Process Improvement or Process Re-arrangement: Will You Know Before It Is Too Late?
by Douglas B. Boebinger
The introduction of the global marketplace has caused many companies to re-evaluate their entire business structure. They are discovering that the methods and means they used to develop and market their products yesterday may not be as effective as they should be today. With the increase in competition as a result of such influences as the GATT and NAFTA treaties as well as overwhelming growth of the Internet, companies that stand still in their product and process development will swiftly be passed by those who are hungrier, leaner and more agile.
Many companies are looking towards re-organization and process re-engineering in order to meet the these new challenges. The problem is, how will these companies, your company, know that the re-organization and re-engineering will be a true process improvement as opposed to a process “re-arrangement”? Corporate re-organization is simply shaking the tree and watching the monkeys move to different branches. Process re-arrangement is simply changing the way you “do it”. Process improvement involves a total analysis of the current state and desired future state of the company from the ground up. It is not a white wash of the current company but a re-development of it. True process improvement is much more difficult but yields much larger, more profitable results!
The Traditional Approach of Process Improvement
During the last recession companies realized that they had become too large and cumbersome to efficiently perform in the new global marketplace. These companies believed that their re-organization would be the silver bullet to solve these problems. These re-organizations were characterized by what has been called “right sizing”, a nice way of saying that the company was reducing its workforce, including “white collar” workers.
Besides meeting new global marketplace challenges, company re-organizations were performed to do one, or more, of the following:
- Increase operational efficiency
- Minimize operation costs
- Maximize corporate profits
- Align themselves closer with their customers
- Centralize operations
- Decentralize operations
- Countless time, effort and money has been spent in the re-organization process. The results are usually mixed. They may receive marginal benefits, in the short run, but not the substantial outcomes they anticipated.
This is substantially due to the fact that most re-organizations are done in the following order:
- Re-organize by selecting the type of organizational structure desired and fitting the company into it..
- Each area of the company defines what and how their respective aspect of the company will function.
- Develop processes to support each area’s work responsibilities.
- Discover that the organization cannot support the process properly and efficiently.
- Re-re-organize to support the process thus expending additional time, money and resources.
This process continues down to the lowest level of the company. The result, more often than not, leads to sub-optimization of each aspect of the company rather than an optimization of the company as a whole. This type of “optimization of the parts” yields corporate disconnects and duplication of functions which cause the new organizational structure to function less effectively than originally intended. This results in less realized benefit than desired. Slowly the company fattens up on people and procedures to put “band-aid” solutions on major problems. Soon the organization is bogged down again in excessive overhead, procedures and their resulting costs. Correcting these problems may itself lead to yet another re-organization. This wastes precious corporate assets (both people and money) as well as the most precious of resources, time.
Once the company has re-organized, they then turn to the next business at hand—saving money. In other words, how to do the work cheaper. Process re-engineering is also becoming a major focus of companies who want to run leaner while maintaining, or increasing, their current workloads. It is a simple rule of math. Productivity is defined as the following:
Productivity = (Work Throughput) / (Number of Work Hours Performed)
Given this definition, in order to maintain the same productivity level while decreasing the number of work hours performed, the company will need to decrease the work throughput. This, however, is unacceptable. The company wants to increase, or at least maintain, work throughput while reducing the number of work hours performed (“right sizing”). The only way to do this is to increase work throughput. There are two options available to accomplish this increased throughput.
Work Harder – i.e. Just Do It FASTER, or
Work Smarter – i.e. Just Do It More EFFICIENTLY.
As the office joke goes “Beatings will continue until morale improves”. Although there may be room to improve throughput by working harder, the company will not receive substantial gains over a long period of time. Working harder by increasing the number of workdays, the number of work hours, etc. will only lead to a disgruntled, unmotivated workforce which is not the type of environment that will lead to substantial improvements in efficiencies.
The only true way to increase productivity for the long term is to work smarter. Working smarter means determining the minimum work required to be performed with the minimum of effort yielding the maximum benefit. This may yield some hard facts to accept. Old ways of doing business may no longer be appropriate. Administrative process requirements may prove to be more of a hindrance than a help.
To obtain this work smarter advantage, many companies are re-inventing their processes. Great efforts have been undertaken to re-develop how to do business in the future under the new organizational structure. After all, how can we do the same old thing with fewer people?
Again, a great effort is expended to re-invent the process. Again, each area of a business develops how they will do their work. Again, each area will optimize their own work. Statements are made such as “If we could get more complete information earlier we could yield better results” or “If we had the proper amount of time to do our work, we could produce better information for others”. Corporate initiatives may be developed to highlight, and thus resolve, major business problems. Whereas corporate initiatives typically are well intended, they may not actually result in a net benefit to the company. If their total impact on the company isn’t evaluated, the results of the actions may yield further problems which may, in reality, be worse than the initial one targeted.
