Process Analysis & the Business Case

Transcription

1 Process Analysis & the Business Case MHC-1056 Improvement Opportunities Alternatives in the Balance Innovative & Comprehensive An Accredited Course of the MHi Business Process Reengineering Certification Program

2 Copyright All Rights Reserved.

3 Process Analysis & the Business Case (MHC1056) Table of Contents Page PART I: BPR PROCESS IMPROVEMENT ANALYSIS 1-1 Chapter 1: Preparing for BPR Process Improvement Analysis 1-4 Chapter 2: Define the Baseline (AS-IS) Process, Organization, and Technology 2-1 Chapter 3: Analyze the Baseline for Improvement Opportunities 3-1 Chapter 4: Define the New (TO-BE) Process with Enablers 4-1 PART II: BPR BUSINESS CASE ANALYSIS 5-1 Chapter 5: Introduction to the Business Case 5-1 Chapter 6: Building the Business Case 6-1 Chapter 7: The Business Case Decision Package 7-1 Chapter 8: Benefit Comparison Techniques 8-1 Chapter 9: Financial Comparison Techniques 9-1 Chapter 10: Risk & Sensitivity Analysis 10-1 Appendices: A: References/Bibliography A-1 B: Dave s Doughnuts Case Study Module B-1 C: Data Analysis Technique Descriptions C-1 i

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5 Part I: BPR Process Improvement Chapter 1 PART I: BPR PROCESS IMPROVEMENT ANALYSIS You will be able to: Objectives Page 1 Describe how BPR Process Improvement fits into the Innovative Management Framework. List the steps in the BPR Process Improvement methodology. Describe the methodology for conducting a baseline analysis of your current AS-IS process. Describe the methodology for conducting an improvement analysis. Copyright Figure 1-1: Part I Objectives Chart 1 You will be able to: Objectives Page 2 Describe the methodology for redesigning/reengineering a new TO-BE process. Identify when to apply the BPR process improvement methodology Incorporate the results of IDEF and ABC analyses in the process analysis project. Copyright Figure 1-2: Part I Objectives Chart 2 Page 1-1

6 Preparing for Process Analysis Chapter 1 Part I discusses the heart of the Business Process Reengineering which is the process of BPR Process Improvement Analysis. We will begin this part by providing an introduction to BPR process improvement. We will then present an overview of the Innovative Management Framework followed by a discussion of the specific steps in BPR Process Improvement Analysis. Process Improvement will not be successful without consideration of organizational and cultural issues and the impact of technology. Therefore, the impact of organization and culture issues and technology on process improvement will be addressed in this part. BPR Origins Michael Hammer is generally acknowledged to have defined the concept of business process reengineering 1. He counseled that the rules have changed and organizations needed to fundamentally rethink their business processes. In essence, Hammer said that process reengineering is radical and encouraged process improvement teams to "think big" and seek order-ofmagnitude increases in critical process performance measures. Thomas H. Davenport took a slightly different perspective. He suggested that American enterprises needed to combine the concept of radical reengineering (Hammer) with the discipline of continuous process improvement (TQM). 2 He focused on the use of technology enablers combined with organizational change management and suggested that the project management concept (matrix management) is the way to achieve maximum benefits with the lowest risk. He also encouraged the inclusion of customers (internal and external) in process reengineering work teams. In general, Davenport recommended a more structured, controlled approach to process reengineering (than Hammer's radical approach) which seems more appropriate in government enterprises. There were other early authorities on process reengineering, but Hammer and Davenport seemed to have captured the spectrum of the concept. Hammer was radical and visionary while Davenport was more moderate and practical. 1 Reengineering Work: Don t Automate, Obliterate, Michael Hammer, Harvard Business Review, July-August Process Innovation, Thomas H. Davenport, HBS Press, Process Analysis & the Business Case

7 Part I: BPR Process Improvement Chapter 1 About the same timeframe, the United States Department of Defense (DoD) established its own approach to BPR called the Functional Process Improvement Program (FPIP) and developed the FPI Framework for process improvement as a methodology to facilitate in this transformation. This FPI Framework was arguably the most comprehensive approach to BPR that was available in government and in commercial industry at the time. The Army Management Engineering College (AMEC) was contracted by DoD to develop the original Cadre 100 certification training program for DoD. Based on the FPI Framework, Cadre 100 was intended to equip a nucleus of BPR practitioners within DoD who would energize the BPR the transformation of processes within the Department of Defense. Since then, the Mountain Home Institute for Innovative Management (MHi) has continuously evolved the original FPI Framework to include current business management concepts such as Knowledge Management (KM), the Balanced Score Card, and Lean Six Sigma (to name a few). In addition, Mhi has incorporated the results of its own research resulting from the lessons learned from the consulting experience of Mountain Home Training & Consulting, Inc. based on the currently evolved Innovative Management Framework. The results of all this research and experience have been included in this text. Figure 1-3: Innovative Management Framework Page 1-3

8 Preparing for Process Analysis Chapter 1 Chapter 1: Preparing for BPR Process Improvement Analysis Process and Organization Basics Before we begin our discussion of process management, we need to have an idea of where processes come from. To do that, we must talk about the basics of the organization. In many respects organizations dominate our society and our lives. In addition to our involvement in natural human groupings, such as families and friendship groups, we are typically born in organizations, educated by organizations, and spend our working lives employed by organizations. An organization may be simply defined as a human grouping established to accomplish specific objectives. It is expected to perform a mission or turn out products or services, and as members of that organization, undertake to do the work involved, several observable characteristics of an organization emerge, including: Division of work and specialization Coordination of varied activities (processes) Communication Definition of relationships between activities, or people. The word organization comes from the word organism, which is a structure with parts so integrated that their relationship to each other is governed by their relationship to the whole. This points out the two basic elements of an organization, parts and relationships. The parts being described by this definition are the activities (or processes) necessary for the accomplishment of the work and the people assigned to these activities. Parts should relate to each other, as the complimentary tasks of production and sales in a manufacturing firm. If they do not, that would be a very good place to start your analysis, however the most significant relationships arise among the people performing the activities. The part of the organization that this text will focus on is the study of processes and activities, which are performed in the accomplishment of the mission of the organization. If we concentrate our management efforts on the activities being performed and look for ways to improve them, we would see a significant increase in the efficiency and effectiveness of the organization. Functions Before we talk about processes and activities, we should first talk about functions and how they are different from processes and activities. We are all familiar with the functional stove pipes or silos in our organizations. These 1-4 Process Analysis & the Business Case

9 Part I: BPR Process Improvement Chapter 1 vertical alignment of functions represent the way the majority of our organizations are structured. We can credit (or blame) the existence of these functions on two people: Adam Smith ( ) and Frederick Winslow Taylor ( ). Adam Smith had a profound impact on the development of modern society in the areas of economics. He was one of the first to highlight the advantages of work specialization and simplification. Using the example of the production of pins, Smith pointed out that an individual working alone could make 20 pins per day, while 10 people working on specialized tasks could make 48,000 pins per day. Taylor thoughts revolutionized the way work was performed. He believed that there was only one right way to accomplish any industrial task and the key to identify this optimum way was to break tasks down into discrete actions performed over time. Similar functions could then be combined and time and motion studies could be performed of these functions to achieve the most efficient means of accomplishing work. As a result, organizations were created where people with common specialties were brought together into these functional components to perform common work tasks. This alignment of work into functions was believed to be the most efficient and effective way to perform work, not only in an industrial setting but also in an office environment. The problem with managing by function is that people lose sight of who the customer is, how what they do meets a customer s requirement, and the perspective of the entire value chain of actions from when raw materials come into an organization to when a product is delivered into a customer s hands. By focusing on work within narrow functional components, they lose sight of what the actual mission of the entire enterprise is and how to most effectively accomplish it. Definition of Process BPR is about improving business processes. At the macro level in any organization, process can be defined as: An end-to-end set of decisions and activities that work together to produce a predefined product or service for an external customer. Most core business processes cut horizontally through a vertical organization crossing multiple organizational elements along the way. There are five parts to the Process Management Model: (1) the mission (which is the reason the organization exists), (2) the customer (who the Page 1-5

10 Preparing for Process Analysis Chapter 1 organization serves), (3) the product (what the organization produces for the customer), (4) the process (the activities and decisions that are performed in the development of the product), and (5) and information infrastructure (the management of information flow). Process Management Model Mission Information Infrastructure Copyright BPR Definition Figure 1-4: Process Management Model BPR is about making major changes to processes to achieve dramatic improvements in mission performance. The most common definition of BPR is from the landmark book entitled, Reengineering the Corporation, A Manifesto for Business Revolution, by Michael Hammer and James Champy. 3 In that book, Hammer and Champy define business process reengineering. Since culture is a key aspect of organization change, we have inserted that word into Hammer and Champy s definition. Culture often is a barrier to process change but it can also be a great enabler. The fundamental rethinking and radical redesign of business processes and culture to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed. BPR is not just about making radical change and it is not just about saving money. It is about making a difference. It is about making a difference for our customers and the individual enterprise of which we are a part. 3 Reengineering the Corporation, a Manifesto for Business Revolution, Michael Hammer and James Champy, Harper Business, Process Analysis & the Business Case

11 Part I: BPR Process Improvement Chapter 1 Process Management Process Management is about managing how work is performed; it s about managing the end-to-end series of activities from external supplier to customer. Process management is about managing the process not the functions of the organization. We are accountable functionally; however, we must manage by process. We cannot ignore the functional concerns of the organization. We must be accountable to follow the rules (i.e., the directives, laws, and regulations) as they are passed down the chain of command. However, it is our mission to meet the needs of our customer and it is only by managing the process that we will be successful in meeting our mission. If we decide to reengineer or not, we must move toward implementing process management in our organizations. That does not mean necessarily that we have to restructure our organizations along process lines. That may not be possible or even desirable. However, there are several things that we should do to move our organizations toward process management. One of the first steps that we can take toward process management is to define what our processes are. Formulating a team to model our processes using IDEF0 should be a top priority. Once our processes are defined, they need to be communicated to everyone in the organization so that everyone is able to see how he or she participates in delivering products and services to customers. Measurements of these processes need to be established. Starting with customer and other stakeholder expectations, key measures of process performance need to be documented and tracked on an ongoing basis. Activity Based Costing is an excellent tool for understanding the cost of our processes and the products and services provided our customers. Process management needs to be seen as a priority of top-level executive management. Process managers need to be appointed to track ongoing process performance metrics on an on-going basis. Process performance goals and measurable objectives should be developed and reported to top-level management on a regular basis. Top-level management needs to use this information on process performance to make decisions on actions necessary to met process objectives. Of course, these process objectives need to be in line with the strategic direction of the enterprise. Page 1-7

12 Preparing for Process Analysis Chapter 1 The Innovative Management Framework The Innovative Management Framework (IMF) describes specific activities which can be used by managers and improvement teams as a guide through the improvement process from mission validation to postimplementation assessment. A0: Innovative Management Framework Model A1: Strategic Planning A11: Conduct Mission Analysis A12: Conduct Environmental Analysis A13: Conduct Performance Analysis A2: Define the Baseline (As-Is) Process, Organization, and Technology A21: Model the Baseline Core Business Processes A22: Perform Organizational Cultural Assessment A23: Perform Baseline Technology Assessment A24: Identify Baseline Process Performance Levels A25: Document the Baseline Condition A3: Analyze the Baseline for Potential Improvements A31: Identify Potential Process Improvement Opportunities A32: Initiate Best Business Practice (Process) Benchmarking Analysis A33: Analyze Gaps in Process Performance A34: Identify Potential Initiatives for Improving Process A4: Define the New, Redesigned, or Incrementally Improved To-Be Enterprise A41: Develop To-Be Models A42: Develop Core Business Processes Change Mgmt Plan A43: Develop Organization Change Management Plan A44: Develop Technology Change Management Plan A45: Develop Final List of Alternatives for Improving Performance A5: Develop and Document the Business Case and Approve the To-Be Enterprise Structure A51: Conduct Economic Analysis on Selected Process Improvement Alternatives A52: Select Alternative that Best Meets Performance Targets A53: Develop Business Case for New Enterprise A6: Implement New Learning Enterprise and Monitor Performance A61: Develop Project Execution Plan A62: Deploy Organization Change Management Plan A63: Implement/Deploy Technical Change Management Plan A64: Deploy Enterprise Performance System A65: Monitor Enterprise Performance Figure 1-5: Innovative Management Framework Node Tree Reengineering is a process and as with any process, it can be decomposed into activities and sub-activities. The decomposition of the reengineering process is presented in Figure 1-5 with appropriate activity 1-8 Process Analysis & the Business Case

13 Part I: BPR Process Improvement Chapter 1 modeling (IDEF0) notation. The process begins with the development of the strategic plan and ends with the implementation of the new learning enterprise. The IMF Framework is not intended to rigidly followed but as a guide to assist in performing reengineering. Not all of the sub-activities are performed in the sequence listed. Some activities are performed in parallel, others may be performed out of sequence, and others will need to be revisited as you work through the Framework. Strategic Planning An essential front end to process improvement is strategic planning (Activity A1). Process reengineering can only produce meaningful results if the reengineering effort is directed in support of the strategic direction of the enterprise. It is a waste of resources and effort to make processes more efficient which are unnecessary, redundant, and do not support the mission and vision of the organization. Organizations must establish their purpose for existence and clarify a strategic vision for the future before engaging in an effort to reengineer their processes. If they skip planning, the reengineering effort may result in greater efficiency but it will probably fail in achieving greater effectiveness. Even if the results of the reengineering effort are improved efficiency, what is the value added in being more efficient in performing non-essential work? The following activities should be performed in strategic planning: Strategic Planning A1: Strategic Planning A11: Conduct Mission Analysis A111: Identify and Define Key Customer Groups A112: Define Product/Service Requirements A113: Identify and Define Core Business Processes A114: Document Mission Statement A115: Define Core Competencies A116: Map Core Business Processes Against As-Is Organization Structure A12: Conduct Environmental Analysis A121: Conduct Strategic Bechmarking A122: Conduct SWOT Analysis A123: Define Critical Planning Assumptions A124: Conduct Stakeholder Analysis (Performance Cell) A13: Conduct Performance Analysis A131: Define Corporate Vision and Values A132: Define Corporate Strategic Goals and Objectives A133: Develop Enterprise-Level Performance Scorecard A134: Identify Performance Gaps and Prepare Corporate Breakthrough Objectives Copyright Figure 1-6: IMF Framework Activity A1 Page 1-9

14 Preparing for Process Analysis Chapter 1 At the end of strategic planning, a Business Process Reengineering project is selected which is entirely consistent with the strategic direction of the enterprise, supported by sufficient resources, guided by a well-conceived process vision, and bounded by clearly defined objectives. The objectives are related to quantified goals that define the success factors for the project, and keyed to performance measures that monitor the attainment of project objectives. BPR Project Planning After the strategic plan has be developed and senior management has decided the direction of the process improvement effort a Process Improvement Project Plan must be created. It is not the intent to reengineer all processes, just those which are broke. A determination as to which processes are broke and require fundamental rethinking is performed in the strategic planning. Broke processes are those which are not meeting mission requirements and the gap between requirements and actual performance is so great that incremental improvement will never achieve the result necessary. The following activities need to be performed in preparing the plan and establishing the project: Establish the Process Improvement Project Specify process improvement project Select and confirm a process manager and project manager Develop and/or validate the Process vs. Organization Matrix Record functional management considerations Document the scope/mission/objectives of functional elements Select and train the cross-functional process improvement team Develop a preliminary process vision Develop the process improvement strategy Develop the project plan Review and approve the project plan. Copyright Figure 1-7: Establish the Process Improvement Project These activities are discussed in the MHTC course, Business Process Reengineering Fundamentals (with Strategic Planning), MHC Process Analysis & the Business Case

15 Part I: BPR Process Improvement Chapter 1 Business Process Reengineering This course book presents and discusses the activities performed in business process reengineering (Activities A3, A4, and A5). There are three aspects to process change. All of these aspects must be thoroughly considered for successful reengineering. 1. Process. For fundamental improvement to take place in meeting organizational objectives, there must be an understanding of the key processes of the organization and a system to improve those processes. But, fundamental change in key business processes cannot take place without an understanding of the key enablers of that process. Enablers can be categorized in two general areas: Organization and Culture Technology. 2. Organization and culture. Process change is only a dream without the cooperation and support of management and the employees of the organization. 3. Technology. Technology, in particular information technology, is a prime enabler for process change. Three Aspects to Process Change Copyright Figure 1-8: Three Aspects to Process Change Page 1-11

