13 Oct Business Process Management
Business Process Management (BPM) is a key strategy implemented by organizations to manage their business more effectively while deploying IT solutions where applicable. However, the increased focus on technology sometimes makes organizations forget about the basics.
Business Process Management (BPM) tends to conjure up images of copious amounts of documents requiring constant updates, with large departments concerning themselves solely with the constant influx of change requests.
So why bother? Well, there are a lot of benefits in implementing a robust, performance-driven BPM philosophy within a company, but at the same time there are a lot of pitfalls to consider.
Benefits include:
Agility & Continuous Improvement – it’s much easier to make rapid changes to an existing business process if it is properly documented
Productivity through technology integration – easy identification of redundant process steps and bottlenecks, while providing a bridge between business and IT
Aiding in the establishment of a risk culture – knowing what risks are incurred by executing a business process will make executors more conscious of the consequences of errors
Compliance & Standardization – a process being executed by different teams, perhaps in different locations needs proper documentation to enforce compliance where required, and repeatability
Onboarding – summaries of procedural documentation can be very useful when onboarding new employees, in combination with on-the-job coaching
Main pitfalls include:
Poor Quality Documentation – documents of poor quality and / or the documentation of poorly designed business processes will lead to frustration and inefficiencies
Overdocumentation – too many documents to update in a changing business environment will simply stagnate
Document Focus – making the documents the focus of the BPM effort will not drive the required continuous improvement
So, what is a business process?
One of the questions we get asked the most, tends to be ‘how do we define a process’? There is a significant number of different definitions, and they can for the most be summarized into something like:
‘a collection of related activities that transforms a series of inputs into one or more outputs’
The challenge with these definitions is that it basically opens up for pretty much anything to be labeled a ‘process’, so not too useful. Instead, let’s focus on core business processes – in this case, the above definition can be updated to:
‘a collection of related activities that transforms a series of inputs into one or more outputs, in which the inputs, outputs and / or the activities themselves carry significant risk to the company’
There are numerous types of risks to consider here, the most prevalent being HSE, CSR, Regulatory and Financial risks, although this may vary across industries. When organizations go down the BPM route, this aspect is frequently being applied to only what a small group of people consider important or overlooked completely.
The BPM journey
A sensible place to start is to develop the Business Process Classifier (BPC) for the organization, defining the business processes either for the entire organization, or for a part of it.
Next, select core processes by identifying which of the business processes in the BPC has significant risk associated with it. In many cases, particularly for large organizations, it makes sense to identify the core processes directly, instead of developing the full list of processes.
Once the core processes have been selected, it may be useful to segment them in an effort / risk matrix, as some of the larger and more complex business processes tend to have significant effort involved in documenting them, but not always a comparable level of risk.
Before documenting the core processes, it is worth noting that most business processes in any given organization, has 3 versions:
- The documented version (how we think the process is executed) – there may be documentation already existing in the organization
- The extant version (the way it is executed in practice) – this might differ significantly from how we think it is executed, and may have variants
- The optimal version (the most efficient way it could be executed) – there might be significant potential for improvement
In summary, before documenting a core process, conduct a process mapping exercise with all relevant stakeholders – there is little value in documenting a non-existing or poorly performing process.
Following the creation and approval of the procedure, check with executors if one or more steps require an instructional document. This is particularly relevant if complex transactions in IT systems are involved.
One thing often forgotten, is the inclusion Process Performance Indicators (PPI) and Key Performance Indicators (KPI) in the procedural document, along with review and control mechanisms. Performance metrics and review cadence can make or break a BPM implementation. A PPI is a metric important to the management of the business process itself, whereas a KPI generally measures an attribute of the whole process. A KPI has the additional criteria that it must be significant at the company level.
Finally, a RACI matrix should be developed, and horizontal analysis (to determine the viability of activities) and vertical analysis (to validate the roles of stakeholder) should be carried out.
Sustainability
While BPM exercises can be very useful in themselves, it is always recommended to consider reviewing Management Control Systems (MCS) at the same time to ensure optimal performance management of the core process. This is particularly true for processes spanning across many different business functions, and which is not fully automated.
The increased use of process automation can also greatly contribute to sustainability – it is however vital to have a real understanding of how a process is executed, before embarking on an automation effort.
How we can help
At the Productivity Lab, we have experience from developing entire BPCs from scratch for vertically integrated, upstream, and downstream oil and gas companies, and significant experience from improving performance of major processes within Supply Chain Management, HR, and Finance.
Whether your organization needs a complete BPM framework developed, or just needs assistance with improving performance of a single process, the Productivity Lab can help!
Alan Aastorp has built capabilities and delivered performance improvements for over 20 years, including engagements with some of the world’s largest companies, as well having professional qualifications in Supply Chain Management, Finance and HR. Alan can be reached at aastorp@productivity-lab.com.