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BPM: An Analytical Perspective

Organizations increasingly realize their business processes give them competitive advantages. To be effective today, organizations must be able to define, analyze, improve, measure, and control their processes. This article provides a practical framework for understanding, modeling, improving, and evaluating business processes; the framework applies to both new and existing processes.

Understanding Processes

There are two ways of getting work done–projects and processes. Whereas project management is the planning and execution of temporary endeavors to produce something of value, Business Process Management (BPM) employs techniques and systems to help an organization continuously oversee processes and increase efficiency as they reproduce something of value. While projects are temporary, processes are ongoing and meant to be repeated.

To understand BPM, we first need to define process. A process can be described as all the inter-related activities, whether cross-functional or not, needed to produce something of value. Processes always transform inputs to outputs with a definite start and stop.

Consider a mortgage processing process. It begins with receipt of the mortgage application and ends with loan closing. All activities performed in between, such as checking the applicant's credit history and verifying employment details, are components of the process required to transform input to output.

The output of one process is the input of the next. Processes are inter-related and it’s important to ensure processes are seamless, with no gaps in between. For example, a gap would occur if, at the conclusion of services rendered, they didn’t have an automatic process to immediately start invoicing. Delay in invoicing creates a gap in between processes and delays payment. Gaps represent loss of revenue and additional problems with organizational control and customer satisfaction.

Similarly, overlapping processes create redundancies. If there’s more than one person documenting the same customer information, there’s repeated data input, which is inefficient. Worse, duplication often results in multiple data repositories, leading to confusion about what the "real" data is. Organizations should strive to remove duplication so they’re doing things that only add value to the company.

Processes should be interlinked so they flow into one another. BPM aims to oversee these processes; it helps an organization to view the entire end-to-end process and focus on value-added details for maximum efficiency.

Benefits of BPM

The main goal of BPM is to enable efficiency while maintaining effectiveness and complying with regulations. If your processes are aligned with the organization's strategic direction, then there’s greater potential to achieve objectives and increase efficiency. The three most significant benefits of BPM, in our opinion, are as follows:

- Time savings and cost reductions: Formulating rules forces enterprises to think through and standardize business logic. Ultimately, this process always saves time and money, removing non-value added and duplicate procedures, resulting in increased efficiency and less time wasted due to rework and errors.
- Customer service improvements: Focusing on what produces value is usually in the customers' interest.
- Regulatory compliance: Compliance calls for defined processes and appropriate rules. Unless both are present and consistent, the audit trail is broken and the organization is exposed to risk.

Organizational Challenges

There are many reasons organizations don’t manage processes well. When different departments are involved, it’s not unusual for power struggles to arise over ownership of and responsibility for different aspects of the process. Managers are often compensated for the output and efficiency of their own departments, often without regard to other departments.

Cross-functional projects and processes are difficult to manage as functional silos get in the way. Because of reporting structures and compensation plans, it's natural to focus on one's own processes instead of taking a broader view.

Each function has its own objectives and goals. Optimizing processes in one silo often constrains others. For example, in a mortgage production process, if application processing is automated to employ Web Services, but credit and employment verifications still occur manually, then interfacing them with each other is difficult. Plus, bottlenecks in the existing manual system may nullify benefits from the newly automated process.

When processes grow up in different functional departments, a single process manager can’t easily control processes that affect the entire organization. So departments may end up fine-tuning their segment of the process, independent of how this affects other departments and their processes. For example, a mortgage application department may add new software to streamline its own process, but the software doesn’t interface cleanly with the verification departments. The answer is simply to step back and take a broader look at what’s best for the whole organization from a BPM standpoint.

BPM and Business Strategy

Process-driven organizations change their goals to best support where they want their processes to lead them. For example, reducing production time of a product from three days to one day is a company objective. Instead of initiating a project to fulfill the objective, the organization should identify its processes and initiate a project to improve them that will decrease production time, which achieves the objective. Projects are needed to support processes and processes increase efficiencies to meet business goals.

The first step to implementing a process-centric approach is to analyze your current situation. Identify existing processes, define their purpose and assess effectiveness. Once you understand the impact of existing processes, you can refine them to ensure they’re properly aligned with the strategic direction.

Business Process Analysis (BPA) is a collection of analysis and modeling tools and techniques used to analyze processes in terms of what needs to done, by whom and when. BPA techniques offer a way to organize processes, understand them using pictorials, and document and improve them in ways written narratives cannot. To apply BPA, it’s essential to analyze the big picture. Think about the organizational hierarchy. Who are the stakeholders? How can you ensure business vision and strategy tie into processes? Identify and map out processes. Decide which ones should be analyzed first, prioritizing those processes that have the highest value and are within scope. By documenting existing processes and where they "reside" (e.g., marketing, purchasing, human resources, etc.), stakeholders must agree on their processes, what their boundaries are, and who owns them.