16 Preparing for Process Analysis Chapter 1 Organizational Health Assessment Prior to initiating Business Process Reengineering process improvement project, enterprises need to assess organizational capabilities by performing an Organizational Health Assessment (OHA). An OHA should be initially performed during strategic planning. The purpose of the OHA at this point is to assess if the organization is ready for BPR. It assesses the cultural climate of the organization to determine how receptive and adaptable the organization is to fundamental change. In some cases, efforts may be required to change the organization and culture prior to initiating a process improvement project. The OHA can also be designed to assess the state of the current technology. From this assessment, the improvement team can determine if there are organizational, cultural, or technological barriers that will need to be address in the study and how the study should proceed. The results of the OHA will provide a BPR Roadmap which is divided into three sections: I. General Observations; II. The Assessment, which includes four focus areas: 1) Process Assessment, 2) Organization Structure Assessment, 3) Organization Culture Assessment, and 4) Technology Assessment documenting discovered Findings and Conclusions; and III. The Road Ahead which includes the recommended approach for the BPR study. BPR Change Model BPR Change Model AS-IS Analysis TO-BE Identify Current Process Identify Current Org & Culture Identify Current Info Technology Analyze Process for Improvements Identify Org & Culture Changes Identify Technology Changes Redesign/Reengineer Process Organization Change Management Plan Technology Change Management Plan Planning Links AS-IS to TO-BE Copyright Figure 1-9: BPR Change Model The BPR Change Model reflects the overall transition from the AS-IS to the TO-BE state that takes place when performing a reengineering study. The details of proceeding through this model will be content of Part 1 (Process 1-12 Process Analysis & the Business Case

17 Part I: BPR Process Improvement Chapter 1 Analysis) of this course. The three aspects of process change (Process, Organization and Culture, and Information Technology) are addressed in this model. Identifying and Documenting the AS-IS State The reengineering study starts by identifying and understanding the current process (Activity A2). This is accomplished by creating a process model, data model, Activity Base Costing model and perhaps a simulation model. It is also essential that all the relevant performance measures be identified at this time. It is important not to spend an excessive amount of time identifying the AS-IS state since important energy for process improvement can be expended in detailing the status quo. Concurrent with identifying the AS-IS process, the current information technology architecture needs to be identified as well as the current organization and culture. This is essential to identify potential barriers to process change and determine how information technology and organization and culture can be enablers of reengineering. This will be an extension of the OHA performed at the beginning of the project. Performing Improvement Analysis Once the AS-IS state is understood and adequately documented, analysis of improvement opportunities can take place (Activity A3). The focus of improvement will be on the process. Benchmarking will be performed to determine what are the best practices within or outside of the organization being studied. Good ideas that are found through benchmarking are analyzed to determine how they can be best adapted for making fundamental improvements to the process being studied. Gaps in performance need to be identified between current performance (as identified in the AS-IS state) and strategic objectives (identified in strategic planning). Gaps in performance need to be identified between current performance and industry best organizations (identified through Benchmarking efforts). In-depth analysis must take place as to what needs to be done to the AS-IS process to close these gaps. Since information technology and organization and culture are enablers of process change, an analysis has to be performed to identify changes to the existing state of technology and organization and culture that are necessary to make process improvement possible. Page 1-13

18 Preparing for Process Analysis Chapter 1 Identifying and Documenting the TO-BE State There is no clear line between where the analysis ends and documenting the TO-BE state begins (Activity A4). As improvement opportunities are identified, analyzed, and determined to be instrumental for fundamental change, they need to be documentation in the TO-BE process. All relevant improvements in information technology and organization and culture that support process improvement need to be identified and documented as well. The TO-BE process will be documented in the same way that the AS-IS process was documented. A TO-BE process model, a data model, an Activity Based Cost model, and a simulation model will be documented. A strategy for process improvement is developed with detailed initiatives to implement the new TO-BE process. To support the documented TO-BE process, a Technology Change Management Plan and an Organization Change Management Plan needs to be documented to indicate the changes that will be necessary in these key enablers to make process change a reality. Upon the documentation of the TO-BE state, a Business Case Analysis (BCA) Decision Package is prepared to assemble all the documentation of the BPR effort for presentation to a decision maker for approval to implement the reengineered process (Activity A5). The BCA recommends a course of action that is justified based on the organization's planning documents, the analysis of the current situation of the process in question, the results of an improvement analysis, and the design of the future state process. The BCA will present a full risk-adjusted economic analysis of the recommended changes. It will include the elements of organizational change management needed to support the new process and a full evaluation of the technology enablers that are needed to implement the change. Planning Links the AS-IS to the TO-BE The strategic plan provides the direction for process reengineering efforts. If this plan is specific and provide quantifiable objectives for improvements, the plan will provide clear direction for process improvement efforts. The strategic plan will provide the roadmap for process improvement and a firm basis to evaluate improvement opportunities. BPR Change Model Activities Each activity in the BPR Change Model portion of the Innovative Management Framework is divided into sub-activities that clearly describe the tasks to be performed, the deliverables to be produced, and the 1-14 Process Analysis & the Business Case

19 Part I: BPR Process Improvement Chapter 1 recommended tools and techniques that can be used to produce the deliverables. Part I of this course book will be a presentation the sub-activities within the BPR Change Model. Part II will discuss the activities involved with developing the Business Case. The chart in Figure 1-10 represents a basic flow chart of the major activities involved in process analysis from the strategic plan to the development of the business case. The next three chapters of this book are represented in this chart. They are develop and document the baseline, analyze the process for improvements, and develop and document the TO-BE with enablers. Organization Change Management and Technology Change Management run parallel with main the process improvement activities. Process benchmarking is performed within the analysis element. The preparation for the benchmarking study is initiated during the documentation of the baseline. However, it is during the analysis element that a separate benchmarking team be established to perform comparative analysis of your process to the best that is available within the government or in industry. PROCESS ANALYSIS STRATEGIC PLANNING DOCUMENT BASELINE ANALYZE OCM OCM 1 TCM TCM BM DEVELOP TO-BE BUSINESS CASE OCM 1 TCM Copyright Figure 1-11: Process Analysis Flow Chart Page 1-15

20 Preparing for Process Analysis Chapter 1 Chapter 1 Questions: 1. What are the 6 major activities in the Innovative Management Framework? 2. What are the five parts to the process model? 3. What are the three aspects of process change? 4. What assessment should be done prior to initiating the first step in the Business Process Reengineering and why? 5. What are some actions that can be done to implement Process Management in our organizations? 1-16 Process Analysis & the Business Case

21 Part I: BPR Process Improvement Chapter 1 Chapter 1 Slides Page 1-17

22 Preparing for Process Analysis Chapter 1 NOTES: 1-18 Process Analysis & the Business Case

23 Process Analysis & the BCA Chapter 1 You will be able to: Objectives Page 1 Describe how BPR Process Improvement fits into the Innovative Management Framework. List the steps in the BPR Process Improvement methodology. Describe the methodology for conducting a baseline analysis of your current AS-IS process. Describe the methodology for conducting an improvement analysis. Copyright S1-1

24 Process Analysis & the BCA Chapter 1 You will be able to: Objectives Page 2 Describe the methodology for redesigning/reengineering a new TO-BE process. Identify when to apply the BPR process improvement methodology Incorporate the results of IDEF and ABC analyses in the process analysis project. Copyright S1-2

25 Process Analysis & the BCA Chapter 1 Innovative Management Framework Copyright S1-3

26 Process Analysis & the BCA Chapter 1 The Innovative Management Framework Conceptual Model Strategic Planning Implement & Monitor Performance A6 A1 A2 Establish the Baseline IMF Develop & Build the Business Case A5 A3 Analyze the Baseline A4 Define the To- Be Enterprise Copyright S1-4

27 Process Analysis & the BCA Chapter 1 Chapter 1: Preparing for BPR Process Improvement Copyright S1-5

28 Process Analysis & the BCA Chapter 1 Process Management Model Mission Information Infrastructure Copyright S1-6

29 Process Analysis & the BCA Chapter 1 Strategic Planning A1: Strategic Planning A11: Conduct Mission Analysis A111: Identify and Define Key Customer Groups A112: Define Product/Service Requirements A113: Identify and Define Core Business Processes A114: Document Mission Statement A115: Define Core Competencies A116: Map Core Business Processes Against As-Is Organization Structure A12: Conduct Environmental Analysis A121: Conduct Strategic Bechmarking A122: Conduct SWOT Analysis A123: Define Critical Planning Assumptions A124: Conduct Stakeholder Analysis (Performance Cell) A13: Conduct Performance Analysis A131: Define Corporate Vision and Values A132: Define Corporate Strategic Goals and Objectives A133: Develop Enterprise-Level Performance Scorecard A134: Identify Performance Gaps and Prepare Corporate Breakthrough Objectives Copyright S1-7

30 Process Analysis & the BCA Chapter 1 Establish the Process Improvement Project Specify process improvement project Select and confirm a process manager and project manager Develop and/or validate the Process vs. Organization Matrix Record functional management considerations Document the scope/mission/objectives of functional elements Select and train the cross-functional process improvement team Develop a preliminary process vision Develop the process improvement strategy Develop the project plan Review and approve the project plan. Copyright S1-8

31 Process Analysis & the BCA Chapter 1 Three Aspects to Process Change Copyright S1-9

32 Process Analysis & the BCA Chapter 1 BPR Change Model AS-IS Analysis TO-BE Identify Current Process Identify Current Org & Culture Identify Current Info Technology Analyze Process for Improvements Identify Org & Culture Changes Identify Technology Changes Redesign/Reengineer Process Organization Change Management Plan Technology Change Management Plan Planning Links AS-IS to TO-BE Copyright S1-10

33 Process Analysis & the BCA Chapter 1 PROCESS ANALYSIS STRATEGIC PLANNING DOCUMENT BASELINE ANALYZE OCM OCM 1 TCM TCM BM DEVELOP TO-BE BUSINESS CASE OCM 1 TCM Copyright S1-11

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35 Part I: BPR Process Improvement Chapter 2 Chapter 2: Define the Baseline The purpose of conducting a baseline analysis (Activity A2) is to establish a firm foundation from which to begin the improvement effort. In many cases, this is the beginning of shifting the organization from a functional management concept to a process management concept. The goals of baseline analysis are challenging to achieve. However they are clear and straightforward: Define the process (or activity) in terms of the activities (or subactivities) that are performed, the outputs they produce, the inputs they require, the resources they consume, and the standards under which they operate. Define the data elements required, produced, or modified by the process and the business rules inherent in the existing data structures. Understand the relationship of the process to each functional element that participates in process performance. Identify and characterize the stakeholders of the process including customers, suppliers, higher authority, and resource providers and determine their relationship to the process in terms of quantifiable measures. Clarify exactly how the process works, not how process participants think or believe it works. Determine the unit costs of each major output produced by the process and the cost of the activities that produce them. Determine process cycle and response times with respect to producing desired output products and services. Document known problems, issues, deficiencies, and defects with respect to organizational structure, process operation, and output products and services. Document the status of the technology elements that support the process; e.g., computer and communications platforms, networks, databases, application systems, and technical support services. The elements in this activity (A2) provide the foundation on which to analyze processes for improvement. Some have advocated that an Page 2-1

36 Conduct Baseline Analysis Chapter 2 understanding of the baseline is not important if we know radical change is necessary. However, most organizations do not know their current processes well enough to understand WHAT changes when a new process is implemented. Also, a firm understanding of the current AS-IS process is essential for process benchmarking efforts. When this activity is complete, the process improvement team will know three important things about the process: the present state (baseline analysis), the future state (planning objectives and goals), and organization and technology barriers to change. With this information, the next activity, Analyze the Baseline for Potential Improvements (A3), will provide guidance on how to get from present state to future state in the most expeditious manner possible. The following tasks are performed in this activity: Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model the Baseline Process Identify Critical Measures of Process Performance Conduct Stakeholder Analysis using Performance Cells Identify Gaps and Establish Process Performance Objectives Perform Baseline Organization & Culture Assessment Perform Baseline Technology Assessment Document the Baseline Condition Staff and Approve the Baseline Condition Copyright Figure 2-1: Define the Baseline Document the Project Scope and Vision. As a result of strategic planning, a decision is made as to which processes must be fundamentally rethought and radically redesigned in order to achieve dramatic improvements in performance. The goals, objectives, and breakthrough objectives provide the direction on which processes are broke and require fundamental rethinking. Tools to accomplish this are the goal to process or breakthrough objective to process matrix. These matrices assist in identifying which processes contribute toward accomplishing key goals and objectives. 2-2 Process Analysis & the Business Case

37 Part I: BPR Process Improvement Chapter 2 Dave s Doughnut Example: As a part of Dave s Strategic Plan, Dave identified the following Goals and Objectives: 1. Goal: Lead the local doughnut and pastry market in market share. Objective: Achieve a market share of 40% by the end of two years. Breakthrough Objective: Increase market share from 5% to 25% this year, 40% by the end of next year. 2. Goal: Be a profitable doughnut and pastry business unit. Objective: Achieve a 10% profit margin within one year. Breakthrough Objective: Increase profit margin from 2% to 10% within 12 months. 3. Goal: Be the low cost provider of Doughnuts and Pastries in the local community. Objective: Sell doughnuts at a price of $6 per dozen within one year. Breakthrough Objective: Reduce the overall cost of operations by 25% within the next six months. 4. Goal: Be recognized as the leaders in the community for our timeliness in filling special customer orders for doughnuts and pastry. Objective: Fill all special orders within one day from the time a customer places an order within one year. Breakthrough Objective: Reduce the time to fill special orders from 3 days to one day during the next year. Objective: Attain a backorder rate less than 3% within one year. Breakthrough Objective: Reduce the Backorder rate from 13% to 3% within six months. 5. Goal: Lead the community in customer satisfaction as determined by the Regional Good Service Market Analysis Group. Objective: Achieve an overall superior (5.0) customer satisfaction rating on the Regional Food Service Market Analysis Group Customer Satisfaction Survey within one year. B/O: Increase overall customer service rating from average (3.0) to superior (5.0) within six months. Figure 2-2: Dave s Strategic Goals and Objectives Dave decided to prepare a goal to process matrix to identify which processes must be fundamentally rethought and radically redesigned to close the critical gaps identified in the supporting breakthrough objectives. Page 2-3

38 Conduct Baseline Analysis Chapter 2 As a result of preparing this matrix, Dave has determined that one of his processes called Provide Doughnuts and Pastries must be designated for in depth analysis. Goal to Process Matrix Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Provide Doughnuts & Pastries X X X X X Provide Catering Services X Copyright Figure 2-3: Goal to Process Matrix Those goals, objectives, and breakthrough objectives that relate to the process improvement effort provide the basis for developing the process vision statement. STRATEGIC PLANNING PROCESS ANALYSIS STRATEGIC OBJECTIVES & BREAKTHROUGH OBJECTIVES PROCESS VISION STRATEGIC GOALS STRATEGIC VISION RELATED TO OTHER PROCESSES Figure 2-4: Process Vision Statement 2-4 Process Analysis & the Business Case

39 Part I: BPR Process Improvement Chapter 2 Dave s process vision: To reengineer the provide doughnuts and pastries process in order to be the leader in the community with the best product at a competitive price. Figure 2-5: Dave s Process Vision The first step in understanding the process is identifying what the major activities are of that process. The Process Development Matrix is a tool for identifying these activities. All processes can be put into the context of a life cycle with at least four phases in this life cycle. The first phase is the requirements phase where the requirements for the outcomes of the process are identified. The second phase is acquisition where the resources and mechanisms are obtained for delivering a product or service. The third phase is the stewardship phase where the basic service performed or product developed. The fourth phase is the disposition phase where the product or service is delivered and the final activities are performed. Multiple activities can be identified in each of these phases but the initial effort to identify activities should be high level. Activities can be further decomposed into subactivities. A starting point in identifying the activities is identifying the major products or services that are delivered to the customer. From that point the process that is in place to deliver the product or service can be named. Remember that the process is an action so the name should consist of a verb/ noun combination (Example: Provide Training). Once the process is named, the major activities can be identified in each phase of the process life cycle. Once this matrix is developed the study team has a good understanding of all the activities that contribute toward that process delivering a product or service to a customer. Page 2-5

