Business Process Management A best-practice report from 1 6 # - * $ " 5 * 0 / 4 Business Process Management Project Personnel Study Personnel Becki Hack, project manager Marisa Brown, project champion Darcy Lemons, project support Steve Huynh, analyst APQC Subject Matter Experts Cindy Hubert, executive director, Custom Solutions, APQC Bill Curtis, chief process officer, Borland John Alden, executive consultant, Borland Mike Epner, vice president, Process Optimization, Borland Special Advisers Celia Wolf, CEO/publisher, BPTrends Paul Harmon, executive editor/analyst, BPTrends Collaborative Partners Thomas Davenport, center director, Babson College Process Management Research Center Brad Powers, executive director, Babson College Process Management Research Center Editors Krystl Campos Paige Leavitt Designer Fred Bobovnyk Jr membership information For information about how to become a member of APQC, and to receive publications and other benefits, call 800-776-9676 or +1-713-681-4020, or visit our Web site at www.apqc.org. copyright ©2005 APQC, 123 North Post Oak Lane, Third Floor, Houston, Texas 77024-7797 USA. This report cannot be reproduced or transmitted in any form or by any means electronic or mechanical, including photocopying, faxing, recording, or information storage and retrieval. Additional copies of this report may be purchased from the APQC Order Department at 800-776-9676 (U.S.) or +1-713-685-7281. Quantity discounts are available. ISBN 1-932546-51-0 Statement of Purpose The purpose of publishing this report is to provide a reference point for and insight into the processes and practices associated with certain issues. It should be used as an educational learning tool and is not a “recipe” or step-by-step procedure to be copied or duplicated in any way. This report may not represent current organizational processes, policies, or practices because changes may have occurred since the completion of the study. 2 Business Process Management • ©2005 APQC Business Process Management Contents of Study Report 4Sponsor and Partner Organizations A listing of the sponsor organizations in this study, as well as the best-practice (“partner”) organizations that were benchmarked for their business process management activities. 7Executive Summary A bird’s-eye view of the study, presenting the study focus, the methodology used throughout the course of the study, key findings, and a profile of participants. The findings are explored in detail in the following sections. 19Study Findings An in-depth look at the findings of this study. The findings are supported by quantitative data and qualitative examples of practices employed by the partner organizations. 81Partner Organization Case Studies Background information on the partner organizations, as well as their innovative practices in project management. 217Index Business Process Management • ©2005 APQC 3 Business Process Management Sponsor Organizations American Express Co. MetLife Inc. Aramco Services Co. Northrop Grumman Integrated Systems Caterpillar Inc. Cemex, S.A. de C.V. Petroleo Brasileiro S.A. (Petrobras) ChevronTexaco Corp. Ricoh Corp. 1 ConocoPhillips Sears, Roebuck and Co. ExxonMobil Corp. Telstra Corp. Ltd. Gartner Inc. The ServiceMaster Co. Halliburton Energy Services Group U.S. Department of State IBM Corp. The Williams Companies Inc. International Truck and Engine Corp. Xcel Energy Inc. Johnson & Johnson LifeWay Christian Resources 1 4 Two Conoco Phillips divisions participated: Transportation and Global Information Systems. Business Process Management • ©2005 APQC Business Process Management Partner Organizations Air Products and Chemicals Inc. Bechtel Corp.** Bosch Security Systems Inc**. Coors Brewing Co. Dana Corp.** Deere & Co. Northrop Grumman Space Technology Operations Management International Inc. ** These three organizations participated as data-only partners. Business Process Management • ©2005 APQC 5 Business Process Management Executive Summary A 2 ll work is a process. At one time, a process existed within the four walls of an organization. Now modern organizations must manage an ecosystem with no boundaries, one that is consistently buffeted by globalization, faster cycle time requirements, multiple relationships, unknown competitors, and complexity at every turn. Business process management becomes the art of the disciplined, where decisions are made at the front line, closer to the customer. Best-practice leaders realize they must empower staff to make decisions, guided throughout by process. The amount of variability that arises when processes move from flowcharts into action is high. Workers are continually redesigning and improving core processes, as well as subcontracting processes that are not core to their businesses, yet these processes still must be managed. Business process management (BPM) is a broad set of management approaches that encompass process redesign and innovation, process sourcing, and process improvement. BPM continues to evolve in terms of the best practices associated with each approach and the results that are accruing for process-focused organizations. A process focus is the triple play in modern management, yielding greater operational efficiency, control, and customer satisfaction. To focus on processes, workers need to leverage the best directions and practices to create a competitive advantage. This report provides validated, in-depth primary research focused on managing by processes and associated best practices. APQC and 3 Teraquest (the APQC project team) and special advisers BPTrends and Babson Process Management Research Center set out to closely examine BPM best practices that are proven, adaptable, and actionable. rocess—A series of interrelated activities that convert inputs into results (outputs); processes P consume resources and require standards for repeatable performance; processes respond to control systems that direct the quality, rate, and cost of performance. 3 Now Borland through acquisition 2 Business Process Management • ©2005 APQC 7 s u m m a r y • • • • • • Some of the questions driving this consortium study follow. What are the benefits of managing by process? Are those benefits significant? What types of strategies, approaches, and structures are required for successful business process management? Does business process management have a long-term impact on the organizational culture, customers, and leadership? Does it lead to improved productivity across an enterprise? Is there a significant impact on cross-functional decision making? Is there a standard way to define business process management? The APQC project team and the study sponsors selected five organizations to study based on their experience in business process management. The study partners were selected because each organization could articulate a formal strategy for designing a framework, dedicating resources, implementing an initiative, and demonstrating the effectiveness of BPM. Eighty percent of the partners’ BPM initiatives impacted the entire organization. Based on the research, the project team concluded that an enterprise approach allowed for economies of scale and produced larger gains from process improvements leveraged across an organization. HIGHLIGHTS OF FINDINGS 1. Best-practice organizations are able to demonstrate the value of BPM. By linking their BPM initiatives to core business strategies and processes and measuring the impact of implementing BPM initiatives on business outcomes, partners are able calculate the tangible benefits of BPM. These benefits include cost reductions, improved productivity, and increased customer satisfaction. One partner reported five to six times return on investment, conservatively. 2. BPM is the way best-practice organizations conduct business. By integrating process thinking with the organizational structures (functions), business objectives, and people that drive changes in work, partners shift their management focus from hierarchical to horizontal. By becoming a process-focused organization, partners integrate design and management of end-to-end, customer-driven processes with functional activities and goals. This leads to a seamless, unified approach for providing customer value through daily work. 3. Managing the matrix leads to becoming a process-focused organization . Bestpractice organizations minimize hand-offs and recognize that work is an endto-end process. BPM drives the integration of process and function by deploying BPM activities from a matrix approach. The art of matrix management is most successful when beginning with core or value-creating processes and having functional and process ownership reside in the same place. 8 Business Process Management • ©2005 APQC s u m m a r y 4. Best-practice organizations developed comprehensive BPM frameworks . These frameworks encompass the following key elements: an enterprise process model; clearly defined measures to assess process performance and maturity; robust governance structures; human performance management focused on change; a technology infrastructure; and process improvement methodologies to drive progress, support change, and track the impact on the business. The BPM frameworks were instrumental in driving implementation and cultural change through the organization. Alignment of the BPM framework to core business strategies and performance leads to sustainability and success. 5. Enterprise process models ensure top-down understanding and coordination of work flow . The enterprise process model defines and visually portrays how organizations and their employees work and is a key element of the BPM framework. Four of the five partner organizations began their transition to BPM by defining an enterprise process model. A process model is vital to supporting the complex and cooperative activities needed to implement BPM: defining roles and responsibilities, setting standards, aligning measures, and improving processes. Additional benefits include simplification of communication and change. 6. The partners’ BPM frameworks promote a robust governance structure. The partner organizations ensure the success of their BPM initiatives by actively involving their leaders in its design and implementation. The top executives (e.g., CEO, COO, vice president of supply chain, and vice president of human resources) of all of the partners are significantly involved. These leaders meet with a core BPM group monthly as well as engage directly with business units involved with or affected by BPM on a monthly or more frequent basis. Top-down support drives accountability at all levels. 7. Sequenced events with dedicated resources and continued funding drive BPM implementation. Transformation to a new way of working cannot be a part-time job. The partner organizations dedicated as much as 36 percent of the BPM core group’s time to implementation-related activities, such as training, supporting sponsors, and initiating process improvements. In addition, the partners engage and define roles for all levels of the organization, including governance councils, process owners, and process users. Additional people mean additional funding. A good portion of the funding for BPM (80 percent) is being borne by department operational budgets in partners. Sixty percent of the the partners have an independent annual budget to support the BPM initiative. 8. The partners integrate their BPM initiatives into all aspects of human performance and work force management. Change management strategies are important for any transformational initiative, BPM not excluded. Yet having the right people at Business Process Management • ©2005 APQC 9 s u m m a r y the right time at the right place is not always a simple concept. Middle managers and first-level supervisors at partner organizations were greatly involved in the planning and defining process improvements for BPM. Integrating BPM into training, development, performance management, and compensation leads to staff buy-in and compliance of the initiatives. 9. BPM creates a discipline for process improvement . The partners align process improvement activities with the BPM framework. Alignment allows prioritization of process improvement efforts by focusing on the ones that will yield the highest impact to the bottom line, which leads to significant business results that impact revenue, profits, productivity, employee satisfaction, and customer satisfaction. 10. Best-practice organizations measure process performance to see results and maturity of process to see progress. Partners use traditional measurement tools, such as the balanced scorecard, to evaluate the impact and effectiveness of BPM on business performance. Because stakeholders are a critical component of the larger picture that portrays how effectively the organization is performing, the partners designed measures from the stakeholders’ point of view. Four of the five partners use a form of a maturity model to help monitor progress in moving from immature, inconsistent business activities to mature, disciplined processes. Maturity assessments help determine a process’s ability to contribute to organizational objectives, which in turn drives process improvement priorities. The partners report improvements in work flow, which result from more mature processes. ORGANIZATION OF REPORT The purpose of this report is to guide the successful preparation (by establishing a strategy, a structure, and funding), design, implementation, and evaluation and assessment of business process management (BPM) initiatives within an organization. Throughout the report, the elements of the BPM framework are described; this framework is the overarching compilation of the elements critical to enable behavioral change—to transition the culture to one of process focus. Important to this change is credibility of results linked back to strategy. Chapter 1 provides an overview of BPM and sets the stage for the remainder of the report. Chapter 1: Setting the Stage —Chapter 1 addresses why BPM is important, the need for a common language, the origins of BPM, the benefits of this process focus, and BPM critical success factors. Chapter 2: Strategy, Structure, and Funding —Chapter 2 explores how and why organizations undertake BPM and focuses on how organizations initiate and develop a scope for BPM efforts and the goals they seek to achieve. Whether as a result of 10 Business Process Management • ©2005 APQC s u m m a r y a pressing business problem or opportunity, the partners realized BPM’s potential to focus their organizations more closely on customers, high-impact processes, and meaningful business results. They developed a powerful BPM framework as a comprehensive approach to transition their culture to one in which managing by process is a customer- and performance-focused way to manage the enterprise, linking directly to strategy and business imperatives and driving from the top. Chapter 3: Design and Implementation —Chapter 3 begins to explore the BPM framework elements that are critical when designing a BPM initiative and transforming an organization to a process focus: • an enterprise process model to define end-to-end processes (from customer contact through to fulfillment) and ensure lower-level integration and standards; • leadership involvement, definition of roles (e.g., process owners and users), and dedicated BPM resources; • alignment of measures and links to performance scorecards; • change management; • technology enablers to support change; and • the discipline of process improvements linked back to strategy and business imperatives. Chapter 4: Evaluation and Results —Chapter 4 examines how participating organizations evaluate a BPM initiative, demonstrate value, and link BPM directly to business outcomes. By using performance measures and maturity models, the partners measure BPM effectiveness and efficiency and have seen results in both. Through their BPM initiatives, these organizations have seen dramatic process improvements with bottom-line, high-impact results: increased productivity, more competent employees, happier and more loyal customers, and increased revenue and profits. Chapter 5: Lessons from the Front—Chapter 5 examines some challenges the partners recognized and overcame along their BPM journeys. Importantly, it summarizes the factors partners espoused as critical to achieving their success. Five case studies detail how Air Products and Chemicals, Inc.; Coors Brewing Co.; Deere & Co., Worldwide Ag Customer Support; Northrop Grumman Space Technology; and Operations Management International Inc. implemented and manage their BPM initiatives. PARTICIPANT INFORMATION Figure 1 (page 12) depicts the industry breakdown for the 30 organizations participating in this study. Fifty-seven percent of the participating organizations reported global operations. Business Process Management • ©2005 APQC 11 s u m m a r y Figure 1: Industry Breakdown for the 30 Participating Organizations Industry Partners Sponsors and Others Chemicals/Petroleum 20% 16% Manufacturing 20% 12% Utilities 20% 4% Aerospace/Defense 20% 4% Food and Beverage 20% Consulting/ProfessionalServices 12% Telecommunications 4% Health Care 4% Insurance 4% Government 4% Retail 4% Automotive 4% Electronics 4% Services/Hotel 4% Bank/Financial 4% Other 16% n = 5 (partners) n = 25 (sponsors and others) Sixty-one percent of the organizations participated in this study on behalf of their enterprise. All five partner organizations have extensive BPM implementation and report significant results. BENCHMARKING METHODOLOGY APQC’s Benchmarking Model: The Four-phased Methodology The APQC consortium benchmarking study methodology was developed in 1993 and serves as one of the premier methods for successful benchmarking in the world. It was recognized by the European Center for Total Quality Management in 1995 as first among 10 leading benchmarking organizations’ models. It is an extremely powerful tool for identifying best and innovative practices and for facilitating the actual transfer of these practices. Phase 1: Plan The planning phase of the study began in summer 2004. During this phase, secondary research conducted by APQC was used to help identify innovative organizations to participate as best-practice organizations (the partners). In addition to this research, APQC staff members and the 12 Business Process Management • ©2005 APQC s u m m a r y subject matter experts identified potential participants based on their own firsthand experiences, research, and sponsor recommendations. Each recognized organization was invited to participate in a screening process. Based on the results of the screening process, as well as organization capacity or willingness to participate in the study, a final list of 12 potential partner candidates was developed. A kickoff meeting was held in October 2004, during which the sponsors refined the study scope, gave input on the data collection tools, and indicated their preferences for site visits to partner organizations. Five organizations were selected for site visits from the original list: Air Products and Chemicals, Inc. (APCI); Coors Brewing Co. (Coors); Deere & Co., Worldwide Ag Customer Support (Deere); Northrop Grumman Space Technology (NGST); and Operations Management International Inc. (OMI). Finalizing the data collection tools and piloting them within the sponsor group concluded the planning phase. Phase 2: Collect Three tools were used to collect information for this study: 1. screening questionnaire —qualitative and quantitative questions designed to identify best practices within the partner organizations; 2. detailed questionnaire —quantitative questions designed to collect objective, quantitative data across all participating organizations; and 3. site visit guide —qualitative questions that parallel the areas of inquiry in the detailed questionnaire, which serves as the structured discussion framework for all site visits. The five partner organizations selected for continued participation in the study responded to the screening questionnaire as well as the detailed questionnaire. Three partner candidates that were not selected for site visits were invited to participate as “data partners.” Twenty-one of the 23 sponsors completed the detailed questionnaire. (Two sponsor organizations did not complete the detailed questionnaire. One sponsor organization had two separate divisions participating in the study; thus, it completed two surveys and brought the total sponsor responses to 22.) Additionally, the five partner organizations hosted day-long site visits attended by sponsors, other partners, and members of the study’s project team. The APQC project team prepared a written report (case study) of each site visit and submitted it to the partner organization for clarification and approval. Phase 3: Analyze The subject matter experts and APQC analyzed both the quantitative and qualitative information gained from the data collection tools. The analysis concentrated on examining the challenges organizations face in the four study focus areas. 