A New Way of Process Improvement
The problem with Re-Organizing and Re-Engineering is not that they, themselves, are bad. It is the how, and when, they are accomplished which is bad. If Re-Organization and Re-Engineering don’t yield the desired results, then what will? To answer this we need to look at the basic laws of business. Just as their are undeniable laws of physics, there are undeniable laws of business which, if broken, yield catastrophic results.
Re-inventing a company is a four (4) step operation. The steps must be followed in the proper order or the results will be less than desired as discussed previously. The four steps are:
1. Determine the PRODUCT the company should produce.
2. Determine the PROCESS which will efficiently produce the product.
3. Determine the SERVICES & TOOLS which will effectively support the process.
4. Determine the ORGANIZATIONAL STRUCTURE which will efficiently support the process, services & tools.
What Products Should I Produce That The Customer Will Buy?:
When entrepreneurs begin to think about starting a new business, the first thing they think of is not “what organizational structure should I use”. The first thing they think of is “what product (or service) will I produce that the customer will buy?”
The product must have a perceived value greater than the competition’s product. This requires a customer driven analysis of the marketplace, the competition, the economic conditions, etc. Be forewarned, do not skip over this step. Otherwise, the company will not know what to focus their process on.
The Process Produces The Product:
After the product is determined the entrepreneur focuses on how to consistently, reliably, and profitably produce the product. In other words, what process will assure that the time to market will be faster than the competition. The ability to be the low cost producer, first to market and with the best product will yield a substantial competitive advantage. The question is “How do you develop the optimal process to produce the product?” After all, it is the process that produces the product.
Practicing what is preached, the means utilized to develop the re-engineered process is, itself, a process with the re-engineered process as the desired end product to be “purchased”/used by the company. The steps to develop the process is the main emphasis of this article.
Services & Tools Support the Process:
The process is what produces the product; however, processes need services & tools to make the process function efficiently. The activity may be performed without the benefit of the supporting service; nonetheless, the supporting service makes the activity more efficient and effective. Understanding the inter-relationship between the product, the process and the supporting services & tools is important in order to develop efficiencies and to understand the optimal organization to support it.
The Organization Supports The Process:
Only after all of all this information has been developed will the entrepreneur determine what organizational structure will best support the process. Many in business fail to make this realization. The organization supports the process, not the other way around.
Therefore, based on these basic business premises, if the company is going to “re-invent” itself successfully the company needs to follow these same rules.
Developing the Process, Supporting Services & Tools, and Organization
The steps required to re-engineer the process are:
1. Identify the current process
2. Assess the strengths and weaknesses of the current process
3. Determine the optimal product partitioning
4. Envision the new process
5. Create the new process
6. Determine what supporting services & tools are required
7. Develop the new organization
8. Implement the new process, supporting services and organization
9. Continuous process improvement
10. Identify The Current Process:
It is extremely difficult to plan out the new process if the company is not first knowledgeable of its current process. To understand and document the current process the company will need to go through roughly the same methodology outlined in the “Developing the New Process” section below, except instead of inventing the process the company is documenting the current process. It may seem unnecessary to perform this step; however, the results of doing this effort will be three fold:
Identification of disconnects and inefficiencies which will need to be addressed in the new process
Strengthen the resolve of the company that a new process should be properly developed due to the frustration of the documenting current, poorly defined process.
Development of a baseline to use in comparing and analyzing the new process for true process improvements.
Assess The Strengths And Weaknesses Of The Current Process:
Based on the determination that the company wants to be customer driven, it will need to evaluate the current process based on the customer. Questions that should be asked:
1. How satisfied are our customers with our current product/service?
2. What enhancements would the customer desire in the future?
3. How satisfied are our competitor’s customers with the competitor’s products?
4. What would it take to convince a competitor’s customer to purchase our product/service?
5. What elements of the current process support customer requirements?
6. What elements of the current process hinder/don’t support customer requirements?
7. What re-occurring problems exist in the current process?
8. What aspects of the current process allow the organization to function efficiently?
9. What “short-cuts” to the current process have people developed to get the product/service to market?
10. How well do our suppliers interact with the current process?
The customer information (questions 1 through 4) can be determined through face-to-face discussions, focus groups, surveys (mailings or by telephone), or any of the other means available. The process information (questions 5 through 10) can be determined by interviewing a sampling of people from your organization and your supplier’s organizations. This sampling should be representative of the various levels of personnel, from the Chairman of the Board to the newly hired employee. They should also be representative of all functional areas. (i.e. planning, accounting, engineering, purchasing, manufacturing, customer support, sales).