40 Conduct Baseline Analysis Chapter 2 PROCESS DEVELOPMENT MATRIX LIFE CYCLE Key Product or Service Doughnuts Key Product or Service Key Product or Service Key Product or Service REQUIREMENTS Take Order ACQUISITION Acquire Ingredients and Supplies STEWARDSHIP Bake doughnuts DISPOSITION Sell doughnuts Figure 2-6: Process Development Matrix One important technique for setting the scope of the project are developing or confirming the Process vs. Organization Matrix, and using the IDEF0 context diagram technique to establish bounds on the improvement project. The Process vs. Organization Matrix shows the functional organizations that are involved with a process and the degree of their participation. The Context Diagram shows the boundary conditions of the process with respect to inputs, outputs, controls and mechanisms (resources). Each of these lines (input, output, etc.) is connected to a process stakeholder. Key: D=Decision M=Major Involvement, S= Some Involvement Copyright Figure 2-7: Process vs. Organization Matrix 2-6 Process Analysis & the Business Case

41 Part I: BPR Process Improvement Chapter 2 The project scope identifies the organizational elements that will participate or be affected by the improvement project and the stakeholders in the process. These data will be useful in establishing performance measures and performance goals later in the methodology. Context Diagram Control Input Output Mechanism Copyright Figure 2-8: Context Diagram This tasks in this activity are usually performed in a workshop environment with experienced process participants and representation from key stakeholders. Once the scope of the improvement project is established, the next four tasks develop detailed models of the baseline process. In a large corporation, major processes can extend throughout the organization. It may not be feasible to attempt to perform process improvement on such an extensive basis. This means that the focus of improvement efforts will have to be at the activity level. This requires a firm understanding of the scope of the improvement project. In this context, the term scope does not refer to the amount of improving that will be attempted; it refers instead to the potential involvement of functional units in the improvement project. Model the Baseline Process During the first iteration of process improvement, it is not likely that models will exist for the process scheduled for improvement. In this case, models will be developed for the first time in the baseline workshop. If models do exist, they still need to be reviewed and revised as necessary to reflect the actual status of the process. We are going to discuss three types of models that are important to understand the baseline process. Page 2-7

42 Conduct Baseline Analysis Chapter 2 Develop/Review/Revise AS-IS Activity Models. Activity models are developed to display business activities and their relationships. When completed, an activity model represents a detailed understanding of how the process works and how information and physical artifacts flow through the process. Activity models also aid considerably in identifying process performance measures that reflect stakeholder interests. The task then is to develop a fully decomposed activity model using the process context diagram as a starting point. A process is fully decomposed when the resulting levels of activities clearly show the major outputs produced by the activities in the process. Node trees, which are hierarchical representations of the activities in a process, are produced before the decomposition process is begun. IDEF0 is a standard activity modeling technique used by commercial and federal organizations in the United States. Process improvement team members must be trained in IDEF0 techniques prior to or in conjunction with a process improvement effort. Develop/Revise AS-IS Data Models. The next task is to develop a data model that shows the structure and relationship of the elements of data that support the business process. While an enterprise may have an infinite number of business activities, which themselves may be highly dynamic, the enterprise generally has only one relatively stable base of data to support those activities. For instance, once the data elements related to employees are encoded in a database, these data elements may be used in a great number of different applications. Furthermore, data about employees such as name, Social Security number, address, grade, etc. change infrequently or not at all. Therefore, a well-constructed database serves as a strong foundation for building information systems to support business processes. Furthermore, processes are integrated primarily by transferring data effectively between and among them. For instance, in concurrent (integrated) manufacturing systems, engineering and production are integrated via a shared database of commonly used data elements. This task is concerned with constructing the data models that represent how the process uses data-which elements of data it creates, references, changes, and deletes. The data model also inherently contains business rules that act as constraints on process operations. For instance, the structure of the data model may prevent the deletion of a customer record if that customer has 2-8 Process Analysis & the Business Case

43 Part I: BPR Process Improvement Chapter 2 outstanding invoices. In other words, the rule is that before a customer can be deleted from the database, all open invoices must be closed out. Data models are created at different levels. The higher-level models are completed by process improvement team members; the more detailed models are completed by technical staff working from the higher-level models. Data models then become an effective means of communication between functional and technical people. IDEF1X is a standard data modeling technique used by commercial and federal organizations in the United States. Process improvement team members must be trained in IDEF1X techniques prior to or in conjunction with a process improvement effort. Develop/Revise AS-IS Activity-Based Costing (ABC) Model. The next task in this step is to develop a cost model of the process under study. Activity-based costing techniques are used to determine approximately the resources it takes to produce a specific product or unit of service. With respect to an activity model, it is said that outputs consume activities and activities consume resources. For instance, if an activity can produce 100 widgets a week, then producing 100 widgets a week consumes the entire activity. If the cost of the activity is $10,000 per week in terms of labor and facilities charges, the activity will consume $10,000 to produce 100 widgets. The unit cost of each widget is then $100 plus materials. If this seems too easy, it must be remembered that most activities produce many different kinds of products and services, and have many different categories of overhead or indirect labor charges associated with them. The trick is to understand the unit costs (direct and indirect) of each type of product or service produced. ABC techniques allow the process improvement team to allocate all overhead costs to specific products and services that benefit from or are the reason (cost driver) for the overhead costs. In service-type processes, as opposed to product-producing processes, process costs are caused by the demands of the customer rather than the demands associated with producing tangible products. For this reason, ABC techniques are best employed in service organizations after customer requirements and demands are understood by the process improvement team. Once the unit costs are known for each product and service, this information can be used as a baseline figure for process improvements that will lower the unit cost of outputs. As we will see, unit costs can be lowered by Page 2-9

44 Conduct Baseline Analysis Chapter 2 eliminating non-valued added activities, applying innovative technologies, increasing training to reduce waste and rework, improving the quality of incoming materials to reduce rejects and scrap, and by many other means. Performing an activity-based costing study will identify the sources or triggers for costs expended within a process. Cost driver analysis will be performed during the next step in the methodology-process improvement analysis. Additional ABC analysis work will be recommended during the process redesign/reengineering step. The principles of Activity Based Costing are contained in the 3 1/2 day Mountain Home course, Activity Based Costing Principles (MHTC-104). Perform Time-line Analysis (Simulation). While knowing the current unit costs of a process is vital baseline information, it is equally important to understand the baseline cycle times for a process. Cycle-time measures show how long it takes to produce a product or service once the request for that product or service has been triggered. Experience has shown that the best way to reduce process costs is to focus on reducing process cycle time. Cycle time is made up of several elements: Operations time, which is the actual processing or machine time needed to produce an output Delay time, which is the time work sits in queues (in-baskets) waiting for attention or resources. Quality rework time, which is the amount of time spent discovering and fixing problems (rework time is an overhead that has to be distributed to all output products.) Inspection and oversight time, which is time spent ensuring that products and processes conform to standards and requirements. Each of these elements of time is a contributor to overall process cycle time. Each element of time can be reduced using appropriate techniques. Some of these techniques are: employing technology enablers, increasing training time, just-in-time inventory and work flow, and eliminating unnecessary directives and other constraints. But before these techniques can be applied, it is necessary to understand where the time is spent in the baseline process Process Analysis & the Business Case

45 Part I: BPR Process Improvement Chapter 2 Simulation techniques are used to determine baseline cycle time and, of course, to test potential improvements. Prior to using simulation, a wellconstructed activity model is a prerequisite. Identify Critical Measures of Process Performance The documentation of the AS-IS baseline should include an identification, description, and quantification of significant performance measures. There are several ways that performance measures can be categorized. 1. Efficiency. Efficiency is a measurement of how well the process uses its resources in delivering a product or service. Resources could include time, cost, people, material, equipment, and space. 2. Effectiveness. Effectiveness is a measure of how well the process delivers a product or service that meets the needs of a customer. Quality is a measure of effectiveness. 3. Flexibility or Adaptability. Flexibility or adaptability is a measure of the ability of the process to respond to changes in either customer requirements or changes in the external environment. In the military environment, contingency planning should consider the impact of changes in threat to our processes. Typically, time and cost are measures of flexibility and adaptability. Time in terms of how quickly the process can adapt to changing requirements and cost in terms of what are the costs of making adjustments to the process. In general, all measurements can be broken down into three categories: time, quality and cost. Measurement of the process can take place at several points in the process. If we consider the basic IDEF model, we can see that each one of the ICOMs can serve as a point for measurement. We can quantify the inputs in terms of timeliness, quality, and cost. We can likewise determine measurements for the other ICOMs (controls, outputs, and mechanisms) in terms of these three categories as well. In addition, we can establish measurements for the activities within the process. As you can see, there can be a multitude of measures for a process. Obviously, not all measures are created equal; some measures are more important than others. But how do we determine what are the truly important measures that we must monitor? Page 2-11

46 Conduct Baseline Analysis Chapter 2 Two Directions to Look for Identifying Critical Performance Measures One major place to look for determining what are the critical measures of performance is benchmarking. The key measures of your competitors or industry best organizations may serve as a basis for identifying critical measures that must be monitored to stay competitive A second starting point in determining which measures of our process are the important ones is to identify the critical outcomes of our process. In this regard, it is important to distinguish between outputs and outcomes. Outputs are the products and services that come out of the process and are delivered to customers. They are viewed from the perspective of the process. Outcomes, on the other hand, are viewed from the perspective of the customer. They are in terms of the results of the process. We can be very efficient at delivering our outputs, but fail miserably in delivering what the customer wants. Example: The police department in your town might be very efficient and effective at delivering speeding tickets. They might be able to deliver a lot of them and do it very quickly. These tickets would be considered outputs of a process that might be called provide traffic safety. But what is the relationship between these outputs and the mission accomplishment of this process? If the expectation of this process is that the outcome will be reduced traffic accidents, then we need to look closely at how outputs impact outcomes. Conduct Stakeholder Analysis Using Performance Cells. If the Performance Cell Technique was used in the strategic planning activity (A1) of the Framework, this is a good time to revisit the baseline measures that were included in the performance cell charts. Stakeholder Analysis using Performance Cells is a way to identify stakeholder expectations (outcomes), important measures of performance, and the gaps between expectations and actual performance. In strategic planning, the technique was used to identify enterprise level (organization-wide) measures of performance. Since we are at the process level, we will need to update these measures to make them relevant to the process being studied. With the additional data gathered in this step, the baseline measures can be validated or updated to reflect reality. It may also be necessary to update the targets in the performance cells if the current targets seem either too ambitious or too insignificant with respect to the baseline measures obtained in this step. Significant changes to performance targets must be highlighted for approval by the process owner(s) Process Analysis & the Business Case

47 Part I: BPR Process Improvement Chapter 2 Updated and valid performance cells provide an important input to process improvement efforts. Performance in terms of satisfying customer requirements is a dominant theme in process management. However, there are other stakeholders in the success of the process whose needs must also be satisfied. Stakeholders can be defined as a person/organization or group of persons/organizations who have an interest in the outcome of a process, activity, or enterprise. Stakeholders can be customers, higher authority, resource providers, suppliers, employees, partners, stockholders, and others. Factors that need to be considered in stakeholder assessment and performance cell construction: - There are multiple stakeholders in the performance of a process, and each has an explicit or implied right to expect certain benefits from the process. - Each stakeholder s interest in the process may be at cross-purposes with the interests of other stakeholders. Satisfying the needs of one stakeholder may be at the expense of the others unless all are considered together. - The planning process must define a system of key indicators for each activity that provide data relating to performance on an on-going basis with respect to stakeholder interests. - The planning process must establish target values or goals for each indicator that provide standards of performance for the activity with respect to each stakeholder. - Methodologies, techniques and tools must be established that can be used to achieve an optimum balance in satisfying multiple stakeholder interest in performance. Page 2-13

48 Conduct Baseline Analysis Chapter 2 Figure 2-9: Performance Cells Performance Cells Performance Stakeholders Supplier Higher Authority Customer Resource Provider Standards Quality Time Cost Copyright Methodology: 1. Identify who your stakeholders are in the following categories: Customer: A person/organization outside the process that receives and uses the outputs (products or services). Higher Authority: Any organization that is outside the process that imposes constraints or controls on your organization. Constraints include standards, goals, requirements, and specifications. Resource Provider: Any agency that is outside your organization that provides the facilities, machines, staffing, supplies, and funding needed to support the process. Supplier: Any external organization that provides materials (raw materials, components, subassemblies) or data that will be transformed into a product or service of higher value. The Performance Cells can be modified as necessary. For example, if the customer is the resource provider, they can be combined into one category of stakeholder. On the other hand, you might have different groups of customers who will have differing requirements. You will want to separate these customer groups into different categories Process Analysis & the Business Case

49 Part I: BPR Process Improvement Chapter 2 Global Management Training Institute (GMTI) Example: GMTI provides management training to very large commercial and government organizations worldwide. Training is based on training needs assessments performed within each corporation or agency. GMTI requires three-year notice by clients when new courses are required in order to allow time to develop these courses. Courses are scheduled with the corporations and agencies based on the survey results as specified in the contracts. Classes are held at regional training sites and on-site at the organizations. There have been ongoing complaints by clients that that GMTI is slow in offering courses that are critical to their needs. Contract instructors provide all training for GMTI. Recently, it has been difficult to find a sufficient number of available qualified instructors to present classes. Instructors that have taught for GMTI for years have told GMTI that they have decided to teach for other organizations because of financial reasons. GMTI is itself a part of a larger corporation, FPE, which specializes in the production of food processing equipment. Contacting and payment is handled at the corporate level by the Finance Department. Finance has set financial standards for GMTI to meet based on cost of training. The Operations Department of FPE has set standards for training delivery. Operations has recently informed GMTI of new requirements for each course to be designed strictly to the new policy requirements (for example, each course presentation chart will have the FPE logo on it). GMTI s stakeholders were initially identified: Stakeholder Supplier: Higher Authority: Customer & Res Provider: Customer & Res Provider: Contract Instructors FPE: Operations Dept 1. Students 2. Local organizations FPE: Finance Dept 2. Identify the interests and requirements of your stakeholders in the performance areas listed below. This information can be gathered by interviewing the stakeholders directly or by sending them a questionnaire. Standards: A performance measure that assesses how well a product or service meets established standards imposed by higher authority. Page 2-15

50 Conduct Baseline Analysis Chapter 2 These standards might be prescribed by law, regulation, directives, etc. It can be a measure of quality, and effectiveness, and efficiency. Quality: A performance measure that assesses how well a product or service matches customer requirements or desires. It is a measure of effectiveness. Costs: A performance measure that addresses how efficiently an process consumes its funding in delivering products and services. It is a measure of efficiency. Time: A performance measurement that assesses how efficiently a process uses time in delivering products and services. There are four types of time values: operations time, which measures the time spent adding value to the work in progress; delay time, which measures the amount of time work is stacked in queues or inventories; non-value added time associated with management, oversight, inspection, compliance, etc.; and quality rework time. Time is a measure of efficiency. Typical Customer Interests: 1. High quality (Quality) 2. Prompt service (Time) 3. Low prices (Cost) 4. Alternative sources 5. Custom products (Quality) Typical Higher Authority Interests: 1. Conformance to product standards (Standards) 2. Adherence to rules and regulations (Standards) 3. Off-the-shelf components (Standards) 4. Oversight and review (standards) 5. Avoidance of custom products (Standards) Typical Resource Provider Interests: 1. Low costs (Cost) 2. High return on investment (Cost) 3. No waste/scrap (Cost) 4. High performance (Quality and/or Time) 5. Low overhead (Cost) Typical Supplier Interests: 1. Complete specifications (Standards) 2. Sufficient lead times (Time) 3. Prompt payment (Time) 2-16 Process Analysis & the Business Case

