Organizations continually aim to increase profits by reducing costs and increasing efficiency. This has been the mantra since the first wave of process improvement initiatives in the 1970s and 1980s where Total Quality Management, process improvement methods and statistical process control where the leading enablers. However, traditional businesses underwent dramatic changes in the late 1980s due to globalization and the removal of trading barriers. Many organizations reassessed their take on performance improvement and began adopting a process-centric approach called Business Process Management (BPM) to improve their performance and reduce cost.
BPM has evolved significantly since the 1990s (when process reengineering and Six Sigma were all abuzz) and has now reached the stage for the third wave in BPM methods. Organizations today use various long-term strategies such as automation, resource optimization, process standardization and process re-engineering to achieve cost reduction and operating-model effectiveness. All these strategies have processes at their core. Unfortunately, few organizations truly recognize how easily they can reach operational efficiencies through BPM. Every organization has its own business processes that, if left unmanaged, can potentially become complicated. As activities or tasks go from person to person, it can be difficult to keep a high-level perspective on what is actually going on.
On the other hand, technological advancements such as the rise of social media and mobility, demand that businesses transform in order to remain relevant. Hence, companies are under constant pressure to innovate in products and reengineer processes to stay ahead of the competition and earn profits. They must ensure that all operational processes are as effective and efficient as possible with the resources at hand.
It is reassuring to note that more and more companies are acknowledging that BPM is significant to improve efficiencies, reduce cost of service, reduce waste and generate higher revenues. Getting started can feel a bit daunting, but the overarching idea in BPM is to reengineer a business and the underlying processes.
When an organization decides to reengineer a process, the first step is to understand the existing state (or the “as-is” situation). Once the proper functioning of processes is understood and captured, it becomes easier to analyze the process and identify any control gaps, process redundancies and inefficient processes leading to poor customer experience. During this stage, analysts use different techniques (such as Six Sigma, lean and 5S) to identify these gaps. Analysts also perform benchmarking and maturity model analysis to spot improvement areas. Once the gaps are identified, designing the desired state or “to-be” state of the process is done. Once the “to-be” state models are created, the processes are implemented for monitoring. Normally, the “as-is” and “to-be” process models are created in process-modeling tools.
Process modeling links business processes, performance metrics, practices and people skills into a unified structure. Process models integrate the well-known concepts of business process reengineering, benchmarking, process measurement and organizational design into a cross-functional framework. Process models are very effective in improving current business operations and establishing a common language across the firm, and are often used as a foundation for improvement initiatives.
During process modeling, organizations inevitably encounter the following questions:
1. Which processes exist in the organization?
2. Where does the process handshake occur?
3. At what level of detail should these processes be modeled?
4. Who is responsible for the processes and who actually executes them?
5. How many resources are deployed in the processes?
These questions are particularly relevant when an organization has a plethora of process models. Global organizations, for example, typically have tens of thousands of processes running in parallel. Organizations therefore use readily available frameworks — created by consulting, IT and nonprofit organizations — as a reference. These frameworks contain a typical process architecture for an organization in the sector, the definition of a process, activities that should be included in a process, roles and responsibilities, and process measures and benchmarks, among others.
A number of companies have achieved dramatic improvement in economic value driven by BPM. The basic value proposition of BPM is that an organization can process more work while improving quality and reducing the effort. The benefits of BPM for companies can be categorized into the following:
1. Efficiency — Clear and defined end-to-end processes will address inefficiencies and eliminate sources of waste such as manual effort, poor interdepartmental handoffs, and the inability to effectively monitor overall progress.
2. Effectiveness — BPM promotes process effectiveness through the creation of a BPM governance process to manage and oversee the delivery of projects and the realization of business value. Other benefits of greater process effectiveness are the ability to handle exceptions faster and better, the ability to make better decisions, and the ability to execute consistently, which is critical for providing a better customer experience.
3. Agility — In this fast-paced ever evolving environment, organizations need to be nimble and have complete visibility of their processes, which go beyond inputs and outputs and process steps. They need to know who is performing the processes, how to measure the performance of each process, what the potential risks are and how they can be mitigated and controlled. The common factors that affect the performance of an organization such as social, technological, economic, environmental, political, legal and ethical aspects will require companies to be agile in changing or developing its processes. The faster we define and structure the ways of working, the quickly we can bring improvements in customer service and experience.
BPM enables organizations to align business functions with customer needs, and helps executives determine how to deploy, monitor and measure company resources. When properly executed, BPM has the ability to enhance efficiency and productivity, reduce costs, and minimize errors and risk — thereby optimizing results. Implementing best practices in BPM contributes to sound financial management and quantifies how well an organization is succeeding in meeting its goals. A BPM approach will help a business innovate and transform its way to achieving more business value.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.
Erwin D. De Arroz is a Senior Director of SGV & Co.