From this information the company will be able to identify opportunities for improvement. These opportunities may come in the form of :
- improved customer satisfaction
- lower cost
- increased quality
- improved time to marketDetermine
The Optimal Product Partitioning:
As stated previously, the process must support the product. Therefore, an understanding of the product must precede the development of the new process. In order of the product to be of the highest quality, it must function as “one unit”. It is the tendency of the traditional design process to make each component of the product as “perfect” as possible. In other words, to optimize each component with respect to cost, quality and function. After all, it is not the components that the consumer is purchasing, it is the end product, the whole system, that the consumer is purchasing. Therefore, the company must focus on optimizing the product as a whole, not its parts, to truly satisfy the customer.
The discipline of Systems Engineering is a vital tool in the understanding of how to efficiently and effectively optimize the whole system, both functionally as well as its attributes. Determining the best way to partition a system into its various subsystem and components together with how to cascade this information to the various subsystems and components is key to accomplishing a quality product. The System Engineering “V” shows how the products functions and attributes are cascaded down on the left side of the “V” from system to subsystem to component during the design portion of the process. The functions and attributes are then are validated up the right side of the “V” from component to subsystem to system to assure the product meets its intended functionality and attribute goals.
Envision The New Process:
It is time to dream! In this stage the company should develop the high level concept of the new process. Objective, measurable goals should be set concerning the new process. Just as the opportunities determined in the previous step were categorized along customer satisfaction, time, cost, and quality lines, the goals can also be put into these classifications.
- Customer Satisfaction
The goals must be customer driven as the customers are the ones creating sales revenue by buying the product. Goals must also be set without influence from current constraints. Developing the goals based on pre-determined constraints will restrict the creativity desired in developing the new process. Thus, paradigm shifts will need to be made, traditional aspects of the business (process, organizations, functional, etc.) must be abandoned. Simply put, there must be no “sacred cows” or the company will limit the amount of improvement realized.
These goals must be objective, not subjective. They must be measurable in order to determine if the company truly has process improvement as opposed to process re-arrangement.
Create The New Process:
In order to meet the goals just outlined, a new process must be developed. This is typically the most difficult segment to perform. It will require substantial original thinking, analysis and interactions to achieve the required end result. Two scenarios typically occur during the process development effort.
1. The team developing the process will take a broad brush approach and develop a process at such a macro level that it cannot be implemented at the working person’s level, or
2. The team will get so bogged down into detail that they lose focus of the overall goals, i.e. they are so focused on the bark pattern of the various trees in the forest, they forget the purpose of being in the forest.
In order to prevent these two scenarios from occurring, a clear process development philosophy and methodology must be utilized. A philosophy of a single, common core process to be practiced by all product development teams will allow for later process improvement efforts to be successful. This will also maximize the use of shared resources, as these resources will not need to learn a new product development process for each project they are involved on.
A methodology of focusing on one of the five typical phases of the process at a time (as shown in Exhibit 3), defining it to a pre-determined level of detail and then proceeding to the next phase of the process will yield a structure approach to the development of the process.
The level of detail with which each phase of the process are developed should start at a macro level and work down to the details. At each level of detail the eight (8) functions of the process, (as shown in Exhibit 4) must be developed. Utilization of the Work Breakdown Structure method of project plan development is quite useful for this work. This allows for focused work which will result in a better understanding of the intricacies of the new, integrated process.
This may seem like a lot of work, and you are correct. In the actual application of the product to the process, the product development team will deal with all of these stages and functions. Thus, it is better to do it right the first time then to do it wrong for each project that goes through the flawed process. You may also think that the company can streamline this process by going straight to the detail level; however, experience has proven that this will actually take longer. This is due to the problem that the development team is not grounded in a basic understanding of philosophy of the new process.
Determine What Supporting Services & Tools Are Required:
A product development process can be developed and implemented, but may not be as efficient as it could be. For example, there are many ways to develop an article. You could use a #2 pencil and line paper, make corrections manually, type set the document and print it on a hand press. Or you could use modern desktop publishing techniques to write, edit and publish the paper. Both have the ability to yield a quality article; however, the first method will take longer to do. Supporting services & tools are any instrument, etc. which is applied in the performance of a task/activity (i.e. process step). The task may be performed without the benefit of the supporting service; however, the supporting service makes the activity more efficient and effective.
In order to achieve the best utilization of the supporting services & tools, the company may have as one of its process development philosophies that all product development teams use common supporting services & tools. This will also allow for later process improvement efforts to be successful.
