Category Archives: business process management

Smart Business Process: Wal-Mart Proves (Again) That Reducing Costs & Adding Customer Value Leads to Profits

Wal-Mart aired its latest performance data today and revealed that, despite the recession, they have maintained profitability. Shining a light on Wal-Mart is kind of silly given that virtually no other organization in the world (and most countries, for that matter) are in the same league.  The point is that we can all learn from their lessons. The lessons this week are absolutely central to the argument for  smarter business process management. Wal-Mart applied several elegant tactics with what appears to be precision execution. Firstly, they reduced their inventory which contributed to the goal of reducing costs by 6%. Secondly, they recognized that their customers are facing deep income cuts of their own and identified which product discounts would be perceived as most helpful. They leveraged their world-class inventory data to identify specific products and discounted prices considerably. The result was an influx of new customers who compensated for lower sales per customer thereby producing profits that exceeded everyone’s expectations.

Lessons Learned – What Small Business, Non-profits and Governmental Organizations Can Take-Away From Wal-Mart (without stealing)

In the spirit of keeping it simple, the following lessons can be brought home to your organization:

  1. Visualize, illustrate and understand your supply-chain
  2. Negotiate discounts with your suppliers
  3. Reduce your inventory and reduce inventory costs
  4. Ask your customers what they believe will add value to their lives and modify your offering to reflect that demand…now
  5. Let your prospects and customers know that you have satisfied their demands – promote yourself effectively
  6. Establish clear and specific performance expectations including those for positive financial results
  7. Measure and report results openly (even the bad news)

It doesn’t matter how big or small you are and it is frankly irrelevant which industry you hail from…you can apply all of these lessons and tactics. I have done so in commercial for-profit enterprises, governmental programs as well as in non-profit settings.

BPM – whether it is enabled by software or not – is key to each and every one of these tactics.

  • If you cannot “see” your supply chain;
  • if you cannot model how you will reduce inventory;
  • if you cannot illustrate how you will engage and interact with customers to understand where and how you can create value in your value-stream;
  • if you cannot develop a straightforward mechanism for gathering, measuring and reporting performance data, then you will find managing your business very difficult compared to those who can.

The best strategy and the best intentions will be trumped by lousy, inefficient and absent business processes. Between you and me – when I run across reasonably successful organizations that lack identifiable and manageable business process and controls, I know they are successful quite by accident. Ignorance in managing organizations and performance is not bliss.

Advertisements

Prioritizing BPM Projects is a Sign of Effective, Experienced Leadership

I received an email from a friend of mine today lamenting the projects he’s had to wave good-bye to. The email read: “That other process improvement stuff is nice, however, right now…revenue generation is the only process that matters. We have to keep the doors open”.  It made me think deeply about my clients and the projects we’re working on. How many of  them have leaders who’ve called emergency meetings in the past 12 months to reconsider and re-prioritize their approach and focus? None. How many of them have since been panicking and flailing? All of them. Most of them have reduced schedules and laid people off lately. Not a single one ever stopped to prioritize and shift attention when they could.

What’s a Priority?

First of all, if you’re still slogging through 4-6 month process improvement projects, you’re braver than I am. Get lean in your approach, folks. Secondly, if you don’t know how to prioritize in this economy and are struggling to choose which of your projects should “rise to the top of the list”, please ask your peers and ask the big boss. Go to the executive team and ask them to help you decide if you need help. But no matter what, show some initiative and demonstrate that you’re thinking like an executive. If not, you’re setting yourself up for disappointment.

Short answer: it’s a priority if it will immediately help us make more money (sales) or save on costs (making us more profitable). Sales are tough now so anything that can reduce costs is a big hit with executives and shareholders. If you’re a non-profit, cost reductions are popular with boards and donors. Toot your horn. If you’re a government entity, you have serious challenges too. You must get costs under control. Government doesn’t often lay people off but I have seen it happen in the past 6 weeks. I have seen it happen where people dragged their heels, hemmed and hawed, went to far too many meetings, and took too many vacation days. They complained and wondered who was in charge. They failed to prioritize and act swiftly and assertively. Now they’re looking for work.

Inventory your projects, identify the revenue generators and cost-efficiency opportunities and move them to the top of your to-do list. Everything else takes a back-seat until your executive team gives you the green light to relax and do something interesting. That may be months from now so get comfortable fighting fires.

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.

