Non-Profits Benefit From Business Process Management and Improvements

Non-profit organizations are near and dear to my heart. I have worked for several (hospitals, social service agencies, quasi-governmental) and have volunteered as a board member for three. I am a current board president for a global organization serving children in poverty in India and Cambodia (www.lotusoutreach.org) so this affinity for charitable organizations is fresh.  Not unlike their for-profit counterparts, non-profits want to deliver their services effectively, efficiently and produce the outcomes they’d hoped for at a cost that is at least equal to the revenue (donations) they generate. In other words, in their business model, it’s “ok”  to break even though not ideal. Reserves and income on reserves are much better than breaking even. If that equation sounds familiar to profit-seeking capitalists, it’s because it’s essentially the same equation. What’s different, of course, is the mission, customers are “beneficiaries”, and there are no shareholders to answer to…only a board of directors and donors. Quite daunting, actually.

Like investors, major donors and grantors expect to see results. The demand for performance indicators is, frankly, equal to the demand for metrics in any business. Philanthropists, after all, are almost always successful business people.

Enter BPM

All of the conditions that underlie and are so fundamental to business  – from HR and finance processes to supply-chain and customer service processes – are present in non-profit organizations. The value stream is clear, waste is common and the benefits of automation are real. The role of process improvement – driving waste and inefficiency out of processes while infusing them with information and visibility – is best evidenced in healthcare settings. Hospitals and clinics are the closest cousins to  non-profit agencies and are proving that the application of methods like Six Sigma and Lean in addition to standardizing processes for the sake of quality, compliance and shared services is in every body’s best interest. Emergency rooms around the country are now simulating changes in their workflow using BPM tools like ProModel and Visio diagrams are as common in some public health clinics as PowerPoint presentations. Healthcare has caught on to BPM.

Invest-able Change

I suspect the biggest determinant for hospitals’ and public health agencies’ enthusiasm for BPM has been their ability to pay for the consulting support they receive. It’s quite common to see firms like KPMG, Accenture, FCG, IBM, BCG and other global firms competing for BPM work with large state and federal public health entities related to Medicare and Medicaid as well as large county general hospitals who are taking great strides toward electronic medical records. The money is there so the consultants are eagerly positioned to deliver their BPM offering and support.

Most non-profits are of the social service ilk and have much shallower pockets. $300 and $500 per hour consultants in Italian suits are not an option. Similarly, top-flight MBA grads who have never imagined serving soup in a shelter or working with children in slums are not a good fit when it comes to maintaining the integrity of a process. The truth is, we’re out there. There are seasoned professionals and subject matter experts who bring to bear an abiding commitment to mission-driven work in addition to a proficiency in quality improvement and business process management.

Don’t Let The “B” Fool Ya

I think the hang-up people in the non-profit sector have with BPM is with the B.

“But we’re not a business. We’re not in business. We need to be effective, not profitable.” - I hear these refrains often and I gently remind folks that they are an organization of people, process, systems and tools organized to deliver a service or product to a consumer. And they get paid to do it (whether they’re volunteers or not, money is coming in the door somewhere). Non-profit does not mean broke. They are just as bound to a continuous need for quality improvement, safety, efficiency and measurable results. Anyone who doubts the future course of non-profits should take a look at the Gates Foundation expectations for efficiency and results. Donors care whether or not their contributions are paying for results or being squandered on wasteful practices.

BPM is in no way incongruous with the purpose, cause and mission of any non-profit. From this day forward, I pledge – when addressing the non-profits in my life – to use the term Organizational Process Management. OPM it is!

I’d love to hear how your non-profit organization benefited from or could benefit from some old fashioned OPM. Chime in…and thanks for listening.

BPM Must Align with the Business Model

I have witnessed several very strong process-related projects fall  flat in the wake of our economic conditions. That’s not surprising given the spate of lay-offs and bankruptcies. What is surprising is the lack of fundamental integration I bear witness to. BPM and related projects, when they stand on their own, are weak, fragmented, vulnerable and will be deemed to lack business viability  in a heart beat (especially during an economic heart attack). Failure to fully integrate and demonstrate inherent value in the business model is the surest path to obsolescence.

I believe firmly in the practice, art, science and discipline of BPM and all of its cousins (Lean, Six Sigma, workflow, etc.) however, I remain steadfastly concerned that IT is much more akin to BPM than are operations people and executives. That has to change. Unfortunately, the projects I have seen shrink and dissolve these past few weeks were mission-critical.  However, it is only reasonable to expect that executives must make the best decisions they know how with the information they have. I hope we, as a field and as a discipline, can do more to demonstrate value and weave BPM into the very fabric of our organizations. As a consultant, I hope I can find new ways to better and more fully make the case for the integration of BPM within and throughout organizations so it matures into a business fundamental and not a “project”. I sincerely hope that you and your peers can provide your executives with the most succinct case for continuous process management in order that they might make the most informed decisions.

