This entry is for organizations at the beginning of their process journey. We will address more of the complex aspects of process transformation in a future post.
Because I spend a lot of time talking about operationalizing businesses it may seem I think there is always a process or technology fix for a company’s challenges but this is not the case. For smaller organizations in particular, over-designing operations can be just as damaging as letting things run as they are. It is important, therefore, to take a balanced approach to building your business processes and supporting tools.
Operating discipline is one of the first items companies need to address as they grow.
Discipline is a combination of the business processes, technology that automates and controls these processes, and the talent profiles and structure of the people responsible for executing the processes. You also need the management capabilities required to measure and lead a process-focused organization.
The goal of business processes is to create consistency in how your business runs and to make it more efficient and effective, more controllable, and more transparent.
The simplistic way people talk about this sometimes would lead you to believe that processes are only good if they make your business more efficient. This isn’t always the case. Good processes can slow things down to make them more predictable or more controllable. Bad processes can be quick and predictable but lack transparency. You need to weigh these factors differently based on your business, your scaling goals, and the specific processes at hand.
The challenge is figuring out how far to go now and what to save for later. Here are three key factors to consider when determining how far to go with your process transformation:
1. Efficiency and Effectiveness
Business processes should be designed to be as efficient as possible, but this only applies to entire process strings. You can design wonderful processes on a one-off basis that don’t work well together and lead to inefficiencies in the entire string. Efficiency needs to be looked at holistically, within an entire business process area. This means optimizing the processes independently first and then analyzing upstream and downstream impacts.
The process of creating a new customer and entering their first order may be spectacularly efficient but if it often results in incorrect products being shipped or incorrect shipping addresses, it’s inefficient and ineffective as a process string.
When you make processes more effective, you open up more automation possibilities. Good processes mean less rework and fewer iterations for a single execution. If you know the product on an order is going to be right by the time it hits fulfillment, then you can automate that fulfillment. If a person still needs to review it because 2 out of every 20 orders will need to be adjusted, you can’t automate it.
In this example, well defined processes make the order-to-fulfillment processes more efficient and more effective.
Keep It Lean
The way hotels react to customer complaints is highly variable and needs to be nimble. If a hotel staff is not empowered to react in real time to requests or complaints it substantially impacts the quality of service. Creating extensive processes around how to comp food, award extra points, or switch rooms would detract from the ability of the business to operate effectively.
In this example, efficiency and effectiveness is the absence of process, not presence of it.
Like efficiency, control needs vary greatly from process to process. Some processes should have a high level of control – tax calculation and billing, for instance – and some shouldn't – like new product engineering. If a business process is a core management function, odds are it should be controlled. Processes linked to governmental compliance requirements will need a high level of definition and control. If there is a high level of human interaction or iterative work that is required, less control may be appropriate.
Journal entry approval always needs to be a highly controlled process. Ideally you have systems in place to automate a high percentage of your journal entries, but any manual entries will need a well-defined approval workflow and clear documentation requirements. At the end of the month, you can’t risk not understanding entries with significant financial impact that weren’t approved and have no evidence.
In this example, more control means more integrity in your financial reporting.
Keep It Lean
During product development, engineers will often need to buy a number of non-standard materials. Implementing formal approval processes for everything they need to purchase would slow the development process down. Creating broad levels of latitude to allow them to buy whatever they need, within reason, on-demand and without approval will lead to better, faster development.
In this example, less control leads to better (and faster) engineering results.
For a process to be managed it needs to be transparent. Process management has become increasingly important for many organizations and is critical to companies that use methods like lean/six-sigma to constantly improve their operations. Key business processes should be decomposed and executed to a level so you can track and measure them in detail and manage them over time. Software to enable these processes will be required to produce meaningful reporting and analytics.
Manufacturing companies have important requirements about transparency because so much of their cost is directly related to production. Manufacturers should have processes decomposed to the point of being able to measure the effectiveness and timing of each step of the production process. This allows them to constantly lower the cost of their operations and understand which levers in the production process correlate most to product quality. More definition leads to more transparency that allows management to make decisions of substantial benefit to the business.
In this example, process definition also has wide-ranging impacts on product consistency, cost of quality, employee training, production capacity, etc.
Keep It Lean
I have come across several organizations that enforce too much process on how their sales reps interact with prospects. Understanding sales success at some logical milestones may have management value, but too much process limits the ability of reps to react to customer needs. You don’t want processes to intrude into the customer experience to the point where they turn sales reps – your human face to the customer – into automatons that have difficulty gaining trust. This is especially true when the transparency management gains only leads them towards decisions they would have difficulty executing anyway.
In this example, a reasonable level of detail in sales processes is appropriate but you should guard against over-engineering them.
Strive for Balance
There is no single answer for how much process is right for your business. The answer will change as you grow in employees, customers, transactions, and revenue. At RCG, we recommend sitting down with someone who can help you structure your roadmap to process transformation. This person can help you make your process discipline appropriate for your current size and also for where you hope to be in 2, 3, or 5 years. They can also help prepare your organization for the day-to-day impact they will feel with increased process definition.