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Archive of posts tagged process owner

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.

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.

Process Owners: How to Help Them Succeed

This is a brief summary of the article “How to help process owners succeed”, posted on Harvard Business Review Blog Network by Brad Power.

According to Brad, six things militate against success in the role of the process owner:

  • The management team’s attention shifts to other priorities.
  • Process owners misunderstand their role.
  • Process owners are not held accountable for improvements.
  • Process owners are not senior enough to have the necessary influence.
  • The organizational structure to accommodate the role is too complex.
  • Employees are uncomfortable belonging to business processes rather than functions.

Brad lists 6 specific bullet points how to address these issues:

  1. Make the process owner role permanent and incorporate it into overall performance management.
  2. Select process owners with strong leadership skills and develop those skills even further.
  3. Make the process owner accountable for how well the process performs.
  4. Give the process owner organizational power.
  5. Minimize disturbance to the organizational structure. Create process owners outside the formal organization with a very small staff, leave most people in their functional organizations, and clarify the process owner’s role with respect to the functions and business units they will work with.
  6. Help employees get comfortable thinking in terms of end-to-end activities that together generate value to customers. Encourage cross-departmental activities that solve customer problems, and reward cross-departmental teamwork.

The Impact of Process Ownership and Process Performance Measurement on Firm Performance

This article summarizes the study “Process Ownership, Process Performance Measurement and Firm Performance” by Kohlbacher M. and Gruenwald S., to be published in the International Journal of Productivity and Performance Management, Vol. 60, Issue 7, 2011.

Process performance measurement and the process owner role are two key components of business process orientation. The article investigates whether the implementation of process owners and process performance measurement can improve firm performance. The study was conducted with 132 randomly selected manufacturing companies in Austria. For every firm one executive (CEO, CIO or quality manager) was interviewed.

The following items were used to measure to which degree the role of the process owner is established in the organization:

  • Is a process owner assigned to each business process?
  • Are process owners experienced managers/leaders?
  • Are process owners responsible for continuous improvement of their processes and do they perform this task proactively?
  • etc.

The following items were used to measure to which degree measurement of process performance is carried out in the organization:

  • Are performance indicators defined for business processes?
  • Are process performance indicators derived from enterprise goals and/or from (internal) customer requirements?
  • Are improvement actions actually initiated if poor process performance is encountered?
  • etc.

Results of the study:

The contingency table of the process owner role and process performance measurement is illustrated below:

Process Performance Measurement
Low implementation High implementation Total
Process ownership Low implementation 46
(34.8%)
5
(3.8%)
51
(38.6%)
High implementation 34
(25.8%)
47
(35.6%)
81
(61.4%)
Total 80
(60.6%)
52
(39.4%)
132
(100%)

In approx. 35% of the firms, both process performance measurement and process owners are virtually absent. Approx. 26% of the interviewed firms implemented process owners in their organization, but do not or only sparely measure the performance of their business processes. Approx. 4% of the organizations implemented process performance measurement, but have no or only a rudimental implementation of the process owner role. Finally, approx. 36% of the firms have both process performance measurement and process owners in place.

The core finding of the study is that implementing process performance measurement or the process owner role only is insufficient to achieve high performance. Organizations must implement both concepts (process performance measurement and the process owner role) to reap the fruits of process management. This finding is illustrated in the following figure:

processowner_processperformancemeasurement_performance

The left illustration applies for firms with no or rudimentary implementation of process performance measurement. These firms apparently cannot profit from establishing process owners. The right illustration applies for firms which (comprehensively) implemented the concept of process performance measurement. It can be said that those firms benefit from establishing the process owner role in their organization.

In summary, the empirical evidence shows that both concepts – process ownership and process performance measurement – must be present in the organization in order to gain higher organizational
performance.

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.

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

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.

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

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).

Main Characteristics of a Process-Oriented Organization

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.

Further information on the characteristics of process orientation can be found in this blog post: The Components of Business Process Management.

Information on which process management components are important for improving firm performance can be found here: The Effects of Process-Oriented Organizational Design on Firm Performance.