Beginners Guide to Business Process Management
Organizations have objectives to accomplish and goals to achieve. It could be the delivery of products or services to end-users, or the performance of support services to ensure customer satisfaction.
It could be the transformation of raw materials into parts that are subsequently assembled to create a final product. It can even be the proper recording of all financial transactions of the company for purposes of budgeting and financial management.
The accomplishment and achievement of these goals and objectives require the performance of a task or activity, or a series of tasks and activities. These sets of activities or tasks, which are logically related and often follow a logical flow, are referred to as business processes.
The day-to-day operations of businesses and organizations, regardless of their nature, structure, and even the industry they belong to, are basically comprised of business processes. Manufacturing itself is considered a business process, but it is a very broad one, considering how it also encompasses other business processes, such as product assembly and quality assurance. Finance is just as broad, involving lesser but nonetheless vital processes, such as invoicing, billing, and budgeting.
Even the activities and tasks that are often considered by many as peripheral and “non-central” to the core activities of the business or organization are also business processes. Human Resources, for example, conduct a series of logical steps in their hiring and recruitment process. Other processes they are concerned with include attendance management and leave management.
If you take a look at the very nature of business processes, it is easy to see how there is a need to manage them. While some processes are straightforward, involving only two or three steps or tasks, there are others that are far more complex, with multiple steps that involve multiple performers or users. These steps are also often performed repetitively and on a regular basis. These spur organizations to find ways to optimize and standardize these processes, and that’s where Business Process Management comes in.
BPM is a very broad topic and cannot be summed up in one sitting or discussion. This article aims to give you a broad introduction on the fundamental concepts of Business Process Management.
BUSINESS PROCESS MANAGEMENT
Businesses, in order to achieve its goals and objectives, design, implement and use business processes which they, in turn, manage for optimization and standardization purposes, using what is known as Business Process Management.
Business Process Management (BPM) is a management discipline describing the systematic approach to “identify, execute, document, measure, monitor and control both automated and non-automated business processes to achieve consistent, targeted results aligned with an organization’s strategic goals.”
To put it simply, it is the systematic approach to improving the business processes of an organization, making the workflow more efficient and effective, and improve its overall ability to adapt to an ever-changing business environment.
Management of business processes through BPM involves modelling, analysis, design and measurement of these processes. It sounds like a lot of work, which is why BPM is designed to be technology-enabled. This means that it makes use of various technological tools in carrying out its roles.
Aside from the obvious, which is the improvement of business processes to achieve its goals and objectives, why is it so important for businesses to have a BPM system in place?
- BPM facilitates the improvement and management of processes that drive optimized business results, leading to lower costs, higher revenues and high customer satisfaction, to name a few.
- BPM enables businesses to align its processes with the needs of their customers.
- BPM aids decision-making on matters such as deployment, measurement and monitoring of the resources of the organization.
- BPM contributes to the maintenance of a sound financial management system of the company.
- BPM allows the organization to keep track of its progress in meeting and achieving its goals.
To understand it better, let us take a deeper look at the benefits that organizations can derive from the implementation of Business Process Management.
Increased revenue potentially means increase in the net profit earned by the company. BPM, as mentioned earlier, helps align business processes and functions to the needs of customers.
This means higher customer satisfaction and improved reputation for the company, which ultimately contribute to more revenue and, consequently, profit.
Another component of increased profit is having lower costs and expenditures. Inefficiencies and waste of resources – two definite reasons for cost hemorrhage in organizations – may also result from poor planning and subsequent tracking or monitoring of the usage of these resources.
An effective BPM system provides a means for tracking the resources, and gives management the heads up in the event that some adjustments have to be made to address these inefficiencies.
BPM establishes a system of checks and balances within the organization, so the functions and corresponding responsibilities and accountabilities of each department, each officer, and each employee are clearly defined.
This minimizes (and may even eliminate) the risk of losses due to human error in the conduct of their respective tasks and activities, as well as the potential of fraud and negligence.
Improved and increased productivity
Productivity is affected by various factors, including proper utilization of capital and resources, human resource management, and physical working conditions, among others. B
est practices in BPM have an impact on these aspects or areas of the business, ensuring that overall productivity is boosted.
Improved reliability of information
Having a working and effective BPM system can increase the reliability of generated business information which, in turn, will be used by management for decision-making, and other stakeholders.
