Applying CPIM to Business Processes

Business processes are another application area for a CPIM. The tools, templates, and processes are quite different than they are in the case of a process or practice improvement initiative for a PMLC model. For organizations that aspire to Level 5 maturity, knowledge of business process improvement is essential.

The business process targeted for an improvement initiative will have been identified already. Its performance is less than nominal, and that is the reason it will undergo a CPIM project. Often, you will choose to start identifying requirements for the project by mapping the current (“As Is”) business process or processes that are going to be affected. You might also want to map the business process after the solution is installed (“To Be” process). This is assuming you know the To Be solution. If you know only parts of the To Be solution, you will have to use an APM PMLC model for the process improvement project. Both the As Is and To Be processes are excellent artifacts to use as input to the requirements-gathering process.

From the systems development perspective, the process of gathering requirements often begins with knowledge of the current or As Is business process and ends with the To Be business process. That gap is filled with new or enhanced project deliverables. The As Is and To Be business process flow diagrams will be invaluable aids in the ensuing solutions development effort.

It is an ongoing dictum of today's business that you must continuously improve your business processes. The old “If it ain't broke, don't fix it” adage no longer applies. If you aren't continuously improving your processes and the way that they support your clients, you run the risk of losing market share. Your client should also be taking the lead in approaching your teams to demand process improvement. Conversely, they are your clients, and you should be ever watchful for ways to improve the service they deliver to their customers.

All organizations are under pressure to improve. The pressure can come from the client, the competition, environmental change, technology change, or some combination of the four. The improvements can be in the client's products or processes. It is all too often the case that the client doesn't give their business to the company with the best product. When clients find that a business is too difficult to deal with, they will decide to use second best, a supplier who is easier to deal with.

This also applies to internal organizations. One reason for outsourcing is a belief that external groups will be easier, faster, or cheaper to deal with. Internal organizations need to counter this belief by clearly demonstrating that they are continuously improving products and processes to the degree that their performance is competitive with external (outsourced) groups.

Characteristics of Business Processes

The more you understand business processes, the more you can improve them. To do that, you must clearly understand the following characteristics of business processes:

• Flow — The method for transforming input into output.
• Effectiveness — How well client expectations are met.
• Efficiency — How well resources are used to produce an output.
• Cycle time — The time taken for transformation from input to final output.
• Cost — The expenses of the entire process.
• Boundaries — How and where each process crosses from one function (or organization) into another. Each boundary equals a handoff, which often requires a Service Level Agreement (SLA) to ensure a smoothly running process. If a single process crosses two or more functions and the total end-to-end handoff, boundaries, and SLAs are not addressed, there is a large risk that improvements made to one piece of the process will cause unintended problems in other parts of the same process, thus defeating the purpose of the continuous improvement effort.
• Non-value-added time — The time between process steps when no work is done on the product or service.

Except for effectiveness and efficiency, these items are self-explanatory.

Process Effectiveness

Process effectiveness is how well the process meets the requirements of the client. It measures the quality of the process. Effectiveness is also how well the output of the process meets the input requirements of internal clients and how well the inputs from the suppliers meet the requirements of the process.

The effectiveness of every process can be improved. The direct result of increased effectiveness is happier clients, improved sales, and an increase in market share.

The first step in bringing about an improvement in process effectiveness is to identify the most important effectiveness characteristics. Effectiveness characteristics are indicators of how well the process is functioning. The goal is to be sure that the output meets the client requirements.

The following are some typical indicators that a process lacks effectiveness:

• Unacceptable product and/or service
• Client complaints
• High warranty costs
• Decreased market share
• Backlog
• Redoing completed work
• Rejected output
• Late output
• Incomplete output

During the walkthrough, the team should be constantly looking for and identifying effectiveness characteristics.

Process Efficiency

The achievement of process efficiency is for the primary benefit of the client. Typical efficiency characteristics include the following:

• Cycle time per unit of transaction
• Resources per unit of output
• True-value-added cost percentage of total process cost
• Poor quality cost per unit of output
• Wait time per unit of transaction (usually at a boundary point)

During the walkthrough, the team should be looking for ways to measure efficiency.

Streamlining Tools

Streamlining is the trimming of waste and excess in order to improve performance and quality. There are 11 tools for streamlining, as described in the following subsections.

Bureaucracy Elimination

Remove unnecessary administration tasks, approvals, and paperwork.

Duplication Elimination

Remove identical activities that are performed at different parts of the process. Be careful here that you don't create backlogs going from multiple stations to a single station.

Value-Added Assessment

Evaluate every activity in the business process to determine its contribution to meeting client requirements. Real-value-added activities are the ones that the clients would pay you to do.

Simplification

Reduce the complexity of the process.

Process Cycle-Time Reduction

Determine ways to compress cycle time to meet or exceed client expectations. Here are some ways that you can reduce cycle time:

• Use parallel instead of serial activities where possible
• Change the sequence of activities
• Reduce interruption
• Improve timing
• Reduce output movement
• Closer proximity of related work stations

Error Proofing

Make it difficult to do the activity incorrectly. Error proofing is the process of eliminating the opportunity to create errors. This can be accomplished in many ways. For example, you can automate a data entry process to remove the human-error factor. Barcoding and scanning are other ways to reduce errors. Everyone has a tendency to make errors; therefore, the more you can automate a process, the greater likelihood that a careless error will not occur.

Upgrading

Make effective use of capital equipment and the working environment to improve overall performance. Upgrading refers to improving not only your technology or office equipment, but also your personnel. Continuous learning is the norm in today's business world. Organizations that provide training and educational incentives will reap large dividends in the long run due to increased profit and higher employee morale.