Business Process Improvement Involves Tremendous Risk Management

PMBOK (the project management book of knowledge) gives us a wonderful (and comprehensive) outline for managing risk in any project. Now more than ever, you and I have a lot of risk to manage and mitigate – especially if we are managing a portfolio of business processes and/or are expected to treat our process improvement initiatives as though they are full-fledged projects (which I believe they are).

Here’s the basic outline and a few tools (credit goes to PMBOK). As you read, notice how much emphasis there is on access to information, data and analysis. Risk management is a series of actions and exercises. It is very much a verb! Those of us who are tasked with improving workflow and business processes need to be mindful of the risks involved in our work and bright ideas as much as we need to be aware of the broader environment we are working in. Be vigilant for risks inherent in your inputs, process, outputs (deliverables) as well as your assumptions.  Nobody wants to make a mess of something they were asked to improve.

Risk Management Outline

1. Risk Management Planning – approach to and plan for risk management as well as the approach an organization takes to execution of plans

2. Risk Identification – determining risks and identifying the characteristics of those risks

3. Qualitative Risk Analysis – prioritizing risks responses based on probability of occurrence and impact

4. Quantitative Risk Analysis – analyzing effect of risks should they come to fruition

5. Risk Response Planning – developing options and actions to minimize risks and their effects

6. Risk Monitoring & Control – tracking risks, monitoring residual risks, identifying new risks, executing risk response plans and evaluating effects of those plans

Note: PMBOK states some risks are positive and refers to them as Opportunities. Some risks are negative and are commonly  referred to as Threats. I think it is a stretch to call a risk an “opportunity.”  I prefer that you conduct a SWOT analysis.

I  am including a couple of simple tools (since its Thanksgiving!)

Impact

Very Low

Moderately Low

Neutral

Moderately High

Very High

Cost

Time

Scope

Quality

Measuring Probability

Probability

Threats

Opportunities

Very High

Moderately High

Neutral

Moderately Low

Very Low

Risk Assessment Tool

Dimension

Risk

Technical

· Requirements

· Technology

· Complexity & interfaces

· Performance & reliability

· Quality

External

· Subcontractors & suppliers

· Regulatory

· Market

· Customer

· Weather

Organizational

· Project dependencies

· Resources

· Funding

· Prioritization

Project Mgmt

· Estimating

· Planning

· Controlling

· Communication

Lean Process Improvements Demand Lean Workload

I will try to be sensitive to the mixed feelings and opinions on this topic. However, our economic crisis is growing worse daily so it’s time to dispense some tough love. There are mission-critical, core competency processes in your organization that require immediate, exacting and concerted attention and effort in order to eliminate any remaining waste. Eliminating waste reduces your cost and liberates valuable resources making you a bit more profitable. You must be lean or leaner as soon as humanly possible. If you are successful in this endeavor, you will save someone’s job. Perhaps your own. You will contribute to valuable cost reductions while you stimulate innovation and improved competitiveness. Sounds good doesn’t it?

You Have A Problem

Getting lean now must become your singular focus. Organizations of all kinds make the common mistake – all year long though especially in crisis – of heaping too many responsibilities and priorities atop their managers and directors. By over-committing their time, you effectively neuter their ability to affect change effectively. A manager or director who finds themselves assigned to several new crisis management initiatives (en vogue these past weeks) while remaining married to their regular crop of assignments will struggle to decide which task, which meeting, which fire deserves their attention. Your problem is most likely an executive leadership problem.

You Need A Prioritized Inventory

Every manager, director and executive needs to make a list of all their responsibilities. This sounds so silly but in crisis mode, simple thinking seems to be the first casualty so I don’t mind reminding you. Schedule a stand-up meeting and share your lists with one another. Make strategic decisions as to what is priority and what is not. Priority = urgent + important. If a task or commitment is a priority then you must attend to it at the exclusion of something else. You will scratch something off your list being careful to delegate it to someone else or save it on your list of to-do’s for later. You should only have as many commitments as can be effectively executed right now.

Don’t Be An Oxy-Moron – Lean Means Lean

If you hope to pull the right people into the room and effectively execute lean process improvements, you need to know that their participation is a priority; their participation will require that they stop doing something else; and that their participation will require as little wasted time as possible.