1. BPM strategy, structure, and funding 2. BPM design Business Process Management • ©2005 APQC 13 s u m m a r y 3. Implementing and sustaining BPM 4. Evaluation and results The analysis of the data, as well as case examples based on the site visits, is contained in this report. Phase 4: Adapt Adaptation and improvement, stemming from identified best practices, occur after the sponsors apply key findings to their own operations. APQC staff members are available to help organizations create appropriate action plans based on the study. SUBJECT MATTER EXPERTS: APQC AND BORLAND Cindy Hubert, executive director, Customer Solutions, APQC Hubert is the executive director of APQC’s Customer Solutions, which provides individualized and collaborative approaches in the areas of metrics, measurement, best practices, process improvement, and knowledge management to solve business needs across multiple industries. Over the past nine years, Hubert and her team have worked with more than 300 organizations in a variety of industries including oil and gas, manufacturing, health care, financial, retail, nonprofit, and consumer products. Hubert has led customer and employee survey projects that included complex analysis and empirical research and has created training programs, communication plans, and competency models. Hubert has played an instrumental role in the development and implementation of APQC’s Open Standards Benchmarking Collaborative™ (OSBC) Research, which provides a standardized process framework and measures that organizations worldwide use to benchmark and improve their performance. The measures are based on cost, quality, cycle time, and productivity and focus on key functional areas such as supply chain management, financial management, human resources, and customer contact centers. Hubert has been a keynote presenter at APQC’s Performance Measurement conference and has spoken extensively on business performance and process issues and best practices at conferences around the world. Dr. Bill Curtis, chief process officer, Borland Dr. Bill Curtis is chief process officer at Borland, where he uses his expertise in software process improvement, organization change, people management, and technology development to coach management teams in how to orchestrate change, lead assessments of organization capability, and craft appropriate programs for improving clients’ organizational maturity. Dr. Bill Curtis is a former director of the software process program in the Software Engineering Institute (SEI) at Carnegie Mellon University, where he led the project to produce the Capability Maturity Model® (CMM®) from the process 14 Business Process Management • ©2005 APQC s u m m a r y maturity framework developed by Watts Humphrey. He is also the architect and primary author of the People CMM, an organizational maturity model for attracting, developing, motivating, organizing, and retaining an outstanding work force. He was a member of the CMMI® authorship team where he focused on the system acquisition extensions. He also leads programs to construct capability maturity models for clients in industries where CMMs have not yet been defined. He has published several books and over 100 technical articles in the areas of software engineering and management. He is on the editorial boards of five technical journals and is a popular keynoter. Dr. John Alden, executive consultant, Borland Dr. Alden works with the sponsoring executives and the governance entities (boards, steering groups, task forces) to assure that strategy, business process, technology enablement, and human capital are aligned to produce required business outcomes. John has more than 30 years of direct experience in industry and government, understanding the needs of large, complex organizations, as they evolve the skills of their people and their use of technology and processes. He brings a keen understanding of the needs of executives, as well as those of the rest of the organization, based on the positions of responsibility he has held and the clients he has served during his career. Mike Epner, vice president of Process Optimization, Borland Mr. Epner directs and manages Borland’s Process Optimization Practice (formerly TeraQuest), which includes a team of strategic consultants, process maturity assessors, workshop facilitators, and process improvement advisers. He plays a primary role in building and managing relationships with clients. In many of his ongoing engagements with clients, Mike works with organization leaders to identify the few critical business areas that best benefit from process improvement. With more than 18 years of experience in software development, management, and outsourcing, he brings real-world experience to clients to optimize their investment of scarce resources to simultaneously meet near-term and long-term objectives. SPECIAL ADVISERS: BUSINESS PROCESS TRENDS Paul Harmon and Celia Wolf are co-founders of BPTrends, the primary source of business intelligence for the global community of business executives and process change practitioners focused on business process management. Through this valuable resource, industry thought leaders provide news, analysis, and opinion on trends, ® CMM, CMMI, and Capability Maturity Model are registered in the U.S. Patent and Trade Office. Business Process Management • ©2005 APQC 15 s u m m a r y directions, and best practices relating to all aspects of business process change, including strategy, architecture, redesign, automation, and human performance. Celia Wolf, CEO and publicist, Business Process Trends In addition to serving as the publisher and founder of Business Process Trends, Wolf is CEO and founder of Enterprise Alignment, a professional services company providing educational and consulting services to managers interested in understanding and implementing business process change. Celia has more than 25 years of experience in business development, operations management, and marketing across a broad range of industries and markets. For the past 15 years she has focused her efforts on the software applications, tools, and services markets. Most recently Celia has been a consultant to start-ups and restarts, developing and implementing strategies for e-business initiatives. Paul Harmon, executive editor/analyst, Business Process Trends In addition to his role as executive editor and founder of Business Process Trends, Paul Harmon is chief consultant and founder of Enterprise Alignment. Paul is a noted consultant, author, and analyst concerned with applying new technologies to real-world business problems. He is the author of Business Process Change: A Manager’s Guide to Improving, Redesigning, and Automating Processes (2003) and co-author of Developing E-business Systems and Architectures (2001). He has worked on major process redesign projects with Bank of America, Wells Fargo, Security Pacific, Prudential, and Citibank, among others. He is a member of ISPI and a Certified Performance Technologist. COLLABORATIVE PARTNER: BABSON COLLEGE PROCESS MANAGEMENT RESEARCH CENTER The center’s mission is to be the definitive authority on process excellence for high-performance enterprises and service providers. It is a forum to provide organizations with access to the best thinking on process management and a network of peers with whom to share best practices. Thomas H. Davenport, center director, Babson Process Management Research Center (formerly Babson Institute for Process Management) Tom Davenport holds the president’s chair in information technology and management at Babson College and is an Accenture Fellow. At Babson he is also director of research at the School of Executive Education and leads two sponsored research programs there: The Institute for Process Management and Working Knowledge, a program on knowledge and learning in organizations. Tom is a widely published author and acclaimed speaker and consultant on the topics of process management, information and knowledge management, reengineering, enterprise systems, and electronic business and markets. In addition to Thinking for a Living: Getting Better Results from Knowledge Workers (Harvard 16 Business Process Management • ©2005 APQC s u m m a r y Business School Press 2005), his works include the first books on business process reengineering and achieving value from enterprise systems. He has written articles for such publications as Harvard Business Review, the Financial Times, CIO, and InformationWeek. In 2003 he was named one of the world’s “Top 25 Consultants” by Consulting magazine. Brad Power, executive director, Babson Process Management Research Center (formerly Babson Institute for Process Management) Brad Power is the executive director of the Process Management Research Center at Babson College. With more than 20 years of management consulting and research experience across a variety of industries around the world, he addresses the important business opportunities and problems of clients by combining human, technological, and business perspectives. From 1981 to 1997, Brad worked for CSC Index, the premier business reengineering firm. In addition to leading many process innovation consulting projects, he led CSC Index’s research service in business reengineering for three years, working with more than 30 senior executives leading major reengineering initiatives and the founders of business reengineering. Brad has an M.B.A. from UCLA and a B.S. from Stanford University. APQC’S BACKGROUND IN BUSINESS PROCESS MANAGEMENT This study marks the first consortium benchmarking study on BPM conducted by the APQC. However, process has been part of APQC’s business language for years, starting with its role with the Malcolm Baldrige National Quality Award and continuing through more than 120 consortium benchmarking studies focused on process improvement, the design of the Process Classification FrameworkSM (PCF), a body of work on knowledge management, Six Sigma studies, and most recently, the global Open Standards Benchmarking CollaborativeSM (OSBC). • Process Classification Framework SM (PCF) —APQC began developing the PCF in the early 1990s. It is a unique benchmarking tool that allows organizations to measure their activities in an industry-neutral paradigm. A global advisory council of industry leaders helps to define the various components of the PCF. The PCF enables organizations to understand their inner workings from a horizontal viewpoint, rather than a vertical perspective. From there, it is much easier to see where the organization is and where it needs to go. APQC has also created a list of measures often used by leading organizations to measure performance within specific functions and/or process areas. • Open Standards Benchmarking Collaborative SM (OSBC) —The Open Standards Benchmarking Collaborative research is the overall research effort to develop commonly used processes, measures, and benchmarks that are available to organizations worldwide to improve performance. The mission of the research is to establish, lead, and promote a universal process framework and performance Business Process Management • ©2005 APQC 17 s u m m a r y metrics, created by industry for industry. The OSBC research strives to enable rapid and innovative improvement within organizations. Led by APQC and the project’s advisory council, this global research will identify performance levels within key business, government, health care, and educational processes. The measures that the research will focus on are: cost, quality, cycle time, and productivity. The Open Standards Benchmarking CollaborativeSM research will also deliver tools that organizations can use to embrace standards around processes and measures. 18 Business Process Management • ©2005 APQC Business Process Management Study Findings 21Chapter 1—Setting the Stage 29 Chapter 2—Strategy, Structure, and Funding 41 Chapter 3—Design and Implementation 65 Chapter 4—Evaluation and Results 73 Chapter 5—Lessons from the Front Business Process Management • ©2005 APQC 19 Business Process Management c h a p t e r 1 Setting the Stage T he discipline of process thinking has evolved rapidly through practice. There are improved methods and practices to recognize performance gaps in business processes, which allow employees to envision how they can improve. In addition, software applications and tools to document and model the ideal work flow of a process have also improved in the past five years. What has been missing is a comprehensive and structured framework to align and integrate business processes and supporting activities to organizational strategy and outcomes. Closing that gap is addressed in this report. In order to set the stage for the key findings in this report, the APQC project team felt it was important to address the established principles of business process management, as well as how it is defined, how it evolved, and keys to its success. Developing a Common Language One of the goals of this consortium was to begin developing a common framework and language for BPM. History shows that creating common definitions and standards for a business management practice advances the field by enabling faster and more flexible change, adoption, and institutionalization. The term “business process management” has been used in a number of contexts, from both a technology and a change management perspective. The varied and large number of definitions provided by vendors, consultants, and practitioners offer little help in establishing a simple, common meaning, but hiding behind the many descriptive definitions of business process management is an important approach 4 to work flow that many organizations are taking very seriously. 4 Leavitt, Paige. “What is Business Process Management?” APQC CenterView. APQC, 2004. Business Process Management • ©2005 APQC 21 ch a p t e r 1 For the purposes of this study, BPM is referred to as a management approach that governs work flow in an organization. BPM focuses on work (and flow) across functions. An important step in this research was to understand the continuum from functional- based organizations to process-based organizations. • Functional-based organizations are hierarchical in practice and manage people who are performing vertical, process activities. Functional organizations often 5 find it difficult to respond to rapidly changing markets and customer needs. • Process-thinking organizations conceptualize groups of activities as processes and seek to understand how all of the processes in the organization work together to 6 take inputs and produce products, services, and profits. Process thinking leads to the development of definitions and documentation of processes but does not involve action to integrate people and the business. • Process-focused organizations integrate design and manage end-to-end, customer-driven processes that are tied to functional activities and goals. The focus for management shifts from hierarchical to horizontal management. Process-focused organizations take action to integrate process thinking with the organizational structures (functions), business objectives, and people that drive changes in work and cause behaviors to change. • Process-based organizations reorganize and manage completely around processes with an end-to-end focus on work flow that creates value for the customer. Functional activities are embedded in the processes, and a senior executive is responsible for the inter-enterprise process. Process-based enterprises organize work starting at the customer interface to final service or product delivery. An example of this is the “procure to pay” process. This process begins with a customer request for a product/service and ends with the final invoicing of the customer. This involves a complete integration of finance, sales, and supply chain. In this study, all of the partners can be categorized as being process-focused organizations; for this reason, this report focuses on emerging best practices. Simply defining the terms above is not enough to develop and receive the benefits of a governance model, process life cycle, and transformation of organizational behavior. It is important to understand how the partner organizations are evolving to rigorously apply BPM to achieve business performance excellence. 5 6 22 www.helpdesksurvival.com (retrieved February 2005). www.bptrends.com/resources_glossary.cfm (retrieved February 2005). Business Process Management • ©2005 APQC c h a p t e r 1 The Origins of BPM Before detailing the critical success factors and elements that enable successful BPM, it is important to clarify that BPM did not just appear. Process thinking has been around for years, as noted in the evolution of APQC’s research (Figure 2), but adding value through a process focus demands additional—and creative— thinking. APQC “Process” History 20 20 19 9 5 19 9 1 19 7 7-8 3 05 SM 01 OSBC * Six Sigma and Process Improvement Knowledge Management and Collaboration Benchmarking and APQC’s Process Classification SM Framework (PCF) Productivity and Quality: Malcolm Baldrige 1977 2005 * Open Standards Benchmarking CollaborativeSM Research Figure 2 One of the first steps in the process-thinking to process-focus evolution is to define the core work processes that deliver products and services to customers. Whether the goal is to increase productivity, add customer value, or drive profitability, partners continue to build on past process efforts to help define core processes and assign ownership for those processes. Some of the partners’ BPM efforts evolved from process improvement efforts. The continued focus on process improvement by using methods such as Six Sigma, quality management, ISO, and Baldrige Award criteria led to a better and more advanced understanding of process for the study partners, which in turn led to a better integration of BPM with their strategies, performance, and functions. Business Process Management • ©2005 APQC 23 ch a p t e r 1 The partners reported that the most pronounced successes came from strongly integrating BPM into the core, or mainstream, business flow. BPM is not a process unto itself; it is simply the means by which the business is conducted and evolved. Northrop Grumman Space Technology (NGST) identified the need to change the way they did business in 2001. (At the time, this change was driven by TRW, which Northrop Grumman Corp. acquired in 2002, making it the No. 2 U.S. defense contractor.) According to NGST Six Sigma Vice President Ron Smith, “Optionalism was fraught throughout the organization; we had 30-plus ways of calculating pi.” Senior leadership selected Six Sigma as the transformational framework because it is process-focused. Projects drive change with customerfocused outcomes, and the methodology fit with the NGST culture. In order to enable Six Sigma projects, NGST had to realign by process so that a process could be defined, measured, analyzed, and improved. Thus began the company’s evolution to BPM with the objective to improve performance of NGST business practices and apply those practices to the sector’s business. BPM Benefits If you really want to become process-focused, you are changing the way corporations have been evolving, which is around functions, around businesses. Now what we are saying is that there is this thing called “process,” a whole new way of thinking about the way we add value. —George Diehl, global director, Process Management COE, APCI In a recent interview, Dr. Michael Hammer, president of Hammer and Company, stated that only 10 percent to 20 percent of Fortune 500 companies are managed with a process focus. When asked why that is, Hammer said, “Because in many ways this is the most difficult thing companies have ever undertaken. It entails changing everything: organizational structure, managerial roles, compensation systems, measuring systems, job definitions, [and] IT systems. There isn’t a thing in 7 the company that does not get changed. But the payoffs are astonishing.” Why would anyone undertake a massive redesign or reorganization effort to manage their enterprise by process? Partners’ reasons for beginning their BPM initiatives were to solve a business problem or capitalize on a business opportunity by changing their modes of operation. As a result of focusing on a business problem or opportunity, partners were able to demonstrate the value and benefits of BPM. 7 24 “ Michael Hammer and Howard Smith on Process Thinking.” CSC World. June-August 2003: pp. 28-30. www.csc.com/aboutus/cscworld/jun_aug_03/csc_world_v8_2003.pdf (retrieved February 2005). Business Process Management • ©2005 APQC c h a p t e r 1 Most of the primary benefits of BPM for the best-practice partners can be traced to strategic alignment from top leadership to the front line and the customer, as well as the rigor behind their process improvement efforts. In addition, partners installed processes that involve relentlessly measuring, tracking, and reporting performance that is aligned with business outcomes. As a result of these unyielding efforts, the partner organizations are able to: • achieve better results in process improvement efforts —apply a consistent and replicable approach to assess and improve processes that are aligned with the strategy and business outcomes, • reduce costs—avoid redundancies in process improvement, • increase customer satisfaction—define and align end-to-end business processes with measures reflective of customer needs, and • improve productivity—eliminate process overlaps and ineffectiveness by reducing process complexities and implementing enterprise-wide standards. A few examples follow. Better Results and Reduced Costs Conservatively, we have seen five to six times ROI. —Dick Croxall, vice president of mission assurance and chief engineer, NGST By improving a process design engineering issue related to one chip called an application-specific integrated circuit (ASIC), NGST caught 13 defects in its new ASIC process implementation. This resulted in approximately $6 million of cost avoidance. is the third largest brewer in the United States and is among the top 10 brewers in net sales in the world. Coors BPM core team estimates that it has saved Coors more than $3 million on its Cornerstone project, which integrated 150 supply chain processes, improved services, reduced order cycle time, and eliminated 85 percent of the legacy systems. In addition, it discovered $2 million in reverse logistics. Coors Brewing Co. Increase Customer Satisfaction With headquarters in Englewood, Colo., Operations Management International Inc. (OMI), a leader in water and wastewater facilities management, operates more than 180 facilities around the world including projects in the Americas, the Middle East, and Asia. OMI attributes its growth to the high-quality services it provides at the lowest possible cost and to its dedication to customer satisfaction. A redesign of OMI’s supplier alliance approach achieves between $500,000 and $750,000 cost savings annually. Business Process Management • ©2005 APQC 25 ch a p t e r 1 Air Products and Chemicals Inc. (APCI), a Fortune 500 organization, sells gases, chemicals, and equipment in more than 30 countries and has 19,900 employees worldwide. APCI measures 54 individual customer characteristics. The characteristics can be defined as table stakes—areas designated as the cost to conduct business— and key drivers—areas that differentiate APCI to their customer, add value, and increase customer satisfaction. Increased customer satisfaction leads to a higher percentage of business gained from these customers as well as recommendations to other potential customers. APCI has linked BPM implementation to increased customer loyalty (Figure 3). Customer Loyalty SAP Recovery Evident in Germany Key Drivers—Differentiators (from the customer’s perspective) • Ease of doing business • Respond and resolve problems • Lower cost of business Customer Loyalty Germany • Manage activities in an integrated fashion • Increase productivity and efficiency Business Basics—”Table stakes” • Consistent reliable product SAP Go Live • Delivery as committed • Complete and accurate invoicing Currently Note: Vulnerable = Indifferent + At Risk Customers Figure 3 Resource Management Leads to Productivity Deere & Co. is the world’s leading manufacturer of agricultural and forestry equipment and a leading manufacturer of construction, lawn, grounds, and turf care equipment. The organization’s global work force totals 46,000. Since implementing a new contact management enabling process, Deere has seen success in many areas. One example has been in the number of dealer technical assistance cases, which, prior to the new process, increased by 3.5 percent per month. After implementing contact management, Deere had a net decrease of 13.5 percent from 2002 to 2005. 