Scope

Let's consider a telemarketing company example to illustrate scope. If you’re a telemarketer hoping to make a sale, what actions should your process contain?  It should allow time for learning about the product or service you wish to sell, developing a list of targeted customers, and devising your sales script. All these actions are within the scope of the process for making a sale. Researching your targeted customers' family histories, however, or collecting on past due accounts are both actions not directly related to the process for making a sale. They’re out of scope for this particular process initiative.

Apply this to your organization. You’ve identified all existing processes and now you must prioritize those processes that are in scope to be improved. Let's take two separate processes for:

1. Collecting hours to be billed
2. Organizing company social events.

If your objective is to reduce billing delays, processes within scope are those that directly impact the ability to invoice customers. If your process for billing clients requires manual collection of hours worked, it will directly impact efficiency. The process for collecting hours is within scope. A process for organizing company social events, however, doesn’t impact efficiency and is out of scope.

A simple scope diagram can be useful as you’re determining processes in and out of scope. You can build it easily with post-its and flipcharts and it's a handy tool as you make process decisions.

Definition

Once you’ve identified your organization's current processes and have determined which to analyze first, you should work on defining and mapping out each individual process. Process definition works best when done in two phases:

1. Frame each process to establish boundaries and identify the stakeholders involved.
2. Complete the details of what’s done, by whom, and in what order by mapping the process.

Process Framework

To frame a process, use the standard Supplier-Input-Process-Output-Customer (SIPOC) chart format. Think about what must be true for the process to start and, similarly, what should be true when the process ends. 

To clarify, let's return to our sales example. You’ve been given a new product to sell via phone. You also know to whom you are supposed to sell it. These are pre-conditions. The result, closing the sale, is a post condition. Between pre-condition and post-condition, there’s a process comprised of SIPOC elements. Here, there are two suppliers: the people who may need the product and the distributor who provides it. The suppliers always provide the input to a process, which, in this case, would be the potential purchaser's needs and the products themselves.

The inputs in a process get transformed to outputs. Here, the purchaser's needs and the product for sale get transformed into a satisfied need and sold product. This concept of input to output transformation is often one of the most difficult, but most valuable, parts of process definition. Establishing the inputs and outputs, together with the pre- and post-conditions, forms the framework for a process. The recipient is the person who has bought the product and made the payment (the customer both literally of the sale and figuratively of the process).

Once a process's framework is established, it simplifies the task of mapping it. The most effective tool is a process map called a "swim lane" diagram or cross-functional flowchart. It uses standard flowcharting symbols and places them into parallel tracks (or "lanes" such as swimmers use), corresponding to what role or function the people play in a process. It clearly shows who does what and can pay large dividends in identifying excessive handoffs between actors in a process, bottlenecks and delays, and redundancies.

Process definition is necessary to document the current nature of processes. Often, people are tempted to dive in and start improving processes before adequately understanding their current state. By starting with a documented framework and visual layout of each process, it’s easier to identify improvement possibilities. For example, suppose the process you currently use for billing clients for professional services isn’t as efficient as it could be. Perhaps the swim lane diagram for the process showed a gap between the termination of services and initiation of billing. This means clients aren’t immediately billed and payment is delayed, which may impact other areas of your business such as the ability to pay your own bills. If you refine the billing process by closing up the gap and arranging for the billing process to be initiated more rapidly, delays and subsequent problems will be reduced.

Process Implementation

Once your BPA is complete, you can begin to manage the process. When you initially implement a process, it’s essential that you continue to monitor, control and evaluate it. Organizations usually pilot new software, but forget to do the same for new processes. Using a pilot to try out new processes can reveal additional opportunities for refinements and diminish the impact if problems arise.

To help with the people aspects of introducing new processes, consider using a Responsibility, Accountability, Consult, and Inform (RACI) diagram. Taking time to document these four key areas for any process will uncover hidden stakeholders affected and resources to consult. It's a simple diagram to construct and any process should warrant using one.

A method to control processes and improve process maturity is to consider automating process management using a Business Process Management System (BPMS) using Business Process Modeling Language (BPML). These tools can electronically record and retrieve process documentation and serve as a central repository. They’re the process equivalent to a Database Management System (DBMS) that uses SQL to retrieve and report information.

Control also means enforcement. Ideally, processes should control the people performing them, not the other way around. Whether it’s for adopting best practices, compliance, or simple efficiency, an ad hoc approach makes it difficult to repeat desired outcomes. Consider how the processes themselves can contain built-in metrics and reporting to notify decision-makers when processes are out of alignment.

Summary

Taking a process-centric approach with BPM means you’ll focus on processes first, automation second. Analyzing and refining your processes will enable you to select or design software that can best manage your company's individual processes. Through BPM, you gain a real understanding of what your processes mean to the organization, which allows you to develop relevant software solutions. As they say, it doesn't pay to "pave over the cow paths."

BPM establishes an ongoing organizational mechanism to oversee processes end-to-end. BPM provides a structured way to achieve time and cost savings, improved customer service, and compliance with government regulations. Not a bad return for the time invested in it.