Information retrieval and dissemination is also easier, saving time and effort that would have been wasted in looking them up.
Simplified and assured compliance
Many businesses unwittingly find themselves facing issues regarding non-compliance with regulations and rules imposed by legislation and industrial standards. Having a BPM system in place allows the organization to cover all its bases and keep track of their duties and obligations.
Obviously, non-compliance issues can be costly to settle, not to mention other legal repercussions that may threaten even the right of the business to operate.
Tighter security measures
The resources, as well as information, that belong to the company will be safer from loss, theft and misuse, since BPM measures are also designed to protect them. Proper documentation and dissemination of information ensures that they will not fall into the wrong hands, especially those of a confidential nature. Compliance monitoring also sees to it that the company and its employees are protected from possibilities of litigation and other legal repercussions.
Unfortunately, it is a fact that there are still a lot of businesses that do not use Business Process Management, largely because they are not aware of the concept or, even if they do, they do not fully understand its importance or the benefits they can get from it.
For others, they are intimidated by the idea of applying BPM, thinking that it is something extremely complicated and may even cost them money. After all, many are under the impression that BPM strictly means automation of business processes, and they equate “automation” with “more spending”.
There are also a few businesses that decide that they cannot “be bothered” to use BPM, since it is not the core function of their business.
However, the business landscape today has become more competitive due, in large part, to the effects of globalization and the volatility of economies and markets all over the world. Staying competitive has become one of the main concerns of most businesses, and one way to achieve that is through optimization of business processes.
Thus, Business Process Management is something that should not be ignored or easily dismissed.
CORE ELEMENTS OF BUSINESS PROCESS MANAGEMENT
Researchers suggested six elements that every effective BPM should have.
#1. Strategic alignment or synchronization
The alignment referred to is that of the BPM and the overall strategy of the organization, meaning the business processes must be designed, implemented and managed (through the BPM) in accordance with the strategic priorities, objectives and goals of the organization.
There has to be a direct and identifiable linkage or connection between these priorities and the processes. Otherwise, you will have wasted your resources on an ineffective BPM system.
From the outset, the roles and responsibilities for the different levels of BPM must be clearly established and communicated to all members of the organization and other stakeholders.
This is to ensure transparency and accountability. This also involves setting out clear guidelines on the decision-making process, as well as rewards and sanction programs.
The conduct of BPM initiatives entail the utilization of methods, or tools and techniques that facilitate management of business processes.
The most common example often used is the Six Sigma, a set of techniques developed by Motorola engineer Bill Smith in an effort to improve the capability of business processes.
#4. Information Technology
BPM has become increasingly associated with technology, mostly because of how heavily it depends on IT-based solutions. Thus, information technology plays a very important role in the execution of BPM initiatives.
Technology and information systems are pretty much useless by themselves, without any human factor. Therefore, organizations assign specific manpower solely dedicated to carry out its BPM initiatives.
These people possess all the necessary knowledge and skills in process management, while seeing to it that they are in alignment with the goals of the organization.
This mostly pertains to the organizational culture, or the collective values within the organization. First and foremost, the organization must have a culture or environment that facilitates, complements and supports its BPM initiatives.
After all, BPM is not a standalone unit of the organization, since it cuts across the entire organizational structure.
THE BUSINESS PROCESS MANAGEMENT LIFE CYCLE
The BMP Life Cycle is characterized by iterative set of activities, done in phases. This means that the cycle can be repeated, instead of ending once the final phase is over.
There are six phases in the BPM life cycle.
PHASE 1: Process Planning and Strategy
In business, everything begins with a plan. This plan will serve as the guidelines to be followed by those who will implement it.
BPM begins with the development of a plan that clearly maps out the strategy and the direction of the organization’s BPM initiatives. In order to be useful for BPM, the strategy must be process-driven, and the plan must be designed and structured in a way that will ensure the delivery of value to customers.
Process planning and strategy involve the following:
- Understanding of the organization’s strategies and goals. These will serve as a guide in setting the objectives and strategies of BPM, since the two must be aligned.
- Identification and enumeration of current processes, requiring an in-depth look at the existing process architecture of the organization.
There are three types of processes or activities that exist in organizations:
1. Primary processes
These are the core processes of the company, which are readily identifiable because of their cross-functional nature, and the fact that these are the processes that directly deliver value to customers. These processes arise from the main activities of the business.