51 Part I: BPR Process Improvement Chapter 2 4. No rejects (Quality) 5. Partnerships GMTI interviewed stakeholders to determine what is important to them: Stakeholder Performance Standards Supplier: Contract Instructors Higher Authority: FPE: Operations Dept Courses Meet Standards Customer: 1. Students 2. Local organizations Resource Provider: FPE: Finance Dept Quality Training Meets Needs Time Courses Delivered When Needed Cost Better Pay More Training Per $ 3. Each performance expectation (outcome) must be quantified as much as possible. It is critical not only to identify what the interests of the stakeholders are but what are the important metrics of their expectations. This can be extremely challenging. However, without knowing the degree to which expectations need to be met, it will be impossible to formulate adequate process metrics and objectives. Page 2-17

52 Conduct Baseline Analysis Chapter 2 GMTI modified the matrix and added measurements to quantify each of the expectations. GMTI did not guess at the measures but developed them in direct contact with their stakeholders. Stakeholder Performance Standards Supplier: Contract Instructors Higher Authority: FPE: Operations Dept 100% of Courses Meet Standards Customer: 1. Students 2. Local organizations Resource Provider: FPE: Finance Dept Quality 100% of Courses Meets Needs Time 100% of Courses When Requested Cost $400 per Course day $150 per Student Day Identify Gaps and Establish Process Performance Objectives Now that critical performance measures are established, we need to determine the gap between actual performance and the target level performance we need to achieve to meet stakeholder expectations. These gaps in performance provide the basis for validating existing, or establishing new, goals and objectives for process improvement. Actual performance measures are determined either by looking at the current process or by surveying the stakeholders to determine how you are performing in their eyes Process Analysis & the Business Case

53 Part I: BPR Process Improvement Chapter 2 GMTI identified current performance levels and determined the gap between current performance and stakeholder expectations: Stakeholder Performance Standards Supplier: Contract Instructors Higher Authority: FPE: Operations Dept 100% of Courses Meet Standards Customer: 1. Students 2. Local organizations Resource Provider: FPE: Finance Dept Actual: 25% GAP: 75% Quality 100% of Courses Meet Needs Actual: 65% GAP: 45% Time 100% of Courses When Requested Actual: 50% GAP: 50% Cost $400 per Course day $150 per Student Day Actual: $350 GAP: $50 Actual: $200 GAP: $50 Page 2-19

54 Conduct Baseline Analysis Chapter 2 Based on the GMTI stakeholder gap analysis, a list of objectives were developed that would serve as metric to drive process improvement efforts. The target date for meeting each objective would be one year after implementation of the new process. Objective 1: Increase pay to contract instructors from $350 per course to $400 per course. Objective 2: Increase the percentage of courses that are designed to policy from 25% to 100%. Objective 3: Increase the percent of courses considered adequate by our customers from 65% to 100%. Objective 4: Improve the delivery of courses when requested by our customers from 50% to 100%. Objective 5: Reduce the cost of student days from $200 to $150. Perform Baseline Organization and Culture Assessment Business process improvement inevitably requires change to an organization's structure and culture. All change is disruptive. Therefore, business process improvement is disruptive to an organization's structure and culture. Enterprises that have attempted process improvement while ignoring this syllogism have invariably failed. This means that organizational change management is the most critical responsibility in an overall program of process improvement. Organizational change management begins during the strategic planning and extends through the project implementation. Thus, dealing with organizational change is a continuous responsibility. This responsibility may be vested in one member of the improvement team, or it may be the responsibility of a separate team chartered to support all process improvement teams. The former works when only one process improvement effort is under way across a group of functional units; the latter is necessary when functional units are affected by two or more improvement efforts. A change management team can serve as the focus or hub for multiple process improvement efforts. A change management team can take a broader view of the relationship of process to organization to help ensure that organizational change management efforts are coordinated for all improvement efforts. Technology change management is also best dealt with by an independent change management team working with separate process improvement teams Process Analysis & the Business Case

55 Part I: BPR Process Improvement Chapter 2 Change management must consider the external environment, external stakeholders, and the technical infrastructure when attempting to shape the organization's structure and culture around improved processes. The role of the organizational change management team or person is to ensure that the organization's structure and culture will be able to successfully assimilate the improved process. An established change management team may even be able to develop enablers that help guide design of the new process. Structural change management is concerned with the way a functional unit is organized to carry out its work responsibilities. This includes policy and procedure, rules and regulations, management and staffing, facilities and equipment, and human resource practices. Structural change management has to do with things or facilities. Cultural change management is concerned with the way people interact with each other both in peer relationships and superior/subordinate relationships. Cultural change management has to do with people, and is therefore the more difficult of the two to successfully deal with. People and culture - the human systems of an enterprise - are what make or break any change initiative. The change management team must accomplish four general objectives: Understand the organizational changes that are needed as a consequence of process redesign or reengineering. Design the necessary structural changes needed to support the new process. Design a program that will begin the cultural transformation of the organization to one that is aligned with the principles behind process improvement. Anticipate, recognize, and resolve the barriers to change that will spring up in reaction to the change management plan. Solid change demands careful planning with inputs from all levels of the organization. Carefully timed action steps support change implementation. This requires answers to the who, what, when, where, and why. Is the organization's leadership prepared to lead the change effort? Page 2-21

56 Conduct Baseline Analysis Chapter 2 Have we primed the organization for planned changes? Is the organizational structure ready to support change? Do team members have the right mix of skills to make the changes happen? Is success a reasonable expectation? Are functional managers properly committed to the planned change? Are sufficient resources available to support the change effort? Negative answers to the above questions suggest areas for the improvement team to work on because experience has shown that unless and until all questions can be answered in the affirmative, successful implementation of redesigned processes is at considerable risk. Perform Baseline Technology Assessment While many useful and rewarding process improvements can be achieved apart from any consideration of technology enablers, radical reengineering efforts invariably depend on exploitation of available or emerging information technology capabilities. The effective use of advanced technology can dramatically enhance an organization's ability to achieve major breakthrough improvements performance. Technology enables radical business process reengineering. The key word is enables. This means that technology is not something that is considered after processes are reengineered. Rather, consideration of technology capability drives the development of the new process design. Therefore, the time to consider technology issues begins with process visioning, continues through process redesign (construction of the TO-BE model), and becomes a major component of the Business Case Analysis (BCA) decision package. At this point in the analysis, the study team needs to assess the limitations of the existing technological platform that supports current business processes. While it is possible that current capability is not fully utilized to support process requirements, it is more probable that existing technology is obsolete and a detriment to process improvement. In this case, existing technology represents a barrier to process improvement that must be overcome just like organizational barriers exist to thwart process improvement efforts Process Analysis & the Business Case

57 Part I: BPR Process Improvement Chapter 2 Weaknesses in technology represent barriers to process improvement that may set limits on how much improvement can be accomplished without substantial new investment. Weaknesses are often represented by legacy systems built on yesterday's technology that still serve vital business purposes. Years of poorly documented maintenance actions may make it impossible to replace such systems one component at a time. Whatever the situation, it is important to fully evaluate the strengths and weaknesses of the existing technology and determine what new technology may be required to support potential business process improvements. This analysis should extend to the capabilities of the technical staff to support desired improvements as well as their capacity to do so in light of current and continuing responsibilities and assignments. The technical divisions may represent a bottleneck that restricts the amount of technical support available for process improvement efforts. When this assessment is complete, the team will be able to note the areas and issues of most concern with respect to technological change and process improvement. It will highlight areas of strength and weakness in the current technological infrastructure. It will also identify and describe the most promising new technologies that may find application in process improvement efforts. In this way, it serves as a heads-up notice to the technical elements for demands, requirements, or requests that may be forthcoming from the process improvement effort. Document the Baseline Condition. Once the modeling, activity-based costing, and cycle-time tasks have been completed, the information generated must be summarized in the baseline report. At this time, everything known about the process is organized and described. It is important to include data that are not directly contained within the models. This document should contain: 1. Project scope and vision to include a process to organization matrix 2. AS-IS process models to include: The Activity Model The Data Model The Activity Based Costing Model The Timeline Simulation Model 3. Stakeholder requirements 4. Critical performance measures 5. Gaps in performance and objectives for improvement 6. Organization and Culture issues 7. Technology issues Page 2-23

58 Conduct Baseline Analysis Chapter 2 The general rule is simple: anything that can be of potential use to the improvement team should be included; anything that is extraneous to this purpose should be omitted or stored separately as backup documentation. The objective is not to measure the value of the report by its thickness, but by its useful content. Staff and Approve the Baseline Condition After all baseline data have been assembled and reviewed and accepted by the process improvement team members and the functional managers, it is submitted to the process owner or other higher authority for review and approval. As stated in the introduction to this step, the process improvement team will now have achieved two important accomplishments at this point in the methodology: a description of the desired future state for the process is established, and a description of the actual present state of the process has been provided. With the baseline described and the future state objective known, the process reengineering team needs to figure out how to get from here to there. The rest of the methodology is dedicated to this objective Process Analysis & the Business Case

59 Part I: BPR Process Improvement Chapter 2 Chapter 2 Questions: 1. What is the purpose of initially developing a Context Diagram? 2. What is the purpose of developing a Process vs. Organization Matrix? 3. What is the purpose of developing an AS-IS activity model? 4. What are the benefits of developing a data model? 5. What are the benefits of ABC in process analysis? 6. What are the differences between output and outcomes as it relates to process measurement? 7. What is the purpose of Stakeholder Analysis? Page 2-25

60 Conduct Baseline Analysis Chapter 2 NOTES: 2-26 Process Analysis & the Business Case

61 Process Analysis & the BCA Chapter 2 Chapter 2: Define the Baseline (AS-IS) Process, Organization, and Technology Copyright S2-1

62 Process Analysis & the BCA Chapter 2 Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model the Baseline Process Identify Critical Measures of Process Performance Conduct Stakeholder Analysis using Performance Cells Identify Gaps and Establish Process Performance Objectives Perform Baseline Organization & Culture Assessment Perform Baseline Technology Assessment Document the Baseline Condition Staff and Approve the Baseline Condition Copyright S2-2

63 Process Analysis & the BCA Chapter 2 STRATEGIC PLANNING PROCESS ANALYSIS STRATEGIC OBJECTIVES & BREAKTHROUGH OBJECTIVES PROCESS VISION STRATEGIC GOALS STRATEGIC VISION RELATED TO OTHER PROCESSES S2-3

64 Process Analysis & the BCA Chapter 2 Dave s Doughnut Example: As a part of Dave s Strategic Plan, Dave identified five major goals with supporting objectives and breakthrough objectives. To accomplish these goals and objectives, Dave has determined that his processes called Provide Doughnuts and Pastries must be fundamentally rethought and radically redesigned to meet this objective. These goals and objectives provides the basis the Vision for process improvement for one of his process: Provide Doughnuts and Pastries. Copyright S2-4

65 Process Analysis & the BCA Chapter 2 Dave s Strategic Goals: Goal 1: Lead the local doughnut and pastry market in market share. Goal 2: Be a profitable doughnut and pastry business unit. Goal 3: Be the low cost provider of doughnuts and pastries in the local community. Goal 4: Be recognized as the leaders in the community for our timeliness in filling special customer orders for doughnuts and pastry. Goal 5: Lead the community in customer satisfaction as determined by the Regional Good Service Market Analysis Group. Copyright S2-5

66 Process Analysis & the BCA Chapter 2 Goal to Process Matrix Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Provide Doughnuts & Pastries X X X X X Provide Catering Services X Copyright S2-6

67 Process Analysis & the BCA Chapter 2 Dave s process vision: To reengineer the provide doughnuts and pastries process in order to be the leader in the community with the best product at a competitive price. Copyright S2-7

68 Process Analysis & the BCA Chapter 2 Context Diagram Control Input Output Mechanism Copyright S2-8

69 Process Analysis & the BCA Chapter 2 Pay Personnel Pay Change Request Financial Systems Organization Pay Personnel Pay Change Order Financial Administration Organization Process Pay Payment Copyright S2-9

70 Process Analysis & the BCA Chapter 2 PROCESS DEVELOPMENT MATRIX LIFE CYCLE Key Product or Service Doughnuts Key Product or Service Key Product or Service Key Product or Service REQUIREMENTS Take Order ACQUISITION Acquire Ingredients and Supplies STEWARDSHIP Bake doughnuts DISPOSITION Sell doughnuts Copyright S2-10

71 Process Analysis & the BCA Chapter 2 Key: D=Decision M=Major Involvement, S= Some Involvement Copyright S2-11

72 Process Analysis & the BCA Chapter 2 Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model Model the Baseline Process Activity Model Data Model Activity Based Costing Model Time-line Model (Simulation) Copyright S2-12

73 Process Analysis & the BCA Chapter 2 Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model the Baseline Process Identify Identify Critical Measures of Process Performance Copyright S2-13

74 Process Analysis & the BCA Chapter 2 Output vs. Outcome Your Process Output Outcome Your Customer Copyright S2-14

75 Process Analysis & the BCA Chapter 2 Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model the Baseline Process Identify Critical Measures of Process Performance Conduct Stakeholder Analysis using Performance Cells Copyright S2-15

76 Process Analysis & the BCA Chapter 2 Performance Cells Performance Stakeholders Supplier Higher Authority Customer Resource Provider Standards Quality Time Cost Copyright S2-16

77 Process Analysis & the BCA Chapter 2 Performance Cell Methodology 1. Identify Stakeholders Copyright S2-17

78 Process Analysis & the BCA Chapter 2 Global Management Training Institute (GMTI) Example: GMTI provides management training to very large commercial and government organizations worldwide. Training is based on training needs assessments performed within each corporation or agency. GMTI requires three-year notice by clients when new courses are required in order to allow time to develop these courses. Courses are scheduled with the corporations and agencies based on the survey results as specified in the contracts. Classes are held at regional training sites and on-site at the organizations. There have been ongoing complaints by clients that that GMTI is slow in offering courses that are critical to their needs. Contract instructors provide all training for GMTI. Recently, it has been difficult to find a sufficient number of available qualified instructors to present classes. Instructors that have taught for GMTI for years have told GMTI that they have decided to teach for other organizations because of financial reasons. GMTI is itself a part of a larger corporation, FPE, which specializes in the production of food processing equipment. Contacting and payment is handled at the corporate level by the Finance Department. Finance has set financial standards for GMTI to meet based on cost of training. The Operations Department of FPE has set standards for training delivery. Operations has recently informed GMTI of new requirements for each course to be designed strictly to the new policy requirements (for example, each course presentation chart will have the FPE logo on it). Copyright S2-18

79 Process Analysis & the BCA Chapter 2 Stakeholders were initially identified: Stakeholder Supplier: Contract Instructor Higher Authority: FPE: Operations Dept Customer: 1. Students 2. Local organizations Resource Provider: FPE: Fin Dept Copyright S2-19

80 Process Analysis & the BCA Chapter 2 Performance Cell Methodology 1. Identify Stakeholders 2. Identify Requirements by Category of Performance Copyright S2-20

81 Process Analysis & the BCA Chapter 2 Stakeholder Performance Standards Supplier: Contract Instructor Higher Authority: FPE: Operations Dept Customer: 1. Students 2. Local organizations Resource Provider: FPE: Fin Dept Quality Time Cost Copyright S2-21

82 Process Analysis & the BCA Chapter 2 Stakeholder Performance Standards Supplier: Contract Instructor Higher Authority: FPE: Operations Dept Courses Meet Standards Customer: 1. Students 2. Local organizations Resource Provider: FPE: Fin Dept Quality Training Meets Needs Time Cost Better Pay Courses Delivered When Needed More Training Per $ Copyright S2-22

83 Process Analysis & the BCA Chapter 2 Performance Cell Methodology 1. Identify Stakeholders 2. Identify Requirements by Category of Performance 3. Quantify Requirements Copyright S2-23

84 Process Analysis & the BCA Chapter 2 Stakeholder Performance Standards Quality Time Cost Supplier: Contract Instructor $400 per Course day Higher Authority: FPE: Operations Dept 100% of Courses Meet Standards Customer: 1. Students 2. Local organizations 100% of Courses Meets Needs 100% of Courses When Requested Resource Provider: FPE: Fin Dept $150 per Student Day Copyright S2-24

85 Process Analysis & the BCA Chapter 2 Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model the Baseline Process Identify Critical Measures of Process Performance Conduct Stakeholder Analysis using Performance Cells Identify Identify Gaps and Establish Process Performance Objectives Copyright S2-25

