PROCESS MANAGEMENT BASIC PRINCIPLES AND METHODICS OF IMPLEMENTATION INTO EXISTING COMPANY SYSTEM

Transcription

1 Modul 1 Part 5 PROCESS MANAGEMENT BASIC PRINCIPLES AND METHODICS OF IMPLEMENTATION INTO EXISTING COMPANY SYSTEM Introduction Process: One word, but lot of meanings in various fields of human knowledge. Macroeconomics, politicians, managers, farmers, physicians and others use this word very frequently. The process of digestion, process of growing, production process, as well as other meanings of this word are known. What does the word actually mean? How can it be identified? Is it measurable, improvable or even manageable? Process management and its development is based on the standard ISO 9001:2000 which designs the frame for certification of quality management systems. Teaching goals The goal of this part is to show to SME managers an effective system of the management of their activities based on their natural processes both horizontally and vertically. Having understood principles and phases of implementation of the process management resulted from this section, the manager should easily apply the process approach. He should manage following tasks: hierarchy of the processes identification of process activities, their interactions and graphic interpretation using the methods of process map development evaluation of the indicators relating to processes orientation among software instruments supporting the process management Accordingly, the goal of this section is to learn identification, measurement and improvement of processes of the enterprises Glossary Process set of interrelated or interacting partial activities which transforms inputs into outputs. It is a flow of work proceeding from one worker to another. Process management systematic identification, visualisation, measurement, evaluation and continual improvement of processes based on methods and principles of the process approach.. It is understood as an open and dynamic system based on activities. The subsystem comprises processes developed on the logical and sequential linking of activities. The links and their level between individual elements of the system and between system elements and their environment represent performance indexes relating to process attributes. 83

2 Process attributes significant part of process management as they create points to catch on measurement and improvement of processes. Standard ISO/IEC TR :1998 defines the process attribute as measurable characteristic applicable to any process. Owing to many different views there is a need of the process attributes systematisation. Process attributes Activity attributes Integral attributes process owner activity owner costs process structure activity input added value process input activity output time process output internal supplier productivity external supplier internal customer quality external customer workplace of activity knowledge innovation Critical Success Factors are the sections of an enterprise assuring its competitive performance. Fifteen significant companies were analysed in a case study (18); fourteen of them defined critical success stories as follows: customer satisfaction, quality, product delivery, employees satisfaction, productivity, financial efficiency, safety, environmentalsocial efficiency. Key Performance Indicators are the indicators being used to quantify performance values in relation to the relevant critical success factor. Activity Based Costing is a method focused on process activities. The method is based on a principle that costs are not invoked by product but by activities. The ABC method is based on the system of accounting, calculation and budgeting of cost for activities of main and support processes. So the method is focused on the process attribute cost. Reengineering is a principal and radical reconstruction of processes in the way to reach the improvement of the activity dramatically (in particular with respect of critical performance indicators: cost, quality and quickness). KAIZEN means customer focus and continual improvement of processes. It means endeavour after continual improvement not through big innovative steps but through details. 1. Process Management and Its Nature In function management general process activities are crumbled up in different departments without clearly defined links and logical interconnections between all processes implemented in the enterprise. The activity descriptions can be available in various internal directives and standards relating to given units. However, it is very difficult to find out the influence of the implementation of these activities on the other activities from the standpoint of cost, quality, duration, etc. Some activities are even unneeded, doubled or ineffective. 84