26 Business Process Management • ©2005 APQC c h a p t e r 1 Deere contact management process owner Mike Pasold attributes this to documentation, efficient routing, and dealer coaching, which are all results of standard processes. He said, “That kind of turns it around and gives it some real value—business results from implementing processes. That means fewer cases, fewer people to take cases, [and] faster response times to customers delivered by dealers. That is the ultimate of where we want to get to, so that dealers can fix the problems faster.” After seeing the tangible and anecdotal evidence (see Chapter 4) of successful BPM implementation, the APQC project team and sponsors understood why organizations managed by process. The next step was to understand how organizations achieved these benefits. Critical Success Factors As the APQC project team researched and analyzed the practices and approaches of each partner, three themes emerged as critical success factors for successfully implementing BPM. These themes will serve as the foundation for examining the elements that support BPM. 1. Each partner developed and implemented an evolutionary, performance-based BPM framework that aligns and supports its organizational mission, values, strategies, business objectives, and customer needs. Ultimately, this approach provides a blueprint of how all elements of BPM work together. The objectives of partners’ frameworks are to establish accountability and to encourage integration among processes and people. Although each partners’ BPM is unique in the way it operates, there are common elements to be noted in each one. Some of these elements include an enterprise process model, performance management systems, and process improvement methods. 2. Partners are able to define their BPM journeys by clearly articulating a process life cycle. This life cycle involves discovering, designing, and deploying a process as well as optimizing the process by analyzing the performance and feeding back any changes for improvement into the work flow. Best practices discovered through benchmarking and process improvement can be integrated into this seamless process flow to establish a process discipline—a routine of core repetitive processes. In turn, the process life cycle becomes the foundation for continuous improvement, by allowing for standardization and simplification to benefit customers and employees. By building a culture of discipline and developing a Business Process Management • ©2005 APQC 27 ch a p t e r 1 common language, these benefits are delivered through dynamic and repeatable processes. “Deliver the Difference,” the platform for business excellence and corporate order at APCI , mandates the concept of a unified company. One of the four key foundational initiatives involves reducing cost through work process simplification and standardization. 3. A platform for change and transformation is embedded in the day-today activities. Partners used continuous and direct communication from engaged leaders, robust performance measurement approaches, new roles and responsibilities defined by process, and ongoing training to mature their organizations from process thinking to a process focus. Summary This report will explain how business process management enables organizations to understand their inner workings from a horizontal, process viewpoint, rather than a vertical, functional viewpoint. Starting with the next chapter focusing on BPM governance models, strategies, and structures, this report will explore in-depth how the partner organizations successfully align and manage business processes. 28 Business Process Management • ©2005 APQC Business Process Management c h a p t e r 2 Strategy, Structure, and Funding N o matter what its name—model, architecture, framework, or blueprint—each partner had a formal and visual way of depicting its BPM initiative and the accompanying elements. After reviewing and analyzing each partner’s depiction of their BPM initiative, the APQC project team determined that the term “BPM framework” was all-encompassing of the partners’ efforts and, consequently, is used to explain this approach throughout the report. 8 The partners applied systems thinking to how all of the elements of BPM would work together. Each developed a powerful BPM framework as an approach to not only manage core operating and management processes but also prioritize and leverage process improvements across the enterprise, resulting in an advanced, more integrated level of coordination of strategy and work. The frameworks partners created and tested over time reflect a multidimensional view of their businesses, using process improvement methodologies as a unifying framework. The framework for BPM is best applied as an umbrella over existing organizational methodologies and structures rather than replacing them. The following common elements and features were found in all of the partners’ frameworks. • The overall organizational strategy is aligned with business objectives. • An enterprise process model provides an end-to-end view of core processes and common process definitions and language. Three of the five partners developed 8 S ystems thinking is defined as “conceptualizing sets of entities, activities, or organizations as systems. Focusing on how elements relate to each other and depend on each other.” www.bptrends.com/resources_glossary.cfm?letterFilter=S&wordid=1585D4F8-1031-D5223B0DDA91FBC81F2B (retrieved February 2005) Business Process Management • ©2005 APQC 29 ch a p t e r 2 • • • • • their enterprise models by starting with an existing industry, quality, or process schema. Performance management utilizes performance scorecards and business measures as well as methods and approaches to assess process maturity. Leadership is engaged through governance councils and participation in design. Change management approaches such as training, the transfer of best practices, and lessons learned must be incorporated. Technology enablers support and automate BPM efforts. Ron Smith, vice president of Six Sigma at NGST, stated that infrastructure is just as important because an organization can have the greatest process, but if the data associated with that process are not available, then BPM will not be successful. Robust process improvement methodologies including Six Sigma, continuous improvement, ISO assessments, and quality management systems facilitate the transition from design to execution and help mature the process life cycle. Quality as a business strategy is OMI’s driving philosophy that incorporates BPM. This strategy enables OMI to view and measure the organization as a system and links OMI’s family of measures to planning and managing improvement efforts. Executive leadership uses the framework to plan system-wide improvement on an annual basis, linked to its balanced scorecard and two- to five-year strategic imperatives. In addition, the BPM framework is a useful tool for problem identification, orientation, and collaboration. Deere’s business process excellence initiative, driven out of the Malcolm Baldrige excellence criteria, was established as: • a means to rapidly and dramatically change business results and enhance customer value; • an intense focus on process management and improvement; • a common language, framework, and methodology for continuous improvement; • Six Sigma concepts and practices; and • a way for employees to understand all aspects of how Deere does business. Strategic Alignment: Play Under the Main Tent “It’s simply the way we conduct our business,” was the resounding mantra heard from all partners when discussing their BPM initiatives. The APQC project team wanted to learn how partners moved their BPM initiative from flavor-of-the-month status to a permanent mode of operations. All partners stated that linking BPM to critical business objectives, activities, and outcomes resulted in a more aligned organization. Partners ensure long-term 30 Business Process Management • ©2005 APQC c h a p t e r 2 sustainability and success of process management by aligning their BPM frameworks and objectives with core business strategies. 1. 2. 3. 4. 5. 6. The top six partner objectives for BPM initiatives are: to better align the organization with new business priorities, to increase productivity, to improve work force performance, to increase customer satisfaction, to reduce costs, and to change organizational culture. Best-practice organizations use their BPM frameworks to provide connectivity of these objectives to business measures of outputs and outcomes as indicators of the impact of BPM. In addition, the alignment of process improvement to the BPM framework demonstrates a clear impact to business objectives and can be measured for results. Partners clearly expect BPM to have a tangible impact on business outcomes. Figure 4 shows the perceived impact of BPM on business objectives. The partners’ perceived impact may be high in these areas because they are specifically addressing the priorities of the business units and functions they are supporting. The APQC project team concluded that partners are actually seeing an increased impact on key business outcomes such as reduced costs, increased productivity, and improved work force performance due to their focus on better aligning the organization with new business priorities. Alignment leads to a more mature and effective process state, which causes a downstream impact on other core business objectives and results. Average Rating of BPM Initiative on Objectives Better align organization with new business priorities 6.8 6.0 Increase productivity Improve work force performance 5.8 Increase customer satisfaction 5.4 5.2 Reduce costs 6.6 Change organizational culture 0 1 Partners (n=5) 2 3 4 5 6 7 Frequency of Response Figure 4 The data also suggest that culture change is not an antecedent of BPM; but rather, when BPM is sewn successfully into the fabric of the organization, it will lead to an acceptance and drive the culture to adapt to a new way of working. The Art of Matrix Management It has been written by many process management experts that it is necessary to turn an organization upside down in order to develop a process focus, but the Business Process Management • ©2005 APQC 31 ch a p t e r 2 APQC project team and sponsors were not convinced. Consequently, the project team set out to determine if functions and processes could co-exist and, if so, what were the most effective approaches to get results. A process-focused organization for the sake of being process-focused has little value and, quite frankly, has a negative feel to it. If it is not placed within the context of the strategy and direction of the company, you are probably not going to get a whole lot of recognition or buy-in for the concept itself. —Bill Cantwell, vice president of supply chain, APCI Function vs. Process Leadership Process Managed Customer Acquisition Product Delivery Order Fulfillment Customer Support Channel Management Human Resources Information Technology Business Acquisition Finance and Accounting Quality Human Resources R II RI Marketing Deere’s BPM initiative began as a centralized program Business driven by the top Customer executives. It has since Matrix Focused evolved to a more decentralized program at the execution level, whereas monitoring and strategic direction are still centralized. As Figure 5 a result, the company deploys BPM activities from a matrix approach. The company’s functional roles and process management matrix provides a visual illustration of Harmon’s definition (Figure 5). 9 32 Engineering Manufacturing Process-thinking, process-focused, and process-based organizations are key concepts that help organizations define where they are on a spectrum of process evolution. Paul Harmon’s function-process matrix provides clarity on what the evolution from functional and process-thinking to process-focus looks like. The function-process Functional Roles vs. Process Management matrix lists functions A Balance of Function and Process Management or departments on the horizontal axis and value chains or business Function Managed processes on the vertical axis and shows which functions are involved 9 in which processes. www.bptrends.com (retrieved February 2005). Business Process Management • ©2005 APQC c h a p t e r 2 Process ownership at Deere is not full-time at the enterprise level, but it is fulltime in the divisions and functions. Functional and process ownership often reside in the same person, which is a practice Deere—along with Coors and APCI—deems as most successful. Although the majority of individuals at Deere report to a function, the organization makes it clear that each person works within a process with specific goals focused on deploying their work (e.g., paying claims and helping a dealer.) OMI’s linkage of processes model is the enterprise business process management framework and defines how OMI has integrated process with functions. The linkage of processes model identifies more than 180 processes that are central to the organization. There are three categories of processes: 1. enabling and driving processes for the organizations such as measurement, strategic and financial planning, and communication processes; 2. establishing core or value-creating processes; and 3. supporting processes associated with traditional business functions such as procurement, finance and accounting, human resources, information technology, and communication. These 180 processes are integrated to provide alignment of goals and objectives of the organization. APCI is not, nor does it strive to be, process-based. It is not organized by process but by function with a dimension that is focused on the business and geographical location (Figure 6). APCI’s global process management framework has three axes. 1. Businesses determine where people work, as well as strategy and customers. 2. Functions describe what employees do and how they make sales calls, process orders, and Global Process Management create financial A Third Dimension in Management statements. 3. Processes describe how employees do BUSINESSES • Businesses (Business unit, region, focused on P&L’s and markerts) the work. determine where Within these dimensions, APCI began to examine the concept of the connectivity of jobs. Historically, the company had a tendency to isolate jobs and hand off W or k “Best Company to Invest In” we work. FUNCTIONS (Departments, Centers of Excellence) • Functions describe what we do. “Best Company to Work For” • Processes focus on how we do our work. PROCESSES (Source, make, fulfill, etc.) “Best Company to Buy From” Figure 6 Business Process Management • ©2005 APQC 33 ch a p t e r 2 responsibilities. The company is currently minimizing handoffs and recognizing that work is an end-to-end process. In 2005 APCI plans to form shared service centers, which will be organized by process; Supply Chain Vice President Bill Cantwell said this is a potential step toward APCI being a more process-based organization. As the partner organizations began their BPM journey, there was a clear shift of management from functional to process, as functional areas became more integrated as part of BPM. This shift can be seen as instrumental in leading to process-focused and cross-boundary cooperation. This cooperation has a significant impact on moving behavioral change through the organization. According to some of the partners, a process focus may be a critical step on the path to becoming processbased. Ultimately, partners’ drive toward process is the means to accomplish work most cost effectively. Partner organizations were intent on setting BPM up as the way they run their businesses. By integrating processes with the functional areas of the business, they were able to measure process-related goals that tied directly to functional goals while continuing to focus on horizontal work flows. Today’s NGST organization is exceptionally process-focused, said Six Sigma Vice President Ron Smith. Fourteen processes report directly to the NGST president: five core processes, six sector-enabling processes, and three corporate enabling processes. NGST is a matrix-managed organization in the sense that the programs’ management staff report to the programs’ organization and draw their talent from the other organizations (engineering, production, supply chain, etc.) as required. In a similar matrix relationship, the enabling processes support all core processes. (See the NGST case study for details on reorganization to a process focus.) is transforming itself to become more process-focused so that it can drive productivity and customer value. Supply Chain Vice President Bill Cantwell said APCI’s vision is to be an organization where all work is “thought of, performed, and managed as a process, focused on the customer to create satisfaction and ultimately customer loyalty.” APCI Value Creation Defines the Course of BPM Integration Partners set out by developing enterprise process models aligned to business strategies; adapting external best practices; and enforcing standards to expedite BPM design, implementation, and bottom-line impact. They chose to do these key activities where the most value was realized by the customer and where they were able to expand based on strategic priorities. 34 Business Process Management • ©2005 APQC c h a p t e r 2 Today, the partners report significant progress in integrating the majority of functional areas into BPM, with the greatest degree of integration in supply chain, financial management, human resources, and customer service (Figure 7). established an integrated supply chain group to focus on building standard capabilities, solutions, and global strategies across the company. The supply chain’s processes compose $4.6 billion in spend annually. “It is the core set of processes where the money is,” said Tom Ward, vice president of integrated supply chain for APCI. APCI Extent of Functional Area Integration with BPM Financial management 4.3 2.3 Research and development Information technology 3.3 4.0 Human resources 3.4 Customer service 3.0 Marketing and sales The APCI group members are deployed globally. A director has been assigned to drive the Supply chain supply chain activities for each business. To create a unified approach, the businesses align everything 0 1 Partners (n=5) that they do with what the integrated supply chain team does at the enterprise level. Because Figure 7 the integrated supply chain team is responsible for continuous improvement and has a supply chain key performance indicator dashboard, each business has the same responsibility. 4.5 2 3 4 5 6 7 Frequency of Response A challenge for APCI was to focus on the supply chain without creating a separate structure; the company wanted to work with the existing organizations. It wanted to leverage the existing continuous improvement, process management, and knowledge management infrastructure. It reorganized without spending any new money and actually reduced costs due to overlapping activities. APCI’s goal is to have 13 percent operating return on net assets by 2007. It is driving a program to triple productivity based on APCI’s historic rate. The supply chain teams play a critical role by continuously improving the supply chain and reducing functional costs. People first tried to meet the goals by simply reducing service levels and not worrying about effectiveness. To prevent a slippage in effectiveness, the company is now entering into service level agreements with its functions and businesses. Senior Management Commitment Executive sponsorship driven from the CEO level is required and essential if BPM is to be implemented on a large scale. BPM frameworks promote a robust governance structure and top-down support to drive accountability at all levels. At each partner organization, the BPM initiative is within the line of sight of the CEO, Business Process Management • ©2005 APQC 35 ch a p t e r 2 with the person accountable for the BPM initiative having access to all top-level management. In addition, many of the senior executives in the partner organizations actually owned the end-to-end processes. Much of leadership engagement among the partners was done through councils or governance boards. These boards leveraged the BPM framework to drive organizational initiatives. As Mark McMurray of ServiceMaster stated, “Top leadership as a vocal, visible, powerful, and political driver of the program is a telling component.” At APCI, the CEO’s attendance is routine for all strategy-focused BPM meetings. 