CHAPTER 37
Achieving Business Excellence Using Baldrige, Business Process Management, Process Improvement, and Project Management
In the last thirty years, there have been many terms used to describe various approaches to achieving business excellence. Some of the more familiar are quality improvement, total quality control, quality management, Total Quality Management (TQM), process improvement, ISO 9000, Six Sigma, business process management (BPM), Lean, Lean Six Sigma, Baldrige, and even the more generic term continuous improvement. Project management, while not in the above list, becomes an enabler to help implement the different methodologies. When one takes a step back and looks at all these approaches, one finds that there are some common elements that are the keys to success, no matter what the method or methodology.
Business excellence can now be defined as a holistic, customer-focused, process-based systems approach to successfully achieving the goals of the organization. The Baldrige criteria for performance excellence provide the framework for this systems approach—what an organization must do to be successful. Embedded throughout the criteria is a proactive, integrated, process framework that uses data to make decisions. And, to continually improve all the organization’s processes and keep them current with changing customer and market requirements, a process improvement approach is needed. The concepts and tools of project management are used to help implement many of the changes that are necessary to make these process improvements.
USING BALDRIGE AS A FRAMEWORK
The Malcolm Baldrige National Quality Award was established in 1987 to recognize organizations that have demonstrated excellence against a set of criteria representing best practices of role model companies. As these practices have advanced, so have the criteria.1 The criteria provide a framework to evaluate how an organization delivers value to its customers and stakeholders and how successful it has been in doing so. Whether the criteria are used for internal self-evaluation or for assessment as part of a state or national award process, the goal should be the same—accelerate the organization forward in its journey towards business excellence. Those who focus solely on the award miss its real purpose. The most important output of an award is the feedback an organization receives identifying its strengths and its opportunities for improvement. Properly addressing the latter is what makes an organization better.
Criteria for Performance Excellence
The seven Baldrige categories that are the heart of the criteria provide the framework for an organization’s approach to achieving business excellence. How they connect and integrate is shown in Figure 37-1.2 The organizational profile at the top of figure sets the context for the way an organization operates.
The organization’s leadership (category 1) uses strategic planning (category 2) processes to develop and implement strategies to support the customer focus (category 3). These categories set the organizational direction. Using the workforce addressed in the workforce focus (category 5) to accomplish the work, operations focus (category 6) approaches are implemented to achieve the desired results (category 7). The categories are linked as shown. All actions point toward results—a composite of product and process, customer-focused, workforce-focused, leadership and governance, and financial and market results. The system foundation of measurement, analysis, and knowledge management (category 4) is critical in a fact-based, knowledge-driven system for improving performance and competitiveness.
FIGURE 37-1. THE BALDRIGE CRITERIA FOR PERFORMANCE EXCELLENCE FRAMEWORK
Used by permission from Baldrige Performance Excellence Program, 2013, 2013–2014 Criteria for Performance Excellence (Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology, http://www.nist.gov/baldrige/publications/business_nonprofit_criteria.cfm).
The Seven Baldrige Categories
The Baldrige categories are as follows:
1. The leadership category examines how senior leaders’ personal actions guide and sustain the organization; how senior leaders create an environment for customer engagement, innovation, and high performance; how they communicate with the workforce and key customers; and the organization’s governance and how it ensures legal and ethical behavior and fulfills social responsibilities.3
2. The strategic planning category examines how the organization establishes a strategy to address its strategic challenges and leverage its strategic advantages and strategic opportunities, and deploys these throughout the organization. It also addresses how the organization makes key work system decisions and how it converts its strategic objectives into action plans.4
3. The customer focus category examines how the organization listens to the voice of the customer. It addresses how customer and market requirements and expectations are determined and how relationships are built with customers, including the key factors that lead to customer acquisition, satisfaction, loyalty, and retention.
4. The measurement, analysis, and knowledge management category examines how performance data and information are selected, gathered, analyzed, and improved; how the quality and availability of needed data and information are ensured; and how organizational knowledge is managed.
5. The workforce focus category “assesses workforce capability and capacity needs and builds a workforce environment conducive to high performance. The category also asks how the organization engages, manages, and develops its workforce to utilize its full potential in alignment with your organization’s overall mission, strategy, and action plans.”5
6. The operational focus category examines how the organization “designs, manages, and improves its products and work processes and improves operational effectiveness to deliver customer value and achieve organizational success and sustainability and includes effective management of operations on an ongoing basis and for the future.”6 It addresses how the organization identifies and manages its key processes and how it improves them so they are efficient and effective and stay current with changing business needs and directions.
7. The results category examines the organization’s performance in key business areas. It measures the organization’s progress toward achieving its overall strategy through implementing its approaches defined in categories 1 to 6.
