Business Process Change

Paul Harmon

• Publisher: Morgan Kaufmann
• Year: 2014
• ISBN:
  9780128005224
• Edition: 3
• Topic: Ciencia de la computación
• Subtopic: Desarrollo de software

Business Process Change, 3 rd Edition provides a balanced view of the field of business process change. Bestselling author Paul Harmon offers concepts, methods, cases for all aspects and phases of successful business process improvement. Updated and added for this edition is new material on the development of business models and business process architecture development, on integrating decision management models and business rules, on service processes and on dynamic case management, and on integrating various approaches in a broad business process management approach.

New to this edition:

• How to develop business models and business process architecture
• How to integrate decision management models and business rules
• New material on service processes and on dynamic case management
• Learn to integrate various approaches in a broad business process management approach

• Extensive revision and update addresses Business Process Management Systems, and the integration of process redesign and Six Sigma
• Learn how all the different process elements fit together in this best first book on business process, now completely updated
• Tailor the presented methodology, which is based on best practices, to your organization's specific needs
• Understand the human aspects of process redesign
• Benefit from all new detailed case studies showing how these methods are implemented

Chapter One

Business Process Change

Abstract

A brief history of the idea and development of the basic concepts of business processes, its relationship to the systems perspective, and its various modern manifestations in quality control, business process reengineering, management, and information technology.

Keywords

Information technology (IT); Lean; Levels; Six Sigma; Systems; Value chain

This chapter provides a brief history of corporate business process change initiatives. Individuals working in one tradition, whether BPR, Six Sigma, or ERP, often imagine that their perspective is the only one, or the correct one. We want to provide managers with several different perspectives on business process change in order to give everyone an idea of the range of techniques and methodologies available today. At the same time, we will define some of the key terms that will be used throughout the remainder of the book.

People have always worked at improving processes. Some archaeologists find it useful to organize their understanding of early human cultural development by classifying the techniques and processes that potters used to create their wares. In essence, potters gradually refined the pot-making process, creating better products, while probably also learning how to make them faster and cheaper.

The Industrial Revolution that began in the late eighteenth century led to factories and managers who focused considerable energy on the organization of manufacturing processes. Any history of industrial development will recount numerous stories of entrepreneurs who changed processes and revolutionized an industry. In the introduction we mentioned how Henry Ford created a new manufacturing process and revolutionized the way automobiles were assembled. He did that in 1903.

In 1911, soon after Henry Ford launched the Ford Motor Company, another American, Frederick Winslow Taylor, published a seminal book: Principles of Scientific Management. Taylor sought to capture some of the key ideas that good managers used to improve processes. He argued for simplification, for time studies, for systematic experimentation to identify the best way of performing a task, and for control systems that measured and rewarded output. Taylor’s book became an international bestseller, and many would regard him as the father of operations research, a branch of engineering that seeks to create efficient and consistent processes. From 1911 on, managers have sought ways to be more systematic in their approaches to process change.

New technologies have often led to new business processes. The introduction of the train and the automobile, and of radio, telephones, and television, has each led to new and improved business processes. Since the end of World War II, computers and software systems have provided a major source of new efficiencies.

Two recent developments in management theory deserve special attention. One was the popularization of systems thinking, and the other was the formalization of the idea of a value chain.

Organizations as Systems

Many different trends led to the growing focus on systems that began in the 1960s. Some derived from operations research and studies of control systems. Some resulted from the emphasis on systems current in the computer community. Today’s emphasis on systems also arose out of contemporary work in biology and the social sciences. At the same time, however, many management theorists have contributed to the systems perspective. One thinks of earlier writers like Ludwig von Bertalanffy, Stafford Beer, and Jay W. Forrester and more recent management theorists like John D. Sterman and Peter M. Senge.

In essence, the systems perspective emphasizes that everything is connected to everything else and that it is often worthwhile to model businesses and processes in terms of flows and feedback loops. A simple systems diagram is shown in Figure 1.1.

The idea of treating a business as a system is so simple, especially today when it is so commonplace, that it is hard for some to understand how important the idea really is. Systems thinking stresses linkages and relationships and flows. It emphasizes that any given employee or unit or activity is part of a larger entity and that ultimately those entities, working together, are justified by the results they produce.

To make all this a bit more concrete, consider how it is applied to business processes in the work of Michael E. Porter.

Systems and Value Chains

The groundwork for the current emphasis on comprehensive business processes was laid by Michael Porter in his 1985 book, Competitive Advantage: Creating and Sustaining Superior Performance. Porter is probably best known for his earlier book, Competitive Strategy, published in 1980, but it is in Competitive Advantage that he lays out his concept of a value chain—a comprehensive collection of all of the activities that are performed to design, produce, market, deliver, and support a product line. Figure 1.2 shows the diagram that Porter has used on several occasions to illustrate a generic value chain.

Figure 1.1 A business entity as a system.

Although Porter does not show it on this diagram, you should assume that some primary activity is initiated on the lower left of the diagram when a customer orders a product, and ends on the right side when the product is delivered to the customer. Of course it may be a bit more complex, with marketing stimulating the customer to order and service following up the delivery of the order with various activities, but those details are avoided in this diagram. Figure 1.2 simply focuses on what happens between the order and the final delivery—on the value chain or large-scale business process that produces the product. What is important to Porter’s concept is that every function involved in the production of the product, and all of the support services, from information technology to accounting, should be included in a single value chain. It is only by including all of the activities involved in producing the product that a company is in position to determine exactly what the product is costing and what margin the firm achieves when it sells the product.