3 The process approach has a long tradition, particularly in production. It has been isolated for a long time without any connections with processional managed activities that have been captured by the function approach. The process approach to the production was a part of the classic hierarchy of managing pyramid and this did not allow using the advantage of the process approach. Enterprises are made up of functional structures which perform partial elements of general processes. The crumbled processes and specialised structures of companies show a high inefficiency. If we are able to identify all processes and the real need of people assuring these processes, we can join together a great number of people carrying out same tasks but in different processes. This joint, of course, need not be physical, what means that they need not sit in one office. Primitive organisms do not have any organ systems but higher organisms perform various processes through cells joint in tissues and organ systems. Function management is mainly focused on outputs and hence it is orientated on consequences, not on causes. Financial and economic analysis is a classic tool for the evaluation of results of the enterprise activity, which uncovers points of low productivity and high cost. This is followed by measures focused on the individual functional levels of management, the task of which is to solve the discovered problems. The process management does not focus on the consequences but on the causes. The basic idea of the process approach is that bad results of the enterprise activities are caused by ineffective processes, which must be changed to become effective and to reach as high as possible added value for the customer. In spite of the use of function management there is a lot of problems in many enterprises. Different functions are often focused only on locally defined attitudes. They do not take in the actions which are seemingly not concerned. Accountancy departments are presented as an example as they process financial and management information but do not interest in factors which cause these situations. The competition between function departments and slowdown of communication due to bureaucratic regulations in the information transfer to the head of the unit is another disadvantage of the function management. Even worse example is the noncommunication, when employees of a unit are glutted with the work connected with the unit. If we summarise all the aspects, the process management can be distinguished from the function management by following traits: 1. Horizontal management which uses autonomic organisational units with strong horizontal bindings. The vertical integration has been preserved only in key and general activities of strategies and developments 2. Process teams which are substantially independent and their work is based on the business activities of the enterprise (Tomas Bata formulated this principle in the thirties of the preceding century). 3. New way of motivation, which is based on the team motivation, reflects the commitment of the process team to the added value for a customer. It is measured by the process output not by the activity performance. The customer and its satisfaction is the main measure of the fee for the team 85

4 2. Relation between Process Management and Quality Management System The process approach to the creation, development and assurance of quality has been the other factor in the process management development. The process approach is an inseparable part of Quality Management Systems (QMS). It was first applied in the System Process Quality Management, as it is more and more difficult to achieve the best quality of products. Modern productions comprise thousands operations and various activities within the enterprise, as well as numbers of external experts and suppliers. However, the process approach philosophy has been extended later to cover other processes. Basic condition for modern quality management systems, based on the ideas of a standard ISO 9001:2000 and Total Quality Management (TQM), is the process orientation of the enterprise. According to ISO 9001:2000 the organisations shall identify and manage a number of interrelated processes. The output from one process very often becomes the direct input to other process. The process approach is defined by systematic identification and the management of processes in the organisation, as the above mentioned standard says. On the contrary, the concept of TQM prefers rather informal approach, i.e. the atmosphere of responsibility, self-control and improvement, than strict standards. So the TQM is focused not only on the product quality and related activities, but on all the activities of the enterprise without any exception, horizontally as well as vertically. People (9%) People Results (9%) Leadership (10%) Policy and Strategy (8%) Processes (14%) Customer Results (20%) Key Performance Results (15%) Partnership and Resources (9%) Society Results (6%) Figure 1: EFQM excellence model Innovated model EFQM, a part of the national quality award, contains nine main criteria and thirty two partial ones. Processes are one of the model criteria. The assessment aims at the way of designing, management and improvement of the organisation processes in achieving set policy, strategy and customer requirements. This criterion comprises five partial subcriteria: - Processes are systematically designated and managed - Processes are improved and innovated with the aim to enhance the value for customers and other interested parties - Products and services are designed and improved in accordance with customer needs and expectation - Production, distribution and maintenance of products - Customer relations are managed and improved 86