Evaluation Using the Criteria
With the Baldrige criteria providing the framework for business excellence, it is important for an organization to evaluate its progress in the improvement journey. Whether doing an internal self-evaluation or as part of an external assessment, the extent to which the organization has matured in its process implementation will impact the results achieved. Figure 37-2 illustrates the steps toward mature processes.7
FIGURE 37-2. STEPS TOWARD MATURE PROCESSES
Progress is evaluated from two perspectives: process and results. The former are addressed in categories 1 to 6, and the latter in category 7.
Evaluating processes looks at the approaches used, the extent of deployment of these approaches within the entire organization, how these approaches have been improved, and how aligned and integrated the approaches are to support organizational-wide goals.
For results, the current level of performance, trends, comparisons, and integration are evaluated to assess the extent to which results address key customer, market, process, and action plan requirements.
BUSINESS PROCESS MANAGEMENT AS A FOUNDATION
Everyone engages daily in both personal and business processes. When you perform an activity repeatedly on a frequent enough basis, it is worth your attention. An example is driving to work every day. If the process is executed consistently, then the results can be predicted. Business process management is no different. It is all about managing business processes to get the desired results, to consistently and efficiently meet or exceed customer requirements, and, in so doing, enabling an organization to be successful and grow. Within the Baldrige criteria framework, BPM becomes the foundation to move an organization forward in its continuous improvement and business excellence journey.
Organizations that have not yet implemented BPM often find themselves working feverishly on everything at once. Typically, an organization has started a lot of projects, often using disciplined project management techniques and set financial expectations. The projects, however, are working in a rapidly changing environment. The more cross-functional the process, the greater the chance for miscues, and many of the projects or improvement efforts are uncoordinated, perhaps even redundant, with real savings hard to quantify. Often, work priorities shift due to the next crisis management issue or simply because of what an executive may have said. In many cases, a structured approach from which to select projects does not exist.
Business process management provides a structured approach in an environment where little structure existed before. It focuses an organization’s resources on the top priority projects and on work that is aligned to the organization’s vision, mission, strategies, and goals.
Overcoming the perception that BPM takes too long or that a quality system is just a theoretical exercise requires a disciplined and structured implementation. Above all else, leadership engagement and commitment is a must. Of course, marketing a few successes significantly helps to gain buy-in from those who are sitting on the fence.
Business process management provides a structured method to manage processes with data and documents, stores key work processes for easy accessibility and reuse, leverages and builds on knowledge management, captures process dependencies, uses objective process measures, and closes the gap between customer needs and actual process performance.
Implementing BPM enables an organization to control core business processes as well as the process outcome. Business process management focuses and aligns an organization on its top priorities, creates a common process language, and accelerates organizational learning. It also provides a positive return on investment by identifying and targeting process improvement and leveraging process replication across the company
Business process management implementation entails the following key steps:
• Identify top-priority, critical processes.
• Validate customer requirements.
• Develop process measures.
• Monitor the process for the following:
• Stability—consistent performance
• Capability—meeting customer needs
• Flexibility—for new requirements
• Manage and improve the process.
Identify Critical Processes
A process is series of repetitive and systematic actions or operations that add value and are necessary to produce and deliver a product or service. From a simplistic perspective, a process starts with an input from a supplier, work is performed, value is added, and the product or service is delivered to a customer. A business process is much more complex and is typically cross-functional in nature with multiple process levels. An activity at one level becomes a process at the next lower level. At each level, someone owns the process. Depending on the organization’s process maturity, each level process owner may be accountable for the results. The concept of process ownership is important to achieving business excellence.
Top priority or critical processes are those processes that are typically operational in nature and are core to delivering a product or service to external customers. A problem with a top-priority or critical process directly results in not meeting customer requirements or expectations.
Eventually, all critical processes need to be addressed. Which one to look at first can be determined by (1) evaluating the criticality of each process to satisfying customers and achieving organizational goals, and (2) evaluating which processes are not performing as expected. The determination of the top-priority processes is extremely important. Typical corporate prioritization is done by focusing on what is “most broke” or what is receiving the most top-level scrutiny. Having a structured, disciplined approach to managing core business processes results in incremental continuous improvement, occasional radical process simplification, and a “pipeline” of projects to work on next.
Validate Customer Requirements
A customer of a process is the person who receives the product or services from the output of the process. Depending on the level of the process and where the process fits into the overall order-to-delivery of the organization, the needs of both external customers and internal customers have to be met.
In many organizations, a number of employees do not have direct interaction with the external customer. They may deal with other functional areas, management, or “next process” customer. This would be an example of an internal customer.