As a result of Porter’s work, a new approach to accounting, Activity-Based Costing (ABC), has become popular and is used to determine the actual value of producing specific products.

When Porter’s concept of a value chain is applied to a business organization, a different type of diagram is produced. Figure 1.3 illustrates a value chain or business process that cuts across five departmental or functional boundaries, represented by the underlying organizational chart. The boxes shown within the process arrow are subprocesses. The subprocesses are initiated by an input from a customer, and the process ultimately produces an output that is consumed by a customer. As far as I know, this type of diagram was first used by another management systems theorist, Geary Rummler, in 1984.

Figure 1.2 Michael Porter’s generic value chain.

Figure 1.3 A business process cuts across traditional departments to combine activities into a single process flow. After Rummler (1984).

Geary Rummler was the second major business process guru of the 1980s. With a background in business management and behavioral psychology, Rummler worked for years on employee training and motivation issues. Eventually, Rummler and his colleagues established a specialized discipline that is usually termed Human Performance Technology (HPT). Rummler’s specific focus was on how to structure processes and activities to guarantee that employees—be they managers, salespeople, or production line workers—would function effectively. In the 1960s and 1970s he relied on behavioral psychology and systems theory to explain his approach, but during the course of the 1980s he focused increasingly on business process models.

At the end of the 1980s Rummler and a colleague, Alan Brache, wrote a book, Improving Performance: How to Manage the White Space on the Organization Chart, that described the approach they had developed while consulting on process improvement during that decade. Rummler focused on organizations as systems and worked from the top down to develop a comprehensive picture of how organizations were defined by processes and how people defined what processes could accomplish. He provided a detailed methodology for how to analyze an organization, how to analyze processes, how to redesign and then improve processes, how to design jobs, and how to manage processes once they were in place. The emphasis on “the white space on the organization chart” stressed the fact that many process problems occurred when one department tried to hand off things to the next. The only way to overcome those interdepartmental problems, Rummler argued, was to conceptualize and manage processes as wholes.

Later, in the 1990s, Hammer and Davenport would exhort companies to change and offered many examples about how changes had led to improved company performance. Similarly, IDS Scheer would offer a software engineering methodology for process change. Rummler and Brache offered a systematic, comprehensive approach designed for business managers. The book that Rummler and Brache wrote did not launch the BPR movement in the 1990s. The popular books written by Hammer and Davenport launched the reengineering movement. Once managers became interested in reengineering, however, and began to look around for practical advice about how to actually accomplish process change, they frequently arrived at Improving Performance. Thus, the Rummler-Brache methodology became the most widely used, systematic business process methodology in the mid-1990s.

Figure 1.4 A performance framework. Modified after a figure in Rummler and Brache’s Improving Performance.

One of the most important contributions made by Rummler and Brache was a framework that showed, in a single diagram, how everything related to everything else. They define three levels of performance: (1) an organizational level, (2) a process level, and (3) a job or performer level. This is very similar to the levels of concern we will describe in a bit, except that we refer to level (3) as the implementation or resource level to emphasize that an activity can be performed by an employee doing a job, by a machine or robot, or by a computer executing a software application. Otherwise, our use of levels of concern in this book mirrors the levels described in Rummler-Brache in 1990.

Rummler and Brache also introduced a matrix that they obtained by crossing their three levels with three different perspectives. The perspectives are goals and measures, design and implementation issues, and management. Figure 1.4 illustrates the matrix. Software architects today would probably refer to it as a framework. The important thing is that it identifies nine different concerns that anyone trying to change processes in an organization must consider. Approaches that focus only on processes or on performance level measures or on process management are limited perspectives.

Notice how similar the ideas expressed in the Rummler-Brache framework are to the ideas expressed in the SEI Capability Maturity Model (CMM) we considered in the introduction. Both seek to describe an organization that is mature and capable of taking advantage of systematic processes. Both stress that we must be concerned not only with the design of processes themselves, but also with measures of success and with the management of processes. In effect, the CMM diagram described how organizations evolve toward process maturity, and the Rummler-Brache framework describes all of the things that a mature organization must master.

Mature organizations must align both vertically and horizontally. Activity goals must be related to process goals, which must, in turn, be derived from the strategic goals of the organization. Similarly, a process must be an integrated whole, with goals and measures, a good design that is well implemented, and a management system that uses the goals and measures to ensure that the process runs smoothly and, if need be, is improved.

The Rummler-Brache methodology has helped everyone involved in business process change to understand the scope of the problem, and it provides the foundation on which all of today’s comprehensive process redesign methodologies are based.

Prior to the work of systems and management theorists like Porter and Rummler, most companies had focused on dividing processes into specific activities that were assigned to specific departments. Each department developed its own standards and procedures to manage the activities delegated to it. Along the way, in many cases, departments became focused on doing their own activities in their own way, without much regard for the overall process. This is often referred to as silo thinking, an image that suggests that each department on the organization chart is its own isolated silo.

In the early years of business computing, a sharp distinction was made between corporate computing and departmental computing. A few systems like payroll and accounting were developed and maintained at the corporate level. Other systems were created by individual departments to serve their specific needs. Typically, one departmental system would not talk to another, and the data stored in the databases of sales could not be exchanged with data in the databases owned by accounting or by manufacturing. In essence, in an effort to make each department as professional and efficient as possible, the concept of the overa...