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The Effects of Process Management: A Literature Review

27 January 2010, 7:33 pm

This article is a brief summary of the paper “The effects of process orientation. A literature review” by Kohlbacher M., to be published in the Business Process Management Journal, vol. 16, issue, 1, 2010. The paper examines the literature to review studies that report about the influence of process orientation on organizational performance. Studies were classified into statements without straight empirical support, quantitative studies, and case studies. A total of 26 studies were identified that report about effects of process orientation on organizational performance. Studies where positive effects are obtained are predominant.

According to the results of the paper, the effects most often reported are

  • speed improvements (most often in terms of cycle time reductions), reported by 14 studies
  • increase of customer satisfaction, reported by 11 studies
  • improvement of quality (most often in terms of product quality), reported by 10 studies
  • reduction of cost, reported by 10 studies
  • improvement of financial performance (e.g. in terms of sales, profits or profitability), reported
    by 8 studies
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Cascading and Segmenting: Two techniques of Designing an Organization’s Business Process Model

2 December 2009, 5:37 pm

The idea of process cascades (representing internal customer-supplier relationships between business processes of an organization) was originally developed by Tipotsch (1997), Schantin (2004), and Suter (2004). The idea is illustrated in the figure below. Process A, acting as an internal customer, places an order to Process B, acting as an internal supplier. After receiving the order, Process B deals with the order and delivers the result back to Process A. Cascading of business processes is an recursive approach, i.e. process B may itself place an order to another process, and so on.

Cascading business processes

The idea of cascading business processes

The idea of business process segmentation was also originally developed by Tipotsch (1997), Schantin (2004), and Suter (2004). Other authors refer to this idea as well. For instance, Osterloh and Wübker (1999) call it “Triage”, and Gaitanides (2007) calls it “process variant”. The idea is illustrated in the figure below.

Segmentation of business processes

Segmentation of business processes

Segmentation of a business process refers to the idea of creating process variants of a business process which faces heterogeneous market and/or customer requirements. The objective is that every process variant created can then handle homogeneous requirements. Some possible examples of business process segmentation are depicted in the figure below (segmentation by degree of business case complexity, customer type and customer location).

Business process segmentation examples

Business process segmentation examples

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The Characteristics of Process Orientation. Part 4: Process Performance Measurement

5 November 2009, 2:52 pm

Measurement and management are not separable (Lebas, 1995). By focusing measurement on processes rather than functions, alignment and common focus across separate organizational units can be achieved (Hammer, 2007). Implementing measures and taking corrective actions are operating precepts of process management (Melan, 1989), since a business process can only be mastered if it can be measured (Hinterhuber, 1995).

Process performance indicators are metrics which numerically capture the performance of a business process. The measures assigned to each process should be specified explicitly for each process (Braganza and Lambert, 2000). The process performance indicators have to be derived from the process objectives which themselves must be derived from business objectives and/or from the requirements of the process’ internal/external customers. This is crucial because business processes have to be linked with business strategy (Ndede-Amadi, 2004) and with the environment they intend to respond to (Kiraka and Manning, 2005). In his book, Davenport (1993) describes strategy as the backdrop against which process vision is created and driven.

Process performance measurement only makes sense if performance indicators are calculated from process performance data which is continuously collected. Not continuously collecting process performance data would impede timely reaction on poor process performance.

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The Characteristics of Process Orientation. Part 3: The Process Owner Role

11 October 2009, 12:58 pm

A business process needs to have a process owner who has end to end responsibility for the process (Osterloh and Frost, 2006; Suter, 2009).

Process owner of a business process

Process owner of a business process

The existence of process owners is the most visible difference between a process enterprise and a traditional organization. Moreover, process ownership needs to be a permanent role (Hammer and Stanton, 1999). A process owner does not only need to have process knowledge, but also leadership experience (Schmelzer and Sesselmann, 2006).