A requirement represents a need or a want that the customer expects to have satisfied. It is necessary to review the customer requirements frequently with customers to be sure they are specific, measurable, have not changed, and can be provided in a satisfactory format and time frame. This may involve negotiation with the customer if the above criteria cannot be met. The requirement becomes valid only after agreement is reached that (1) the need can be satisfied, and (2) the party responsible for the process agrees to satisfy it. The same criteria apply in validating requirements for both internal and external customers.
In some organizations, other key stakeholder requirements may be as important as customer requirements. For example, in a healthcare environment, the needs of physicians, families, and insurance companies can play a significant role in how a hospital serves its primary customers—patients. In education, requirements of parents and other stakeholder (e.g., businesses and institutions of higher learning) could impact the way a school teaches its primary customers—students.
An organization also must carefully consider its suppliers and partners. To provide products and services that meet customer expectations and requirements consistently, employees must understand the end-to-end system and where they fit in the bigger picture.
Model the Processes
Documentation of the work processes makes them visible. All the steps necessary to achieve the final product need to be shown. A process should be described in simple terms, at a level of detail represented by four to eight activities. The process for the manager should be at a level of detail reflecting those activities that he or she will personally follow. Each activity block might represent a lower level process that must also be controlled.
In describing a process, in addition to the flow of activities and their triggering events, it is important to consider the various components that are necessary to make the different steps of the process work. These include people, systems, information and data, materials, tools and equipment, documentation, and environmental factors. Not all components apply to every process or process step. If a process is not performing properly to meet customer requirements, the activities may be correct but one or more of the components of the process could be the problem area.
When looking at any particular process, there are a number of different versions that can be considered. These versions can represent the process as defined in a procedures manual, the process as management thinks it works, the way the process is actually performed—the “as-is” process, the “ideal” process (as-is, but cleaner), or the “future state” process. The most important version to model and measure first is the “as-is” process. Since the output of a process is a direct result of what happens in the process, it is necessary to understand what is currently being done, including what is not working properly, before looking at any future state process.
In the past, processes have been documented using flowcharts. Flowcharts usually show activities, have a single symbol to represent a decision, and may identify the responsible person or function for a group of activities. This, however, is not enough. What happens to complex decisions and how are they represented? What about some of the other components of a process that are absolutely necessary if a process is to work properly?
Modeling a process has a number of benefits not available from just flowcharting. In addition to providing visual descriptions of processes, modeling addresses more complex decisions and process components; links to information technology (IT) systems, people, and other resources; uses an enterprise-wide database with a common language; permits simulation of “what if” scenarios; and can link to measures that are part of a balanced scorecard.
Develop Process Measures
Measuring process performance is important to determine if it is meeting customer requirements and to understand how the process is actually performing.
A results indicator measures the output of a process and determines whether a process is satisfying the customer’s valid requirement, based on the customer’s viewpoint as to what is most important—not what is convenient to measure or possibly an internally focused business metric. But if the process team uses a different set of indicators, its interpretation of success may be different from the customer’s.
A process indicator is used to show whether a work process is stabilized and to provide a sense and respond capability for problems that could impact final results. This is the “voice of the process” speaking to us. It represents the process owner’s view. Located upstream in the process, it alerts the team to unwanted outcomes.
If the indicators show that the targets are being met but the data show that the process is not stable, then the process owner has been favored by luck. When a process is unstable, anything can happen, and it often does. Response to this instability is usually called firefighting, and unnecessary variation is added, affecting process performance.
If the data show that a process is stable but the indicators show that the targets are not being met, then the process is not capable of achieving the desired results. It must be changed in some way. A problem-solving process is used to eliminate root causes and identify improvements to the process. Process stability is required before addressing capability issues.
Process control requires an understanding of the relationship between the process indicators and the results indicator. For example, if the forecasted date for turnover of new equipment to the customer is the result indicator being monitored, it is also important to follow the schedule for completion of each of the key activities in procuring that equipment. If the engineering activity is running late, this has a direct impact on the turnover date, unless action is taken to correct the situation. By monitoring this process indicator, the process owner can predict whether the customer’s required turnover date can be met or can take appropriate action to improve the situation before it is too late. If the process is not controlled upstream of the outcome, the impact is felt downstream, but not by the people who cause the problem. Correcting the steps or activities in the engineering process that cause delays may also prevent the same factors from affecting future engineering activities.
Monitor the Process
Once the process has been defined and measures established, the process owner needs to do the following:
• Confirm the process model with all stakeholders.
• Start measuring the results and process indicators.
• Establish targets and thresholds.
• Manage and improve the process based on the data analysis from the measures.
Managing a process is an ongoing effort. The process owner has to continually confirm that the process is meeting customer requirements, especially in a changing market environment, and the process is efficiently executing so as not to waste the organization’s resources. When it is not, improvements in the process are required. A process improvement approach provides the roadmap and tools to make the needed improvement.
