Aligning business processes and achieving business process excellence
If your organization is using a Balance Scorecard and have a running ERP system, then you can adopt the following 10-step model to achieve process excellence. This approach will help you to assess the process maturity, prioritize, select a suitable approach for process excellence, launch an initiative, and manage change. You can develop an excel model after understanding the following steps.
Step 1: Identify business processes
First of all, you need to identify the mega business processes of your organization. You can find many methods to classify the business processes into various levels; adopt any one of them. All you need to make sure is the consistency in process classification. I usually recommend classifying business processes into three levels mega, main, and sub-processes.
Step 2: Identity process leaders & key process members
Most of the organizations if not all, are structured organizationally by functions. While doing step 1, you identify the key process members who are directly doing the level 2 processes (main process). Then identify the senior leader who has the major stake in the execution of the process.
For example: If you take Produce-to-order kind of company and select “Order-to-delivery” as the MEGA process; it can have main processes such as order-intake, master scheduling, production, and dispatch. For each of the main processes select one process member. If you have multiple product lines, you may need to select more than one. The senior manager responsible for the whole process becomes process leader
Step 3: Map business process against strategic objectives (from strategy map)
If you are using a balanced scorecard approach for strategy execution, then you can take the list of strategic objectives from the strategy map. If you are not using the balanced scorecard, then you need to adopt a different approach, I will write another blog for this case.
Put the list of business processes in rows and strategic objectives in the column. Make sure that all strategic objectives from the strategy map are covered. You can highlight the cells (intersection) with three colors (Green for a fully aligned process, Yellow for non-aligned but a required process, Red for the non-aligned process). This exercise will highlight non-aligned processes, which are not required. These processes are good candidates for review and possible elimination or restructuring.
Step 4: Score for the strategic impact of the process excellence
Identify strategic impact for fully aligned processes on strategy. This exercise usually needs a good understanding of strategy and business processes. The senior leaders responsible for operations can assess this. The scoring from 1 to 5 can be given; with score 1 to low-impact and score 5 to very high-impact. You may use any external consultant to facilitate and help in this step.
In this exercise, you can identify the core business processes required for focus. Obtaining excellence in these processes can close 80% of the value gap.
Step 5: Assess the current state of process maturity
Only a few organizations have very well defined KPIs for business processes. You are lucky if your organization is doing so. Against each process based on KPIs and its performance, you can obtain score the process maturity. You can score 1 to low-performance processes and score 5 to high-performance processes.
If your organization is not having any process KPIs, usually this is the case, then you can conduct a brief survey (qualitative) and assess the scores. You can do the survey from process leaders, process members, and some key stakeholders to find the process maturity. You can score 1 for a poorly performing process and score 5 for a high-performance process.
You can make the processes into the following categories based on the above scores:
Non-standard process: This process is completely fragile and usually needs designing or re-engineering
Standard & needs improvement: This process is standard and performed routinely but there is a big room for process improvement
Standard & needs automation: This process is good but a lot of manual processes.
Standard & needs maintenance: Everything is fine with this process, but you need to maintain it.
Step 6: Assess the level of effort required and the probability of success of process optimization
In this step, you can assess the effort required for optimizing processes based on the process maturity. This is again qualitative. Score 1 if the very high effort required and score 5 if the low effort required. It may look funny to give the scores like this, but once you complete the model you can get a fairly good picture.
You also can give the score based on the probability of success of process optimization. You can give score 1 if the probability of success is low and score 5 if the probability of success is very high.
At this moment you have three scores:
1) Strategic impact score
2) Level of effort required score
3) Probability of success score
Step 6: Prioritize business processes based on composite scores
Multiply strategic impact score, level of effort required score, and the probability of success scores. You can put the processes based on the descending order of the composite score. This list gives you a fairly good idea of priority. However, this priority list needs to be adjusted based on some special cases. This list also sometimes adjusted based on funding for process improvements. However, the adjustment for the priority list is subjective to the organizational needs.
Step 7: Identify a suitable approach for process excellence
Now you can select a best-fit methodology for process improvements. The following guidelines could help you.
Ø Business process re-engineering or deploy industry-standard practice if the process is nonstandard.
Ø Lean six sigma/Kaizen methodologies if the process is standard and needs improvement.
Ø ERP optimization if the process is standard but needs automation.
Ø Business process management to monitor and govern the processes if the process is good.
Step 8: Prepare a high-level road map for process excellence initiative
You can prepare a high-level road map for process excellence by selecting the processes from the above priority list and depending on the methodology selected.
Usually, if your organization is implementing new ERP, then first the implementation should be completed. This results in the standardization of processes to a large extent. If you have functioning ERP in place then you can go for a process improvement initiative through Lean six sigma combined with kaizen methodology. I strongly advise using the initiative is operational excellence and use all the tools that required either lean or six sigma etc. This way your focus is operational excellence, not the methodology.
Step 9: Launch and manage operational excellence initiative
You need to make necessary communication about the operational excellence initiative; ideally, the CEO should communicate the memo. You need to make sure of the senior leadership team is committed and sponsor the initiative. As part of initiative governance, you need to identify program and project managers, form the governance council, and perform necessary program management processes. You could establish PMO if the organization is large. I will write about initiative governance in my upcoming blog.
You should form one team for the mega process with key process members and a process leader for process improvement. After achieving process excellence, the job description of the functional members who are process members and process leaders can be updated to include process responsibilities. Embedding process responsibilities in functional job descriptions will help in sustaining the process of excellence effort and help in further optimizations.
Step 10: Manage change effectively
The leaders usually don’t pay enough attention to managing change and eventually end up in severe wastage of organizational resources and may lead to initiative failure. The change should start from the top and it should be visible that the leadership team is promoting change. I advise you to adopt any proven change management framework such as ADKAR etc. This will help you to follow specific steps and help you to focus on change management.