5 3. Implementing Phases of Process Management into Existing Management System of an Enterprise The implementation of process management into an enterprise is a unique action, where project management can be used. The project starts with a decision of top management to adopt the philosophy of process management and ends with taking over responsibilities for processes by process teams and process owners, including all aspects of measurement, analysis and improvement of the enterprise processes. The project management offers the system approach in planning, implementing and monitoring unique actions (1). The implementation should comprise following basic steps: 1. Setting up a project team to implement the process management 2. Developing the hierarchy of all processes 3. Identification of process activities and development of process maps 4. Identification of existing and selection of new performance indicators of processes 5. Ranking performance indicators of processes with objectives defined by the strategy 6. Benchmarking of processes. 7. Process simulations and their optimisations 8. Process progress 9. Measurement, assessment and improvement of processes. All these steps implementing process management comprise even other activities. The implementation of process management is demanding and contains a number of related activities. The number, of course, depends on the size of the enterprise, the number of processes and extent of automation and integration through information systems. There are certain principles that should be kept in relation to the process management implementation: 3. 1 Setting up a Project Team to Implement Process Management Setting up a project team has especially a planning character. First of all, employees and a representative of top management are assigned to be responsible for the implementation of process management. If functional units of the organisation are defined, one employee should be selected from each larger unit, e.g. a section, (strongly dependent on the size of the enterprise). The project team is formed in such way. Then the course of the action in details should be planned from the perspective of implementation of individual activities and relevant responsibilities, as well as, required resources and time schedule Hierarchy of All Enterprise Processes This step is the first important milestone of the implementation. The enterprise should form a list of all processes in order to determine which main processes are and which are supporting ones, either managing or servicing. The classification should be done in accordance with requirements for main or supporting processes, particularly in relation to added value for a customer. Ranking of processes according to their importance in relation to the defined critical factors of success of the enterprise is done within the list. 87

6 CASE STUDY 1: Hierarchy of selected processes of a car company Critical Success Factor Financial Work Safety Customer Quality Significance Process performance satisfaction Contracting Process x x 2 Car Production x x x 3 Car Delivery x 1 Car Repair x x Identification of Process Activities and Development of Process Maps Once the list of all the processes is completed, an organisational structure can be constituted. Selection of process owners is the key activity. Process owners make important links between processes and top management. In some cases, the owner can also be a representative of the top management. The relationships between top management, process owners and process teams are like following: Relation between top management and process owners Top management represents the unit, which has the highest rights to make decisions, coordination and provide information, as well as take responsibility for running the enterprise. Their task is assure in particular strategic activities in relation to process teams and its transformation into performance indicators. Furthermore, they decide on extensive investments and business projects implemented by individual project teams. This means that there are relationships between the top management and process owners, in particular managing relationships as follows: - reciprocal informational relationship, when the top management regularly informs the process owners about changes in the strategy, running the enterprise, etc. and the process owners inform about the status of their processes - one-sided coordinative relationships in the direction: top management process owners, when the top management coordinates process teams through process owners - one-sided decisive relationships in the direction: top management process owners, when specific tasks are allocated to the process owners, who are responsible for their performances. Relation between a process owner and a process team Process owner is usually the head of process team, but this not a rule. The relation is similar to the foregoing one and there are in particular following managing relationships: - reciprocal informational relationship, when the process owner regularly informs members of the process team about changes in the strategy, running the enterprise, etc. and members of the process team inform the process owner about the status and performance of the process and/or its particular activities - one-sided coordinative relationships in the direction: the process owner the process team, when the process owner coordinates his process team - one-sided decisive relationships in the direction: the process owner members of the process team, when specific tasks are allocated to members of the process team by the process owner, who is responsible for their performances. 88