86 Process Analysis & the BCA Chapter 2 Stakeholder Performance Standards Supplier: Contract Instructor Higher Authority: TCOM 100% of Courses Meet Standards Customer: DOD & Service Installations Resource Provider: DOD Activity & Service HQs Actual: 25% GAP: 75% Quality 100% of Courses Meet Needs Time Actual: 65% GAP: 45% 100% of Courses When Requested Actual: 50% GAP: 50% Cost $400 per Course day $150 per Student Day Actual: $350 Actual: $200 GAP: $50 GAP: $50 Copyright S2-26

87 Process Analysis & the BCA Chapter 2 GMTI s process vision: Provide training that will enable organizations to be prepared for the challenges of the 21 st century. Objective 1: Increase pay to contract instructors from $350 per course to $400 per course. Objective 2: Increase the percentage of courses that are designed to policy from 25% to 100%. Objective 3: Increase the percent of courses considered adequate by our customers from 65% to 100%. Objective 4: Improve the delivery of courses when requested by our customers from 50% to 100%. Objective 5: Reduce the cost of student days from $200 to $150. Copyright S2-27

88 Process Analysis & the BCA Chapter 2 STRATEGIC PLANNING PROCESS ANALYSIS STRATEGIC GOALS STRATEGIC OBJECTIVES & BREAKTHROUGH OBJECTIVES PROCESS VISION PROCESS OBJECTIVES STRATEGIC VISION RELATED TO OTHER PROCESSES Copyright S2-28

89 Process Analysis & the BCA Chapter 2 Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model the Baseline Process Identify Critical Measures of Process Performance Conduct Stakeholder Analysis using Performance Cells Identify Gaps and Establish Process Performance Objectives Perform Baseline Organization & Culture Assessment Perform Baseline Technology Assessment Copyright S2-29

90 Process Analysis & the BCA Chapter 2 Document the Baseline 1. Project scope and vision to include a process to organization matrix 2. AS-IS process models to include: The Activity Model The Data Model The Activity Based Costing Model The Timeline Simulation Model 3. Stakeholder requirements 4. Critical performance measures 5. Gaps in performance and objectives for improvement 6. Organization and Culture issues and barriers 7. Technology issues and barriers Copyright S2-30

91 Process Analysis & the BCA Chapter 2 Define the Baseline (AS-IS) Process, Organization, and Technology Document the Project Scope and Vision Model the Baseline Process Identify Critical Measures of Process Performance Conduct Stakeholder Analysis using Performance Cells Identify Gaps and Establish Process Performance Objectives Perform Baseline Organization & Culture Assessment Perform Baseline Technology Assessment Document the Baseline Condition Staff Staff and Approve the Baseline Condition Copyright S2-31

92 Process Analysis & the BCA Chapter 2 STRATEGIC PLANNING DOCUMENT BASELINE PROCESS ANALYSIS ANALYZE OCM OCM 1 TCM TCM BM DEVELOP TO-BE BUSINESS CASE OCM 1 TCM Copyright S2-32

93 Part I: BPR Process Improvement Chapter 3 Chapter 3: Analyze the Baseline for Improvement Opportunities At this point in the methodology, the baseline situation of the process is documented and its future state has been visualized in terms of the gaps in performance that must be closed. In addition, the baseline Organization and Culture environment and the baseline Technology environment have been established. This step is concerned with analyzing the process to determine what needs to be done to it to achieve the vision for improvement. This step will also document the barriers that must be overcome in Organization and Culture and Technology to achieve realize the new process. The next step in the methodology is concerned with designing the program that will close the performance gaps and bring the process to a new higher level of performance. This step requires the application of process improvement techniques for data gathering and for analyzing the process to identify improvements needed to close performance gaps. The results of this step will also help the improvement team decide whether a process redesign (incremental change) effort is indicated or whether a process reengineering (radical change) effort is indicated. This is a critical decision because process redesign projects take less time to complete and therefore deliver results (process improvements) faster at lower cost with less risk than reengineering projects. The results of this step will also provide meaningful data for inclusion in the Business Case Analysis (BCA) package completed when the new process is documented. The BCA package will be the basis for the management decision to proceed or not proceed with the recommended process improvement project. The following tasks are performed in the improvement analysis step: Analyze the Baseline for Improvement Opportunities Confirm Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Document Technology Issues & Barriers Incorporate the Results of the Benchmarking Analysis Identify Improvement Opportunities Identify a Strategy for Process Improvement Prepare Process Improvement Analysis Report Staff & Approve Process Improvement Analysis Report Copyright Figure 3-1: Analyze the Baseline for Improvement Opportunities Page 3-1

94 Conduct Process Improvement Chapter 3 Confirm Process Vision, Measures, and Objectives. The strategic plan produced a process vision that included a series of breakthrough objectives which identified specific measurable targets for improvement. Based on these breakthrough objectives a vision for process improvement was established in the previous step. In addition, information and insights that were gained during the baseline analysis step as to the gaps that must be closed to meet stakeholder expectations must be assessed to determine consistency with breakthrough objectives. This information needs to be reviewed and reaffirmed by the process improvement team to ensure all team members have a clear view of the desired future state of the process. GMTI s objectives identify the gaps that will need to be closed in a process improvement effort. Objective 1: Increase pay to contract instructors from $350 per course to $400 per course. Objective 2: Increase the percentage of courses that are designed to policy from 25% to 100%. Objective 3: Increase the percent of courses considered adequate by our customers from 65% to 100%. Objective 4: Improve the delivery of courses when requested by our customers from 50% to 100%. Objective 5: Reduce the cost of student days from $200 to $150. Figure 3-2: GMTI s Objectives Identify Potential Process Improvement Opportunities. It may seem premature at this point to begin identifying potential process improvement opportunities. After all, systematic analysis of the baseline process to determine improvements necessary to close performance gaps has not yet begun at this point. However, this is a very important action to take at this time. As you no doubt discovered in the Process Modeling & Activity Based Costing (MHC-1034) course, teamwork in documenting, discussing, and understanding the baseline process generates ideas for process improvement. These ideas can direct the improvement team in directions to explore for potential improvement. In addition, the identification of improvement opportunities serves to direct the benchmarking effort. There is a danger here however. The improvement team and management must not be caught in the mistaken belief that they have Page 3-2 Process Analysis & the Business Case

95 Part I: BPR Process Improvement Chapter 3 achieved a solution at this point and declare victory. Management in particular has a history of wanting to jump to the solution; however, the analysis has only begun! Certainly, numerous incremental improvements will result from developing and documenting the baseline in the previous step. Fundamental improvement, on the other hand, requires further detailed analysis and careful consideration. This is not the time to jump to conclusions! At the end of this action, the improvement team should have compiled a list of potential improvement opportunities that should be used to direct data collection by the improvement team and the benchmarking team. If the gaps in expected versus actual process performance in these areas are significantly large, process reengineering may be called for. If not, it is an indication that process redesign or streamlining may be sufficient (at least with regard to stakeholder interests.) The improvement team needs to understand that stakeholder interests are not the only (and perhaps not the most important) factor in deciding how radical process improvement efforts should be. GMTI Example: Several improvement opportunities were identified that could potentially reduce the gaps in performance: 1. Investigate the potential of using multimedia technology in delivering classes. 2. Identify high cost drivers and eliminate non-value added activities. 3. Review all course materials to assure compliance with policies. 4. Review all courses to determine adequacy in meeting customer requirements. 5. Reduce the time to identify customer requirements and field new courses. Figure 3-3: GMTI Example Initiate Best Practices Benchmarking Analysis. With the understandings gained up to this point, the process improvement team is positioned to initiate a best practices benchmarking study at the process level. Unlike the strategic benchmarking analysis that was performed during strategic planning, which is used to establish performance targets and breakthrough objectives, the best practices benchmark at the process level is more tactical. The strategic benchmark develops the process performance goals; the best practices benchmarking analysis at the process level identifies strategies for attaining the process vision. Page 3-3

96 Conduct Process Improvement Chapter 3 Robert Camp defines benchmarking as: 1 The search for industry best practices that lead to superior performance. The focus of a best practices benchmark is on process characteristics as well as the organizational, cultural, and technical enablers that support the process. This task produces critical data that can be used in performance gap analysis in all areas associated with the process. Benchmarking can take many forms. It may consist of essentially a literature search in which the study team or a subset performs research to identify the best practices in other commercial and government enterprises. There are organizations that provide various services to assist organizations in research and performing other benchmarking activities. Depending on the time and resources available, benchmarking may consist of actually contacting target enterprises and exchanging information. When exchanging information directly with other enterprises, organizations should establish formal procedures for implementing a benchmarking process and strictly follow the benchmarking code of conduct that is located at: Most techniques used in benchmarking are relatively easy to learn and use. But, best practices benchmarking, if it is to be effective, requires that process teams be well-trained prior to embarking on the benchmark program. The period of the benchmark study effort may extend over the remaining actions in this step. There are many advantages to this concurrency and some disadvantages as well. The project leader must determine whether to perform best practices benchmarking in series or in parallel with other steps and tasks. Select Data Gathering and Analysis Techniques. The improvement team is now prepared to launch an extensive data gathering and analysis program in support of the remaining tasks in this step Techniques for Process Improvement There is a saying: if all you have is a hammer, everything looks like a nail. Process improvement teams need a complete repertoire of techniques and tools for the same reason that a carpenter needs a full complement of tools. Whether building processes or houses, tools in the hands of skilled craftsmen can produce a much better product and make the job a whole lot easier. 1 Benchmarking: The Search for Industry Best Practices that Lead to Superior Performance, Robert C. Camp, ASQC Quality Press, Page 3-4 Process Analysis & the Business Case

97 Part I: BPR Process Improvement Chapter 3 The term technique means a method or procedure for gathering, analyzing, or displaying data or information. The term tool refers to an automated system for implementing a technique. The term product refers to a specific or commercial tool. For instance, brainstorming is a technique, groupware is a system that automates the brainstorming technique. Lotus Notes is a commercial groupware system. In the literature, the terms tools and techniques are often used interchangeably. This is not terribly important as long as you understand the context in which the terms are used. There are over 25 techniques that can be used in support of process improvement efforts. A description of these techniques is contained in Appendix E: Data Analysis Technique Descriptions. The presentation of each technique will be brief because the only way to really understand a technique is to actually use it. One can no more learn how to use a technique by reading about it than one can learn to ride a bike by reading about it. Eventually, you just have to mount up and ride. The objective is not to use techniques for their own sake. The purpose of having techniques is so that process improvement teams can base their decisions on objective data rather than subjective feelings. By using techniques to support process improvement recommendations and designs, teams will be better positioned to overcome barriers and obstacles to improvement, and will more readily secure approval from higher authority to proceed with improvement efforts. Figure 3-5: Techniques for Process Improvement Techniques for Process Improvement Data Gathering Survey and On-site visits Interview and Focus Groups Questionnaires and Assessments Brainstorming Checksheets Benchmarking Data Analysis Process Deployment Matrix Pareto Diagrams Cause-and and-effect Diagrams Affinity Diagrams Process Decision Program Charts Quality Function Deployment. Copyright This section is not meant to be all-inclusive of process improvement techniques. The following subsections contain lists of techniques. Page 3-5

98 Conduct Process Improvement Chapter 3 Technique Modes For convenience, we group techniques into four categories-graphical, statistical, modeling, and textual. Each category is useful for specific purposes at different points in the Framework methodology. Familiarity with the techniques, and experience in their use will help teams know when, where, and why to select one category of technique over another. Some techniques may fit into two or more categories. Technique Modes Graphical Statistical Modeling Text Based Copyright Figure 3-6: Technique Modes 1. Graphical. Graphical techniques are best used when it is necessary to display the relationships between or among entities. These relationships can show order or sequence, priorities, dependencies, groupings and categories, and physical positioning. The following are graphical techniques: Quality Function Deployment (QFD) Process flow and process deployment Affinity diagramming Relationship diagramming Pareto analysis Force field analysis Program Decision Process Chart (PDPC) Program Evaluation and Review Technique (PERT) Gantt charts Checksheets Cause and Effect charts. Graphical techniques are highly useful for communicating ideas to interested parties outside of the process improvement team. Whenever possible, data should be displayed in the form of graphics. 2. Statistical. Statistical techniques are used to gather and analyze data resulting from repetitive processes. Statistical techniques should only be Page 3-6 Process Analysis & the Business Case

99 Part I: BPR Process Improvement Chapter 3 used when there is enough data available (enough data points) to make the results meaningful. The use of most statistical techniques requires specialized training in the science of statistics, heuristics, and probability theory. The following are statistical techniques: Histograms Simulation Control charts. 3. Modeling. Models are highly structured graphics with a specialized syntax designed to convey graphical information with a high degree of precision. Many modeling techniques are precise enough to be supported with automated tools that can draw the models and transfer meaningful data to dictionaries, directories, repositories, and other software systems. Modeling techniques are used to gather, analyze, and display data. The following are modeling techniques: Process flow and process deployment Activity modeling Data modeling Simulation. 4. Text-based. Text-based techniques include narratives, reports, tables, matrices, and numeric representations. They are often used to supplement the results obtained from using other techniques. In general, the more structured the data recorded with the use of text-based techniques, the more useful and maintainable the data. Even data presented in report form should follow a well-developed content outline and be supplemented wherever possible with graphs, charts, models, and tables. The following are text-based techniques: Brainstorming Nominal Group Technique (NGT) Performance cell Strategic benchmarking Strength, Weakness, Threat, Opportunity (SWOT) analysis Hoshin planning Activity-based Costing (ABC) Best practices benchmarking Economic analysis Survey/interview. Technique Application Techniques should be used to accomplish predetermined objectives. That is, select a technique for a specific purpose and ensure that the purpose Page 3-7

100 Conduct Process Improvement Chapter 3 is fulfilled. Otherwise, process improvement teams can get carried away with the use techniques and end up more confused than when they started. The following subsections are designed to suggest applications for techniques. Figure 3-7: Technique Application Technique Application Consensus Building Data Gathering Data Analysis Decision Support Presentation Copyright Consensus Building. Process improvement is usually accomplished by cross-functional teams working together. At the conclusion of every step in the methodology, there should be team consensus on the results obtained, the meaning of those results, and the application of the results in subsequent steps. The use of techniques puts process improvement in objective, rather than subjective terms. The more objective the results, the easier it is to gain consensus because emotional or irrational elements are minimized. By consensus, we mean understanding, agreement, harmony and unanimity. Consensus is the basis for effective decision making. Process improvement also results in the development of in-process reports that have to be reviewed and approved before improvement efforts can continue. This means that the improvement team must gain consensus with review teams and higher authorities. Techniques can aid this process by displaying data in terms that can be easily understood by those who are not working day-to-day on the improvement team. Almost all of the techniques presented in this section can be used to gain consensus both within the improvement team and with outside elements. The first step in gaining consensus is to get all of the facts, ideas, opinions, concerns, issues, barriers, and objections out in the open so that they can be dealt with in an objective manner. The following techniques are particularly effective in this: Brainstorming Nominal Group Technique SWOT analysis Page 3-8 Process Analysis & the Business Case

101 Part I: BPR Process Improvement Chapter 3 Hoshin planning Force field analysis PDPC Survey/interview Cause and Effect analysis. The second step in gaining consensus is to display or present data in a form that makes it easy to either agree on a set of data or point out areas of disagreement that can be further investigated. In addition to the techniques listed in the above subsection, modeling techniques can be used to display data in a way that helps resolve areas of disagreement. 2. Data Gathering The more useful the data that are gathered in support of process improvement efforts, the more effective process improvement efforts will be. For meaningful process improvement, data must be gathered about the process in question (baseline data); from all interested parties (stakeholders) especially their needs, requirements, and desires; about the environment the process operates in (organizational and technological infrastructure); and about the possibilities for improvement. There will always be more data available than the process improvement team can hope to gather and analyze. This means that the data gathering process must be disciplined and structured. Before any data is gathered, the team must be able to answer the following questions (who, what, when, where, why, how, and how much): What data do we need Why do we need it When do we need it (what step in the methodology) What filters will we use to screen out unneeded data What will we do with the data when we get it What are the best sources for the data Planning the data gathering effort is most important. The plan should be written and evaluated before the data gathering effort starts. For instance, a good benchmarking effort can take three to six months and cost several thousands of dollars to conduct. The team should be certain of their objective before they commit the time and expense of using this technique. The following techniques are the ones most useful for data gathering: Brainstorming Performance cell Strategic benchmarking QFD SWOT Best practices benchmarking Page 3-9