PROCESS IMPROVEMENT
How does process improvement play a role with BPM? It all depends on how it is positioned and viewed within an organization. As part of achieving business excellence, process improvement is viewed from a problem-solving, process-by-process perspective. The benefits in integrating BPM with the problem-solving and design methodology are operational in nature: faster and cheaper. This includes root cause elimination with statistical rigor and hard dollar improvements. The integration of BPM and process improvement provides a continuous improvement loop that generates a “pipeline” for problem-solving projects (Figure 37-3) from core business process measurement and then improves the processes for continued operations and monitoring.
In using a statistical approach, however, it is necessary to weigh the depth and breadth of the use of statistics within the organization. The seven basic continuous improvement tools8 are often more than sufficient for an organization to start with. As the organization becomes more proficient with the tools themselves, introduction of more advanced statistical methodologies is appropriate.
FIGURE 37-3. CONTINUOUS PROCESS IMPROVEMENT
Problem solving, such as in Lean Six Sigma, is a structured, five-step approach built around the DMAIC process:
• Define—What is the problem?
• Measure—How big is the problem?
• Analyze—What is causing the problem?
• Improve—What can be done to eliminate/reduce the root cause of the problem?
• Control—How will the process be monitored to ensure the gains are sustained?
It does not matter which process is used: DMAIC, or a six-, seven-, or eight-step process. All good problem-solving processes have the same basic ingredients.
From a BPM system approach, process improvement is an enabler to a company’s continuous improvement journey. The continuous improvement impact, if balanced correctly, can be felt in both the short and the long term. Using approaches like the design phase of the Six Sigma methods and tools in the improve phase will help achieve sustainable, long-term results. Lean tools, such as Value Stream Mapping, Standard Work, and 5S are being integrated with the original Six Sigma method, thus often referenced as Lean Six Sigma. Change management now plays a critical role in implementing solutions, and leadership must be engaged for the approach to work. Political issues and obstacles need to be addressed early. Developing, establishing, and improving processes can provide breakthrough results and increased capacity, and allow the organization to address changing customer requirements that will enable it to achieve a desired future state.
BUSINESS PROCESS MANAGEMENT, PROCESS IMPROVEMENT, AND PROJECT MANAGEMENT
Implementing the Baldrige criteria, BPM, or process improvement requires specific skill sets from quality professionals, such as “Black Belts” and Lean practitioners, involved in these efforts. Typical training for these individuals includes project management skills.
Project management skills are important because continuous improvement efforts are often project based and cross-functional in nature. The project leads are held accountable for completing projects on time and within budget (if applicable), and for delivering improvements based on customer or business requirements. This usually requires managing multiple activities at once, addressing change management issues, and meeting rigorous “tollgate” timelines. In addition, Black Belts or other quality professionals are routinely assigned multiple projects at any given time. Utilizing project management discipline, such as understanding a project’s critical path and the key tasks to be completed, improves the probability of success for the projects themselves.
Business process management and process improvement are dependent on the project leads possessing the skills to successfully manage the life cycle of projects. Delivering results are absolutely critical to a program launch in order to gain credibility to the quality system initiative. Project management discipline enables project leads to successfully complete the projects and, therefore, demonstrate the much needed credibility or value to the business leaders.
CONCLUSION
Business excellence is a continuous improvement journey. If an organization does not keep current with changing customer and market needs, someone else will. Profitability and success are challenged, and even survival can become an issue. Only by a commitment to provide better, more responsive, innovative, and efficient products and services can an organization continually achieve business excellence.
DISCUSSION QUESTIONS
Although we make the assertion that BPM is the foundation for business excellence, many organizations want to jump into other approaches and tools to reach the end state without first building the foundation. What barriers have to be overcome to be able to create a business process foundation?
There appears to be a trend of the traditional boundaries of project management, quality, and other management disciplines blurring. How will this trend shape the approach to achieving business excellence in the future?
With new emerging technologies, such as process modeling, workflow, and process automation, organizations are increasingly able to receive information for real-time measurement, process execution, and task management. What kind of impact will this have on achieving business excellence in the future?
REFERENCES
1 Baldrige Performance Excellence Program, 2013–2014 Criteria for Performance Excellence (Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology, 2013), http://www.nist.gov/baldrige.
2 Ibid., p. 1.
3 Ibid., pp. 7–8.
4 Ibid., pp. 10, 12.
5 Ibid., p. 18.
6 Ibid., pp. 22–23.
7 Ibid., p. 30.
8 The seven basic tools are cause-and-effect diagram, flowcharts, check sheets, Pareto diagrams, histograms, control charts, and scatter diagrams. Some authors include run charts or line graphs instead of one of the other tools.