8. Such significant leadership involvement is reflected in the data shown in Figure Partners reported corporate officers’ involvement with the BPM initiative as great to very great, with corporate staff, including functional areas, somewhat involved to very involved. Correlating the results in Figure 8 with the time spent by partners’ corporate officers and corporate staff on the BPM initiative (see Chapter 4 for details on time spent on BPM activities), it is not a mystery why the partners were able to see quicker and better results, faster execution, and reduced risks to the enterprise as a result of alignment and necessary resources and Involvement of Leadership and Staff in BPM Initiative support. Process performers 80% 20% First-line managers 80% 20% Middle management 40% 60% 40% 20% Division executives Corporate staffs (finance, HR, etc.) 40% 40% 0 10% 20% 30% 40% 20% 50% 60% Percentage Partners (n=5) Some 20% 80% Corporate officers Great Very Great Figure 8 36 40% 70% 80% 90% 100% APCI has a single global process governance board responsible for documentation, key performance indicators, management of best practices, and global process management teams. The executive process owners’ responsibilities include articulating a process vision with key metrics, documenting the end-to-end process, sponsoring process Business Process Management • ©2005 APQC c h a p t e r 2 convergence decisions (see APCI case study for more on convergence), and leading as a process zealot. At Coors , IT was a major driver of BPM, yet BPM reports into the highest level in human resources. This unique placement has lead to increasing human productivity supported by a skilled and capable BPM team, according to BPM Director Bob Bonacci. In addition, having BPM in human resources has allowed Coors to tie the performance systems with the work that is being done. In summary, it is not surprising that top-down BPM with direct CEO involvement results in the largest transformations. Committed and engaged leaders: • recognize that BPM “makes it easy” for customers to do business with the organization, • define stellar performance in the eyes of the customer, • link that performance back to the business processes, and • manage and continually improve the flow of cross-functional activity through BPM. Based on an analysis of leadership commitment and using the leadership involvement data as a precursor to discussing funding, the APQC project team concluded that leadership engagement early in a BPM initiative made it easier to prove the value and secure funding to implement BPM. In some cases, it eliminated the demand for a business case. Business Case for BPM There had to be a compelling reason for the business to adopt BPM. At OMI, the platform was iterative, building on their interest in quality improvements. At NGST, the initiative was in response to increasing program complexity and the competitive environment. Coors needed to address two potentially critical failures resulting from SAP implementation. Because the partners were solving a business problem, it was predictable for them to expect the solution to have metrics that supported exceptional pay back. These process improvement efforts helped build the business case for BPM by solving the problem and leading to tangible outcomes and business results. In turn, this led to additional support for leadership and additional employee buy-in, justification for expansion to BPM, and additional funding for the initiative. Only two of the five partners, Deere and APCI, had to make a formal business case for BPM. Figure 9 (page 38) shows the amount of partners’ initial request for funding. Business Process Management • ©2005 APQC 37 ch a p t e r 2 In addition to the initial investment, three of the five partners report their investment requests showing a modest increase over time, with the most recent request being greater than $1 million (USD). Figure 9: Initial BPM Funding Request Initial Investment Partners Less than $1 million (USD) 20% $1 to $4.9 million (USD) 40% More than $4.9 million (USD) 40% Partners report a pattern of compelling arguments in the most recent requests for funding. The partners’ requests focus on expansion and continued value-creation for customers, with tangible results being the business case for the continued funding. Funding Models and Sources • • • • • Primarily, partners’ funding comes from the organization where BPM reports. Air Products and Chemical Inc.—CEO Coors—human resources Deere—quality (reporting to the top leadership) NGST—corporate executive committee and sector president OMI—corporate executive committee and quality Forty-four percent of partners’ budget for BPM comes from a centralized, core budget, whereas the other 56 percent comes from the operating business units. This shows shared accountability with the BPM corporate group and the people in the businesses performing the work. The BPM core group is providing strategy, coordination, and tools; the businesses are paying for the staff and time in the units. A good portion (80 percent) of the funding for BPM is being borne by department operational budgets. In addition, 60 percent of the partners report having an independent annual budget to support BPM initiative (Figure 10). This may lead to the strong focus on quantitative measures and benefits seen among Funding for BPM Initiative Out of department operational budgets 80% Independent annual budget 60% 40% Initiative by initiative 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage Partners (n=5) Figure 10 38 Business Process Management • ©2005 APQC c h a p t e r 2 partners’ measurement approaches; they must demonstrate value to get funding and resources. Partners tend to track direct expenses including travel and meeting costs (100 percent of partners), direct labor expense (80 percent), technology expense (60 percent), materials and supplies expense (60 percent), participation costs (60 percent, and contract labor and outsourced expense (40 percent). These survey results could be the result of the partners having mature BPM initiatives in place and more resources dedicated to process management and ownership. It was noted by the APQC project team that when an organization had implemented a Six Sigma or Lean process improvement methodology, the number of people supporting BPM activities increased significantly. This is due to the fact that partners consider process improvement as part of their BPM framework. Summary As discussed in Chapter 1, each partner’s BPM framework is unique in its design and in the way it works. As detailed in Chapter 2, aligning BPM to strategy allows the partners to focus on those business imperatives that impact core business processes and customer outputs. Without clear direction, the design and implementation of the other elements to follow (e.g., enterprise process models, performance management systems, and process improvement methods) will be activities without context. Lack of context can lead to missed targets and lack of execution. A customer-driven BPM framework, leadership governance and commitment, integration of function with process, and allocation of budget dollars to the front line will be elaborated on Chapter 3, which focuses on design and implementation of the process life cycle and other supporting elements. Business Process Management • ©2005 APQC 39 Business Process Management c h a p t e r 3 Design and Implementation G aining a process focus sounds appealing to many organizations, but it is often difficult to plan for and achieve this fundamental change in thinking and working. This chapter will discuss the basic elements of the BPM framework and how the partners used that framework to design and implement a successful BPM initiative that transitioned their organizations to a process focus. The BPM framework embodies not only the key elements necessary to build a strong foundation but also the support system necessary for launching and sustaining this new way of managing the business. The following common elements of this model were consistent across the partner organizations, although they each traveled their BPM journey along different paths: • launching BPM by defining an enterprise process model and ownership roles; • defining measures to assess process performance (and in four of the five partners, employing a process maturity model to evaluate BPM progress); • driving the transition from the top, with executive governance and committed resources focused on BPM implementation; • employing change management and human performance management principles to ensure changes are implemented and benefits realized; • enabling BPM through infrastructure such as IT tools and systems to facilitate process modeling, systems integration, measurement efficiencies, and BPM information access by process owners and users; and • prioritizing process improvements focused on strategic objectives and business imperatives through the discipline of BPM. As evidenced in Figure 11 (page 42) the partners’ approach has resulted in significant collective progress in their BPM implementations. Looking at each activity separately, the project team concluded that partners first clarified goals regarding a business problem or opportunity, tied goals to strategy, and utilized well-known tools to begin changing behavior. Business Process Management • ©2005 APQC 41 ch a p t e r 3 Status of BPM Implementation Activities Assessment of current status against a process model or standard 4.4 Involvement of customers (input, advice, feedback) in customer-impacting processes 3.6 Selection of strategy, approach, or standard for guiding BPM 4.8 Integration of BPM with business strategy and planning 4.0 Evaluation of the effectiveness of BPM activities 4.2 Definition and use of process measures by process performers Training of affected people in process responsibilities or tools Creation of baseline measures against which to compare BPM progress In designing their enterprise process models, the partners focused on standards and simplicity to achieve the greatest benefits faster. Enterprise Process Model As with the BPM framework, enterprise process models are called names such as “blueprint,” “model,” “architecture,” and “framework,” but all represent the same thing: a clear picture of the work an organization does. As simple as it might sound, the partners have found it takes deliberation and prudence because, much like building a house, this structure is vital to supporting the complex, cooperative activities that follow: defining roles and responsibilities, setting standards, aligning measures, and improving processes. As such, it must come early in the evolution of a BPM initiative and is a key element of the BPM framework. 3.8 4.4 4.0 Definition of a “to-be” process 4.4 Analysis and representation of the “as-is” process 4.2 Formation of teams to address specific process issues 4.4 BPM initiative orientation (or training) for all process performers 4.4 Creation and staffing of a BPM group 4.0 Documented plan with milestones for BPM activities 3.4 0 42 After identifying the business problem or opportunity they were seeking to address with BPM, best-practice partners initiated a cultural change to a process focus by designing an enterprise process model, leveraging external or standard process frameworks where possible for efficiency and adaptation of best practices, assigning process ownership and accountability, and aligning measures to those processes. 4.0 Communication of BPM activities to stakeholders Partners (n=5) Key Elements of BPM Design 1 2 3 4 5 6 7 Process models define and visually portray how organizations and their employees do the work by taking a comprehensive view of the organization that considers suppliers, the connectivity among the organization’s functional roles, and customers. Frequency of Response At an enterprise level, the process model represents the top-level snapshot of core, supporting, Figure 11 planning, and measurement processes. Those processes core to the organization’s operations are the heart of the business; they can include such processes as to develop business, source, deliver, and support customers. Business Process Management • ©2005 APQC c h a p t e r 3 Management or support processes are often functional organizations such as human resources, information technology, finance, legal, compliance, and safety. Importantly, planning and measuring are incorporated in these frameworks to illustrate the continuous life cycle of process improvement linked to strategic objectives. With the comprehensive focus, customers and suppliers are a critical part of this framework. Figures 12 and 13 on page 44 illustrate enterprise process model for Deere and APCI. All partners cited enterprise-level process definition as critical to BPM success. Using an enterprise process model resulted in better governance, forced top-down discipline, the adoption of standards, technology aligned with business needs, simplified communication, and an understanding among process owners and users. Contributing to partners’ success were the following factors: • beginning with enterprise-level definitions to ensure integration with lower-level frameworks, • leveraging external reference models and standards, • keeping frameworks simple, and • continuing to revise these dynamic frameworks based on the needs of the business. Top-down, Enterprise-wide, and Integrated Models Four of the five partner organizations began their transition to BPM by defining an enterprise process model. Although Coors started with a more narrow focus on process definitions related to its supply chain BPM project, it quickly found the need to define the larger enterprise perspective that encompassed all key areas of its business and cites this as a critical success factor. Process models cascade down and are defined to varying levels in partner organizations, but this top-level definition in an enterprise process model provides the overarching umbrella for the lower-level process definitions and the common language to ensure consistency in terms, mapping and modeling, and integration. In turn, this simplifies enterprise-wide communication and change management efforts. Among study participants, the importance of enterprise process models is clear: all best-practice partners use this valuable tool. Although many organizations may be tempted to define processes at the division level first, the bigger issues then become customizations, fragmented processes, and the ability to fundamentally change the culture. In addition, large implementations Business Process Management • ©2005 APQC 43 ch a p t e r 3 Deere’s Enterprise Business Model Worldwide Business Environment Deere & Co. Competitors, Governments Regulations and Requirements, Standards, Economics Customer’s Process Needs Core Processes Business Controlling Process Processes that create value for the external customer Customer Acquisition Processes that direct and tune other processes Product Delivery Order Fulfillment Customer Support Enabling Processes Processes that supply resources to other processes Channel Management Supply Management Human Resources Leadership Process Information Technology Application Business Acquisition Business Measurement Process Processes that monitor and report the results of other processes Supplier’s Process Figure 12 APCI’s Enterprise Process Blueprint Align Enterprise Process Blueprint Supply Chain Plan Innovate Source Sell Make Fulfill Customers Build People Finance Information Environment Governance Figure 13 44 Business Process Management • ©2005 APQC c h a p t e r 3 of enterprise resource planning (ERP) systems require standardized global process definitions. By taking the larger view of the organization, partners have emphasized the need for a unified focus on organizational goals and standards that ensure a common language and integrated picture. The enterprise-level process model helps partners thoroughly document and understand their processes much more clearly—and thus they understand when variations are acceptable. Importantly, the project team found that partners’ executives who own the enterprise model became acutely aware of the importance of this model in driving cultural change to a process focus. In other words, they understood the difference between a picture on paper and the day-to-day use and behavioral changes—consistent with the model—in the people who perform the processes. At APCI, process design requires documentation that provides clear understanding and agreement regarding what work is to be done within and across the company. Just as important as product specifications, process designs help the company resolve customer complaints, take orders, deliver products, and collect money. The company requires processes be documented consistently so the employees in France, the United States, and Taiwan can have a global process that they can understand and perform consistently. Use of External Standards Most partners facilitated the creation of their enterprise process models using industry benchmarking and external standards such as SAP reference models, supply chain operations reference (SCOR), Baldrige criteria, and APQC’s Process SM Classification Framework . These standard frameworks provided credibility with senior management, expedited process design, created a common language for enterprise-wide communication, and accelerated process improvements by enabling external benchmarking—including intra-industry benchmarking. Partners found the greatest value in taking a holistic approach, by adapting and knitting together best practices into a seamless process for the enterprise. As one of his suggestions for success, Coors’ BPM Director Bob Bonacci said organizations should begin with an enterprise model, determine best practices by examining existing industry models, create a baseline model for the organization, and validate the model with the business. has common naming and numbering systems and uses the outside Supply Chain Operations Reference Council reference model for numbering; the numbering system is also being made compatible with Sarbanes-Oxley documentation requirements. Along with the council, APCI leverages other models APCI Business Process Management • ©2005 APQC 45 ch a p t e r 3 that follow standards, such as APQC’s Process Classification Framework, so that it can compare best practices internally as well as with other organizations. Elegance in Simplicity Keeping enterprise process models as simple as possible at the highest level of the model facilitates communication and change. Simpler is better at APCI. One of its 13 global processes is its core process of supply chain. Global Director George Diehl said supply chain is the epicenter of APCI’s global process model (Figure 13). In 2004 each process defined in the model had a longer, more complicated name; for example, “make” was “produce products and services.” In seeking external guidance, which APCI routinely does to benchmark and speed improvements, APCI adopted a concept from the Supply Chain Operations Reference Council. APCI managers liked the shortened names in the council’s supply chain process model, which uses one-word terms such as “plan,” “source,” and “make.” Knowing that simplicity would help convey the message of what it does, APCI adopted that idea. Dynamic Since strategies and priorities change, enterprise process models cannot remain static. APCI’s model has been evolving for four years with minor changes along the way. Coors’ models are dynamic due to its ongoing process work. OMI’s linkage of processes model is updated annually during the company’s quality as a business planning session that is driven by OMI’s executive leadership team; although the “linkage of processes” model is formally updated annually, it may be revised two to three times each year as processes are changed or redesigned. Process Roles and Responsibilities Within partner organizations, process design entails making process owners responsible for each of its processes. Best-practice organizations appoint process owners to take responsibility for the process life cycle and driving performers toward a process focus. A process owner has the most knowledge about the process; he or she owns the full life cycle of the process, from design to implementation and improvement. The following steps represent the process life cycle: • design and modify process, • measure definition and refinement, • document process, • manage people who perform the process, and • improve project implementation and results. When asked to identify responsibilities of enterprise-level process owners, the partners consistently defined this role comprehensively (Figure 14). 