“The process owner must have the authority to take all measures necessary to coordinate and improve the business process.” (Hinterhuber, 1995)

Process owners should have enough power in the organization to act for the interests of the process. An interesting example of the power of process owners is given by Schmelzer and Sesselmann (2006). In their book, they describe the process owner role at Texas Instruments Europe, stating that process owners in this company are members of the European strategic leadership team. Thereby a tight connection between business processes and business strategy is ensured.

An important task of a process owner is the continuous and proactive improvement and optimization of the business process for which the owner is responsible for.

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The Characteristics of Process Orientation. Part 2: Management Commitment

21 September 2009, 2:11 pm

In a process-oriented organization, management needs to support the process program. Without the support of senior executives, the process idea cannot unfold to its full potential. There is a high risk for process management to fail if senior executives do not undertake necessary leadership roles and do not promote process-oriented thinking (Hinterhuber, 1995). Process oriented initiatives are less likely to secure benefits unless managers come to a consensus and an understanding of such initiatives (Edwards et al., 2000).

  • Process orientation must be a long-term commitment rather than a quick fix. Management should perceive process management not as a single project, but as a way of managing the business (Hammer, 2007).
  • In an ideal case, the organization has established a so-called chief process officer (CPO) who deeply understands the concept of the process approach and who is centrally responsible for the advancement of the enterprise-wide business process management (Schmelzer and Sesselmann, 2006).
  • The senior executive team should be actively engaged in the process program (Hammer, 2007),  e.g. by setting process performance goals or deciding between several process design variants.
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The Characteristics of Process Orientation. Part 1: Design and Documentation of Business Processes

19 September 2009, 1:49 pm

Business processes present a difficult challenge in identification and analysis since they are often unknown quantities, have no names, and are not visualized in organizational charts (Kiraka and Manning, 2005). A prerequisite for managing an organization based on its processes is to know which business processes are performed within the organization and how they are related to each other. A precise definition of the company’s business processes is the starting point for process management (Hinterhuber, 1995).

Design of a complete and uniform enterprise process model. The enterprise process model, which is also sometimes referred to as “macro design” (Suter, 2004), “macro model” (Schantin, 2004), or “macro enterprise process map” (Gardner, 2004), gives an overview of the organization’s business processes.

Documentation of processes. Business processes need to be specified in terms of how they are to be executed (Hammer, 2007).

Update of process documentation. Without a timely update of the documentation after a change of the process design, people will soon discontinue to use the documentation, making the documentation of business processes largely useless.

Definition of inputs and outputs for each process. Since processes can be defined as collections of tasks and activities that transform inputs into outputs, the specification of a business process needs to include a definition of these inputs and outputs (Walter, 2009; Schantin, 2004).

Definition of suppliers and customers for each process. A primary characteristic of a process is that it is initiated by and that it must provide results for a customer (Davenport and Short, 1990; Childe et al., 1994).

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Business Process Management Conference 2010

13 September 2009, 1:56 pm

The Business Process Management Conference 2009 (http://www.bpm2009.org) took place at Ulm University in Germany from 7-10 September 2009. Next year’s conference will be held at the Stevens Institute of Technology in Hoboken, New Jersey, from 14-16 September 2010. See all details at http://www.bpm2010.org.

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Process Orientation is neither a Question of Firm Size nor of Manufacturing Process Type

6 September 2009, 6:25 pm

This article is a brief summary of the paper “Process Orientation of Manufacturing Companies” by Kohlbacher M., published in Proceedings of the GBDI Tenth International Conference, Las Vegas, October 2008.

In this paper a model for measuring a firm’s degree of process orientation is introduced. The model measures process orientation by means of ten dimensions (e.g. design and documentation of business processes, process owner, process performance measurement, etc.) and is used for measuring the degree of process orientation of 105 randomly selected Austrian manufacturing firms. With the empirical data collected, it is discussed whether there is a relationship between process orientation, firm size and manufacturing process type (i.e. project, jobbing, batch, and line manufacturing process type).

