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Archive of posts tagged continuous process improvement

How to Build a Process-Oriented Organization

The 10th Business Process Management Conference, organized by the University of Ljubljana, Faculty of Economics, took place in Ljubljana, October 14-15, 2015. The keynote speech “Process Management Practices, Organizational Excellence, and Firm Performance” by M. Kohlbacher was about organizational excellence, i.e. how the organization needs to be designed to gain rigoros performance improvements. Buiding on real world examples, it was shown which process management practices should be deployed in practice and how the organization’s business processes have to be designed in order to improve the firm’s key performance indicators. The key building blocks of a process-oriented organization are as follows:

On the top of all endeavors, there is the customer with her needs. Between the customers and the suppliers, there is the enterprise boundary:

1_customer

Inside the enterprise boundary, the company’s value adding business processes are located:

2_business_processes

The overall goal is it to build a customer-oriented organization. So, internal customer orientation is needed, too. In order to implement internal customer orientation, the organization is designed in a way that the business processes relate to each other like customers to suppliers. In its essence, customer-supplier-relationships are built between the organization’s business processes. Every business process has a defined customer and may also have one or more supplying processes. The customer process is ordering, the supplier process is fulfilling the order and supplies the result back to the ordering process:

3_customer_supplier_relationships

So far, business processes were considered as black boxes. When the black box is opened, the activities of the business process can be seen (process design of a single business process):

4_detailed_process_design

IT-systems are supporting the business processes:

5_IT_systems

Another important element of process management is the role of the process owner. For every business process, a process owner is defined who is responsible for (i) the design of the process, and (ii) for the performance of the process:

6_process_owner

Process performance measurement needs to be in place. This is done by developing key performance indicators (KPIs) for the business processes. Process performance indicators are metrics which numerically capture the performance of a business process. It is important that the KPIs are derived from business strategy and internal/external customer requirements:

7_process_performance_measurement

Having KPIs in place, process performance can be measured and processes can be continuously improved (continuous process improvement):

8_continuous_improvement

In summary, the performance of the firm can be significantly improvement through building a process-oriented organization by using the following main concepts:

  • customer-supplier relationships between the business processes
  • process owners
  • process performance measurement, and
  • continuous process improvement initiatives

Process Management in Service Organizations VS. Manufacturing Companies

How is process management applied in service organizations? Do service providers apply process management practices differently to manufacturers? Does firm size play a role? The brand new paper “Process Management Practices: Organizational (Dis-)Similarities” by D. Weitlaner and M. Kohlbacher, published in the The Service Industries Journal a few days ago, addresses these questions. The study empirically explores the adoption of BPM practices contingent upon different industry affiliations and firm sizes. The summarized findings are as follows:

Process management in service organizations vs. manufacturing companies:
The findings indicate that manufacturers are more process-oriented than service providers. In particular, manufacturing companies are more likely to apply continuous process improvement methods, to have a stronger management commitment toward process orientation, to have process owners on site, and to perform process performance measurement. In particular, the greatest difference between service providers and manufacturers is found in the process performance measurement practice. No significant difference is found in the context of process-supportive corporate culture as well as process documentation.

Process management in small vs. large organizations:
Large companies are more process-oriented than small ones. More specifically, they are more likely to apply continuous process improvement methods, to have a stronger management commitment toward the process view, to have implemented the process owner role, to measure process performance, and to exhibit a higher level of process documentation. However, process-supportive corporate culture seems to be independent from firm size.

The Effects of Process-Oriented Organizational Design on Firm Performance

This article briefly summarizes the study “The Effects of Process-Oriented Organizational Design on Firm Performance”, by M. Kohlbacher and H. A. Reijers, which will be published in the Business Process Management Journal.

The study investigates which process management components (i.e. process design and documentation, management commitment towards process management, process ownership, process performance measurement, corporate culture in line with the process approach, application of continuous process improvement methodologies, and organizational structure in line with the process approach) are important for improving customer satisfaction, product quality, time-to-market speed, delivery speed, delivery reliability, and financial performance.

The empirical findings of the study reveal that

  • process performance measurement is important for improving product quality.
  • a process-oriented organizational structure is important for improving time-to-market speed.
  • the application of continuous process improvement methods is important for improving financial performance, and
  • a culture in line with the process approach is important for improving customer satisfaction, delivery speed, delivery reliability, and financial firm performance.

The paper will be published in the next issue of the Business Process Management Journal (Vol. 19, No. 2, 2013).

Process Ownership and Continuous Process Improvement: Effects on Financial Performance and Customer Satisfaction

This article introduces the study “The Joint Impact of Process Ownership and Continuous Process Improvement on Financial Performance and Customer Satisfaction” by D. Weitlaner, M. Kohlbacher and A. Kamagaew, which will be presented at the IEEE International Conference on Industrial Engineering and Engineering Management in Hong Kong in December 2012. The study is nominated for the best paper award.

