5 Steps to Adopting a Business Process Approach to Management

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By Samuel Okoro

The customer/stakeholder focus of the business process approach to management asks two simple questions: Who are your customers/stakeholders, and what are the benefits that your organization offers them? The first step in answering these questions is to determine exactly who those customers and stakeholders are. Who buys or uses your product or the service you are offering? Who makes the buying decision? What exactly are they buying in terms of benefits? Who else is affected by your activities, and what are their expectations?

A small pharmaceutical manufacturer of multivitamins, antibiotics, syrups and OTC medicines for children, located in a large African city, was trying to answer these questions for their own organization. They came up with the following list:

Customer/Stakeholder and Benefits Sought

• Wholesalers: Availability, reliable delivery, favorable payment terms, margins, marketing support
• Retailers: Availability, quality, clear product information, price
• Suppliers: Guaranteed business, prompt payment
• Hospitals and HMOs: Quality, price
• Doctors: Quality, efficacy, product information
• Consumers: Price, efficacy, pleasant taste
• Shareholders/bankers: ROI, growth
• Regulatory authority: Safety, quality, efficacy

1. Determine the Value Chains That Deliver These Benefits

The information obtained from the previous step can be formed into benefit clusters. Next, trace those benefits back from your products and services through to the inputs. The identified paths form your value chains, or your end-to-end core business processes.

Our pharmaceutical company took this step and concluded they had one major value chain consisting of two major processes, as depicted below: the new pharmaceuticals development process, and the sales and production process.

All the benefits to the customers and other stakeholders can be derived from their product range, their distribution and market support and their information dissemination.

2. Decompose into Processes and Determine the Process Boundaries

The previous step yields an end-to-end view of the organizational value chains. We now need to determine the core processes and subprocesses that make up these value chains and the support processes that enable them. The determination of process boundaries should combine top-down and down-up approaches, applied iteratively.

Listing the major processes in the value chain (as we did in the previous step) is top down. Using the following procedure, suggested by Patrick McDermott, we can then take each major identified process and break each one down into subprocesses. Then the next step is to:

• Brainstorm the milestones or necessary results of the process.
• Link the milestones together such that the output of one is the input of the next.
• Note steps within one-to-one, one-to-many and many-to-one relationships from the above. Assemble all one-to-one steps to form the individual subprocesses within the major process.

In the case of the pharmaceutical example, we might find, after following this sequence, that the sales and production process decomposes into customer acquisition (i.e., identify prospect, qualify prospect and establish contract) and order fulfillment (i.e., receive order, produce/assemble order and ship order) subprocesses.

3. Select Appropriate Metrics Based on Critical Success Factors for the Identified Processes and Overall Strategy

Measurements and rewards are known to drive behavior. To ensure proper balance between focusing on past/current performance and building capabilities that drive future success, metrics that track results, processes, organizational capability and the environment are essential.

Result measures are generally lacking in that they track past performance. By the time the result has been measured, it is too late to do anything about it. Process measures are generally leading and prescriptive, because they predict future performance. Acting on factors that affect these measures will have an impact on future results. Businesses should be careful to select metrics that drive both desired behavior and customer-valued outcomes.

The critical factors that drive delivery of customer and stakeholder metrics or indicators of performance must be chosen, with targets for each measure, and cascaded down to individual subprocesses. A line of sight must exist between overall organizational measures and the detailed measures at process and activity level.

Our pharmaceutical company chose to measure four categories. At the top level, the chosen metrics were:

• Financial: ROI, earnings from new products
• Customer/consumer: Market share growth, price versus competition, value perception, on-time delivery
• Internal: Process improvement index, employee satisfaction index, environmental compliance index
• Learning/growth: Number of patents, applied learning index

4. Appoint Process Owners for Each Core Process

A major flaw of the functional orientation is that there is no one within the organization who has a complete view of the process as it is experienced by the customers and stakeholders. Appointing process owners corrects this flaw.

The job of process owner is to manage the processes in the critical areas of improvement, boundary management, metrics, collaboration and advocacy. The process owner coordinates the functions and activities at all levels of the process and has the authority and ability to makes changes to the process. He or she is both responsible and accountable for its outcome.

5. Begin a Never-ending Cycle of Business Process Improvement

With all core processes defined and documented, appropriate metrics selected and process owners appointed, the next step is to begin an improvement cycle.

Using process diagrams, value stream maps and metrics, determine the current capabilities of your core processes. Identify and quantify areas of greatest opportunity, using information from customer surveys or comparison of your process performance with a similar ideal process.

Businesses that not only survive but also thrive in steady and in changing financial times use continuous business process improvement to ensure that their customers' and stakeholders' needs – which can change – are always met successfully. Smart managers make continuous business process improvement part of the culture in their organization.

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