102 Conduct Process Improvement Chapter 3 Economic analysis Survey/interview Checksheets Control charts. 3. Data Analysis. Raw data is seldom useful. All the data that is worth gathering is worth analyzing to derive meaning (information) from the data. Ineffective data analysis is more than worthless, it is misleading and damaging. The adage: there are lies, damn lies, and statistics points out that we can analyze data in such a way as to support any predetermined conclusion if we so choose. To minimize or prevent this from happening, data analysis must be as disciplined and structured as the data gathering process that produced the data. In data analysis, it is important to select the most effective technique for the job at hand, use the technique properly, and then let the results speak for themselves. If there are disagreements in the interpretation of the results, rather than rework the analysis, it is better to note the differences in a supplemental report. In this way, others can examine the results without bias. The following techniques are the ones most useful for data analysis. There are many techniques that can be used for data analysis, so it is most important to select the ones most appropriate for the task at hand. Experience in using the techniques will provide skill in technique selection. Some of the techniques listed are also used in data gathering. In other words, the technique is used to both collect and organize data. In this case, the results are more suspect because the person or team using the technique may have lost some objectivity in the analysis phase of the technique: Nominal Group Technique Strategic benchmarking (analysis, conclusions, and recommendations) QFD Affinity diagram Relationship diagram Activity modeling Data modeling Activity-based costing Pareto analysis Histograms Best practices benchmarking Simulation Force field analysis Economic analysis PDPC PERT Page 3-10 Process Analysis & the Business Case

103 Part I: BPR Process Improvement Chapter 3 Control charts. Cause and Effect. 4. Decision-support. Most of the techniques covered in this section are designed for use by the process improvement team. Some, however, are quite useful for presenting data to review teams and higher authorities to aid in decision making with respect to some phase of the improvement project. It is important that when a technique is used to generate decision-support data, the data itself is neutral, balanced, and factual. It is proper to recommend a course of action, but the decision making team must have access to all of the data that lead to a recommendation for one course of action and the rejection of other alternatives. Decision-support data should be concise and focused. The techniques used to develop decision-support reports will generally produce far more data than should be presented to the decision making agency. This so-called backup should be organized and preserved should it be needed to justify the recommended course of action. It should not, however, be part of the original submittal except in summary form. The following techniques are effective for developing decision-support materials. A key decision-support factor is noted for each technique listed: Nominal Group Technique (rank/prioritize alternatives) Performance cell (acceptance of performance targets) Hoshin planning (acceptance of performance objectives) Activity modeling-to-be situation (proposed future state) Data modeling-to-be situation (proposed future state) ABC (acceptance of unit cost values) Force field analysis (acceptance of barriers to progress) Economic analysis (implementation alternatives) PERT (acceptance of schedules and costs) Cause and Effect (acceptance of drivers). 5. Presentation Techniques provide an effective means of developing materials for presenting progress, results, plans, proposals, scenarios, and other aspects of an improvement project. The following techniques are most often used to develop presentation aids. In most cases, the presentation materials are a by-product of technique use, not the main purpose for using the technique: Performance cell QFD (high-level matrices only) Hoshin planning (cascading objectives) Process flow, process deployment Activity models (context and node trees only) Data models (entity/relationship only) Page 3-11

104 Conduct Process Improvement Chapter 3 Pareto charts Histograms Gantt charts Check sheets Cause and Effect (simplified for presentation). Analyze the Process for Improvements At this point the improvement team can focus its attention on the analysis of the individual activities of the process. Based on the analysis of the data collected as a result of the previous element, the process improvement team will focus on what needs to be done to the individual activities of the process in order to close the gaps in process performance. Although the process analysis team will look for ways to achieve improved measures of performance in each of the activities, overall effectiveness and efficiency will be measured in terms of overall process performance. The process improvement team must keep in mind that improvement in performance of the individual activities may not necessarily translate into improved overall performance. Remember that the gaps in performance are in terms of the results or outcomes of the process. Therefore, overall determination of efficiency or effectiveness needs to be measured in terms of process outcomes. For example: The study team discovered a way to double the throughput of activity A1.2 with little investment. This sounds like a good idea; however, it may not translate into overall improved process throughput and more prompt delivery to a customer because the increased output of activity A1.2 may only be creating increased backlog of input for activity A1.3. In addition, the result could increase the cost of warehousing the output of A1.2 until A1.3 is able to accept it. With this awareness, the improvement team is prepared to look at each one of the activities and look for specific improvements to improve activity performance. We are now at the heart of the process improvement effort. Increasing Product Quality. Process attributes related to delivering high-quality products and services should be the focus of all process improvement efforts. Therefore, closing performance gaps in quality-related areas are critical. Failures in quality may be felt externally, which means that customer s needs are not being satisfied which could also directly cause excessive process costs. There is substantial proof that while quality costs, poor quality costs more. Performance gap analysis should include investigation of the following factors with respect to output products and services. Once again, excessive performance gaps may indicate the need to consider radical process Page 3-12 Process Analysis & the Business Case

105 Part I: BPR Process Improvement Chapter 3 reengineering, especially if benchmarking results show that other organizations are doing much better. Unacceptable products and services - Returns - Rejects - Loss of customers Too much time spent redoing work Customer complaints - Phone calls - Letters to higher authority - Adverse public comments or publicity High warranty costs or service call-backs Excessive meeting time devoted to problem/issue resolution Organization change management. Not delivering the right product to meet customer needs. Reducing Cycle Time. Experience has shown that reducing process time factors will always result in reducing process costs. Therefore, it is also critically important to perform a thorough gap analysis in this performance area. Process time is the aggregate of operations time, delay time, overhead time, and quality-related time. The measures to study include the following: Cycle time per unit of output or per transaction Wait time per unit of output or per transaction The ratio of direct labor hours to total hours Quality-rework time Time allocated to non-value added activities Time allocated to satisfying controls placed by higher authority Value-chain versus control-chain time allocations Response time from request for service to service delivery Ratio of operations time to calendar time Workflow through the process (relative location of work centers) Serial versus parallel processing of transactions Interruptions in employee work time for non-value added activities Method of setting work priorities Supplier-process relationship. Many of the performance gaps uncovered in this task will need to be subjected to cause-and-effect analysis because experience has shown that process delays are often caused by problems upstream of the process. This is the basis of instituting just-in-time methods of material movement. Page 3-13

106 Conduct Process Improvement Chapter 3 Reducing Process Cost. Process costs should never be the direct focus of performance gap analysis. This is because all process costs are directly related to other process factors including mission effectiveness. To reduce process costs, these other factors will have to be investigated. The direct contributors to process costs are excessive process cycle time, poor product and service quality, insufficient information about customer requirements, poor supplier relationships, and unneeded or inappropriate controls placed on processes by higher authority (excessive regulation). Poor process cycle time itself is caused by excessive overhead, obsolete technology, poor work methods, and poorly trained personnel. Poor product and service quality has many causes, each of which has to be investigated as recommended above. Poor supplier relationships result when suppliers are not treated as partners with respect to servicing customer requirements. Inappropriate controls placed by higher authority are often the result of failing to review controls in the light of changes in the way processes are conducted. Some cost-related performance gaps should be studied directly. These include non-process and non-product related expenditures including nonproductive facilities, excessive frills and perks; unnecessary travel and living expenses; bloated staffing levels; and losses due to waste, fraud, and abuse. Improving Value-Added to the Customer In this task, the team will analyze how the process as a whole satisfies customer interests. This is the right time to continue with ABC analysis to investigate and understand the value-added of activities and the sources of process costs (cost drivers). Cost drivers are most often a mix of the costs of inputs, controls, and mechanisms. However, since cost drivers are often outside the scope of the process, the tendency of the process improvement team is not to work outside the scope or boundary of the process. This is a mistake. The project leader must insist that all cost drivers be investigated and must insist that the results of the study be considered in the improvement analysis. If this is not done, the improvement team runs the risk of suboptimizing process performance and cost. If cost drivers are controls, specific actions must be investigated as to what actions are necessary to reduce the limitations on the process. Regulations or directives which inhibit efficient and effective accomplishment of mission objectives must be challenged. Page 3-14 Process Analysis & the Business Case

107 Part I: BPR Process Improvement Chapter 3 Identifying Problems and Corrective Actions Study teams should review the activities in the IDEF0 model to identify problems and corrective actions. In addition to the activity itself, each ICOM should be analyzed to identify improvements: Inputs - A process improvement may result from simplifying an input. Changing the input s properties while retaining its fit, form, and function may result in reduced cost. Controls - A revised regulation may relax a process tolerance, causing a decrease in costs. Mechanism - Changing skill level may reduce the time and cost to perform an activity. Improving the automation support might reduce the cost by displacing manual effort, might reduce the time required to perform the activity, and result in improved quality. Activities - Eliminate non-value added activities. Determine if an activity contributes value to the end product or service. If the activity does not add value, look for controls that require the activity to be performed. If an activity does not add value and is not required by a control it can be targeted for potential elimination. Figure 3-8: Activity Classifications Activity Classifications Discontinue the activity Leave it alone Designate the activity for continuous improvement Designate the activity for process redesign Designate the activity for process reengineering Copyright Classify Activities As a result of the above analysis, each identifiable activity can be placed in one of five classifications. Not all activities will require the same Page 3-15

108 Conduct Process Improvement Chapter 3 degree of reengineering and the analysis from this point on should focus on those activities that will require significant change. After completion of this task the improvement team can focus on removing the barriers in terms of organization and culture and technology and turning these barriers into enablers of process change. Document Organizational Issues and Barriers. Process improvement is not a meaningful term apart from organizational change management. Therefore organizational change management must be addressed as a part of process improvement. At this time, the process improvement team can begin to identify problems, issues, potential barriers to change, and suggestions for organizational improvement. This should be done now, while the improvement team has a fresh understanding of what needs to be done to the process to close performance gaps. Organization and culture barriers could be divided into at least four issue areas that are outside of the process itself. These are: 1. Organizational Culture 2. People Skills and Knowledge 3. Organization Structure and Demographics. 4. Organizational Policies and Directives 1. Organizational Culture. Cultural Barriers to change management success are well known. They generally include the following and all must be successfully contained or resolved or the success of the process improvement cannot be reasonably assured: Lack of active, visible, and committed leadership Ignorance of improvement goals and employees' roles in achieving them Ingrained satisfaction with the status quo Vested interests in keeping things as they are Inadequate training and preparation for the change effort Hostility directed at members of the improvement or change teams No or little reward or recognition for participating in the change effort Threats to personal security and career objectives Lack of organizational support Inadequate, infrequent, or deceiving communications about the changes. Page 3-16 Process Analysis & the Business Case

109 Part I: BPR Process Improvement Chapter 3 2. People Skills and Knowledge. The knowledge and skill level of the people in the organization may serve as a barrier to process change. If they do not have the skills and knowledge to support the new process, process improvement will fail. This issue is apart from the culture issue. People may be willing to support the new process (culture issue), but they may not be equipped with the skills or knowledge level to make the process work. An assessment needs to be made to determine the training necessary to equip the employees with the correct skills to successfully perform the new process. In addition to training, the entire Knowledge Management Program and structure of the enterprise needs to be reevaluated. It is critical that employees possess the knowledge to perform in their jobs. This assessment of the Knowledge Management Program will go well beyond just the assessment of training needs. It encompasses how knowledge is managed throughout the enterprise. If training or change to the Knowledge Management Program will not equip the existing employees with the skills and knowledge necessary to support the new process, an evaluation needs to be made as to how those employees will be recruited from outside of the enterprise. 3. Organization Structure and Demographics. The structure and demographics of the organization may serve as a barrier to process improvement. Perhaps the ridged stovepipe functional alignment of the organization provides barriers for the exchange of information between the activities of the horizontal process. The ideal situation would be to transform the organization structure consistent with the process. This is not always possible in most large organizations and it may not be desirable for accountability reasons. When this is the case, cross-functional teams should be established that are responsible for monitoring the performance of the process across all the functional stovepipes that are involved with the process. In addition to organization structure, demographics may serve as an inhibitor to process change. For example, it may be difficult to coordinate activities of the process that are widely dispersed geographically. Often technology enablers may be employed to reduce the impact of these barriers. 4. Organizational Policies and Directives In analyzing the process for potential improvements, particularly in analyzing the IDEF0 Model and the ABC Model to identify high cost drivers, controls that serve as a barrier to process improvement must be identified. Efforts need to be taken at this time to test those controls to see if non-value added directives and regulations can be eliminated or waived. There have been enough successes with process improvement that some general principles to guide organizational change can be expressed. Page 3-17

110 Conduct Process Improvement Chapter 3 These principles can be used by change management teams to design a program to support process improvement with assurance that the principles have worked for other organizations. It must be remembered, though, that change involving people, their perceptions, and attitudes takes time to settle in. Therefore, these principles function more as a direction for change than an immediate destination. This in no way invalidates their use. Process management must be instituted in such a way that functional managers can support it. Management hierarchies may need to be flattened to make the organization more flexible and responsive to changing conditions. Employees must be involved in decision making and empowered to act on behalf of internal and external customers. Work must be reorganized around cross-functional work groups (teams) that are aligned by process and have responsibility for cost, quality, and cycle time performance. Unnecessary and obsolete rules and regulations that inhibit process performance must be reduced or eliminated. Continuous and just-in-time learning practices must be put in place to facilitate skill development, process driven cross-functional cooperation, and work group flexibility. Managers must manage less and lead more. The new values of commitment, teamwork, performance, and accomplishment must displace the old values of risk avoidance, strict accountability, self-aggrandizement, and functional myopia. Rewards and recognition must be aligned with team accomplishment of process performance goals and individual skill and competency development. Document Technology Issues and Barriers Technology is both an enabler of change and a constraint on change. Enablers come from innovative uses of new technologies, while inhibitors are the result of the presence of legacy systems. This task is concerned with uncovering technology-related issues that need to be investigated and analyzed with respect to process management and improvement. Page 3-18 Process Analysis & the Business Case

111 Part I: BPR Process Improvement Chapter 3 Part of the effort in this task is to identify specific technology barriers to process improvement. This can be done be evaluating the adequacy of the baseline technology to support potential improvement to the process. The other part of the effort is to identify potential improvements that can be made to the technology that can be implemented to close the gaps in process performance. In the evaluation of the adequacy of baseline technology, it is not always easy or even possible for functional elements to distinguish enabling technology from inhibiting technology. There are issues of technology integration, migration or transitional systems, interoperability, and compatibility that are within the realm of the technical elements. Functional elements must focus on what they want in terms of technological capability in terms of measurable improvements to the process, then let the technical elements decide how to achieve the desired results. If the existing technology can be reworked or reconfigured to obtain these results, so much the better. There are also the elements of cost and risk that must be addressed with respect to technology. That a technological investment may return many times its investment becomes moot if the initial investment funds cannot be obtained. Intolerance for high risk may prohibit an investment in new technology even if the funds are available or could be made available. These issues will be addressed as a part of the business case analysis. Finally, technology change management must be integrated with organizational change management, and both must be compatible with the objectives of the redesigned business process. New technology is often frightening to employees and managers alike. There is both a learning curve and an acceptance curve. Since most people cannot accept something they don't understand, and will not learn something they don't accept; these curves must be traveled in parallel, and the journey is not usually as smooth or as fast as we would like. And some people may never arrive at the desired destination. Existing rules and regulations may be more of a barrier to technology insertion than organizational or cultural issues. Rules and regulations are oriented to a command and control working environment, while many of the emerging technologies are designed to enable empowered work teams to focus on serving customer requirements. Empowered work teams depend upon a free flow of information across the business process and increased accountability and decision making authority. Functional managers engaged in process reengineering must work with higher authority early in the process redesign effort to ensure that overly restrictive (or obsolete) rules and regulations are suitably adapted in line with planned technology capability. There are numerous examples of situations where new process designs had to be intentionally crippled so that the process operations could conform to Page 3-19