46 Business Process Management • ©2005 APQC c h a p t e r 3 Responsibilities of Enterprise Process Owners Oversee continuous improvement of the process 100% Manage people who perform the process 100% Approve process design and deployment 100% Manage budget for process performance or support 80% 60% Other 0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percentage Partners (n=5) Figure 14 • • • • • • “Other” enterprise process owner responsibilities reported by partners are: control of information technology spending budgets, collection and review of performance measures, understanding of how process fits into the broader vision, annual process progress reports to senior management, communication of standard processes, and approval of waivers (i.e., exceptions to the standards). Within partner organizations, enterprise process owners, who are often operational executives, are charged with a broader perspective that considers the impact on other processes. Reorganizing around processes and enabling and empowering process owners allowed NGST to carry through the improvements it was trying to achieve. In a matrix organization, process owners are in a unique position to broadly view all programs; giving them full ownership ensures those processes are consistently followed. That is why the new structure has been so important to NGST, according to Six Sigma Vice President Ron Smith. Having a name associated and responsible for each of the 1,600 processes has been a cornerstone for the organization’s longer-term success. Smith said process ownership “is key for any of our process improvement initiatives, and it is certainly driving our Six Sigma success.” To underscore the importance of process management, APCI appointed executive process owners to lead the BPM effort. Executive process owners are vice presidents of the company and are also the functional heads of major departments. Their Business Process Management • ©2005 APQC 47 ch a p t e r 3 functional role is concerned with functional excellence and their cost center. In their new role, executive process owners needed to articulate a process vision with key metrics, document the end-to-end process, sponsor process convergence decisions, and lead as a process zealot. In addition, all IT spending responsibility has been given to the process owners. The APCI process owner role is concerned with the effectiveness and efficiency of the end-to-end process across many functions. “Effectiveness” means that the process owner ensures that the output of their processes is delivering the right value to APCI customers and business owners. “Efficiency” means driving costs down by focusing on cycle time, re-work, etc. By being accountable for an end-to-end process, process owners can re-align how work is done, especially at the functional interfaces, in order to improve productivity and make it easier for employees to perform their work, not just work smarter and faster in the old, inefficient process. Certainly, going through the steps of aligning responsibilities to processes brings to light inconsistencies, redundancies, and process overlaps; working through how best to weave processes together to smooth handoffs and distinguish responsibilities is challenging and continues to receive attention among partners. It is not, however, a recommended place to start. Coors’ BPM team advises against concentrating on clarifying process boundaries in the beginning. “Pick your battles,” BPM Director Bob Bonacci said. “[At Coors,] many people think they own many processes. Marketing bleeds into sales, sales bleeds into marketing. Because the work was immature, the team determined not to fight the fight, because that would kill process management faster than anything. And that is not the intent of the work; the intent of the work is to make Coors a better place to work and to lower the cost per barrel.” As discussed later in the chapter, everyone in the partner organizations is involved in BPM, from senior leadership down to the people who perform an activity in a process. Thus, concomitant with the definition of process owner come the titles of users, performers, or other titles assigned to stakeholders responsible for following the process as designed. Partner organizations charge all employees with this responsibility and explicitly set forth those individuals who are also owners. “stakeholders at large” are those people in the various processes across the business who fall into two major groups: process owners and process users. Process owners have the authority and accountability for the overall health and performance of a process; they are responsible for documenting, communicating, measuring, enforcing, and improving their respective processes. Everyone in the sector is considered a process user; some of them happen to be process owners NGST 48 Business Process Management • ©2005 APQC c h a p t e r 3 as well. Users are responsible for asking questions, providing feedback on process problems, and performing the process as documented. Linking process measures and performance scorecards to BPM helps reinforce process owner and user responsibilities. Aligning Measures to Reinforce the Process Focus Key to partners’ design of processes is aligning measures to monitor and improve process performance and link to individuals’ performance scorecards. All partners have defined process measures and linked BPM to performance scorecards to facilitate the transition to a process-focused culture. Four have aligned these measures to their enterprise process models. Four of five partner organizations indicated they align process measures to their models at the enterprise level; three align measures to the model at the division or business unit level. NGST began by defining its 15 highest-impact processes and implementing its first Six Sigma projects around those. It then defined the dashboard measures it found critical to determining the operating health of those processes. As a lesson learned, NGST Six Sigma Vice President Ron Smith cited the need for more comprehensive dashboards in rolling out BPM. He said some NGST process owners defined dashboards before implementing Six Sigma projects, whereas others did not; the latter are playing catch-up today. Smith said, “Having a dashboard forces you to think about what is important in your organization: what are truly important and perceptive measures that allow you to understand how well your organization is operating.” At APCI, the global process management teams assess processes using specific performance measures and targets. The key performance indicators of a process are leading indicators, which predict performance. APCI plans to have real-time, global key performance indicators in place as a critical element of its process and supply chain focus. Linking Process Performance to Outcomes All partners report linking BPM to performance scorecards. By linking BPM to performance scorecards, partners give process owners and users a concrete understanding of how their individual performance impacts the process measures and, therefore, the overarching strategic objectives. This provides individuals the line of sight to top-level goals focused on the organization’s strategy and customers. Business Process Management • ©2005 APQC 49 ch a p t e r 3 Necessary to implementing new processes was incorporating rewards in the change model at Deere. It linked the process model all the way down to individuals through annual performance management objectives. Deere’s process scorecards and metrics used at the lowest level (e.g., individual representatives within contact management) can be directly linked back to customer requirements, which ultimately support top-level objectives. For example, individual objectives feed into the contact center’s metrics, which are tied to the original seven customer attributes for customer support, which link to division objectives, which link to the enterprise objectives; an employee’s measures are limited to those process metrics that the individual can directly impact but which ultimately impact leadership metrics. APCI links its key performance indicators together. It has a corporate scorecard with 10 key performance indicators that the chairman and executive committee use. It also has a line-of-sight to the process and functional scorecards and to the strategic business unit scorecards. In designing and implementing its Six Sigma efforts, NGST set up a strategic framework by which it could translate sector commitments down to the employee level and prioritize and focus Six Sigma efforts. It accomplished this through strategic decomposition, which breaks down sector objectives into the primary operational drivers that will effect change. Director of Safety and Mission Assurance Systems Dan Inlow said this strategic framework breaks down the NGST president’s commitments into “something that a process owner can actually monitor and be able to perform to.” • Level 1 —Business objectives stated as sector performance measures (lagging indicators) • Level 2—Key drivers, or processes, where performance will drive Level 1 business objectives • Level 3 —Operational drivers (illustrated in process area dashboards) that translate sector goals into something employees can understand and affect (leading indicators that link back up to business results) In addition, most partners put maturity models in place to measure their progress in defining and optimizing processes. (That practice, along with the outcomes study participants have seen as a result of BPM, are discussed in Chapter 4.) Progress: A Result of Focus on Strategy and People As discussed previously, partners embraced BPM to achieve results where they matter most: results linked directly to strategy. They set out defining an enterprise process model; aligning processes from the top down; assigning owners; defining measures; and linking BPM to performance scorecards to expedite BPM design, 50 Business Process Management • ©2005 APQC c h a p t e r 3 implementation, and bottom-line impact. So what progress have they made as a result of these efforts? Figure 15 illustrates partners’ most notable integration efforts: Partners reported the greatest extent of integration with large-scale redesign, Lean manufacturing or services initiatives, human capital/work force management, implementation of new technology, and annual planning. Integrating BPM into large-scale core process redesign and annual planning helps partners continually link to strategic and customer imperatives and set the stage for high-impact results. Clearly, the evidence shows the partners see BPM as a transformation in the way they manage the business, not a technology implementation. And focusing on people through performance management and knowledge management demonstrates partners’ belief that change management is at the heart of the transition to a process-focused culture. Leveraging the BPM Framework to Drive Implementation Processes/Activities Integrated as Part of BPM Initiative Compliance initiatives 3.3 Performance management 3.6 Outsourcing of business processes 3.0 3.5 Knowledge management Large-scale process redesign/re-engineering 4.8 Improved learning opportunities 2.7 Implementation of new technology 4.0 Human capital/work force management 4.0 3.8 Annual planning cycle Strategic governance processes Customer relationship management (CRM) So how does an organization become processSix Sigma focused? Involvement. One of the most surprising aspects of the Lean manufacturing or services partners’ transformation is their success in getting people on board. Change management is tough; 0 1 that’s a given, but partners have reported that Partners (n=5) everyone in their organizations has been involved Figure 15 in BPM at least to some extent. Even with middle managers, the proverbial bane of change leaders’ existence, three partners actually report great involvement. Guided by their BPM frameworks, partners made it easier for employees to adapt. 3.0 1.7 2.8 4.3 2 3 4 5 6 Frequency of Response Partners’ BPM frameworks drove implementation in their organizations by providing the platform for communication and change management to transition the culture to one of process focus and accountability. It pushed the transition from the top through the critical roles of executive leadership and committed implementation resources. It included elements such as executive governance, Business Process Management • ©2005 APQC 51 7 ch a p t e r 3 resources, human performance management, change management and training, and technology enablers. Implementation Roles and Responsibilities If the buck stops here, where does it start? In the case of the partner organizations involved in this study, it started at some of the highest levels. CEOs, chief operating officers, and other high-level executives took on the responsibility (and accountability) for driving the design and implementation of their BPM initiatives. They provided governance, resources (including establishing entire core groups responsible for design and implementation), and an organizational mind-set, or focus, for the initiative. Starting at the Top Leadership support is a critical success factor for any major organizational implementation. Without leadership support, the implementation typically is doomed to failure, if it even gets off the ground. This study’s partners ensured the success of their BPM initiatives by actively involving their leaders in its design and, importantly, its implementation. This was more than just quarterly or annual meetings or reports from those involved in the trenches of the BPM implementation to various executives. The partner organizations’ top executives typically review BPM progress with those accountable on a monthly basis. Eighty percent of the partners indicated that those executives meet with the BPM core group monthly and get directly involved with those involved or affected by BPM on a monthly (40 percent) or more frequent basis. Sixty percent of the partners’ executives also involve process staff in enterprisewide planning, retreats, and strategy sessions on a quarterly basis as well. The monthly or more frequent meetings, as well as the planning and strategy sessions, indicate that the executives at the partner organizations did more than just publicly support the BPM implementation. They truly were involved in all aspects of it, which lends credence to the entire effort. When asked to rate the involvement of leadership and staff in their BPM initiatives, 80 percent of the partners reported that their corporate officers were greatly involved. The same percentage reported that their division executives were greatly involved or involved to a very great extent—that is, they were extremely active and consistent, both with direct involvement in BPM and their public and positive support (Figure 16). Perhaps the more surprising point is that at the partner organizations, middle management was somewhat (40 percent) to greatly involved (60 percent) in the BPM initiative. Why is having this group of employees involved in the initiative so important? These are the people who will experience the greatest impact of the 52 Business Process Management • ©2005 APQC c h a p t e r 3 Involvement of Leadership and Staff in BPM Initiative Process performers 80% 20% First line managers 80% 20% Middle management 40% 60% 40% 20% Division executives Corporate staffs (Finance, HR, etc.) 40% 40% 40% 20% 80% Corporate officers 0 10% 20% 30% 40% 20% 50% 60% 70% 80% 90% 100% Percentage Partners (n=5) Some Great Very Great Figure 16 change relative to their role in the overall BPM implementation. Their involvement is crucial so that the people reporting to them see that they support and adapt to this new mode of operations. (See the section “Robust Change Management and Communication Strategies” later in this chapter for more information on how partners engaged middle management in the BPM initiative.) Such a high degree of executive involvement was critical at each partner organization to integrate BPM into operations. Executives’ continued governance during implementation helped sustain the BPM initiative and reinforce the strategic import as well as the message that BPM is here to stay. Executive-level global process boards play a critical role at APCI. The company has identified 13 global processes, each of which is led by a global process management team. The executive process owners from each global process management team meet regularly as a global process board. The global process board is responsible for documenting process design, identifying key performance indicators, training employees, managing best practices (e.g., the best practices in implementing process management), and resolving issues across the global process management teams. Deere executives designed the company’s enterprise process model and developed an organizational structure to carry its business process excellence initiative into Business Process Management • ©2005 APQC 53 ch a p t e r 3 the business units. To ensure coordination and consistency across Deere, business unit executives serve on the four enterprise-wide executive councils responsible for business process excellence activities within the organization’s four core processes (i.e., customer acquisition, product delivery, order fulfillment, and customer support). These four core process councils and the business unit quality councils are overseen by the Executive Quality Council, which has ultimate responsibility for business process excellence. Partner organizations found that if a process focus was to become simply the way business is conducted, then executives had to not only govern and get involved but also commit the resources necessary to implement and sustain this new way of thinking. This started with dedicated BPM resources. Dedicated Resources Each of the best-practice partners has designated BPM-related roles that enable it to drive the BPM initiative across the organization. One of critical success factors for all the study partners is the core BPM group. Although the size and location of the group varies across the five partner organizations, initially each was made up of people whose time was dedicated to the design, implementation, and ongoing support of the BPM initiative. Key benefits of having this role at the enterprise level included: • transferring specialized knowledge, • defining and expediting an initial benefits stream, • facilitating executive involvement, • supporting a matrix organization style of management, • producing high-quality process documentation, • linking BPM with strategy and annual planning and prioritization processes, and • marrying business and technology needs. When asked where this group reported, 60 percent of the partners indicated that it reported to a corporate executive committee or the president or division general manager. As with executive accountability, the fact that these groups report up so high into the organization lends additional support, visibility, and credibility. It provided these core groups with the authority they needed to get the job done. NGST created a new vice president role to lead the process-focused transformation. The NGST president and all vice presidents were among the first to go through the Six Sigma training, each becoming a Green Belt; they were responsible for personally championing and actively overseeing the first 15 Six Sigma projects and then sponsoring numerous other projects. They committed funds and resources and installed a Six Sigma organization with a vice president to head it, which gave 54 Business Process Management • ©2005 APQC c h a p t e r 3 it equal standing with core and other enabling process areas. Smith said it was a level of commitment that was demonstrated by actions and dollars, as well as the position to make sure that it was visibly important and seated at the table where NGST decisions were being made. This push from the top was critical to giving the organization a process focus and sustaining the business reorganization that Smith said turned NGST upside down in “the biggest change I have seen in the 22 years I have been here.” At Coors’ the BPM organization reports directly to Chief People Officer Mara Swan, who reports to the CEO. Company executives charged Swan and her team with implementing BPM because they realized that the human component was important to change. APCI Vice President of Supply Chain Bill Cantwell said for BPM implementation, organizations must sequence events with dedicated resources. Transformation cannot be a part-time job. Find a number of employees and isolate them to drive the initiative. Cantwell said, “Somebody’s life has to depend on this being successful. If you can say, ‘Well, I did not quite get to this,’…you will not be successful.” Cantwell suggested dividing the work, isolating a few steps, dedicating resources to them, creating credibility in the organization by meeting milestones, and moving to the next step. Responsibilities for the core BPM group vary from organization to organization, but when asked about them, 100 percent of the partners indicated that these responsibilities included: • launching and implementing business processes, • initiating process improvements and establishing action teams, • supporting BPM sponsors and others in performing their responsibilities, and • redesigning or standardizing business processes. Additionally, 80 percent of the partners indicated that this group is also responsible for training managers or process performers on their process. Time spent on BPM-related activities varied widely across study. On average, partners’ core BPM groups spend 17 percent of their time redesigning or standardizing business processes. However, a greater percentage of their time overall (36 percent) is spent on implementation-related activities such as training, supporting sponsors, and initiating process improvements and establishing action teams. According to Master Black Belt Andy Abranches the NGST Six Sigma program office “is really a partnership between this organization and the core process areas that have been doing the design and the development of our technology and Business Process Management • ©2005 APQC 55 ch a p t e r 3 products.” NGST Black Belts in training work closely with process owners to not only understand responsibilities but also help the process owner fully embrace the process framework. They help define processes, eliminate overlap between different areas’ processes, and instill process thinking. Evolution of the BPM