Geary Rummler categorized primary or core processes into three:
- Processes that imagine and create the product or service (ex. Product development, prototyping, conduct of feasibility studies)
- Processes that produce or make the product or service (ex. Production process, raw materials procurement)
- Processes that sell or deliver the product or service to the customers (ex. Sales, distribution)
2. Secondary processes
These are processes that are in place purposely to provide support to the primary processes, which is why they are also referred to as “support processes”. Unlike the primary processes, they do not directly deliver value, and are usually restricted to the functional areas of the organization.
The most common examples of support processes are:
- Human resource management
- Technology development
- Information technology management
- Supplies procurement
- Facilities management
3. Management processes
All organizations strive for efficiency and effectiveness, and the task of monitoring that falls on the shoulders of management, who are responsible for performing management processes.
These processes take a look at both the primary and secondary processes, mainly to monitor whether they are on track in meeting the company’s operational and financial goals. They are also in place to ensure compliance of the primary and secondary processes to regulatory and legal guidelines.
Just like the support processes, management processes also do not directly provide value, but are nonetheless vital to the organization.
- Identification of appropriate BPM roles and responsibilities within the organization. Who are the key players in BPM? What level of support will the organization’s BPM initiatives get from top management and the other members of the organization?
- Identification of methodologies and performance measures to be used in BPM.
PHASE 2: Analysis of Business Processes
There is a need to understand the current or existing business processes since they are the very object of BPM. Obviously, one will not be able to manage something that it does not understand. The objective of this phase is to find out whether the business processes currently in place are aligned with the goals and objectives of the organization.
Certain methodologies are applied in the analysis phase. The most common, and usually first, step undertaken is the gathering of data and information on the business processes. These are obtained from currently maintained company or organization documentation, strategic plans and process models. It may also require more than a peek into the performance measurements being used by the company.
Analysis will provide insights on the strengths and weaknesses of the business processes, and open windows to understanding how they impact the overall performance of the organization.
The process analysis techniques can be classified into two.
1. Qualitative analysis
Qualitative analysis is performed for two reasons: to identify wastes, redundancies, or losses incurred in the processes and eliminate them, and to identify and understand all the issues involved, and prioritize them accordingly.
Some of the most commonly used techniques are:
- Value-added analysis – In this technique, each step in the processes are classified on whether they are value-adding (VA), business value-adding (BVA), or non-value-adding (NVA). A step is considered VA if it produces value to the customer, denoted by a willingness on the part of the latter to pay for that specific step. An example is the assembly process of a product. After completion of the production process, but before delivery to customers, the finished product is required by law to undergo physical inspection by an independent third-party. This does not add value to the customer, but it adds value to the business, since it is a requirement for the continuous operation of the business. This is BVA activity. Rework costs in case the product was defective due to worker negligence, as well as costs of delay in shipment or delivery, on the other hand, do not add value to the customer. This is NVA. Basically, any other activity that does not fall under the VA and BVA categories will fall under this.
- Root-Cause analysis – This issue analysis technique often makes use of cause-and-effect diagrams and why-why diagrams, highlighting causal factors and seeking answers to the “Why” questions regarding the processes. This makes the technique effective for getting to the root of the problems or issues.
- Pareto analysis – Pareto bar charts are primarily used in this technique. The bar chart presents the impact of all the relevant issues or problems. The higher or taller bars are those that require more attention, which means they should be prioritized.
2. Quantitative analysis
Quantitative analysis techniques are centered around numbers, figures and statistics. These often include:
- Quantitative flow analysis – There are several flow analysis techniques being used, depending on the process being analyzed. Flow analysis is usually used in the analysis of capacity requirements, error rates in the process level, as well as costs. Cycle time analysis is also a common application of flow analysis, where the average duration or cycle time for an entire process – or a step in the process – is calculated, in order to assess efficiency and effectiveness.
- Queuing analysis – Unlike the flow analysis, queuing takes waiting time into consideration. Variability in service times, delays and rework times, are factored in, in recognition of the fact that these capacity problems are unavoidable and should, therefore, play a role in process design and redesign.