112 Conduct Process Improvement Chapter 3 rules and regulations that no longer provide customer or business value-added benefits. Current technology capability invalidates much, but not all, of the rationale behind functional or stovepipe organizational structures. Apart from the technological capability that now exists, there was no reasonable way in the past to manage work in large organizations other than through the functional model. That the terms cross-functional work teams, or concurrent engineering, or computer integrated manufacturing even exist is an acknowledgement that we now structure work around current organizational impediments and accomplish results in spite of the functional orientation that still thrives in most large organizations. It is clear that the forces of change are moving organizations irrevocably toward a horizontal or process management orientation. It is also clear that technology is the change engine behind this movement, since it is technology that makes the new work paradigm possible. Furthermore, people do not willingly abandon that which they have prospered from (in this case functional management structures) apart from crisis. This represents a strong argument to consider not only the process improvement potential of technology insertion but also its potential to disrupt the organizational status quo. In other words, technology insertion is far from being solely a technical or cost consideration. The human and organizational issues of technology insertion must be considered fully and in tandem with the pure capability or cost issues. The technological platform or infrastructure must support all business processes, not just the particular process being redesigned. It is the job of the technical change management team to mediate between the technical elements responsible for the technical infrastructure and the process improvement team to ensure that technology changes or insertions do not disrupt overall operations. Opportunities for process improvement using technology: Figure 3-9: Technology Enablers Technology Enablers Process Information Automation Tracking Parallelism Analysis Support Artificial Intelligence Relocation of Activities Copyright Page 3-20 Process Analysis & the Business Case

113 Part I: BPR Process Improvement Chapter 3 Technology enablers are needed to achieve both process effectiveness and efficiency. Some of the benefits of enabling technology are listed below: Process Information = Involves the use of technology to capture process information to improve understanding of how well the process is performing. Providing information on the actual metrics of process performance can assist management on the real time management of process improvements. For example: the automatic capturing of manpower effort and costs associated with the activities of the process would assist in managing the cost of the process. Automation = Involves the replacing of human labor with machines. This can be the use of robots in an industrial setting or use of labor saving office automation tools. Tracking = Involves the use of technology to track the status of items proceeding through the process. Many vendors offer the capability to monitor the status of orders on-line. Using the internet, you can track the status of your FedEx shipments from your computer at home. Parallelism = Involves using technology to change the sequence of activities to allow for parallel processing. The use of technology in this way would reduce throughput time and potentially reduce costs. Analysis Support = Involves use of technology tools to assist in the decision making process. There are decision support tool available which will enable analysis of multiple variables and their impact in the consideration of alternatives. These tools will be discussed more in depth in Part II: BPR Business Case Analysis. Artificial Intelligence = Involves the capturing, processing and distribution of expert knowledge for decision makers within the process or for customers external to the process. Relocation of Activities = Involves looking at the beginning activity and asking, how can technology be applied to transfer that activity to the supplier and looking at the last activity in the process and asking how can technology be applied to transfer that activity to the customer? There are a multitude of examples of this in service industries, from ATMs to pumping and paying for your gas at gas stations, to military personnel making changes to their payroll information on-line. Page 3-21

114 Conduct Process Improvement Chapter 3 Incorporate the Results of the Benchmarking Analysis. At this point, the results of the Benchmarking Team should be reviewed and incorporated into the BPR Team effort. In some cases, the results of the benchmarking effort will require the process improvement team to reevaluate the gaps that will need to be closed. Perhaps the team has been working to reduce the gap in time to deliver products and services from 30 days to 5 days when the benchmarking team discovered that a prime competitor has the capability to deliver a product or service in three days. Perhaps the benchmarking team has discovered innovative new process alternatives that were not thought of or innovative use of enablers that result in superior process performance in industry leading enterprises. These findings might serve as a basis for the identification of separate process improvement opportunities in the following task. Perhaps the benchmarking team has collected data from other leading organizations that confirm the results of the analysis of the improvement team. In this case, the benchmarking findings will reinforce and help to support the analysis of the improvement team. More of this discussion is contained in Section II of this course book. Identify Process Improvement Opportunities. By the time this task is reached, process improvement teams will have a good understanding of the opportunities for improvement that should be addressed in the next step. The following list can be used as a guide in organizing opportunities. All of the data collected and analyzed in previous tasks, steps and activities should be used to complete this task. Because there will be redundancies in any such list, nominal group and data analysis techniques should be used properly to organize and group these opportunities. All opportunities should be accompanied by performance targets whenever possible. The performance cell techniques can be used to guide the effort to quantify potential improvements. This task is best completed in the workshop environment. The improvement team should list opportunities to: Improve customer service by eliminating problems and complaints Improve product/service quality by eliminating errors and rejects Strengthen the value-chain by minimizing non-value added activities Adjust the control-chain by eliminating inappropriate controls Reduce process cycle time (operations, wait, overhead, quality) Lower process costs (fixed and variable) Add new services and products Page 3-22 Process Analysis & the Business Case

115 Part I: BPR Process Improvement Chapter 3 Close performance gaps in baseline-to-target measures Emulate best practices found during benchmarking activities Develop knowledge-based systems for front-line workers Improve workflows within processes by realigning facilities and equipment Make processes more flexible and adaptable to changing conditions Exploit new technologies (see previous task) Satisfy management imperatives (mission, objectives, and goals) Develop new supplier partnerships for just-in-time service and lower costs Improve work place health, safety, morale, and job satisfaction Balance accessibility and security requirements Lower risks of process failure and increase process stability Realign organizational structures to support process management principles Improve training methods in support of competency-based principles Reduce paper work, flows, and storage requirements Develop in-process performance measures for continuous process improvement Maximize resource and asset utilization Streamline and flatten organizational units and reduce unnecessary headcount Standardize around open systems architectures Eliminate and replace obsolete or expensive legacy systems Identify a Strategy for Process Improvement. By this point, a multitude of process improvement opportunities have been identified - some related to process, others related to enablers. The process improvement team should now develop one or more strategies that represent a unit or package of improvement opportunities. A strategy can simply be defined as what needs to be done to the AS-IS process to achieve the vision of the process improvement effort. Strategies help focus process improvement opportunities on accomplishing the basic vision for process improvement. Strategies are focused specifically on the process but include associated supporting enablers. For example: if the improvement team is studying a process called provide materiel, exploiting new technologies would not be a strategy. Nor would improving the training of employees. A more appropriate strategy would be to reengineer the provide materiel process to achieve the specified vision of the process improvement effort. This would be more appropriate as a strategy because it focuses on the process and how the improvement to the process will achieve the vision for process improvement. Exploiting new Page 3-23

116 Conduct Process Improvement Chapter 3 technology and improving the training would be supportive of this strategy but by themselves will not achieve the vision. Each process improvement effort will have one or a few strategies to achieve the vision. If the vision is to achieve multiple breakthrough objectives, it is conceivable that there could be a strategy to support each objective. Another way of determining the number of strategies that should be developed is to consider how the new process should be implemented. If it would be beneficial to have a time-phased implementation, it may be desirable to have separate strategies for each phase of implementation. For example, it might be too ambitious to reengineer all activities of the provide materiel process at one time. It might be more appropriate to have two strategies: reengineer the acquire raw material activity to achieve the goal of improving quality materiel and reengineer the transport materiel activity to achieve the goal of reducing the time to deliver materiel. All improvement opportunities will need to be evaluated to determine how they support the strategy for process improvement. The strategy needs to be verbalized in clear language and the team needs to document how each improvement opportunity supports the strategy. Not all processes will require the same level of process improvement. Some will require more radical change than others. It will be helpful to determine which class (or level) of improvements will be necessary. There four classes of process improvements: Four Classes of Process Improvements: Quick fixes - no organizational or technical changes needed Improvements with organizational change needed Improvements with technical improvements needed Improvements with organizational and technical improvements needed Copyright Figure 3-10: Four Classes of Process Improvements Class 1: Quick fixes that require little or no organizational or technical changes Class 2: Improvements that require organizational changes, but have little or no impact on existing information systems Page 3-24 Process Analysis & the Business Case

117 Part I: BPR Process Improvement Chapter 3 Class 3: Improvements that require technical improvements, but have little or no impact on existing organizational structures Class 4: Improvements that require significant organizational and technical enablers and have major impacts on the existing information and technical infrastructure. Prepare Process Improvement Analysis Report. The process improvement analysis report can now be prepared which documents the specific recommendations for process improvement to achieve the vision for process improvement. The focus of the report should be on process improvements but must also detail supporting enablers to include organization and culture issues and barriers as well as technology issues and barriers. The process improvement analysis report should include: 1. Process Improvement Vision and Objectives 2. Results of the Analysis for Process Improvement 3. Organization and Culture Issues and Barriers 4. Technology Issues and Barriers 5. Identification of Process Improvement Opportunities including the results of the Benchmarking analysis. 6. The Strategies for Process Improvement 7. Recommendations for the development of the TO-BE process. To the extent feasible, the following factors should be included for each recommendation based on the data gathered during the tasks in this step. The team does not need to expend time and resources developing these data if they are not readily available. The purpose of including these data is to enable higher authority to better understand the potential impact of designing solutions for these opportunities. Estimate of resources needed to exploit the opportunity Estimated return on investment of these resources Known risks resulting from the improvement analysis Potential benefits of implementing the recommended opportunity. Staff and Approve Process Improvement Analysis Report. The improvement analysis report is staffed with the functional managers and submitted for review and approval. In some cases, the review team will need clarification or further investigation. For this reason, the project team should remain in place until the final decision is made. Page 3-25

118 Conduct Process Improvement Chapter 3 Chapter 3 Questions: 1. Why is it important to re-look at process vision and objectives at the beginning of this activity in the analysis? 2. Why is it beneficial to identify potential process improvement opportunities before initiating the benchmarking study? 3. What are the five classifications that an activity will fall into after consideration of all process related issues? 4. What are process improvement opportunities? 5. What are strategies and how are they different from process improvement opportunities? 6. What is the purpose of the process improvement analysis report? 7. What are the four classes of process improvements? Page 3-26 Process Analysis & the Business Case

119 Part I: BPR Process Improvement Chapter 3 Chapter 3 Slides Page 3-27

120 Conduct Process Improvement Chapter 3 NOTES: Page 3-28 Process Analysis & the Business Case

121 Process Analysis & the BCA Chapter 3 Chapter 3: Analyze the Baseline for Improvement Opportunities Copyright S3-1

122 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Confirm Confirm Process Vision, Measures, & Objectives Copyright S3-2

123 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Identify Potential Process Improvement Opportunities Copyright S3-3

124 Process Analysis & the BCA Chapter 3 Three Aspects to Process Change Copyright S3-4

125 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Initiate Best Practices Benchmarking Analysis Copyright S3-5

126 Process Analysis & the BCA Chapter 3 Three Parts to Benchmarking Copyright S3-6

127 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Select Data Gathering & Analysis Techniques Copyright S3-7

128 Process Analysis & the BCA Chapter 3 Techniques for Process Improvement Data Gathering Survey and On-site visits Interview and Focus Groups Questionnaires and Assessments Brainstorming Checksheets Benchmarking Data Analysis Process Deployment Matrix Pareto Diagrams Cause-and and-effect Diagrams Affinity Diagrams Process Decision Program Charts Quality Function Deployment. Copyright S3-8

129 Process Analysis & the BCA Chapter 3 Technique Modes Graphical Statistical Modeling Text Based Copyright S3-9

130 Process Analysis & the BCA Chapter 3 Technique Application Consensus Building Data Gathering Data Analysis Decision Support Presentation Copyright S3-10

131 Process Analysis & the BCA Chapter 3 Techniques Matrix Technique/Phase PLN BPR OCM TCM PE Survey/Interviews X X X Site Visits/Focus Groups X X X Questionnaires/Assessments X X X Flowcharting X Process Deployment Map/Matrix X X X Creative Thinking/Brainstorming X X X X Checklists X X Nominal Group Technique X X Multi-Voting X X Groupware X X X X Pareto Diagrams X X Cause and Effect Diagrams X X X X Affinity Diagrams X X Relationship Diagrams X X X X Tree Diagrams X X Hoshin Planning X Process Decision Program Charts X X Force Field Analysis Chart X X Matrix Diagrams X X Quality Function Deployment X X Copyright S3-11

132 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze Analyze the Process for Improvements Copyright S3-12

133 Process Analysis & the BCA Chapter 3 Activity Improvements Increasing Product Quality Reducing Cycle Time Reducing Process Cost Improving Value-Added to the Customer Copyright S3-13

134 Process Analysis & the BCA Chapter 3 Cause & Effect Diagram Fishbone Diagram Process Controls Effect Mechanisms Inputs Copyright S3-14

135 Process Analysis & the BCA Chapter 3 Value Added Analysis Can eliminate without impacting customer? Yes Non-value added Required by a Control? Yes Can control be eliminated? No No No Yes Eliminate if preceding activity done correctly? Yes Customer request? Yes No No Value Added Impact internal customer? Yes No Improving internal efficiency Yes Necessary No Non-value added Non-mandatory Copyright S3-15

136 Process Analysis & the BCA Chapter 3 Activity Classifications Discontinue the activity Leave it alone Designate the activity for continuous improvement Designate the activity for process redesign Designate the activity for process reengineering Copyright S3-16

137 Process Analysis & the BCA Chapter 3 Activity Analysis Matrix Process/Activity Specific Finding/Problem Corrective Action Impact ICOM A0 Provide Donuts and Pastries A1: Take Order A2: Obtain Material A3: Make Product A4: Sell Product A5: Sustain Business Copyright S3-17

138 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Copyright S3-18

139 Process Analysis & the BCA Chapter 3 Organization & Culture Issue Areas Organization Culture People Skills and Knowledge Organization Structure and Demographics Organization Policies and Directives Copyright S3-19

140 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Document Technology Issues & Barriers Copyright S3-20

141 Process Analysis & the BCA Chapter 3 Technology Questions Returns warrant Investment? What are the Risks? Disrupt Culture? Facilitate Process Improvement? Impact on Structure? Impact on Skills? Copyright S3-21

142 Process Analysis & the BCA Chapter 3 Technology Enablers Process Information Automation Tracking Parallelism Analysis Support Artificial Intelligence Relocation of Activities Copyright S3-22

143 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Document Technology Issues & Barriers Incorporate the Results of the Benchmarking Analysis Copyright S3-23

144 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Document Technology Issues & Barriers Incorporate the Results of the Benchmarking Analysis Identify Identify Improvement Opportunities Copyright S3-24

145 Process Analysis & the BCA Chapter 3 Improvement Opportunity to Objective to Activity Matrix Improvement Opportunities to Objectives to Activities Matrix Objectives: Activities Improvement Opportunities A11 A13 A21 A24 Copyright S3-25

146 Process Analysis & the BCA Chapter 3 Exercise 3C: Improvement Opportunity to Objective to Activity Matrix Copyright S3-26

147 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Document Technology Issues & Barriers Incorporate the Results of the Benchmarking Analysis Identify Improvement Opportunities Identify a Strategy for Process Improvement Copyright S3-27

148 Process Analysis & the BCA Chapter 3 Strategies connect the vision/goals/objectives to the initiatives. GOALS & OBJECTIVES STRATEGIES INITIATIVES VISION Copyright S3-28

149 Process Analysis & the BCA Chapter 3 Strategy: To achieve the goal of, we will reengineer the activity through the implementation of the following initiatives:,, and. Copyright S3-29

150 Process Analysis & the BCA Chapter 3 Example: Process: Provide Materiel Strategy 1: To achieve the goal of improving quality, we will reengineer the acquire raw material activity materiel through.. Strategy 2: To achieve the goal of reducing the time to deliver materiel we will reengineer the transport materiel activity through.. Copyright S3-30

151 Process Analysis & the BCA Chapter 3 Bad & Good Strategy Example: Process: Provide Materiel Bad Strategy: Exploit Technology Bad Strategy: Improving the training of employees Better Strategy: To achieve the vision of process improvement we will reengineer r the provide materiel process through streamlining of activities, exploiting technology, and improving the training of employees. Copyright S3-31