Simple Language

Reduce the complexity of the way you write and talk, making your documents easy to comprehend by all who use them. Simplifying the language of your documentation and training manuals will increase effectiveness. Some organizations become burdened by wordy reports and memos. Documentation should be written in simple language for a particular audience.

Standardization

Select a single way of doing an activity and have all employees do the activity that way all the time. Standardization of work procedures is important to ensure that all current and future employees use the best way to perform activities related to the process. When each person is doing the activity differently, it is difficult (if not impossible) to make major improvements in the process. Standardization is one of the first steps in improving any process, and it's accomplished by the use of procedures. These standardization procedures should have the following characteristics:

• Be realistic, based on careful analysis
• Clarify responsibilities
• Establish limits of authority
• Cover emergency situations
• Not be open to different interpretations
• Be easy to understand
• Explain each document, its purpose, and its use
• Define training requirements
• Define minimum performance standards

Supplier Partnership

The output of the process is highly dependent on the quality of the inputs the process receives. The overall performance of any process improves when its suppliers' input improves.

All outputs require inputs, and in many cases, these inputs come from outside suppliers. The first step in this streamlining process is to analyze the inputs to determine their necessity in the process. An organization can lower costs and increase efficiency by eliminating inputs that are not needed. The next step is to work with suppliers to make sure that the inputs are being delivered on time and are of the highest quality.

Big-picture Improvement

This technique is used when the first 10 streamlining tools have not provided the desired results. It is designed to help the process improvement team look for creative ways to drastically change the process. There comes a point in time when you have to be willing to step back and look at the big picture of the process. By looking at the big picture, you examine the process from the perspective of what you would do if you abandoned the old way of doing things and started from scratch.

Watching Indicators of Needed Improvement

You need to define and track several metrics in order to discover process improvement opportunities. Some of the situations you will want to detect are as follows:

• Excessive wait time between process steps
• Backlog at a process step
• Idle workstations in the business process
• Frequent rework
• Excessive non-value-added work
• Errors and mistakes
• Frequent exception situations

For example, an order placement process might have a number of disconnects such as the following:

• Sales reps take too long to enter orders.
• There are too many entry and logging steps.
• The same level of credit checking is done for existing and new clients.
• Credit checking is done before order picking.

Any of these would be a good candidate for a process improvement project.

Documenting the “As Is” Business Process

One approach to identifying the process improvement goals is to develop a clear understanding of how the process is currently functioning (As Is) and how the process could work in the future (To Be). Knowing the gap between the present and the future is input to a plan to change the process (that is, to remove the gap).

The As Is process is nothing more than a picture of how things are currently working. If you were talking about a hotel, you could build a model of the workflow associated with a guest obtaining a room, using hotel facilities, and checking out of the hotel.

For an old hotel with no automated systems, the steps would be manual and highly dependent upon the accuracy of individuals. Having this set of data alone can make some areas prime candidates for improvement.

There is a tremendous temptation to skip the As Is process. People will say they know the process and what needs to be changed. If you skip this step, the team doesn't gain an increased understanding of how the process really works. Without that understanding, you have a very real chance of negatively impacting the client.

Envisioning the “To Be” State

This model is a picture of how the process could work. The same work may be done, but the flow might be very different. In some cases, tasks in the As Is state might be eliminated entirely. The intent of this model is to get people to talk about how it could be. This is sometimes done by having the subject matter experts explain how they would do things if they were building a brand-new process unconstrained by the way you have always done things. This is frequently referred to as the “green field” approach. Another approach is to have people identify areas where they would like to change the current system to do things differently.

Defining the Gap between “As Is” and “To Be”

The difference or “delta” between an As Is process and a To Be process shows the opportunities for improvement. It involves building a comparison of the two so that the differences can be categorized. Some tasks might be eliminated entirely. Some tasks might be done faster than they were before. Some tasks that had been sequential might be done in parallel. Others might be done to a higher level of quality. Some opportunities for eliminating the gap might include the following:

• Eliminate some tasks
• Speed up some tasks
• Introduce parallelism
• Increase quality

Defining a Business Process Improvement Project

The continuous improvement of business processes should be a high priority for every contemporary organization. Every time a process is executed, a wealth of data and information is produced as a by-product. This data and information has great value in helping the process managers identify and isolate areas where improvement can be made. A business process improvement (BPI) project uses that data and information as input to programs designed to improve the process under consideration. This is represented graphically in Figure 15-7.

Figure 15-7: A business process improvement project

The goal of a BPI project is to eliminate or at least reduce the effect resulting from process activities that are preventing the process from performing up to its potential.

Figure 15-7 shows that a backlog exists at a process activity. You might conclude from this diagram that the backlog is the result of two upstream process activities delivering output to a single process activity that is not staffed to handle the volume. What seems like a simple solution — namely, adding staff — might solve the backlog problem at that process activity but create another backlog at the following step. The backlog is just transferred, and the efficiency of the total process is not changed at all. This illustrates a common problem — subprocess maximization that may or may not positively affect the total process. In fact, it could reduce the efficiency of the total process. Each of the activities in a business process could make the overall process cumbersome to deal with. The goal of business process improvement is to eliminate (or at least reduce) the pain coming from the activities that are doing the most damage, and this also implies that there may be one or more precursor projects that have determined the sources of pain, confusion, and/or chaos.

Beyond a single process improvement project, there are continuous process improvement programs. By definition, continuous programs do not end. They focus on a complete process or on a super-process made up of several dependent processes. Their improvement goal is often an ideal end state, which for all practical purposes will never be reached, but it is a worthy goal nevertheless.

Enterprises that are at Level 3 maturity but desire to reach Level 4 will need to develop a BA/PM professional staff and put a CPIM in place for all business processes. The BA/PM professional assures that the PMLC model used for the business processes makes sense and that the CPIM business process initiatives can be managed successfully.