The paper concludes that the application of business process management is neither a question of firm size nor of manufacturing process type. Furthermore, the paper finds interesting correlations, such as the significant correlation between the process owner role and the application of process performance measurement. This correlation states that organizations with a stronger emphasis on the process owner role also make greater use of process performance measurement. There is also a strong correlation between process performance measurement and the application of process-oriented HR-systems, which means that firms making greater use of process performance measurement also place greater emphasis on process oriented HR systems (such as incentive systems which emphasize the process’ needs).

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Main Characteristics of a Process-Oriented Organization

4 September 2009, 2:47 pm

According to (Hammer, 2007; Harmon, 2007; Hinterhuber, 1995; Melan, 1989; Reijers, 2006), an organization which has adopted the process-view exhibits the following characteristics:

First, a prerequisite for managing an organization based on its processes is to know which business processes are performed within the organization and how they are related to each other. Hence, a process-oriented firm explicitly designs and documents its business processes.

Second, management needs to support the process program. Without the support of senior executives, the process idea cannot unfold its full potential.

Third, the existence of process owners is the most visible difference between a process enterprise and a traditional organization. A business process needs to have a manager who has end to end responsibility of the process.

Fourth, a process-oriented organization comprehensively applies the concept of process performance measurement. By focusing measurement on processes rather than functions, alignment and common focus across separate organizational units can be achieved. Implementing measures and taking corrective actions are operating precepts of process management.

Finally, there are other characteristics a process-oriented organization exhibits, including a process-oriented corporate culture (e.g. teamwork, readiness to change, and customer focus), IT systems which seamlessly support business processes, a process-oriented organizational structure, people and expertise (e.g. existence of process redesign and change management experts), process-oriented HR systems (e.g. existence of an incentive system emphasizing the process’ needs) and the existence of a BPM office coordinating and integrating process projects.

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Process Performance Measurement in Outpatient Clinics

3 September 2009, 9:40 am

This article is a brief summary of the paper “An ERP-Based Process Performance Measurement Approach in an Outpatient Clinic” by Kohlbacher M., Gautsch A., Zenz H. and Leodolter W., published in Academy of Health Care Management Journal, Vol.4, No.2, 2008.

Process orientation does not only work for process industry, but can be applied to service industries as well (Davenport, 1993). There is empirical evidence that hospitals with a high degree of process orientation are moderately but significantly more efficient (Vera and Kuntz, 2007). There is no doubt that health care institutions need to become high performers. In order to gain high performance, the organization has to determine its performance indicators, measure its performance, derive the performance gap and initiate actions to close the gap (Jennings and Westfall, 1994).  Assessing processes by means of performance indicators is a prerequisite for process control and serves as a basis for process optimization. Sometimes business processes are fully supported by an operative system like an enterprise resource planning (ERP) system collecting data from which process performance information can be extracted – automatically and free of additional cost.

The paper shows an efficient way for continuous performance measurement of the outpatient treatment process (from a patient perspective) as realized in an Austrian hospital. Performance measurement focuses on time and efficiency of the process. In this hospital the outpatient treatment process is supported by an ERP system which already collects process data of every patient going through the process, primarily for reasons of accounting and invoicing. The process performance measurement approach introduced in this paper uses the data of the ERP system, defines performance indicators, calculates and visualizes the resulting process performance. The paper also compares the ERP approach for collection process performance data with other data collection techniques (client flow analysis, patient surveys, and sensor networks).

With the ERP approach introduced, peak times can be located and reduced which results in shorter patient waiting time; appointments and resources (personnel, facilities) can be better planned and benchmarking between departments can be performed. In general, the impact of any organizational change on process performance can be shown almost in real-time. Although automatically collecting performance data represents a great advantage (there are almost no additional operating costs), the ERP approach does not come without problems. For example, ERP systems are primarily designed to support business processes; collecting detailed process performance data is not their main purpose. Hence, they do not record all desired process performance data.

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