Managing Business Processes: Design and Improvement

1. Managing Business Processes: Design and Improvement Cheng Li, Ph.D. California State University, Los Angeles January 2001

2. The Process Focus • The changing emphasis of management practices: from individual activities to process • Background: • Local optimization is inadequate. • Activities are increasingly integrated.

3. What is the business process approach? • A work process: a set of related activities that adds value and provides a service to a customer. • The process focus: • integrative • cross-functional • customer orientation

4. What is covered? • Business Process Improvement • Business Process Modeling • Process Structure • Total Quality Management • Business Process Reengineering

5. Business Process Improvement

6. What is business process improvement? • Process Improvement: how to do our work better in terms of customer satisfaction, cost reduction, and self-fulfillment, etc. • Related Process Management Theories: • Reengineering (Michael Hammer) • Continuous improvement or TQM • BPI: Business Process Improvement (James Harrington)

7. The Four Phases of Process Improvement • Description • Analysis • Design • Implementation

8. Process Description • Customers • Activities • Primary (value-adding) activities • Supporting (non-value-adding) activities • Work flow • Policies and constraints • Output: process flowcharts & description

9. Process Analysis • Identify potential improvement areas • sources of information: internal and external • problems and causes • Identify related work processes and prioritize improvement projects • Output: major problems, causes of the problems, targeted work processes

10. Process Design • Customer requirements • e.g. telephone repair: short down time, when it can be repaired, convenient hours, short waiting time • Design parameters • e.g. telephone repair: training of the operators, computer systems, # technicians • Relationships between requirements and parameters

11. QFD: Quality Function Deployment • Example: a relationship matrix

12. Process Design (cont.) • Generating ideas • Evaluating alternatives • Designing the new process • Setting policies and controls • Other issues: feedback mechanism, justification of the new process

13. Implementation • Planning • Work process changes • Policy changes • Organizational changes • Training • Promotion and education

14. Business Process Modeling

15. Business Process Modeling • Description of the Process • Flowchart: procedures, policies and constraints • Data on process flow • Queuing Theory • Simulation

16. Basic Techniques: Process Flowchart • e.g. student registration process • get a copy of class schedule • select classes, consult advisor if necessary • make payment • wait for authorization: pin number, time window • call the system • register, etc.

17. Process Flowchart: symbols • Examples: Action/Operation Decision (If …) Delay Transportation

18. Process Modeling Languages • Process Modeling Languages • QPL: Quality Process Language by Gary Born

19. Process Modeling Languages • Process, input, output, the process owner, and authorities list of bids Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier

20. list of bids Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier Quality Process Language • Unchanged and Changed Output: • list of bids: unchanged • selected supplier: changed

21. list of bids Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier Quality Process Language • Process Owner: a person or a machine responsible for execution of processes

22. list of bids Evaluate Bids ---------------- Purchasing Officer list of bids Choice of purchasing officer Selected supplier Quality Process Language • Process Owner: variable

23. Purchasing procedures list of bids Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier Quality Process Language • Authorities: provide rules and guidance on how to process information

24. Modeling Information • Information is the link between processes. • Classifying information based on versions to keep. • Channel: temporary • Information Store: only the current version • Archive: current and previous versions

25. Modeling Information • Symbols: I channel Information Store Archive

26. Queuing Theory • System Characteristics • Population source: finite, infinite • No. of servers • Arrival and service patterns: e.g. exponential distribution for inter-arrival time • Queue discipline: e.g. first-come-first-serve

27. Queuing Theory • Performance Measurement: e.g. infinite source, single server, exponential inter-arrival and service times, first-come-first-serve: • System utilization • Average no. of customers: in line and in system • Average waiting time: in line and in system

28. Queuing Theory • Procedure: • describe the process • collect data on incoming and service patterns • find formulas and/or tables, software to calculate performance measures

29. Process Structure

30. Strategic Positioning through Process Structure • Complexity: • e.g. preparation process: fast food vs. gourmet food • Divergence: degree of customization, the amount of discretion or freedom allowed • e.g. H&R Block vs. CPA firms • e.g. Options for Mercedes vs. for Camry

31. Competitive Advantages through Process Structure • Competitive Advantages • Competitive Strategies • e.g. Sam’s Club vs. Nordstrom • layout, selection, service process, personnel • Competitive Strategy and Structural Positioning

32. Example: Structural Alternatives for a Family Restaurant Current take reservation seat guests, give menus Serve water and bread Take orders Prepare orders: salad (4), entrée (15) Higher specific table selection recite menu, describe entrees and specials assortment of hot breads at table, taken personally individually prepared Lower • no reservations • self-seating, menu on board • customer fills out form • pre-prepared, no substitute, limited to 4 choices

33. Generic Approaches to Service System Design • Production Line Approach • limited Discretionary Action of Personnel • division of labor • substitution of technology for people • service standardization

34. Generic Approaches to Service System Design • Customer as Coproducer • substitution of customer labor for provider labor • smoothing service demand

35. Generic Approaches to Service System Design • Customer Contact Approach • Degree of customer contact • Separation of high- and low-contact operations

36. Total Quality Management

37. TQM/Continuous Improvement • The Concept of Total Quality • The Dynamics of Quality Improvement: continuous improvement vs. tradeoff balancing • Employee Involvement • Emphasis on Customer Satisfaction

38. Statistical Process Control • Emphasis on the process instead of the product/material • Focus on “prevention”

39. Statistical Process Control • Control Charts: • Mean Chart • Range Chart • p-Chart • c-Chart • Process Capability • Process Capability Index

40. Other TQM Tools • Check sheet • Scatter diagram • Histogram (frequency) • Pareto chart • Control chart • Cause-and-effect diagram

41. Business Process Reengineering

42. Business Process Reengineering • Evolution vs. Revolution • Bottom-up vs. Top-down • Break the routine: • habits • assumptions • values

43. Reengineering: Assumption Busting • Problem: a specific performance shortcoming of the process • Rule: A specific aspect of the process design that causes the problem • Assumption: a belief about the environment that gives rise to the rule

44. Reengineering: Assumption Busting Example: • Problem: Customers don’t know when the repair can be done. • Rule: The operator does not have the authority to schedule technicians. • Assumption: The operator does not know where the problem is and does not have information about technicians’ schedules.

45. Overcoming Resistance to Change • Resistance is natural and inevitable: expect it • Resistance doesn’t always show its face: find it • Resistance has many motivations: understand it • Deal with people’s concerns rather than their arguments: confront it • There’s no one way to deal with resistance: manage it

46. The Key Mechanisms for Overcoming Resistance • Incentives: positive and negative • Information: dispel uncertainty and fear • Intervention: one-on-one connections • Indoctrination: make change seem inevitable • Involvement: make people part of the effort

47. The Ten Principles of Communications • Segment the audience • Use multiple channels • Use multiple voices • Be clear • Communicate, communicate, communicate

48. The Ten Principles of Communications (cont.) • Honesty is the only policy • Use emotions, not just logic • Heal, console, encourage • Make the message tangible • Listen, listen, listen

49. The People Side of Processes • People are the most important asset • Empowerment • a sense of achievement in what is accomplished • a sense of control over the means of production • a pace of work which is appropriate for both the worker and what is produced

50. The People Side of Processes • Csikeszentmihalyi (1990): elements of enjoyable work: • capable of completing the task and allowed full control • able to concentrate entirely on the work in hand • clear goals • immediate feedback • deep involvement: free from everyday worries, unaware of time • “Our sense of self disappears, only to return with added strength when the task is finished.”