Business Modeling – the Essence of Viability

The latest Harvard Business Review (December 2008) has a section dedicated to the development of Business Models. Bear in mind that a business model is not a business plan and it is not a business case. Somewhere in between though. A business model is akin to a logic model in that it quickly establishes the logical connections or relationships between who you are, what you do, how you do it, and the effect you want to have. A business model (in particular, the model suggested in HBR by M. Johnson and C. Christensen) is best boiled down to 4 big chunks:

1. Customer Value Proposition
2. Financial Formula
3. Key Resources
4. Key processes

Now, if you’re paying attention and you think BPM is pretty swell, you noticed #4. Let’s start at the top though.

Customer Value Proposition

• who is your targeted customer?
• what problem are you going to solve with your product/service?
• what is your product/service and how does it solve the problem?
• who else is doing anything similar (the competition)?

Financial Formula

• how do you propose making money/generating revenue?
• what are your costs?
• what will your profit margins be?
• how long will it take you to generate revenue and make a profit?

Key Resources

• People
• technology, systems and other tools
• information and R&D
• brand, reputation, relationships, allies, market data and sales channels

Key Processes

• core processes and process owners
• business rules
• performance metrics
• other norms and standards

BPM’s “Must Do”

While business modeling, planning and the like are not usually in the domain of your average analyst or IT staffer, it is imperative that support be generated for the fourth dimension of business models. This is especially true in smaller organizations…the vast majority of companies. You must make your case and educate people within your organization. The best way to do this is to become fluent in business-speak (to refine your business acumen). Approaching your peers with a business model in-hand, making the case for improved Key Processes to enhance the overall business model – complete with simple examples and data-driven ROI scenarios – is your best bet. Demonstrate the relationships and dependencies between these four moving parts and move away from fragmented and discretionary “projects” until you are firmly ensconced as an unequivocal  fundamental. A business is a 4-legged animal. You must become one-fourth of the team that will lead your organization to victory.

Lean Markets Pulling For Rapid Process Improvements (RPI)

The economic news this morning is not so good. The Institute of Supply Management (ISM) manufacturing report sent the market into another free-fall today (down 425 points at the moment, following last week’s massive rally). The ISM index stands at 36.2% which may not mean much to the lay-person. The important indicator here is that anything below 50% is bad news and 36.2% is as low as it’s been in more than a quarter century. This is a report that measures factory output based on orders for manufactured goods. Only two sectors performed well: apparel and paper. European and Chinese factories are reporting similar output and demand for their goods. We all know how this is playing itself out for Ford, GM and Chrysler. They have a shot at financial support that will bode well for thousands of suppliers and – frankly – millions of employed people. For the remainder of the manufacturing community, there may not be a bail-out. What are small businesses and manufacturers to do?

Time is of the Essence

MarketWatch reports that economists now admit the recession began at least a year ago. Could have fooled me. Experts tell us we can rest assured that it will endure at least another year – maybe two. That said, small business and small manufacturers are faced with the need to get lean very quickly. There is no time for hemming and hawing and this is not the time to simply lay people off. Your path forward is as complex as the path that got you here. No silver bullet. Your costs are a reflection of (among other things) executive pay, labor, benefits, space, utilities, supplies, suppliers, marketing, hardware and – to a great extent – your business processes.

Those of you who are familiar with Lean Methodology or who might be familiar with a consultant who specializes in Lean may now be thinking: “This is the time for it.” I commend you. I agree that Lean can and will deliver the elimination of costs associated with waste in your processes. However, bear in mind that Lean can involve between 6 and 12 weeks’ time for execution.

Lean Liposuction?

Lean is a bit like a diet. You have new habits to learn and you glean life-changing insights from an examination of how you did things in the past. Lean is a lifestyle and it creates a certain culture. I want to suggest that you consider the Lean equivalent of liposuction or getting your stomach stapled. It’s quick, it’s dirty, but it works. It’s commonly referred to as Rapid Process Improvement or RPI.

RPI Works and Works Fast

An RPI event requires: 2-3 days; a core business process suspected of carrying waste (extra fat) and whose repair would make a big cost difference; a team of subject matter experts and decision-makers; the willingness to be brutally honest and trim the waste. In that brief 2-3 days time, the process can be articulated and modeled and business rules can be captured. Basic performance measures can be identified and the team can brainstorm ways that waste can be eliminated from the value stream without any adverse impacts. New, future-state process models can be developed and basic simulations can be conducted to assure you and your customers that quality concerns haven’t been introduced or exacerbated. You want the results to be faster and better.  Once you’ve nailed the future state, a solid RPI process involves mapping your implementation and measuring results over the next 3 to 12 months. Hint: measuring cost savings from the get-go is a must. Remember your baseline!

RPI Now

Rapid Process Improvement should be near or at the top of your list of things to do in the next 4-8 weeks. The small business owner and small manufacturer have got to make the time and prioritize events like this until all of the low-hanging fruit has been harvested. This is not business process management or improvement for the sake of developing software. This is crisis management and RPI may save jobs. Every job saved has an immediate impact on your entire community. A job saved is a person saved and that person may very well be your star player when the economy turns upward in 6 months. Don’t lose them when you could easily trim the fat and waste in your processes.