Core Group The BPM core group roles evolved over the course of implementation at the partner organizations. For example, at Deere , once business process excellence became institutionalized, dedicated BPM resources were absorbed by the businesses; the businesses assumed full responsibility for not only their respective BPE initiatives (overseen by its Business Unit Quality Council) but also enterprisewide coordination. Within Coors’ BPM core group, the focus has transitioned from organizational development to business architecture in order to facilitate merging business and technology needs. NGST envisions a smaller Six Sigma organization in the future, once process management is fully embedded. Regardless of the titles of the people involved in the initiative’s design and implementation, process ownership ultimately resides in the businesses; these owners have responsibility for driving transformation. Dedicated BPM resources serve as facilitators and consultants: the purveyors of standards and process focus and the day-to-day proponents of organizational change. IT Support—A Supporting Role Within most partner organizations, those resources responsible for implementing BPM played an integral role in aligning business needs with technology. To do this, it was important to have IT support for the initiative. This could include someone committed to the team who administers any technologies (e.g., an ERP or processing documentation/modeling tools ) used in support of the BPM initiative or some type of service level agreement with the organization’s IT function in support of BPM implementation. At Coors , the BPM team acts as internal consultants to the businesses; their members have consulting, organizational development, and business architect skills. They serve as a bridge between the IT function and the other business units. IT has business partners in each of the business areas and has been a great advocate of the BPM team, according to BPM Director Bob Bonacci. While process modeling is controlled by the BPM team, an ARISTM (the performance process modeling tool used by Coors) administrator resides in IT and keeps the system upgraded and running. includes an IT account manager in its global process management team. This person represents the IT organization and is focused on making sure both APCI 56 Business Process Management • ©2005 APQC c h a p t e r 3 the SAP and the legacy systems for all the IT budget (and the applications that support the process) are addressed. Executive governance responsibility and accountability and the role of the core BPM groups and their supporting roles are all part of a greater evolution at the partner organizations to a process-focused culture. In addition to employing these key roles, the study partners changed the culture of their organizations by employing human performance management and change management principles that instill and reinforce process focus and accountability. Human Performance Management Critical to any change management strategy is an understanding of the human component. Transitioning to process focus, process ownership, and process accountability at all levels—and ensuring the people fit the process—requires integrating BPM into work force management Integration of BPM Overview and Work Force practices (e.g., training and development, Management compensation, or performance Work force planning and 20% 20% 60% management). Partners strategy understood this and Performance management and 60% 20% 20% appraisals actively worked to integrate their BPM Staffing and assignments 60% 20% 20% initiative into all aspects of human performance Team-building activities 20% 20% 60% management. Training and development Best-practice organizations have integrated BPM into their work force planning and strategy, performance management and appraisals, training and development, and competency definition and development to a great extent. More specifically, looking at Figure 17, the partners have integrated 40% 20% 40% 40% 20% Recognition and rewards 20% Compensation and incentive programs 20% 20% 40% 20% Competency definition and development 20% 20% 40% 20% Promotion to new career/role opportunities 20% 20% Formal employee communications programs 20% 20% 0 10% 20% 30% 60% 40% 50% 20% 20% 20% 60% 70% 80% 90% 100% Percentage Partners (n=5) Business Process Management • ©2005 APQC 20% N/A Not at all Little Some Great Very Great Figure 17 57 ch a p t e r 3 the BPM initiative into both promotion to new career/role opportunities and performance management and appraisals to a very great extent (60 percent). contact management process owner Mike Pasold emphasized that to create success, relationships are important with employees. He said, “Getting the right people to implement the process is just as important as anything you can do.” Deere cultivated skilled, well-paid, and highly trained employees and then provided then with the vision and an explanation of what a process-focused organization could accomplish. Deere’s Coors’ Chief People Officer Mara Swan said that BPM is crucial to investing in growth and engaging and inspiring people: “When people know what is expected of them and what the path to success is, they know how to win. Often a disconnect exists between what management thinks ‘great’ looks like and what employees think ‘great’ looks like.” BPM has helped Coors understand how many people are needed to do a job and how individuals should be recruited and trained for jobs. Having BPM in HR has allowed the organization to tie the performance systems with the work done. Before SAP systems are implemented, the BPM team is able to prevent walls being built between process management (the work) and performance management (the rewards). The ultimate goal is less organizational waste. Robust Change Management Further change to the partners’ cultures came about through the use of robust change management and communication strategies. Almost all the partners stressed the need to have the key players/stakeholders/“right” people involved in the design and implementation of their BPM initiatives. The partners took great pains to involve various levels of key people in different aspects of their BPM initiatives. This chapter has already shown the great extent to which middle management was involved in the BPM initiative. The engagement of this group and others is important because it gains buy-in from all parties involved. Those who contribute to the design (or re-design) of a process are more likely to support and promote those changes in their own work and in front of others than those who have it thrust upon them. Middle managers and first-level supervisors at the partner organizations were greatly involved in almost all aspects of the BPM initiative, especially in planning and defining process improvements (Figure 18). In contrast, the rate of involvement among process performers at the partner organizations varies more widely than with the middle managers and first-level supervisors. However, the partners did ensure that these people received coaching and training in the new process responsibilities, were involved in deploying process 58 Business Process Management • ©2005 APQC c h a p t e r 3 improvements, and were involved in performing the improved processes. Each of these activities is crucial to ensuring that the process performer will comply and follow the new (or newly re-designed) process. The partners understood rigorous change management is the only way to overcome resistance to change and ensure that those most impacted by any change will buy in to it, support it, and sustain it. All five study partners leveraged training and communication activities in support of their change management efforts. Additionally, two of the partners, NGST and APCI , also leveraged their knowledge-sharing capabilities in order to ensure their process improvement efforts would be sustained. Training For many of this study’s partners, change management and training go hand in hand. Some of them even go so far as to use tools like stakeholder analysis to help identify groups that might be resistant to change and/or require training on new processes, and some use process models in newhire training. At two of the partners, the BPM core group is leveraged as leadership development, with members rotating out to the businesses to further embed the process focus. Work Force Involvement with BPM Initiative 3.2 3.0 2.6 Have been assessed or audited for compliance with new process responsibilities 4.2 4.0 4.0 Received coaching in new process responsibilities 4.2 4.4 Involved in performing improved processes 5.0 Received training in new process responsibilities 4.4 4.4 4.6 Involved in deploying process improvements 4.4 4.6 4.4 4.6 4.4 Involved in planning/defining process improvements 3.6 4.2 4.0 3.6 Received BPM communication/orientation Middle Managers 0 1 First-level Supervisors At Deere , the hardest problems to resolve Process Performers revolved around people and organizational change. To prepare, Deere included people on its team with Figure 18 advanced degrees and certifications in organizational development. They developed a change approach through which it embedded change tools and techniques in its AIM IMPACT model. (For more detail, refer to the Deere case study at the end of the report.) The model has a communication requirement at each stage, and mandatory training is part of the change management tool kit. Deere also used stakeholder analysis at various times throughout the project to identify resistance and help assess where support was needed. Business Process Management • ©2005 APQC 2 3 4 5 6 7 Frequency of Response Partners (n=5) 59 ch a p t e r 3 leadership realized that providing skills and enabling easy access to information and tools, training, and infrastructure provided the solid foundation for change management. Training was an important step to develop critical mass, enforce top leadership’s focus, and accomplish a specific number of highimpact projects that represented a balance between strategic and business needs. Including people from the process areas on the teams driving change has been highly beneficial for NGST. NGST also leverages feedback mechanisms as part of its change management efforts. According to Master Black Belt Andy Abranches, process users need the opportunity and responsibility to provide feedback on process problems so they can be fixed. NGST manages change before it begins a new initiative by identifying where to expect resistance. In implementing a process focus, APCI posted a process model to its intranet site. Employees can identify where they work in the model, and the model is used in new-hire orientation and other opportunities to communicate with employees. APCI Coors’ corporate leaders envision the BPM team as a feeder organization. The team hires talented individuals from the outside who model business practices. As part of their career plans, team members often transfer into other areas of responsibility in the organization within two or three years. At Coors and NGST, the BPM core group is viewed as an opportune training ground for adding even greater value to the business. Communication There is no such thing as over communicating on an initiative as large as BPM at best-practice organizations. As previously discussed, it is apparent that the partners strove to communicate to all levels of employees in order to ensure that these people understood what was happening, why it was happening, and how it would impact them. CPO advocates promoting BPM in a language that everyone can understand. It is important to use the language of the business and to explain the technology carefully and simply to ensure everyone understands what is happening and what their role in the change is. Coors’ In addition to its executive commitment, NGST waged an aggressive communication campaign as part of its change management plan. This included intensive, evolving communications to reinforce organizational change and share successes as well as setting up an intranet site that gave easy access to all process management information. Said NGST Master Black Belt Andy Abranches, “Process users: that is really where the rubber meets the road. If people do not use the 60 Business Process Management • ©2005 APQC c h a p t e r 3 processes as defined, our efforts are in vain. And our intent is to make it easy, give an intuitive access to the process, make it so water flows down hill, [and] put it in a way that people want to use the processes.” As stated so aptly by Abranches, ease of access to and ease of use of resources and tools go a long way toward sustaining process improvements. Realizing this, partners leveraged knowledge-sharing to support the BPM initiative. Leveraging Knowledge-sharing Capabilities to Sustain Process Improvements 10 APQC’s research into knowledge management demonstrates the need for people to access corporate knowledge, process-based knowledge, or expertise to perform their roles is increasingly important. When that access is limited or when the employees are unaware of where the knowledge exists, the result will be significantly reduced work effectiveness. Recognizing the benefits of easy access to BPM resources and tools, NGST and APCI leveraged existing knowledge management activities in their organizations to disseminate BPM tools and resources. Deere , Coors , and OMI took advantage of centralized repositories to give employees access to process maps, definitions, measures, and other information critical to employees understanding, accepting, and using this new approach. considers “accessibility of process information” a critical enabler for change management and transitioning its culture to a process focus. Thus, its Process Resource Center, a one-stop shopping online portal on NGST’s intranet, has played an invaluable role in NGST’s BPM progress. NGST Leveraging its “Deliver the Difference” vision for a unified company, APCI integrated knowledge management into the organization via its global work processes. “Deliver the Difference” mandates an environment of knowledge sharing 11 and reuse through globally connected communities of practice. Knowledge is shared via a system of integration that includes communities of interest, communities of practice, centers of excellence, aligned organizations, and integrated work processes. 10 11 http://www.apqc.org/portal/apqc/ksn. APCI defines its communities of practice as groups or networks of people chartered to meet specific business needs. It defines its communities of interest as groups or networks of people that meet on a regular basis to share knowledge and learn from each other, and it defines its centers of excellence as communities of experts in strategically important areas of business. Business Process Management • ©2005 APQC 61 ch a p t e r 3 Technology Tools in Support of Change Management The overall opinion among the partners was that technology should never be in the driver’s seat, but as a passenger, it can add great benefits. Two partners indicated that their BPM initiatives were coupled with the implementation of a new technology, but those implementations were driven by the business needs, not IT. In addition to ERP system implementation to facilitate process integration and efficiencies, partners employed other IT tools for process modeling, project databases, training management, measurement, and knowledge sharing, which all contributed to effective change management. With all the process-focused improvement activity taking place, NGST recognized that its systems needed to be able to support the change. To support its process focus and the Six Sigma program office efforts, NGST decided in 2003 to create a longterm enterprise systems strategy. Enterprise Resource Planning (ERP) Program Manager Matt Reynolds said NGST President Wes Bush made it clear that the focus was on processes, not the tool. Reynolds said the process focus “filters everything we do, including how we choose our system.” BPM team projects are supported by ARIS, IDS Scheer’s business modeling tool. The BPM team successfully piloted the ARIS process performance manager in 2004. ARIS was a key enabler to Coors’ BPM success, according to BPM Director Bob Bonacci. It supports Coors’ approach to business modeling. Bonacci said modeling helps in Coors’ change management efforts: “We manage change successfully because we use modeling to understand who individually is feeling the impact of a change. We roll up the individual models to the team level, the division level, and so on.” Coors’ When asked what tools and methodologies they found most valuable in designing their BPM initiatives, among partners’ most valuable tools were governance structure, process frameworks, external framework such as SCOR, customer visits, Six Sigma and Lean methodologies, continuous improvement tools, process management training, knowledge management, change management, process mapping tools, scorecards, and maturity models. Clearly important on this list are process improvement tools, a sign of partners’ focus on continuous improvement as critical to BPM. Discipline for Process Improvement The reason for change must be compelling. What were the partners’ compelling reasons to adopt BPM? They wanted improvement, and they wanted enterprisewide results. Whether it was a competitive threat, failing initiatives (e.g., a merger or 62 Business Process Management • ©2005 APQC c h a p t e r 3 SAP implementation), new leadership challenges, or underperformance, a real crisis did wonders for organizational alignment and a creating focus on results. Although selecting BPM as the overarching framework to create sustainable, high-impact change was rooted in their history and commitment to continuous improvement, the partners saw the greater potential. Enterprise executives chose BPM because it creates a discipline for process improvement by focusing on strategic objectives and business imperatives. This approach could initiate early returns and sustain change by generating powerful, telling results in their respective areas of highest impact (e.g., supply chain, customer loyalty, and product design). • • The partner organizations transformed that potential into reality by: integrating all process improvement initiatives (e.g., Six Sigma, continuous improvement, ISO assessments, Malcolm Baldrige criteria, knowledge management and transfer of best practices, and Lean management) under a BPM framework and prioritizing process improvements by focusing on the highest impact to bottomline and strategic objectives. Partners subscribe to similar versions of a process management continuous loop of defining, measuring, and improving processes. Once they defined their BPM framework, process models, assigned owners, and aligned measures, they used process improvements to fuel a lasting change in the way the business is managed and the way they thought about the business as one system. In other words, the partners developed a process-focused discipline. continuous improvement model for a unified company is a merger of Six Sigma and Lean management principles. Six Sigma is strong in planning and looking across processes to determine where the best opportunities for improvement are, and Lean provides excellent continuous improvement tools. APCI’s APCI’s continuous improvement model has five steps: prepare, analyze and prioritize, plan, implement, and learn. It enables teams to use a variety of tools and solve problems in untraditional ways. Continuous improvement has topdown leadership; businesses or processes do not begin until the top leader agrees. Continuous improvement is tied to the annual planning cycle. The company has commissioned global process teams for 10 of its 13 processes in order to concentrate on where most of the money and customer impact are. uses the Baldrige framework as a catalyst when selecting its process improvements in order to maintain an organizational focus—an alignment with strategy and purpose—on performance improvement. Determining the top 10 improvement initiatives is an exercise conducted in the annual strategic planning OMI Business Process Management • ©2005 APQC 63 ch a p t e r 3 meeting by multiplying strategic weighting (i.e., executive weighting of every process according to its potential contribution to OMI’s five strategic imperatives) and linkage of process ratings (i.e., the process maturity rating using a maturity model with a six-point scale). After substantial discussion, processes that have the highest strategic weightings and the lowest process scores are selected as the organization’s strategic imperatives for the year. From this list of 10 improvement initiatives, three to four are given the highest priority. project management and project prioritization system is a continuous loop. Workbooks are spawned from processes and leadership/planning; projects are prioritized and integrated with metrics; the project results are then captured, and the information from the project results are then fed back into the process work to help with future process decisions. Integrating process and metrics has resulted in: • an alignment of individual/process goals and results with company strategies, business requirements, and customer requirements; • the prioritization of project work; • funding of these initiatives; • improved measurement; • improved results; and • a continuous improvement in processes and project work. Deere’s By using BPM as a discipline for process improvement, partners generated tangible business results to sustain and build greater momentum toward a unified, process-focused organization. 