- Process simulation – Process simulation also considers waiting times, but it is also applicable for processes that involve parallel activities running simultaneously. Queuing generally does not apply to these types of activities. In process simulation, the process is modeled into a simulation model, which is enhanced with simulation data, and undergoes simulation. The outputs are then analyzed. In the event that there are multiple scenarios, the simulation model can be tweaked accordingly and undergo simulation again until all alternative scenarios are covered.
Findings during this phase will usually point to either one of two: it is either the business processes are aligned with organizational goals and objectives, or they are not. The findings will be used in the next phase of the BPM life cycle.
PHASE 3: Design and Modeling of Business Processes
Depending on the results of the business process analysis, there may be a need to design new processes, or redesign the existing ones. The objective is to come up with a process design that provides a full picture of the work, from end to end, to guarantee the delivery of value to customers.
The main concern in this phase is to determine whether the process is good “as is”, or if it should be redesigned in a better, more appropriate “to be” process.
This phase entails the following:
- Understanding of the intention of the organization with respect to the business process, such as what they want to achieve and how they are going to use the process to achieve them.
- Documentation of the work to be performed through process modeling, in detail:
- Nature of the work
- Time, duration and frequency of performance of work
- Location of performance of work
- The workers primarily and secondarily involved in the work performance
- Methodologies, tools and techniques used
- Sequence of activities within the work process
- Identification and understanding of the environmental factors that have an impact on the process, as these are likely to influence the design (or redesign, as the case may be) of processes.
Business process modeling is basically the activity of representing the processes of the organization in a structural form. It serves two main purposes: documentation and analysis. The business process model serves as a ready reference for members of the organization for any future projects or process evaluations. It is also a useful training aid in the case of new employees.
Further, the process model will play a central role when management evaluates the performance of the departments or units, and when it is looking for opportunities for change. In the event that there are plans for business expansion and growth, the documentation will also be a great help.
This can be in the form of a narrative description, a diagram or an illustration, as long as it provides an end-to-end perspective of all the processes of the organization – whether they are primary, support, or management processes.
Perhaps the most identifiable form is a workflow chart or diagram, which maps out the logical flow of activities within the process in a unit or department of the organization. Some companies prefer the representation to be in the form of a map, since it offers more precision. In other cases, the preference is for a model, which are highly precise and highly detailed, and also require a lot of work.
When it comes to process redesign, there are two approaches:
- Continuous Process Improvement. In this approach, there is an implied acceptance of the current processes. Therefore, the main focus is to identify the problems or issues that were previously unnoticed, and seek solutions for them. This approach looks for these solutions incrementally, taking one issue at a time.
- Business Process Re-engineering. Unlike the Continuous Process Improvement, Re-engineering takes a look at the entire process structure and aims to rework it entirely, with the aim of streamlining it or making it more effective and efficient. It is decidedly a more sweeping approach.
PHASE 4: Process Implementation
The designed (or redesigned) process will be implemented. Implementation is performed either systemically or non-systemically.
- Systemic implementation entails the use of specific software and technologies in implementing the process design.
- Non-systemic implementation is when these technological BPM tools are not used.
The choice between the two will largely depend on the nature of the business process and, in a small part, on the resources of the organization. After all, the use of technology is bound to cost the company.
PHASE 5: Process Monitoring and Controlling
The process, once implemented, requires tracking, measuring, and controlling, which is supposed to be done on a continuous basis. The purpose of these is to:
- Obtain necessary information to ascertain whether changes or adjustments must be made to the process design, or even to the resources and tools used in its implementation.
- Measure performance of the process to gauge whether it, indeed, leads to the achievement of organizational goals and objectives.
Business process analytics are the main inputs in this phase, where historical analytics are used for process controlling purposes. Monitoring of the business activities are usually done through the use of dashboards and rule-based notifications, particularly in organizations that have their own IT infrastructure that they can use for the BPM initiatives.
PHASE 6: Process Refinement or Improvement
BPM allows organizations to maintain the high level of quality and performance of its business processes. Through monitoring and control of process performance, the organization will be able to innovate and improve its processes primarily through redesign and reengineering.
Basically, the results of all that analysis and design (and redesign) work will be implemented to “fine-tune” the process. Remember that the company aims to optimize its processes through BPM, and that is mostly fulfilled in this phase.
This phase targets the improvement or refinement of three aspects: performance of the processes, of process management, and of the organization as a whole.