Lean Project Waste:

  • over-processing = too much time in meetings talking in a non-value add fashion.
  • transport waste = making people travel to meetings when they could join by phone or video conference.
  • motion waste = the time required to walk from end of the building to another, from the airport terminal to the rental car desk, from the restaurant to the office building. Too many ineffective meetings (be honest!) are cause for many thousands of wasted dollars simply moving around.
  • inventory waste = when too many meetings result in too many tasks and commitments, those tasks tend to pile up and remain “almost done” don’t they? Too many people in the meeting? What does that inventory cost you? Could the extra people be out selling?
  • over-production = too many meetings with too many people who wind up with too many assignments.
  • waiting waste = waiting for the meeting to begin, waiting between meetings, waiting for the meeting to end, waiting for the deliverable that is “almost done”. Assume each manager or director in a meeting costs you $50 per hour. If you have 10 people in a meeting and the non-value add time they waste is roughly an hour (getting there, interrupted workflow, sitting around the table before and after), then you can surmise that your meeting cost the company $500 above and beyond the cost of the meeting. Multiply this number by the number of meetings per day and per week in your organization. Get the picture?
  • defect waste = all the meetings that don’t produce new outcomes, new rules, better decisions or anything that is actually 100% DONE.

Leading Lean Process Improvements

Your organization requires leadership and thoughtful execution of high-priority work. People need to be honest, respectful yet objective and assertive. Here are some suggestions as you move forward:

  1. assign an executive full responsibility for your lean process improvement initiative.
  2. assign multiple project managers and process owners. One each if need be.
  3. clear the deck. show everyone what is not going to get done.
  4. create a common area or new work space for the lean team.
  5. create a dedicated, cross-functional team or circle of excellence and brand their efforts (the “Lean Machine” or whatever)
  6. temporarily contract for missing expertise. Bring a consultant on-board with a limited scope of work for a limited time and negotiate a hard bargain. Buyers rule right now.
  7. eliminate the internal competition for resources. If someone in leadership does not understand that the lean team is committed or does not agree to participate when called upon, send the responsible executive after them. This is serious business. Nip it in the bud.
  8. establish performance metrics, benchmarks and a baseline. Measure what matters most as often as is appropriate and broadcast results. Celebrate victories.
  9. hint: start with sales process improvement. Make that lean and everything else gets a bit easier.
  10. tell your customers. Tell your story and listen to what matters most (adds value) in their minds.

We are living through an unprecedented economic upheaval. One that likely will redefine our business and careers indefinitely. As conditions worsen before they improve, we must focus on those thoughts, words and deeds that add value and move us toward safer shores. I am not advocating working conditions that burn people out, however, time wasted is lost forever. When we look back on this chapter, we want to know that we contributed our very best to the solution. Prioritize and dedicate yourself and your people. Six and twelve months from now, you’ll be proud and happy that you did.

On The Importance of BPM Governance

The day after the election seems like a good time to remind ourselves of the critical importance of governance – even in business process management. We must remember that the issue and practice of governance is inextricably linked to leadership and the execution of strategic plans. If we are going to be successful in BPM, we must practice good governance. (Frankly, one of my government clients is experiencing hiccups (to say the least) associated with a total lack of governance so that’s really what compelled me to cover the topic. Still, congratulations to President-elect Obama. May he govern well.)

Good Governance in Business Process Management

What does it mean to govern in BPM? Notwithstanding the management in BPM, governance encompasses several high-level areas of responsibility, any and all of which can make or break your BPM initiative. Phil Gilbert, CTO at Lombardi provides a decent sketch of governance in BPM. I’ll add a few dimensions as well so you have a list you can take with you to your next executive team meeting.

Governance is an institutional framework and formalized approach that defines:

  • what BPM projects belong in an initiative
  • who the executive sponsors can be as well as who the process owners will be
  • how projects become approved
  • the division and allocation of labor (human resources)
  • what the most appropriate measures of performance will be
  • the degree to which projects “fit” the organization’s strategy
  • the manner in which the organization will achieve competency and maturity in its BPM orientation

I would add that governance establishes the rules and conditions around communication and it establishes accountability by addressing the issue of consequences in a way few other bodies can.

Governance can tie BPM to other organizational initiatives in a way that maintains their integrity so BPM is not supplanted by other needs. This is important and speaks to what needs to happen beyond the scope of an executive sponsor in some organizations. I think – especially in very large organizations – an executive sponsor can become overwhelmed and lose control of his/her own initiative (even with the best of project managers). Governance allows executives to elevate their initiatives and put them on the table alongside all of the other executive matters. It empowers BPM in terms of stature and importance. That’s quite positive in terms of the attention BPM will recieve and it can prove frightening for the same reason. The choice to progress without good governance is yours.