The Integrated Process Matrix:
With product partitioning determined, the new process developed and the supporting services and tool requirements understood the company is able to understand the inherent inter-relationships between these three facets of an integrated process. A three dimensional “Integrated Process Matrix” made from these three items will graphically show:
which portions of the product partitioning perform which processes
which processes use which supporting services & tools to make them efficient
which portions of the product use which supporting services & tools.
This type of information is very useful when implementing the new product partitioning, process and supporting services & tools. In order to truly achieve a common, integrated product development process the company must have a firm understanding of all the inter-dependencies. The “Integrated Process Matrix” will be invaluable for continuous process improvement, discussed later in this paper.
Create The New Organization:
As was discussed earlier, after the product has been determined and the optimal partitioning developed, the process has been developed to produce the product and the supporting services & tools identified then, and only then, it is time to investigate the type of organization desired. Remember, “The Organization Supports the Process and Services”.
One of the eight functions of the process is “Cost”. This function includes the determination of all of the resources required to execute the process and services. These resources are the facility requirements, equipment and tool requirements, supplier/vendor requirements, and personnel requirements. As important as it is to identify all the resources, it is equally important to understand how they all need to work, and communicate, together. This information has also been developed during the creation of the process as part of the “Information / Communication” function of the process.
There are numerous organizational structures which the company may use and the selection of the type of organizational structure is not as important as developing a culture within the new organization which will allow for open communication and working relationships. As discussed previously, the “Integrated Process Matrix” demonstrates which product partitions, process tasks and services relate with each other. This is very beneficial in determining natural work groups and teams which need to be put in place to perform the process and services.
Implement The New Process, Supporting Services And Organization:
With the new process and organization developed it is time to implement them. Much has been written about implementing change within an organization; therefore, it will not be revisited here. Remember, communication and honesty are required to minimize the fear and insecurity which can result from the implementation of the new process and organization.
Continuous Process Improvement:
Continuous process improvement will keep the company on the leading edge of its industry. It will also reduce the need for total process and organizational revisions. One reason companies make such drastic changes is because the company has become inefficient. As was discussed at the beginning, companies will fall behind simply by standing still. It is easier to make small course corrections along the way than major course revisions all at once.
Continuous process improvement, as its name implies, must be continuous, an ongoing effort, and an improvement, not just re-arrangement. In order to accomplish this a methodology must be put into place to assure these two items occur. Since the process re-engineering was performed and the “Integrated Process Matrix” was developed along three major areas (product partitioning, process and support services & tools), it makes sense to continue this into the process improvement arena. Therefore, three teams, working in conjunction with each other, should be developed to oversee the continuous process improvement effort. The three teams, and their respective responsibilities, would be as follows:
The Product Team –
Support the total process development and continuous process improvement effort
Identify, develop and implement specific processes, based on the total process and the supporting services & tools created, across the organization
Identify and notify the Process Team and Supporting Services & Tool Team of product improvement initiatives
Interface with the Process Team and Supporting Services and Tool Team to assure total process compatibility
The Process Team –
Lead the total process development and continuous process improvement effort
Identify, develop and implement process improvements, based on the product partitioning and the supporting services & tools created, across the organization to assure commonality of process
Identify and notify the Product Team and Supporting Services and Tool Team of product improvement initiatives
Interface with the Process Team and Supporting Services and Tool Team to assure total process compatibility
Initiate “Process Improvement Teams” either along the “product”, “process”, or “supporting service and tool” line, depending on the type of improvement identified
The Support Services and Tool Team
Support the total process development and continuous process improvement effort
Identify, develop and implement common supporting services & tools, which nurture the total process and the product partitions which use them, across the organization
Identify and notify the Product Team and Process Team of supporting services and tool improvement initiatives
Interface with the Product Team and Process Team to assure total process compatibility
This method of process re-engineering may seem long and involved but it is essential. It is ironic that people and companies never have the time, money or resources to do it right the first time but seem to have these resources to do it over when their backs are against the wall. Clearly, this is not the most efficient way to resolve the problem. It is easier, less expensive and less time consuming to do fire prevention than fire fighting. Doing proper process re-engineering and continuous process improvement is fire prevention. Doing traditional re-organization and process re-arrangement is fire fighting. A properly developed, well integrated product development process which produces the products customers want with an organization that supports the process will assure the company that they have truly achieved process improvement and not just accomplished process re-arrangement.
Project Management Institute 1996. A Guide to the Project Management Body of Knowledge. Upper Darby, PA
Project Management Institute’s International Symposium, September, 1997