7 Relation between process owners This relation is based on the equality and its function is mainly decisive. Process owners inform each other about performance of their processes, their management, as well as weaknesses of their management. Internal benchmarking can be used for mutual comparisons. Providing knowledge and filling the bank of knowledge is key issue in this relation. Relation between members of process teams There are two levels of these relations. First level is the relation between members of one team. The second one is the relation between members of various process teams. The team should use principles of team work in the first case, while in the second case, there are more or less informal relations between employees. This model should allow interconnections of members of various teams with the aim to provide knowledge. Development of process maps is an important part of processes. A process map is a graphical representation of running processes. Its both scope and depth depend on chosen distinguishing level of the system. We can distinguish between high level process maps (presentation of relations between main and support processes without distinguishing individual activities) middle level process maps (presentation of sub-processes within a process) and low level process maps (presentation of particular process activities). Several approaches have been found to be suitable and easy applicable for the purpose of SME management, like following: flowcharts, role and activity diagram (RAD) and Petri s networks. Process maps for SME can be developed using a method IDEFO. IDEFO presents the process as a set of interconnected activities with their inputs and outputs, external or internal restrictions and implementing mechanisms. Data and objects are the inputs that are transformed by the process into outputs. Direct result of the activity that can be presented either as data or objects is the output. The restrictions create conditions for correct outputs and the mechanism (in some cases defined as sources) represents equipment or people, who carry out the activity. Constraint Input Uzol Output Mechanism Figure 2: Basic scheme of IDEF0 89

8 CASE STUDY 2: Part of the Process Assessment of Customer Satisfaction presented by the method IDEF0 business standard time time costs evalution order Making out questionarie customer number Customer communication customer approval Questionarie sending postoffice paper computer phone computer assistant questionarie assistent customer supervisor approval postoffice assistant business standard Questionarie approval supervisor 3. 4 Identification of Existing and Selection of New Performance Indicators A first step is aimed at investigating performance indicators that have been monitored in the enterprise in relation to relevant process and process attribute. It is analysed whose responsibility lies with the evaluation of the performance indicator or the responsibility is determined. Mechanism of calculation of a particular indicator and the database, i.e. what data are used for the calculation of the indicator, is the next step of identification. This is followed by the investigation if the calculation is automated or not. Having analysed existing measuring system of processes we approach the definition of new process attributes and related performance indicators 3. 5 Ranking Performance Process Indicators with Strategic Objectives The objective value should be defined for each new performance indicator. Mutual counterpoise should be between indicators related to defined process attributes. This comes out of the enterprise strategy. 90

9 CASE STUDY 3: Ranking indicators with objective values in an enterprise of chemical industry Indicator Unit Attribute Responsible Mechanism Automatisation Periodicity of Objective value assessment Acquired customers number External SMD MIS Yes Quarterly 53 customer Lost customers number External SMD MIS Yes Quarterly 0 customer Number of PC number External SMD ORION Yes Yearly 621 customer Database PC continually Number of new GL number Innovation SMD ORION Yes Quarterly 500 Continually Process duration day Time SMD Software XY Yes Continually 6 Process cost SKK Cost SMDM Software XY Yes Continually SMD- Sales and Marketing Department MIS Marketing Information System GL Graphic Layout PC Purchase Contract 3. 6 Benchmarking of Processes Referential comparison benchmarking is defined as the measurement of one s own performance towards best enterprises in relevant field in key performance indicators with the aim to find out how they achieve the excellent performance and use the information for one s own endeavour to achieve the same or even better performance. Main purpose of benchmarking is to define future standard of one s own performance based on the analysis and comparison of current status Process Simulation and Optimisation There are processes, activities, indicators and their objectives in the enterprise. Their variant assessment by simulation should be carried out before starting the processes. The simulation can uncover hidden defects generated in previous steps and ensure their dispositions Process Progress This phase actually means a continual flow of activities. Once the process starts, the process team headed by the process owner ensures its non-disturbed progress, measurement, assessment and gradual improvement. The process structure can be changed significantly or even lapsed only due to radical reconstruction of the process Measurement, Assessment and Improvement of Processes In addition to the operative assessment by the process team, periodical reviews by the top management are carried out. If distinctive defects or nonconformity with the strategy are 91