Good governance also enables the following:

  • establishing a budget within the organization’s broader budget
  • resolving conflicts
  • assigning technology resources
  • determining future levels of investment according to strategy
  • establishing goals consistent with the strategic plan
  • defining the terms and conditions for democracy within the organization

It’s a simple matter of studying your organizational structure and learning how you can create a Governing Body or Committee. You will also need to study your by-laws and be sure you know who your committee chairperson reports to. That reporting is crucial and is best – in my opinion – if it reports to the CEO. Lastly, bear in mind that there exists a relationship between your Governing Committee and other committees in the organization. Draw straight, solid lines between governance and compliance, finance and others.

Addressing Fear and Confabulation In Business Process Management When Times Are Tough

Happy Halloween. I am writing this post in the wake of some pretty harsh economic indicators. This week has not been good for BPM. For the most part, the news has been about consumer confidence and consumption being at all-time lows and news of lay-offs and job losses peaking at nearly 750,000 in this calendar year. BPM initiatives in this climate are deeply challenged to keep people engaged, productive and cooperative. This is especially true if what you’re doing has even the slightest appearance of cutting costs. Executives are thrilled with the idea of cutting costs but you can expect all of your stakeholders will identify themselves as a cost in the process. And what do people do when they’re afraid for their jobs? They modify their behavior.

Fear and BPM?

Fear evokes instinctual reactions in everyone. The very fabric of our being is primed to fight or flee. So much is at stake right now that it is only natural for people to struggle with objectivity and complete honesty. They become protective and defensive. Some people become angry, some blame others, some withdraw and lose their confidence and will to compete, and some lie like there’s no tomorrow. Either way, if fear is running amok in your shop, your BPM hopes for lasting improvement are being compromised.

I met with a public health client this week who is beginning to show signs of wear and tear. It’s more difficult than ever to get subject matter experts in one room with all of the competing agendas they now have. Budgets lack certainty so it’s harder to commit to plans and strategies. Heavy questions like State financing hang over projects like brooding storm clouds. People doubt and that doubt is a mind-killer. Process improvement and doubt are nearly mutually-exclusive phenomena.

Confabulations!

To confabulate is to tell people what you think they want to hear about the way things are and the way things ought to turn out. You’ve heard of people doing this in psychotherapy. Well, it happens in BPM projects even in the best of times and circumstances. People – particularly managers – tell process analysts and consultants what they want based in large part on what they think the rules of the game demand. Basically, if I think you want to model a current state that has certain features, I will make it up as we go along so the model comes out looking like I think you want it to. It’s because people do this that I invite as many experts to process documentation meetings as possible (within reasonable constraints). I want to hear what everybody has to say about the process. It’s also why I don’t include the boss in the first session. They fear for their lives so I bring them in toward the end to validate what their staff have told me. Staff are so much more candid when their boss is out of the room! If this sounds like an intervention on an alcoholic it’s because the approach is similar. Only the problem is not the manager. It’s a less-than-ideal process that some managers believe reflect poorly on them and their performance.

What To Do About Fear and Process Confabulation?

  • Make some strategic decisions at the executive level about the viability of your initiative. If it’s best to hold off for a few months, then wait.
  • Go easy on terminology like “eliminating waste” and even “automation” for that matter (unless you’re clear that is what you’re after and you’re prepared to deal with the fall-out)
  • Communicate, market and promote your BPM initiative in positive terms. Share the benefits, value-add and goals for organization. Have your executive sponsor write a short, persuasive and motivating letter and make sure everybody reads it or hears it.
  • Observe workflow and process by means of direct observation first
  • Document process with the help of non-management experts. Be inclusive and cross-functional in who it is you invite.
  • Validate processes with managers and directors
  • Identify process-related data and metrics and validate your model and assumptions by reviewing the data. The data rarely lies. If you have 100 customer complaint letters and a manager telling you people complain “once in a while” then you can deal with that discrepancy. If a manager tells you their staff processes 10 invoices per hour each and there are 5 staff working 7 hours per day, then somewhere there should be data supporting 350 invoices per day. Close the loop and don’t get snookered into believing without evidence of performance.
  • Be objective, firm and confident.
  • Lead by example and engage others in the same productive, positive behaviors.
  • Believe that BPM projects and initiatives that overlook human behavior and organizational dynamics like these are guaranteed to flop. This is not an IT project.