, and clearly defined inputs and outputs: a structure for action. ... Taking a process approach implies adopting the customer’s point of view. Processes are the structure by which an organization does what is necessary to produce value for its customers.”
This definition contains certain characteristics a process must possess. These characteristics are achieved by a focus on the business logic of the process (how work is done), instead of taking a product perspective (what is done). Following Davenports definition of a process we can conclude that a process must have clearly defined boundaries, input and output, that it consists of smaller parts, activities, which are ordered in time and space, that there must be a receiver of the process outcome- a customer - and that the transformation taking place within the process must add customer value.
Hammer & Champy’s (1993) definition can be considered as a subset of Davenport’s. They define a process as
”a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”
As we can note, Hammer & Champy have a more transformation oriented perception, and put less emphasis on the structural component–process boundaries and the order of activities in time and space.
Rummler & Brache (1995) use a definition that clearly encompasses a focus on the organization’s external customers, when stating that
”a business process is a series of steps designed to produce a product or service. Most processes (...) are cross-functional, spanning the ‘white space’ between the boxes on the organization chart. Some processes result in a product or service that is received by an organization's external customer. We call these primary processes. Other processes produce products that are invisible to the external customer but essential to the effective management of the business. We call these support processes.”
The above definition distinguishes two types of processes, primary and support processes, depending on whether a process is directly involved in the creation of customer value, or concerned with the organization’s internal activities. In this sense, Rummler and Brache's definition follows Porter's value chain model, which also builds on a division of primary and secondary activities. According to Rummler and Brache, a typical characteristic of a successful process-based organization is the absence of secondary activities in the primary value flow that is created in the customer oriented primary processes. The characteristic of processes as spanning the white space on the organization chart indicates that processes are embedded in some form of organizational structure. Also, a process can be cross-functional, i.e. it ranges over several business functions.
Finally, let us consider the process definition of Johansson et al. (1993). They define a process as
”a set of linked activities that take an input and transform it to create an output. Ideally, the transformation that occurs in the process should add value to the input and create an output that is more useful and effective to the recipient either upstream or downstream.”
This definition also emphasizes the constitution of links between activities and the transformation that takes place within the process. Johansson et.al. also include the upstream part of the value chain as a possible recipient of the process output.
Summarizing the four definitions above, we can compile the following list of characteristics for a business process.
Definability: It must have clearly defined boundaries, input and output.
Order: It must consist of activities that are ordered according to their position in time and space.
Customer: There must be a recipient of the process' outcome, a customer.
Value-adding: The transformation taking place within the process must add value to the recipient, either upstream or downstream.
Embeddedness: A process can not exist in itself, it must be embedded in an organizational structure.
Cross-functionality: A process regularly can, but not necessarily must, span several functions.
Frequently, a process owner, i.e. a person being responsible for the performance and continuous improvement of the process, is also considered as a prerequisite.
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