Managing Business Processes: Design and Improvement

Cheng Li, Ph.D.

California State University, Los Angeles

January 2001

The Process Focus

• The changing emphasis of management practices: from individual activities to process

• Background:– Local optimization is inadequate.– Activities are increasingly integrated.

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

What is covered?

• Business Process Improvement

• Business Process Modeling

• Process Structure

• Total Quality Management

• Business Process Reengineering

Business Process Improvement

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)

The Four Phases of Process Improvement

• Description

• Analysis

• Design

• Implementation

Process Description

• Customers

• Activities– Primary (value-adding) activities– Supporting (non-value-adding) activities

• Work flow

• Policies and constraints

• Output: process flowcharts & description

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

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

QFD: Quality Function Deployment

• Example: a relationship matrix

Training Computer System

#Technicians

Down Time WEAK WEAK

When STRONG STRONG

Convenience STRONG

Process Design (cont.)

• Generating ideas

• Evaluating alternatives

• Designing the new process

• Setting policies and controls

• Other issues: feedback mechanism, justification of the new process

Implementation

• Planning

• Work process changes

• Policy changes

• Organizational changes

• Training

• Promotion and education

Business Process Modeling

Business Process Modeling

• Description of the Process– Flowchart: procedures, policies and constraints– Data on process flow

• Queuing Theory

• Simulation

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.

Process Flowchart: symbols• Examples:

Action/Operation

Decision (If …)

Delay

Transportation

Process Modeling Languages

• Process Modeling Languages

• QPL: Quality Process Language by Gary Born

Process Modeling Languages

• Process, input, output, the process owner, and authorities

Evaluate Bids----------------

Purchasing Officer

list of bidslist of bids

Selected supplier

Quality Process Language

• Unchanged and Changed Output:– list of bids: unchanged– selected supplier: changed

Evaluate Bids----------------

Purchasing Officer

list of bidslist of bids

Selected supplier

Quality Process Language

• Process Owner: a person or a machine responsible for execution of processes

Evaluate Bids----------------

Purchasing Officer

list of bidslist of bids

Selected supplier

Quality Process Language

• Process Owner: variable

Choice of purchasing officer

Evaluate Bids----------------

Purchasing Officer

list of bidslist of bids

Selected supplier

Quality Process Language

• Authorities: provide rules and guidance on how to process information

Purchasing procedures

Evaluate Bids----------------

Purchasing Officer

list of bidslist of bids

Selected supplier

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

Modeling Information• Symbols:

I channel

Information Store

Archive

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

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

Queuing Theory

• Procedure:– describe the process– collect data on incoming and service patterns– find formulas and/or tables, software to

calculate performance measures

Process Structure

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

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

Example: Structural Alternatives for a Family Restaurant

Lower

• no reservations

• self-seating, menu on board

• customer fills out form

• pre-prepared, no substitute, limited to 4 choices

Currenttake reservationseat guests, give menusServe water and breadTake ordersPrepare orders:

salad (4), entrée (15)

Higherspecific table selectionrecite menu, describe entrees and specialsassortment of hot breadsat table, taken personallyindividually prepared

Generic Approaches to Service System Design

• Production Line Approach– limited Discretionary Action of Personnel– division of labor– substitution of technology for people– service standardization

Generic Approaches to Service System Design

• Customer as Coproducer– substitution of customer labor for provider

labor– smoothing service demand

Generic Approaches to Service System Design

• Customer Contact Approach– Degree of customer contact– Separation of high- and low-contact operations

Total Quality Management

TQM/Continuous Improvement

• The Concept of Total Quality

• The Dynamics of Quality Improvement: continuous improvement vs. tradeoff balancing

• Employee Involvement

• Emphasis on Customer Satisfaction

Statistical Process Control

• Emphasis on the process instead of the product/material

• Focus on “prevention”

Statistical Process Control

• Control Charts:– Mean Chart– Range Chart– p-Chart– c-Chart

• Process Capability

• Process Capability Index

Other TQM Tools

• Check sheet

• Scatter diagram

• Histogram (frequency)

• Pareto chart

• Control chart

• Cause-and-effect diagram

Business Process Reengineering

Business Process Reengineering

• Evolution vs. Revolution

• Bottom-up vs. Top-down

• Break the routine:– habits– assumptions– values

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

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.

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

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

The Ten Principles of Communications

• Segment the audience

• Use multiple channels

• Use multiple voices

• Be clear

• Communicate, communicate, communicate

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

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

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.”

The People Side of Processes

• Consultation: part of empowerment• Teamwork:

– size: small enough so that individual effort can make a difference

– organization

– conflict resolution

– responsibility and authority

– team dynamics

– cultural background