64 Business Process Management • ©2005 APQC Business Process Management c h a p t e r 4 Evaluation and Results B PM is considered an ideal merger of processes, people, and technology in order to improve process performance within strategic priorities. This is powered by human performance and enabled by technology, all resulting in dramatic process improvements squarely tied to business outcomes. That is not just theory: Study partners have realized greater effectiveness and increased efficiency using BPM. They have put measures in place to monitor achievement against business goals. They have mounting evidence. Not only do they have increased productivity, more competent employees, happier and more loyal customers, and financial returns to boot, but also their strides toward standard, optimized processes are reaping benefits they never envisioned. Business Process Measures Partners have added to the traditional arsenal of performance metrics and begun use of maturity models to increase process efficiency and effectiveness. Thus, they measure processes in two ways: 1. business performance —tracking and reporting the impact on business performance by using scorecards as a tool to represent quantifiable and continuously refined measures of process inputs and outputs, and 2. maturity models—evaluating the improvement/maturity of the process itself. Best-practice organizations are making consistent use of scorecards and developing more ways to link scorecards into processes to become increasingly measurement focused. Moreover, they are using “process maturity” as a concept—if not as an avenue of organizational change—to drive organizational priorities. One of the goals is deeper, more high-quality performance measurement as organizations strive to move from immature, inconsistent business activities to mature, disciplined processes. Business Process Management • ©2005 APQC 65 ch a p t e r 4 When asked how business processes are evaluated, the most common response among study participants was performance scorecards. Secondly, and indicative of BPM’s link to strategy, survey respondents report process reviews in annual planning. Beyond these means of evaluating processes, study participants reported a variety of other responses, including Sarbanes-Oxley compliance, metrics, operational and executive reviews, and maturity model-based assessments or scoring. Metrics, reviews, and audits are to be expected; maturity models, which are used by the majority of partners and some sponsors and others, are discussed later in the chapter. BPM Impact on Business Outcomes and Results How organizations align process measures to their enterprise process model and integrate with performance scorecards are discussed in Chapter 3. Briefly discussed in this section are those measures study participants have found most useful in measuring effectiveness; results are discussed later in this chapter. When asked to measure the impact and effectiveness of their BPM initiatives or core groups, study participants listed a number of measures each found useful to their respective BPM leadership and organization executives. Among the measures cited as most useful by study participants were key performance indicators in balanced scorecards, hard-dollar revenue impacts, productivity improvements, defects and cost reductions, customer retention/loyalty, project feedback, change readiness surveys, and people surveys. Because stakeholders (e.g., customers, shareholders, and employees) are a critical component of the larger picture that portrays how effectively the organization is truly performing, partner organizations designed measures from the stakeholders’ point of view. In response to a competitive threat, the Deere Ag Quality Council put together a full-time team to design processes and measures. When the team first started, executives told members to conduct benchmarking and find out what other companies were doing right. Said Tom Shelton, Deere customer support administration and shared services: “I’m here to tell you …the very first thing you need to do is go focus on the customer.” The team first mapped current sub-processes and determined strengths and gaps. It then surveyed customers, dealers, distributors, company employees, and leadership globally—1,000 people in 26 countries. Its challenge was to condense the immense amount of data into manageable findings, categorize expectations, and distill key themes for what customers would need in the future. 66 Business Process Management • ©2005 APQC c h a p t e r 4 One of the outcomes of this focus on customer was creating its contact management–enabling process. In assessing its existing processes in which customers were touched across the company (e.g., dealers, credit bureau, Web site, headquarters, and regional offices), Deere found it had 121 different points of customer contact, little to no documentation of solutions, and three main themes in customer opinions (from the 1,000 customers surveyed). These customer themes became Deere’s contact center customer and business requirements. Deere used those seven attributes to design new Ag Customer Support Contact Center processes. It then mapped the processes and sub-processes using Visio and mapping standards, enabled the processes with existing technology, and created metrics to fit the contact management processes. Most important, said Pasold, “You cannot get to the metrics unless you do the process first.” measures its success based on two result areas: increases in productivity as shown on the profit and loss statement and increases in customer loyalty scores. Incentive compensation is designed to reward people based on the performance of the company as a whole and not on the performance of the business—a system that Cantwell said encourages convergence. APCI has not drawn a direct line between customer loyalty scores and incentive compensation. Customer loyalty is a leading indicator, a means to an end. APCI BPM initiatives are clearly aligned to the organization’s family of measures. OMI uses a balanced scorecard approach to track measures related to finance, operations, employees, and customers/market. Whereas hundreds of measures are collected at the micro level (collected across OMI’s project facilities), OMI has identified approximately 30 macro-level corporate measures that fall into the four balanced scorecard categories. Each BPM improvement effort identifies and monitors 10 measures (i.e., targets for improvement) that roll up and link to this corporate scorecard. OMI’s Business Process Maturity Bill Curtis, Borland chief process officer and one of the three co-authors 12 of CMM® , defines a process maturity model as an evolutionary road map for implementing the vital practices from one or more domains of an organization’s business processes. It guides an organization through an evolutionary progression from ad hoc methods to the implementation of stable, local procedures; standard organization-wide, end-to-end business processes; statistically managed 12 e Capability Maturity Model (www.sei.cmu.edu/cmm/) is used by many organizations to Th identify best practices useful in helping them increase the maturity of their processes (retrieved February 2005). Business Process Management • ©2005 APQC 67 ch a p t e r 4 and predictable processes; and finally, continuous process innovation and optimization. According to Babson Center for Process Management Research Director Tom Davenport, although more than 150 maturity models exist in the public domain, there is no single model generally accepted for business process management. Most focus on the following benefits: • Facilitates improvement (directs to best practices) – Which processes to focus on – Who needs to be involved – Anticipation of barriers and knowing means to overcome – Which tools to use – Which metrics to use • Enables comparison among organizations over time • Is straightforward to understand and apply • Raises attention to process management • Clearly ties, if followed, to success and financial benefits In this study, 60 percent of partners and responded that they currently measure the maturity of their processes, but during this study’s site visits, it was clear that four of five partners use a form of the maturity model in some fashion. Collectively, they use this tool to: • achieve high-fidelity definition of work processes and documentation requirements, • assess processes against standards, • guide organizational improvement, and • achieve cultural changes that drive/institutionalize continuous improvement. Their models are similar, but they are being employed in various ways. Along with its need for the strategic framework to translate top-level goals to each employee, NGST recognized the need to measure maturity of its processes. Thus, it came up with a methodology it calls its “greening,” in which it categorizes its maturity on a red, yellow, and green scale based upon its progress in five categories: process, checklists, metrics/standards, review, and enforce. It defines “mature” (green) as processes that are managed quantitatively, but it does not yet include the notion of optimizing as does the CMMI. For each of the processes on its indentured process list of more than 1,600, process owners continually assess and categorize the process. Greening targets are established for each process area. 68 Business Process Management • ©2005 APQC c h a p t e r 4 uses its maturity model in annual strategic planning as one of two factors used to prioritize project improvements linked to strategy. It uses the following six-point scale: 1. The process is not defined. The process needs to be designed and documented. 2. There is a general understanding of the process by those who work in it. No formal documentation or process standards exist, and no formal work to improve the process has been undertaken recently. 3. The process has been defined, and the intent is understood. Documentation of the process exists to include flow charts, standards, checklists, procedures, training manuals, etc. 4. The process is well-defined, and measures are in place. Customer feedback is solicited and used to fine-tune the process. Graphs and charts are used to evaluate the process and learn from the measures. 5. The process has been formally improved within the last year. Ongoing measures are used to track progress, and process documentation is kept up-to-date. Customer feedback is solicited and used to fine-tune the process routinely. 6. Key measures of the process and process outcomes are predictable. Customer feedback is solicited and used to fine-tune the process routinely. Control charts are used to monitor performance, and the process consistently meets the needs and expectations of customers. Process documentation is kept up-to-date. OMI APCI believes that the higher a process is in the maturity model, the better the link to business value. (The company has used a maturity model developed by Kevin 13 McCormack. ) Processes are designated with the following levels of maturity: • Ad hoc (score 1.0 to 2.0) —Processes are unstructured and ill-defined. Process measures are not in place, and the jobs and organizational structures are based on the traditional functions, not horizontal processes. Individual heroics and working around the system are what make things happen. • Defined (score 2.0 to 3.0)—Basic processes are defined and documented. Changes to these processes must go through a formal procedure. Jobs and organizational structures include a process aspect but remain basically traditional. Representatives from functions meet regularly to coordinate with each other concerning process activities but only as representatives of their traditional functions. • Linked (score 3.0 to 4.0) —This is the breakthrough level. Managers employ process management with strategic intent. Broad process jobs and structures are put in place outside of traditional functions. Cooperation among intracompany functions, vendors, and customers takes the form of teams that share common process measures and goals. 13 cCormack, K.P. and W.C. Johnson. Business Process Orientation: Gaining the E-Business M Competitive Advantage. St. Lucie Press, 2001. Business Process Management • ©2005 APQC 69 ch a p t e r 4 • Integrated (score 4.0 to 5.0) —The company, its vendors, and suppliers take cooperation to the process level. Organizational structures and jobs are based on processes, and traditional functions—as they relate to the supply chain—begin to disappear altogether. Process measures and management systems are deeply embedded in the organization. Advanced process management practices take shape. In 2003 APCI surveyed 100 of its top managers: the top 50 in the corporate hierarchy plus another 50 thought leaders. The survey asked: Where do you think we are on this model? The average score was 3.2. McCormack’s benchmark data showed that APCI was below the average of leading process-focused companies, whose average score was 3.5. McCormack and APCI’s process leaders concluded that, to drive its process efforts up the maturity scale, the company should concentrate on process measurement, process design, and role clarity. In this way, the company used a maturity model to focus its priorities to build company capabilities. Impact of Process Maturity on Work Flow Partners acknowledge the value of maturity models in gauging efficiency, with the ultimate goal of integration or optimization. At this most mature level come the full-force benefits of process management, including work flow management. Work flow, an essential factor in business process management, is the sequence of activities within a process, along with how those activities are allocated and 14 scheduled across the factors of personnel, technologies, equipment, and facilities. Business process management should ensure that work flows cross boundaries and account for all activities within a process and that each process’s policies, standards, and procedures do not conflict with departments’ and individuals’ goals. Work flows should be tracked to ensure information is not lost in individual or department handoffs in a given process. Results: Revenue, Profits, and Customers How does effectiveness and efficiency really translate to the bottom line? What results have best-practice organizations seen from their BPM initiatives thus far? As Figure 19 shows, the most commonly reported improvement across all best-practice organizations is increased productivity, and the majority have seen at least a 25 percent to 50 percent improvement against baseline in revenue and operating margin—hard dollars. Importantly, the majority of partners have enjoyed that same impressive increase in customer satisfaction and loyalty. They have seen that percentage improvement in all categories except for customer acquisition and 14 70 www.sixsigmatutorial.com/BPM/BPM.aspx (retrieved August 2004). Business Process Management • ©2005 APQC c h a p t e r 4 BPM Initiative Improvements Over Baseline Improved employee morale 40% Reduced operational costs/ increased margins or profits 40% Improved productivity 20% 20% 20% 40% 20% 40% 20% 40% Shortened times for releasing products or delivering services 40% 40% 20% Reduced defects, mistakes, wrong information 40% 40% 20% Increased revenue 40% 40% 20% Improved customer satisfaction/ loyalty 40% 40% 20% Improved employee competency 40% 20% 0 10% 20% 30% 40% 40% 50% 60% 70% 80% 90% 100% Percentage Partners (n=5) 0-24% 25-50% 51-75% 76-100% Figure 19 retention. Arguably, with such significant improvements in other indicators, a positive movement in these customer measures should soon follow. Since implementing its new contact management enabling process, Deere reports it has seen success in many areas. One example has been in the number of dealer technical assistance cases. Prior to the new process, this number increased by 3.5 percent per month. After implementing contact management, Deere had a net decrease of 13.5 percent from 2002 to 2005. Contact management process owner Mike Pasold attributes this to documentation, efficient routing, and dealer coaching—all results of standard processes. How do current benefits measure up to what best-practice organizations expected? Figure 20 (page 72) illustrates that, on average, partner organizations received moderate benefits, in that not all benefits were achieved, but initiative was justified across all listed categories. The consensus was that benefits were excellent, with fully met expectations, in terms of productivity improvements. Improvements in culture and quality did not miss the “excellent” rating by much, coming in at an average of 3.8 among the partner organizations. One can expect these assessments to Business Process Management • ©2005 APQC 71 ch a p t e r 4 BPM Benefits Delivery Against Expectation improve as organizations move closer to and achieve the highest level of process maturity. The Bonus: Ancillary Benefits Improvements in work force attitude 3.4 Improvements in productivity 4.0 Improvements in quality 3.8 Improvements in financial performance 3.4 Improvements in customer relationships 3.6 Director of Safety and Mission Assurance Systems Dan Inlow said NGST has received numerous benefits from BPM, some of which it 2 0 1 3 4 5 6 7 had not originally intended. Most importantly, it Frequency of Response has found its BPM philosophy is congruent with AS9100 Certification (a quality management Figure 20 system for aerospace), Software CMMI® Level 5 (i.e., optimized), and Sarbanes-Oxley compliance. With SOX compliance, standard processes made NGST’s documentation easier, and the process mapping facilitated discussion with auditors. Improvements in the culture of the organization Partners (n=5) All partners found that BPM adds tremendous direct and indirect value to their organizations. In addition to the aforementioned direct BPM benefits, partners cited significant ancillary benefits that they are enjoying or anticipate with such initiatives as Sarbanes-Oxley (SOX) compliance, 15 ISO , CMMI, mergers, and shared services or outsourcing decisions. 3.8 values its enterprise model, according to BPM Director Bob Bonacci, because it allows the company to build on existing knowledge, facilitates representation of process integration, is reusable for new projects, and enables Sarbanes-Oxley compliance. Defining processes and standards also helps the organization with outsourcing decisions. According to Bonacci, “It is impossible to outsource properly unless the BPM work has been done.” The outsource provider needs the details and the rules of engagement. Similarly, the BPM team sees the value BPM will have in its impending merger; the BPM team will support the organization in its re-design and change management. Coors At OMI , BPM has led to increased effectiveness and efficiency of processes, a stronger focus on resource utilization, and improved internal audit findings. Importantly, it has led to a perception of value to not only the top executives but also individuals in the organization. Cohen said the CEO considers the linkage of processes model and managing by process as “the lifeblood”—that is, OMI’s approach to create action to achieve strategy. 