The process owner role and continuous process improvement are two key components of business process orientation. The article investigates whether the implementation of these two concepts can improve the firms’ financial performance and customer satisfaction. The study is based on data from 840 Austrian manufacturing and service companies. The empirical evidence indicates that organizations that implement both concepts – process ownership and continuous process improvement – reap the fruits of process management in terms of higher financial performance and customer satisfaction.

The paper will be available via IEEE Xplore after the conference. The poster of the study can be found here.

Survey on Process Management: People and Expertise

In a process-oriented firm, people who execute the processes need to have appropriate skills and knowledge. Furthermore, knowledge of certain process improvement, process redesign and change management techniques have to be present. This article discusses the results related to people and expertise of the process management survey. Survey details (research design, sample, etc.) can be found here.

Process performers must have appropriate knowledge of how to execute the process, otherwise they won’t be able to implement the process design (Hammer, 2007). Most of the surveyed firms state that their employees only have moderate knowledge about the design of the business process they work for. The item “Employees can describe the design of the business process they work for. They know how their work affects subsequent work, customers and process performance” was rated by the firms in the sample as follows:

  • 13,33%: Disagree
  • 51,33%: Neither agree nor disagree
  • 35,33%: Agree

The item “Our organization’s employees are skilled in problem solving, process improvement and decision-making techniques” was rated by the firms in the sample as follows:

  • 20,67%: Disagree
  • 61,33%: Neither agree nor disagree
  • 18,00%: Agree

According to Hammer (2007), a process organization must have some people skilled in, and with knowledge of, process redesign. The item “An expert cadre is available in the organization including change management, process redesign and project management experts” was rated by the firms in the sample as follows:

  • 42,67%: Disagree
  • 33,33%: Neither agree nor disagree
  • 24,00%: Agree

Improving the performance of business processes requires knowledge about, and usage of, process improvement methodologies.The item “The organization makes use of methodologies for continuous process improvement, like KAIZEN, Six Sigma, etc.” was rated by the firms in the sample as follows:

  • 32,89%: Disagree
  • 29,53%: Neither agree nor disagree
  • 37,58%: Agree
The organization makes use of methodologies for continuous process improvement, like KAIZEN, Six Sigma, etc.

The organization makes use of methodologies for continuous process improvement, like KAIZEN, Six Sigma, etc.

The Components of Business Process Management

This article summarizes the study “Process orientation: Conceptualization and Measurement” by Kohlbacher M. and Gruenwald S., to be published in the Business Process Management Journal in 2011, Volume 17, Issue 2.
The paper empirically explores the “building blocks” (“components”) of business process management. The article first considers the following definitions of business process management:

  • The approach of process orientation emphasizes processes as opposed to hierarchies (McCormack and Johnson, 2001).
  • Process orientation means focusing on business processes ranging from customer to customer instead of placing emphasis on functional structures (Reijers, 2006).
  • Process management capitalizes on improving an organization’s efficiency through high-level coordination of an organization’s activities in a rationalized system of end-to-end processes (Benner and Tushman, 2002).
  • The process management philosophy is a comprehensive problem-solving heuristic that is process-oriented, customer-focused, fact-based, and participative throughout a firm (Winter, 1994).
  • Business process management incorporates the discovery, design, deployment, execution, interaction, control, analysis and optimization of business processes (Smith and Fingar, 2003).

Based on these definitions, the paper builds up a model consisting of different business process management aspects. The final empirical analysis of the model suggests that process management is a concept consisting of seven “building blocks” (“components”):

  1. design and documentation of business processes
  2. management commitment towards process orientation
  3. the process owner role
  4. process performance measurement
  5. a corporate culture in line with the process approach
  6. application of continuous process improvement methodologies, and
  7. process-oriented organizational structure.

At present, many managers are looking for ways to make their organization more process-oriented. The findings of the paper indicate that business process management involves many different aspects, ranging from design and documentation of business processes to process-oriented organizational structure. The developed model in the paper has potential use for an organization to review its internal progress of process-oriented organizational design and has potential use for process assessment, either as an alternative or supplementary measurement of process capability and organizational maturity.

Survey on Process Management: The Role of the Process Owner

The existence of process owners is the most visible difference between a process enterprise and a traditional organization (Hammer and Stanton, 1999). This article discusses the issue of the process owner role of the process management survey. Details on the survey (research design, sample, etc.) can be found here.

A business process needs to have a process owner having end to end responsibility of the process (Suter, 2009). The results of the survey show that the role of the process owner is established in most of the firms (see figures below). It is worth mentioning that 28% of the surveyed firms state that the role of the process owner does not exist.