10 detected, the process must be improved radically. Based on the management review, the assessment of the project owner in compliance with principles of process motivation, as well as customer satisfaction, all interested parties of the process are motivated. 4. Software Tools for Process Management In principle there are two options how to take advantage of information systems 1. to buy a complex software package 2. to use a number of software tools used until now. Both the options have advantages and disadvantages. The advantage of first option is its complexity, when the software allows defining sets of elements of process management, constructing process maps, simulating and optimising processes, as well as measuring and assessing certain indicators. High price of such software is the disadvantage, in particular for SME. This solution is suitable for large enterprises having complicated and complex structure of processes. Another possibility is to buy one of the modules and other modules can be bought step by step according to the financial disposables. This means the other advantage of modularity of such information systems. For example Aris has following bids: - Aris Toolset methodology, analysis and optimisation - ARIS BSC measurement of strategic objectives, - ARIS ABC process cost analysis - ARIS Web Publisher modules distributions via intra-net or inter-net, etc. User environment can also be the disadvantage for some users. This means that the program respects the content of process management; however, the application of its own graphic representations of process elements can sometimes suppress the usage of standard methods. Software available for low price, which allows managing some processes, is another option suitable in particular for smaller enterprises. Low price is definitively the advantage. A need to use several software tools is the main disadvantage. It is better if all of them are produced by one producer. For example, MS Visio enables the development of process maps according to IDEFO standards with different hierarchy and references to other documents. Program MS Project is suitable for monitoring of process attributes: time, cost, human resources. MS Excel can follow the defined process attributes. The use of different programs requires a lot of work and concentration on relations between them, what is a serious disadvantage of such solution. CONCLUSION Nature, principles and difference seem to be almost identical. However, the nature of process management creates larger framework, from which the dissimilarities from function management are unreeled. Principles, as mentioned in first part, are the roof for the 92

11 application of process management. These three views are relatively independent, but they create common intersection, i.e. horizontal management. The horizontal management and the perception of the enterprise as the process system are the nature of the process management. On the other hand, the function management is marked out by vertical management. In process management, the departments are replaced by the process teams and the motivation is based on the development of added value for a customer. These differences come out from disadvantages of function management. With reference to the above mentioned factors, the process management is defined as systematic identification, visualisation, measurement, assessment and continual improvement of processes through use of methods and principles based on the process approach. Asset of Process Management in Quality Management: - Electronic (non-printed) publication of information of quality management - Permanent interconnection between process model and documentation - Measurement of selected parameters in processes. - Explicit definitions of work procedure and needed knowledge for relevant working posts. Asset of Process Management in Performance: - Enhancement of process performance through analyses of performance indicators - Enhancement of process performance through benchmarking - Reduction of overhead cost of processes - Development of internal market of the enterprise - Short cut of main processes - Motivation and assessment of employees in relation to added value TEST 1. The nature of process management is: a) horizontal management b) vertical management. 2. The process approach is defined by: a) ISO 9001, b) ISO Process activities in a enterprise are ensured by: a) enterprise unit, b) process team 4. Process indicators are related to: a) organisational structure b) process attribute. 5. Process hierarchy is determined by: 93

12 a) critical success factors, b) benchmarking 6. Reengineering means: a) radical improvement, b) gradual improvement 7. IDEF0 is a method suitable for: a) Static representation of processes b) representation of process dynamics 8. Process map is: a) graphic representation of processes and their relationships b) a map of the enterprise functions. TASKS AND EXERCISES Question for revision: 1. What elements is the process management made up from? 2. What is the main advantaged of the process management in comparison with the classic function management? 3. What are basic steps of the implementation of process management? 4. Which phase of the process management implementation is most difficult? 5. Are the process owners determined? 6. Are all activities included in defined process? 7. Is the set of indicators defined for each process? 8. Are the interactions between processes identified? Questions for discussion: 1. Have you ever met any conception based on the process approach, e.g. Activity Based Costing, Reengineering, Project management, etc. If yes, what is the asset for your company? 2. Do you think that the introduction of process management may have any direct economic effects in your day-to-day work? 3. Is the general methodology presented in this section suitable for your processes? 4. If you decide to implement the process management, will you require the same also from your suppliers? 5. Do you think that this form of presentation of process management is effective enough? 94