Service-based organizations, particularly those centering around knowledge workers, are discovering that business process improvement (BPI) is an imperative in the effort to reduce costs. Popular philosophies such as Lean Six Sigma and the Capability Maturity Model (CMM) are catching on as important guides to optimizing quality and efficiency in nonmanufacturing based industries, but BPI projects based on those methodologies are only as good as the data available.
Without objective, real-time data, an organization has to rely on conjecture to evaluate its processes; in other words, no one really knows how efficiently the processes are working, and it's hard to make sound decisions about how to improve them. Business process management (BPM) software makes it possible to collect real-time data that can shed significant light on the issue and aid the task of decision-makers. It's all about transparency - how do we calculate efficiency, how do we measure progress and how do we provide maximum customer satisfaction?
Navigating the Land of Generalities
BPM covers a lot of ground: management processes, operational processes, support processes - any set of linked activities, to use a common definition, that create value by transforming an input into a more valuable output long term. Sometimes BPM seems to mean almost anything. For our purposes, it means using tools and techniques to optimize the way a business works.
A number of terms have cropped up to refer to various elements of BPM, producing an alphabet soup that can be confusing. BPI simply means improving or optimizing processes in some measurable way, oftentimes in a one-off capacity. Business process automation (BPA) means using integrated software applications for greater efficiency by eliminating waste and reducing labor costs. Business process optimization (BPO) tools are enterprise software suites that facilitate process measurement and evaluation.
The point is to not get tangled up in the terminology. Practically speaking, all of these terms refer to the central imperative: that efficient business processes require careful, ongoing evaluation and continuous efforts at improvement.
Challenges to Effective BPM
Lack of transparency, inattention to customer needs and limited data can present major stumbling blocks to effective BPM.
Transparency. Many organizations have stewards of efficiency who assess processes and customize systems as such, but oftentimes their activities are not centrally identified as BPM and their projects may not be coordinated with other process improvement activities. Such rogue projects all look like line items on the expense side; calculating their payback as components of an organization-wide effort poses a problem. Nobody can say for sure what their overall effect is on the organization's bottom line or what customers are getting for their dollar.
Customer needs. Too often, the voice of the customer isn't heard in BPM optimization efforts, reducing BPM system effectiveness. This is true whether customers are internal (service-based organizations) or external (e.g., retail or manufacturing). A process optimization initiative may improve efficiency and reduce costs, but if it doesn't meet the needs of the customer - if the customer doesn't get a satisfactory product at the right time and at an acceptable cost - the initiative hasn't accomplished what it should. Philosophies such as Lean Six Sigma and CMM emphasize understanding customers and letting their needs drive the processes. Therefore, customer needs analysis is essential to effective process management.
Limited data, lack of clear KPIs. Gauging the effectiveness of BPI efforts requires objective, real-time data pinpointing cause and effect. Collecting data starts with establishing key performance indicators (KPIs) and deploying a system that can process the necessary metrics for evaluative purposes. Relying on subjective data or inadequate data will not bring results that justify the cost of optimization projects.
KPIs must be specific and focused. It makes little sense to invest heavily in process optimization unless the results are measurable. If BPI projects are funded centrally and run at the departmental or business unit level, there may not be sufficient transparency to evaluate them accurately. For example, some major pharmaceutical companies set up separate organizations for each product line, but they are all supported by shared organizations with service costs leveled across the product divisions. That makes it nearly impossible to appraise the effect of project X on product Y in terms of per-dollar return.
BPM is all about optimizing people, systems and workflow. In the past, processes were constrained by technology capability; now, technology makes it possible to automate processes, from job tracking to project management, which were mostly manual procedures just 10 years ago. Automation also enables an organization to collect real-time data on business processes and weigh performance against established KPIs.
Data-driven decisions are faster, quicker and better. Having the critical data available allows process operators the ability to pull the performance data in real time, without having to wait for reports to be delivered by someone else.
For companies that outsource processes, having the right data is a powerful factor in getting value return from outsourcing agreements. Automated processes combined with clearly defined KPIs and metrics provide tools for assessing vendor performance, determining rewards and penalties and guiding future contracts.
In today's regulatory environment, providing government agencies with the data needed to meet reporting obligations can put a strain on an organization's resources and processes. Regulatory compliance requires external transparency about how companies function and how certain core business processes are controlled. Again, it's a matter of access to the necessary data; automated analytics are essential for compliance with regulatory laws.
Value to the Customer
What should the customer see when business processes are optimized? On the surface, nothing. When the process is streamlined and running at peak efficiency, customer needs have been taken into account and all process steps are determined to add value, the customer works with the process and has no complaints. Customers are fully supported; they get what they want, on the time scale required, at a cost that's right.
If BPM is really working well, customers should see a continuing improvement over time. Behind the scenes, support organizations are doing the work faster, better and with fewer problems.
Organizations that model their BPI strategy on process philosophies must continually ask themselves, "How well are we measuring up against our goals?" An organization that effectively enables BPM and uses analytics driven by automation and accurate, real-time data is in a position to answer that question with confidence.
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