152 Process Analysis & the BCA Chapter 3 Four Classes of Process Improvements: Quick fixes - no organizational or technical changes needed Improvements with organizational change needed Improvements with technical improvements needed Improvements with organizational and technical improvements needed Copyright S3-32

153 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Document Technology Issues & Barriers Incorporate the Results of the Benchmarking Analysis Identify Improvement Opportunities Identify a Strategy for Process Improvement Prepare Process Improvement Analysis Report Copyright S3-33

154 Process Analysis & the BCA Chapter 3 Analyze the Baseline for Improvement Opportunities Review Process Vision, Measures, & Objectives Identify Potential Process Improvement Opportunities Initiate Best Practices Benchmarking Analysis Select Data Gathering & Analysis Techniques Analyze the Process for Improvements Document Organization & Culture Issues & Barriers Document Technology Issues & Barriers Incorporate the Results of the Benchmarking Analysis Identify Improvement Opportunities Identify a Strategy for Process Improvement Prepare Process Improvement Analysis Report Staff Staff & Approve Process Improvement Analysis Report Copyright S3-34

155 Process Analysis & the BCA Chapter 3 STRATEGIC PLANNING DOCUMENT BASELINE PROCESS ANALYSIS ANALYZE OCM OCM 1 TCM TCM BM DEVELOP TO-BE BUSINESS CASE OCM 1 TCM Copyright S3-35

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157 BPR Process Improvement Chapter 4 Chapter 4: Define the New (TO-BE) Process with Enablers Up to this point, we have documented the AS-IS environment and have identified gaps in performance and process objectives to close those gaps. We have gathered data about the process using analytical techniques and have identified organization and culture and technology issues and barriers. Based on the results of this analysis we have identified opportunities for improvement and have developed a strategy or strategies for process improvement. Now in this step, we will use this information to build a redesigned or reengineered TO-BE process. The redesign effort will result in one or more recommended improvement packages that will be structured into a complete business case in the next step (covered in Part II of this textbook). The redesign/reengineering of a process also involves establishing plans to implement organizational and technology enablers. The design package consists of TO-BE activity and data models along with narratives, charts, measures and other data that capture the design features of the renewed process. There are often several alternatives for implementing a design package, usually based on which organizational and technology enablers are selected to support the new process design. For instance, when AT&T was designing its Universal Credit Card customer enrollment process, either dumb terminals or networked personal computers could be provided to service representatives. They initially chose dumb terminals but later replaced them with intelligent workstations as part of a process reengineering effort. Alternatives always have economic implications, which is why a business case analysis is performed. In the next step of the methodology, a full economic analysis will be performed when constructing the Business Case Analysis (BCA) decision package. At the appropriate point in the design process, the process improvement team should initiate activities with data administration and the technical staff for information systems. These groups will need to furnish technical data in support of the BCA. Page 4-1

158 Redesign/Reengineer Processes Chapter 4 The following are the tasks that are performed in this step: Define the New (TO-BE) Process with Enablers Confirm Process Vision, Measures, & Objectives Initiate Development of a Strategy Implementation Plan Develop TO-BE Process Models Revise Process/Organization Matrix Establish a System for Managing the New Process Develop the Organization Change Management Plan Develop the Technology Change Management Plan Identify Alternatives for Process Improvement Prepare TO-BE Analysis Report Staff & Approve the TO-BE Analysis Report Copyright Figure 4-1: Define the New (TO-BE) Process with Enablers Confirm Process Vision, Measures, and Objectives The strategic planning activity of the Framework produced the vision, objectives, and performance measures for the enterprise and established one or more breakthrough objectives to direct the process reengineering effort. The first step in improvement analysis activity documented the current state of the business processes and the improvement analysis step produced opportunities for improvement and a strategy for process improvement. The process improvement team is now positioned to design or reengineer the selected business processes or activities. The first task in the redesign effort is to thoroughly review the results obtained in the previous steps of the methodology as detailed in the Process Improvement Analysis Report. The process vision statement is the keystone of process improvement. It helps process improvement teams stay focused on the expected outcomes of process improvement and not get lost in the details. At this time it is necessary to revisit the vision statement and ensure that it is still valid as a guide to redesign efforts. Process performance cells should also be reviewed to ensure that the specific performance targets are still attainable. Finally, the strategic and business plans that apply to the processes under improvement should also be reviewed to ensure that business objectives and goals are properly considered during the design effort. Finally, the strategy for process improvement as documented in the Process Improvement Analysis Report needs to be reviewed to assure that completion of this strategy will accomplish the process vision. Page 4-2

159 BPR Process Improvement Chapter 4 Initiate Development of a Strategy Implementation Plan The study team next needs to work on the development of a plan to implement the strategy or strategies selected for process improvement with supporting initiatives. For each initiative, the study team needs to identify the specific steps necessary for implementation. For each of the steps, the study team needs to document the process, technology, and organization/culture impact. The impact should include an estimate of the additional resources required to implement and maintain the activity. Under process, the study team needs to also document the impact in terms of the projected resources saved and any anticipated increased revenue resulting from implementation of the initiative. Dollar estimates need to be developed for each resource. Strategy Implementation Matrix Strategy: Initiative # Initiative Steps Process Technology Organization/Culture Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Personnel: Hardware: Training: Savings: Software: Communication: Revenue: DB Design: Copyright Figure 4-2: Strategy Implementation Matrix Develop TO-BE Process Models. At this point in the methodology, the process improvement team has all the information it can reasonably expect to have to employ enablers to achieve process design objectives. The task at hand is to use this information in creative and daring ways to come up with innovative process designs. The design effort should focus on reducing the measurable gaps in performance. The improvement team should review the category designations established in the previous step for each activity. Not all activities will require improvement or the same level of redesign or reengineering Cross-functional work teams can help overcome barriers resulting from problems or situations that affect two or more functional areas. The usual Page 4-3

160 Redesign/Reengineer Processes Chapter 4 terms for cross-functional impediments are red tape and bureaucracy. Worker empowerment is a powerful tool for building flexibility into processes. When workers are empowered to solve customer problems, processes are, by definition, more flexible. Managers and supervisors enable process improvement when their roles shift from controlling employees and enforcing rules to coaching team members and removing impediments to serving customers and other stakeholders. At the end of this task, the improvement analysis team will have developed the following models: TO-BE Activity Model (IDEF0) TO-BE Data Model (IDEF1X) TO-BE ABC Model TO-BE Simulation Model Revise Process/Organization Matrix. Process redesign may impact the current organizational structure as activities are eliminated or consolidated. After the TO-BE models have been developed, the process improvement team should redevelop the process/organization matrix that illustrates the interaction of process to organization. New or changed boundary conditions should also be documented as the first step in designing new policies, procedures, and work rules. Establish a System for Managing the New Process For monitoring the implementation of process improvement when the BPR project is approved, a cross-functional team needs to be in place to monitor performance improvement across the process. Moreover, if process improvement is to be lasting, organizations need to move toward process management. The first step in process management is to identify what the process is and establish major measures of process performance. The BPR analysis provides a firm understanding of the process, the key metrics of performance, and blue print for improvement. However, continuation of process gains requires management of the process on an ongoing basis. This will require the following key elements: 1. A cross-functional team to monitor performance measures on an ongoing basis. This cross-functional team needs to monitor performance across the process on an on-going basis and analyze causes for deviations in process performance. Page 4-4

161 BPR Process Improvement Chapter 4 2. The cross-functional team needs to monitor stakeholder relationships. Working from the newly designed process, new stakeholder relationships should result. These can be documented in a revised performance cell matrix, monitored, and updated over time. 3. Appointment of a process owner or process manager. One individual on the team should be appointed with responsibility to oversee the collection of performance data and to collect recommendations for process improvement on an ongoing basis. 4. Establish a reporting mechanism to report the performance of the process in accomplishing process improvement objectives on an ongoing basis. Process performance should be reported to top management and all functional managers identified on the process/organization matrix. Recommendations for process improvements should accompany reporting on performance. 5. Leadership needs to take process management seriously. This is a key requirement for if leadership does not support process management, the functional managers will see process management as a threat to their authority and will seek to undermine efforts of cross-functional process management. Leadership can demonstrate their seriousness about process management by: a. Using the information reported by the cross-functional teams to make decisions on mission accomplishment. b. Establish annual objectives for process improvements. c. Communicate to the functional managers and the organization that process management is a priority for mission accomplishment. d. Establish rewards for functional managers supporting process management. This could be in terms of special awards or, better yet, include process management support as an element in performance appraisals. Page 4-5

162 Redesign/Reengineer Processes Chapter 4 Develop the Organization Change Management Plan Radical change to the process will require the support of the organization. Once the change management team understands the strengths and weaknesses of the organizational units affected by potential process improvement efforts, they can better plan a series of changes and improvements that will prepare organizations to accept the new process. The change management team should be cognizant of the fact that, where possible, it may be better to shape the new process around organizational strengths rather than attempt to correct all organizational weaknesses in one go-around. When this assessment is complete, the team will be positioned to identify and prioritize a series of organizational changes needed to support planned process improvements. The change management team needs to develop a plan that addresses: organizational culture, people skills and knowledge, organization structure and demographics, organizational policies and regulations. 1. Organizational Culture. Having an understanding of the cultural weaknesses of the organization, the change management team needs to develop a plan to prepare the organization for change. All change, especially radical change, in organization will result in an emotional response from the employees of the organization. Therefore, the plan needs to emphasize communication to include both the art of speaking and listening. The following points should be considered: a. Management must be committed and needs to communicate the shared positive vision of process improvement and why change is necessary. b. Management should articulate what is being changed and what is not being changed; who will be effected and how, and who will not be effected. c. Management must listen and be sympathetic to those who are may be negatively impacted by change. Some emotional reaction may not be rational; however, management must take all concerns seriously. Never be disrespectful of the old process; it and the people who were part of it served the organization well in the past. d. Management must communicate frequently with everyone to keep them informed of what is happening even when nothing is happening. This should be done in as personal a way as possible. One way to do this is via town meetings. Page 4-6

163 BPR Process Improvement Chapter 4 e. Management should try to find an identity for everyone, if possible, in the new organization. Everyone needs to have a vision of how they will fit in to the new organizations. Those who do not have a role in the new organization should be given assistance to find a vision for themselves elsewhere. f. Management must be consistent in what it is saying. Inconsistency in the message weakens support over time for process improvement. g. Management must walk the talk and lead by example. This might involve getting out to the front lines and demonstrating commitment. h. Management may want to implement the low hanging fruit immediately to for the organization to see success and win over doubters. i. Celebrate successes by publicizing them. When the reengineering effort is over throw a party to celebrate the success and initiate the new process. 2. People Skills and Knowledge. People in new process roles will need to be trained in the performance of the new process. If new skills are needed which cannot be accommodated from within the organization, plans need to be developed to acquire those skills from outside of the organization. The enterprise Knowledge Management support structure needs to be evaluated to assure that people have the right knowledge to be successful in their new roles. The new IDEF1X TO-BE model would be a starting point in identifying the types of information and knowledge that the people need to possess. 3. Organization structure and demographics. The Process/ Organization Matrix should be reviewed to determine the impact of the new process on the existing organization structure. In some cases, radical process change will require changes in the formal structure of the organization. The physical layout of the enterprise may have to be changed also to facilitate the new process. Activities which were once dispersed may have to be collocated. On the other hand, with the assistance of technology enablers, activities that were once collocated may be dispersed geographically to better serve the needs of the customers. 4. Organizational Policies and Regulations. Non-value added organizational policies and regulations that inhibit process improvement need to be eliminated. Those that are self-imposed can be terminated more easily than those imposed from higher authority. Actions need to be included in the plan to obtain waivers from higher authority. Page 4-7

164 Redesign/Reengineer Processes Chapter 4 Develop the Technology Change Management Plan The Technology Change Management Plan is the formal plan for instituting technical changes to support the new process and overcome barriers to change. In developing the plan, the technology team should perform the following tasks at this time. o Design High-level Technical Models o Identify Barriers to and Implications of Change o Develop Strategies for Addressing Barriers o Identify Technology-related Training Requirements o Identify Milestones for Technology Insertion The high-level technical models should address the application software and the hardware systems that should be acquired to support the new process along with the associated communications system support. The technology team needs to address actions necessary to eliminate existing technology barriers to process change. These barriers include: o Legacy systems that still serve vital functions and can only be replaced at great time and cost. o Obsolete technology including low-powered personal computers. o Low capacity or non-existent local area network support to for work groups. o Platforms that run various types and levels of systems software that make interoperability problematic, o Lack of defined architectures to guide technology insertion. o Lack of technical support personnel or skill deficiencies. o Installations that have little resources for new technology insertion. The process improvement team should work with the technology team to develop ways to eliminate technology barriers to process improvement. In those cases where barriers cannot be eliminated, alternative means to satisfy process improvement objectives must be found. The technology team should identify the training required to implement new technology insertion. Training should include the requirements of the technical staff as well as the personal responsible for using the new technology in the process. A plan of action needs to be identified with milestones for implementation of the Technology Change Management Plan Page 4-8

165 BPR Process Improvement Chapter 4 Identify Alternatives for Process Improvement. The process improvement team next looks for alternatives in the way a strategies for process improvements will be implemented. The team should seek to document from three to fifteen alternatives in addition to the baseline (no process changes). Alternatives will generally be in terms of implementation of organizational and technology enablers, rather than to internal process changes. Organizational alternatives might include the formation of self-managed teams to support a process design versus standard manager-subordinate structures, training employees in new job responsibilities using in-house capabilities or contracting for that support. Technical alternatives might involve the use of a distributed database versus a central data base concept, contract versus internal information technology support, internally developed systems versus commercial off the shelf software (COTS). There could be multiple ways to implement each initiative. Each of these ways to implement we are going to call Options. Alternatives will be combinations of various options to implement a strategy. For example, if you had two initiatives with Initiative 1 having four options and Initiative 2 having three options, conceivably you could have 12 alternatives. A way to start to reduce the number of conceivable alternatives is to select the preferred option under each initiative. This is not always clear-cut because one option may be the least cost but deliver more benefits than another. The purpose of the preliminary business case (covered in Part II) is to reduce the number of alternatives that you present to the decision maker. Alternatives are combinations of Initiative Options to achieve a Strategy. Strategy Options Initiative 1 Initiative 2 A A B B C C D Alternative A Alternative B Alternative C Alternative D Alternative E Alternative F Figure 4-3 Alternatives Prepare TO-BE Analysis Report. The process improvement team now prepares the final TO-BE Analysis Report reflecting all recommended process changes with supporting Page 4-9

166 Redesign/Reengineer Processes Chapter 4 organizational and technical enablers. This package will consist of TO-BE models with sufficient supporting documentation to facilitate development of the BCA formal business case and management decision package. The TO-BE Analysis Report should contain the following elements: 1. Process Vision and Objectives 2. Process Improvement Strategy 3. TO-BE Process Models to Implement Strategy 4. Revised Process/Organization Matrix 5. Recommended System to Manage New Process 6. Organization Change Management Plan 7. Technology Change Management Plan 8. Alternatives for Process Improvement It may be appropriate at this time for the TO-BE Analysis Report to be a Preliminary Business Case. The preliminary Business Case will compare the cost and benefits of the alternatives, assess the return on investment over an economic life, evaluate each alternative in terms of strategic accomplishment, and assess the risks associated with each alternative. The Preliminary Business Case is addressed in detail in Part II of this textbook. Staff and Approve TO-BE Analysis Report. The TO-BE Analysis Report is coordinated with the functional managers and submitted to senior management for approval to develop the Business Case. Following review and approval, the final business reengineering document, the Business Case, is prepared and submitted to the final approval authority. Page 4-10

167 BPR Process Improvement Chapter 4 Chapter 4 Questions: 1. Successful process redesign is frequently dependent on changes in what two areas that are outside of the process? 2. After the TO-BE models are developed, what should be applied to test the expected results? 3. What are the key elements in implementing a system for managing the new process? 4. Alternatives identify different potential ways that process improvement will be. 5. The TO-BE Analysis Report may be a which compares the costs and benefits of the alternatives. Page 4-11

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171 Process Analysis & the BCA Chapter 4 Chapter 4: business process reengineering Define the New (TO-BE) Process with Enablers MHi Business Process Reengineering Certification Series S4-1 1