The item “The role of the process owner is established in our organization and a process owner has been assigned to each business process” was rated by the firms in the sample as follows:

  • 28%: Disagree
  • 16%: Neither agree nor disagree
  • 56%: Agree

A process owner needs to have leadership experience (Schmelzer and Sesselmann, 2006). The results of the survey reveal that most of the firms which implemented the process owner role have assigned experienced leaders/managers to this role. The item “Process owners are experienced leaders/managers was rated by the firms in the sample as follows:

  • 22,67%: Role of process owner does not exist
  • 8,00%: Disagree
  • 26,00%: Neither agree nor disagree
  • 43,33%: Agree
Process owners are experienced leaders/managers.

Process owners are experienced leaders/managers.

Process owners have to have the authority to take all measures necessary to coordinate and improve the business process (Hinterhuber, 1995). The item “Process owners are members of the enterprise’s seniormost decision-making body” was rated by the firms in the sample as follows:

  • 22,67%: Role of process owner does not exist
  • 8,00%: Disagree
  • 21,33%: Neither agree nor disagree
  • 48,00%: Agree
Process owners are members of the enterprise’s seniormost decision-making body.

Process owners are members of the enterprise’s seniormost decision-making body.

An important task of a process owner is the continuous improvement and optimization of the process the owner is responsible for (Schmelzer and Sesselmann, 2006). The item “Process owners are responsible for the continuous improvement of their processes and they perform this task proactively” was rated by the firms in the sample as follows:

  • 22,67%: Role of process owner does not exist
  • 11,33%: Disagree
  • 34,67%: Neither agree nor disagree
  • 31,33%: Agree
Process owners are responsible for the continuous improvement of their processes and they perform this task proactively.

Process owners are responsible for the continuous improvement of their processes and they perform this task proactively.

In an ideal process-oriented organization, budgeting is done by process instead of by department (Hammer and Stanton, 1999). The item “Process owners take on budgeting responsibility” was rated by the firms in the sample as follows:

  • 22,82%: Role of process owner does not exist
  • 16,11%: Disagree
  • 24,16%: Neither agree nor disagree
  • 36,91%: Agree
Process owners take on budgeting responsibility

Process owners take on budgeting responsibility

Process performance logically depends on the workers executing the actual work within the process. If process owners have influence over personnel assignments, they thereby also have more influence on the performance of the process. The item “Process owners have strong influence over personnel assignments” was rated by the firms in the sample as follows:

  • 22,67%: Role of process owner does not exist
  • 16,67%: Disagree
  • 22,00%: Neither agree nor disagree
  • 38,67%: Agree
Process owners have strong influence over personnel assignments.

Process owners have strong influence over personnel assignments.

Continuous Process Improvement, Business Process Orientation and Innovation

This article is a brief summary of the paper “Dynamic Capabilities through Continuous Improvement, Organizational Process Alignment and Innovation” by M. Kohlbacher and M. Ringhofer, which will be presented next week at the 30th Annual International Conference of the Strategic Management Society in Rome (http://rome.strategicmanagement.net). The paper examines the interaction effect of continuous improvement initiatives (e.g. Six Sigma or KAIZEN) and business process orientation on innovation. The empirical study uses a sample of 67 Austrian manufacturing companies.

 The empirical evidence shows that firms which apply continuous improvement methods and at the same time

  • have a culture in line with the process approach (i.e. a culture based on teamwork and customer orientation; and where  process workers have detailed knowledge of how their process is executed, etc.) or
  • a strong top management commitment towards the process approach (i.e. where management does not perceive the process program as a single project, but as a way of managing the business; and where management is actively engaged in the process program)

can develop their products to the market more quickly. The paper will be presented in Track I, Session 203.

The Characteristics of Process Orientation. Part 8: People and Skills

In a process-oriented firm, people who execute the processes need to have appropriate skills and knowledge. Furthermore, knowledge of certain process improvement, process redesign and change management techniques have to be present.

  • Do process workers have detailed knowledge of how their process is executed? Process performers must have appropriate knowledge of how to execute the process, otherwise they won’t be able to implement the process design. The organization’s employees must be able to describe their business process’ overall flow. Furthermore the employees have to know how their work affects subsequent work, customers and process performance.
  • Are process workers skilled in decision-making, process improvement and problem solving techniques? Hammer (2007) states that process performers need to have appropriate skills in order to be able to deliver high process performance. The organization’s employees should be skilled in problem solving, process improvement and decision-making techniques.
  • Existence of a process redesign, project management and change management experts cadre. According to Hammer (2007), a process organization must have some people skilled in, and with knowledge of, process redesign. In a process-oriented organization, an expert cadre is available including change management, process redesign and project management experts.
  • Use of process improvement methodologies. Improving the performance of business processes requires knowledge about, and usage of, process improvement methodologies (such as KAIZEN, Six Sigma, etc.)