15 72 www.iso.org/iso/en/ISOOnline.openerpage (retrieved February 2005). Business Process Management • ©2005 APQC Business Process Management c h a p t e r 5 Lessons from the Front C learly, as a result of their transition to a process focus, the partners are able to demonstrate the value and benefits of BPM, but they did not achieve those results without some challenges and lessons along the way. Some hurdles the partners sought to overcome and the success factors they found critical to their remarkable achievements follow. BPM Challenges and Lessons Learned Study partners shared several challenges during the site visits, which demonstrated the importance of some of the key elements from the BPM framework: • aligned processes; • aligned measures; • resources, competencies, and technology enablers; • knowledge-sharing approaches; • credibility and simplicity in communication; and • process improvement tools. Aligned Processes Unaligned processes, in ill-prepared organizations, will reduce the payoff of the most superior technology solution. Many ERP implementations have failed to deliver on their promise to enable major change initiatives. Defining, aligning, and understanding processes are imperatives for success in any large scale transformation, especially if ERP implementation is a part of the plan. As APCI implemented SAP, became a process-focused organization, and developed and communicated the concept of a unified company, its leaders Business Process Management • ©2005 APQC 73 ch a p t e r 5 16 attempted to converge processes. Because the chemicals and gas generation industries involve different processes in various areas of the world, convergence became one of the most fundamental principles in process management for APCI. Leaders wanted those who were doing similar jobs to do them in a similar way as a means to drive efficiency and effectiveness. Bill Cantwell, the vice president of the supply chain for APCI, said that the challenge was great because the executives faced a not-invented-here attitude. As they were implementing a major release of SAP, the executives stopped the implementation for a two-month period to focus on process convergence. Stopping cost the company $12 million, but the executives knew they could not succeed until processes were converged. By configuring six transaction models in SAP, APCI has been successful in convergence, said Cantwell. Meaningful Measures Performance measurement dashboards must be rolled out comprehensively. Smith at NGST said, “Having a dashboard forces you to think about what is important in your organization: what are truly important and perceptive measures that allow you to understand how well your organization is operating.” Full-time Resources, Competencies, and Technology Lack of dedicated resources, training, skills, and a robust technology infrastructure present a challenge to BPM implementation. At OMI, process owners have varying process mapping and measurement skills and competing priorities. Although BPM is part of many owners’ jobs, it is not a full-time responsibility. Because owners are usually responsible for one or more processes and can be overloaded, improvement initiative prioritization can be difficult. According to Quality Director Adam Cohen, process owners are also limited by OMI’s technology. They must dial in to gain remote access to data housed in the main office’s LAN-based IT infrastructure. Additionally, with only 350 PCs distributed among 1,400 employees, there is limited access to OMI’s intranet. OMI created training and technology tools to help overcome these barriers. Specifically, OMI provides process owners and project team leaders assistance with process mapping and additional training to increase competencies. In addition, by documenting the highest-priority processes in the organization, OMI is able to assuage competing priorities, said Cohen. To help overcome its technology barriers, 16 74 Convergence, according to Supply Chain Vice President Bill Cantwell, does not mean that everyone in the company does everything the same way, but instead means that employees may have one of six different ways of working (depending on the kind of business). For example, if employees produce and sell a bulk material, then they have a unique model to converge around. Business Process Management • ©2005 APQC c h a p t e r 5 OMI has increased e-mail usage and LAN file storage and provides simple software 17 tools (such as Word, Excel, PowerPoint, and RFFlow ) that help process owners. Knowledge-sharing Approaches Acquiring and sharing internal and external expert knowledge was instrumental to designing and implementing BPM in partner organizations. NGST required expert consultants and Master Black Belts with experience at leading practitioners to kick off their BPM initiative. According to Six Sigma Vice President Ron Smith, this was a big finding for an organization accustomed to being more insular and selfsufficient. Learning from others’ mistakes and drawing upon outside expertise were important to the program, especially in getting started. Simplify the Concept Through Communications To get the stakeholder involvement critical to BPM success, BPM cannot have its own language; it must be simple and easily understood by the businesses. Coors Chief People Officer Mara Swan advocates marketing business process management: “Most business people are not process-oriented. They are experience-oriented. They do the same thing over and over, even repeating bad experiences. Marketing means putting BPM into a language that everyone can understand.” In the beginning, some Coors employees in the business units were somewhat resistant to using ARIS, the modeling tool, because they did not fully understand the BPM method. As a result, the team realized the need for a more user-friendly vernacular, and the members of the BPM team made a point to explain all aspects of the technology carefully and simply. Business Architect Debra Boykin said it is important to put the models together in a way that the business people understood what they are doing. Credibility Showing results is necessary to get buy-in and sustain BPM initiatives. The first six months that the Coors BPM team embarked on enterprise modeling, the team kept a low profile. Bonacci said, “We ran silent and deep; we did not surface until we could show a small victory.” Working on the project provided needed credibility for the Coors BPM team. As it ran multiple projects, the team further recognized the need to build the enterprise model. Bonacci provided examples to the CEO of how business process management work affects ongoing projects. Once the CEO fully understood, he directed that business process management be implemented in all business units. 17 RFFlow is a charting software. Business Process Management • ©2005 APQC 75 ch a p t e r 5 Flexible and Practical Process Improvement Toolset Since process improvement fuels BPM, the toolset can make a difference in results. At NGST, training was the primary vehicle used to change the culture. By broadening the training toolset earlier to include other approaches such as DMADV or Lean, NGST might have touched a broader array of people across NGST processes, said Six Sigma Vice President Ron Smith. Smith emphasized focusing on process control earlier. In early projects, some process owners were unsure how to implement process changes delivered by project teams; thus, some projects languished a while before implementation. Smith said this lost time could have been avoided if NGST had provided more process owner training to ensure a smoother transition from the improvement phase to the control phase of Six Sigma projects. Success Factors for BPM The following success factors were shared by this study’s partners during the site visits. These factors echo themes discussed throughout the report and embodied within the BPM framework. Strategy, Structure, and Funding • • • • • • • Secure support from the CEO and executives. Focus on the customer, core (and highest-leverage) processes, business results, and gaining visibility and velocity. Begin with an enterprise model. Determine best practice by examining existing industry models. Create a baseline model for the organization and validate the model with the business. Select meaningful, high-impact projects. Improve the overall system. Link, align, and focus improvement efforts. Simplify. Removing waste and driving cycle times down are critical. Take complexity out of the business. Design • • • • • • 76 Create a separate organization to implement business process management. Build the body of knowledge centrally. Fully leverage the knowledge of subject matter experts from all levels. Design for the ideal process. Have a top-down modeling approach. A bottom-up approach creates nonintegrated process fragments. Have an enterprise-wide approach. Plan to eventually encompass all areas of the business and link all process models; store in one enterprise database. Business Process Management • ©2005 APQC c h a p t e r 5 • • • • To avoid turf wars, communicate carefully with process owners. Some process boundaries are blurred. Do not recommend new process managers to begin by concentrating on clarifying process boundaries. Set up a governance board (e.g., a process council). Develop a communication plan early. Organizational structure is driven by process. Clearly understand process roles and responsibilities before designing a support structure. Implement and Sustain BPM • • • • • • • • • • • • Do not do everything at once. Lay a foundation and constantly build on what came before. As you go step-by-step, sequence events with dedicated resources. Transformation cannot be a part-time job. Find a number of employees and isolate them to drive the initiative. Find experts (i.e., consultants and Master Black Belts) with experience at leading practitioners. Provide robust training program focused on process improvements. Demonstrate top-down leadership by engaging those people with the most influence—top executives and project champions—and sending them through training first. Select the best employees as full-time Black Belts. Enable BPM through robust infrastructure and tools. Have the methodology that supports BPM. The methodology facilitates a transition from design to executable work flow. Create a single Web-based location for accessing process information and documentation. Provide compensation and rewards. Actively manage change. Follow the communication plan: extensive, ongoing communication of themes and results. Evaluate Progress and Determine Results • • • • • • Ensure measures are customer-focused. Studying the processes can make a company internally focused. If it does not also have a metric to focus on customer responsiveness to the transformation, it will fail. Continuous improvement is driven by metrics, and metrics are driven by processes. Measures are critical to aligning processes to strategies and linking to individual performance. Projects are prioritized based on their impact on customer and business requirements. Focus on both effectiveness and efficiency. Realize that the transformation process is never complete. Continue to refine metrics. Business Process Management • ©2005 APQC 77 ch a p t e r 5 Final Thoughts on BPM Frequently, people ask APQC, “How do you start a BPM initiative?” or “How can we get more out of the one we have?” In this section, the APQC project team addresses these two questions by focusing on how to transform an organization. BPM provides CEOs with a powerful management tool to guide the transformation of an enterprise. However, it is also the case that improvement initiatives can languish for lack of leadership involvement and fail to deliver results. So, the path taken influences the results. The project team, using data from the surveys and site visit discussions, found three primary paths that provide guidance to others who are beginning (or trying to improve) their journey in BPM: 1. enterprise business transformation (i.e., a significant remake of how an organization does business), 2. business process redesign (i.e., a significant design or innovative change in a major process area such as customer relationship management or supply chain), and 3. business process improvement (i.e., a methodical, iterative path of change where priorities are set each period, usually annually, and teams pursue those target improvements). These paths are not discrete. The project team observed that any BPM transformation incorporates elements of redesign and improvement. Process improvement is a valuable tool to relentlessly pursue continued enhancements; it should be envisioned as a part of the end state of larger or more aggressive initiatives. The scope of improvement and time to results for each of these three paths are discussed in the following sections. Enterprise Business Transformation Taking on a whole organization and leading it through a major transformation requires CEO and senior officer leadership. At one partner, the CEO and other top officers kicked off the broad transformation initiative, placed key people in leadership posts, and now sit in on many of the critical governance sessions. Since the start of its initiative, the company has reorganized into more of a process-focused organization, which provides process executives with the staffing and clout to take action. Similarly, at another partner’s site, the CEO kicked off the BPM initiative after a merger failed to materialize. The strategic question was how the organization became 78 Business Process Management • ©2005 APQC c h a p t e r 5 successful from the shareholders’ perspective. The mantra to “change the way we do business” became the philosophy around which the organization rallied; BPM became the programmatic tool to instrument the change process. By focusing on the global supply chain first, huge cost savings and customer benefits were garnered. A correlated enterprise resource planning project (i.e., implementation of a single global instance of SAP) provided the carrot and the stick for the BPM initiative. The SAP team has been tasked to learn processes and standardize, which is what SAP offers: one supportable standard. The SAP implementation operates on a timetable that is forcing the BPM team to resolve open issues quickly. Business Process Redesign/Innovation As in the old saying about what an elephant looks like, where you stand influences what you will see. The project team found many of the success factors for transformation in each of these programs, but the scope was not as apparent. For example, one partner presented its customer service organization, which is producing exceptional results. The centralized enterprise BPM organization had been dispersed to the operating groups; thus, an enterprise process model was necessary to help define interrelationships and a central governance board was key to providing oversight. The bulk of the redesign work takes place in the operating unit, which provides focus and a clear approach to results measurement. At another partner, the project team’s picture of the proverbial elephant was from the perspective of an internal consulting organization, reporting to a senior officer and possessing substantial influence to move about the organization and respond to line executives’ requests for help. Here again, the enterprise process model was necessary to guide overall interactions. Accountability for project success was centered high enough within the organization to have an enterprise impact. Given the timing and the evolution of the BPM group, the projects are delivering high-impact results but do not yet rise to the level of fundamental transformation of the whole business. Business Process Improvement Process improvement can be described as an evolutionary improvement path that guides organizations to move from immature, inconsistent business activities to mature, disciplined processes. This can be a path to follow in its own right or an essential element of the transformational or process redesign approach. For decades, organizations have focused on improving quality, sometimes using approaches derived from Total Quality Management or Malcolm Baldrige Quality Award criteria. Not only do these approaches help to stabilize work unit behavior, but also the assessment process produces valuable information from reviewers. Business Process Management • ©2005 APQC 79 ch a p t e r 5 Process improvement is a steady, consistent effort to improve all aspects of a business by focusing on the top priorities that are considered most urgent. These improvements can be made more strategic if they are linked to an annual planning cycle, which provides the visibility and funding for continuous improvement. The key strategy question, then, is, “Which of these paths is best for my organization’s situation?” How you answer for your organization depends on the urgency, importance, and timing of the challenges that face it. For a CEO in this situation, time to go slow (and cautiously) is not an option; it is better to use BPM to design a serious, bottom-up, top-down transformation or radical process change. If the time to change the organization is not measured in quarters, then process improvement can be a positive path. However, if you have a challenge to deliver improved shareholder value, investors and Wall Street do not wait long for results. That is to say, if you have a serious and urgent problem, then transformation or redesign is the route to go, but involvement in continuous process improvement is actually the goal. Organizations will have to move fast and deliver significant cost saving results while finding new ways to serve customers to generate growth. Designed and executed correctly, a transformational BPM initiative will deliver value and a lasting change to the organization that will look and feel like process improvement. In the end, if you have a plan and a challenge (i.e., the burning platform), then BPM provides the strategic program approach to deliver improved customer value. 80 Business Process Management • ©2005 APQC Business Process Management Partner Organization Case Studies 83Air Products and Chemicals, Inc. 109 Coors Brewing Co. 133 Deere & Co. 159 Northrop 195 Operations Business Process Management • ©2005 APQC Grumman Space Technology Management International Inc. 81 Business Process Management Air Products Air Products and Chemicals Inc. Air Products and Chemicals Inc. (APCI) is a geographically diversified Fortune 500 company with $7.4 billion in annual sales. The company operates in more than 30 countries, and half of its sales are to customers outside of the United States. It sells gases, chemicals, and equipment and serves customers in technology, energy, health care, and industrial markets. It has 19,900 employees worldwide. Deliver the Difference and a Unified Focus In 2000 APCI installed a new chairman and CEO, John Paul Jones, who had been with the company for 28 years. He took the reins of an organization that was doing well and started to develop a plan to position the company for greater growth and profitability. Jones saw inefficiencies and an emphasis on “my business” and “my function.” Employees would often identify their functions as different from the rest of the company and believe that they required separate processes. To establish a new order, Jones introduced a vision called “Deliver the Difference” to unify the organization into a “one company” focus and commitment. It summarizes APCI’s vision, guiding values, and working environment. Today, “Deliver the Difference” posters are displayed throughout the company, in hallways and conference rooms. When employees make decisions, they go back to the document and ensure they are in line with it. Said George Diehl, global director of the Process Management Center of Excellence and supply chain and process management education lead, “People know this [document]; it is a real logo and symbol internally for what we are all about.” The “Deliver the Difference” vision documents how the company differentiates itself from competitors. It outlines guiding values: accountability; innovation; integrity; respect; and a constant focus on safety, health, and the environment. It also contains a working environment statement. The goal of the document is to Business Process Management • ©2005 APQC 83 Air Products increase the efficiency and effectiveness of the company and drive it to be the best company to work for, buy from, and invest in. Despite having disparate businesses, many functions, and operations in many countries, the company identified four organization-wide initiatives that were needed to create increased shareholder, customer, and employee value: 1. change—visibly value people in a positive work environment, 2. portfolio management—continuously improve the return on capital, 3. growth —grow through innovation and superior products and services for customers, and 18 4. work processes—reduce costs through work process simplification. Committing to this vision requires understanding and listening to customers as one company by: • taking the best of the best and bringing it to customers faster (so velocity and speed are important); • providing value for global businesses through one infrastructure (that can mean one set of global processes, one IT system, or a set of legacy systems that support all the businesses in a common way); • simplifying and standardizing global work processes (another embellishment on the emphasis on processes); and • globally uniting by sharing knowledge across regions, businesses, and groups. (Knowledge management is key to “Deliver the Difference,” and it is integrated in the organization through global work processes.) “Deliver the Difference” is the single description of the new corporate order. BPM Strategy, Structure, and Funding “If you really want to become process-focused, you are changing the way corporations have been evolving, which has been around functions, around businesses. Now what we are saying is that there is a new dimension called ‘process,’ a whole new way of thinking about the way we add value.” —George Diehl, global director of the process management COE 18 84 I t is significant to this study that one of the four key foundational initiatives in “Deliver the Difference” involves work processes. Business Process Management • ©2005 APQC Air Products “Creating a process-focused organization must be in the context of something that is very important to the company. A process-focused organization for the sake of being process-focused has little value and, quite frankly, has a negative feel to it. If it is not placed within the context of the strategy and direction of the company, you are probably not going to get a whole lot of recognition or buy-in for the concept itself.” —Bill Cantwell, vice president of supply chain APCI is transforming itself to become more process-focused so that it can drive productivity and customer value. Supply Chain Vice President Bill Cantwell said APCI’s vision is to be an organization where all work is “thought of, performed, and managed as a process, focused on the customer to create satisfaction and ultimately customer loyalty.” The company is not, nor does it strive to be, process-based—it is not organized by process, but by function. In 2005, however, APCI plans to form shared service centers, which will be organized by process; Cantwell said this is a potential step toward APCI being organized by process. Soon after it published and began communicating “Deliver the Difference,” the company tackled several initiatives to integrate this more unified and processfocused vision into daily operations: portfolio management, a growth strategy, a single-instance SAP implementation, APCI’s Delivering the Difference Road Map customer loyalty, and introduction of “process” as a third Past Portfolio Global Enablers Growth Operating Management Continuous improvement Work Strategy “axis” of management. Mode Process Knowledge management Processes Customer loyalty It depicted this Segmentation/business rules E-business transformation in a “Deliver the Difference • Governance plan Road Map” (Figure • Planning and commitment process 21). APCI began first with portfolio management to focus more intently on its “core businesses,” which have the greatest strategic impact for the company. Several businesses in its portfolio did not measure up to EPS Business Process Management • ©2005 APQC • Economy Values Accountability Innovation Integrity Respect Safety, health Environment • EPS growth • Implementation success Drivers SAP Technology Change management Productivity The Best Company Work for Buy from Invest in Figure 21 85 Air Products 19 (earnings per share) growth and profitability standards. “Portfolio management is difficult,” said Diehl. “Many times businesses are part of the company for a long time, and they become part of the family. People really do not like to look at them with a very sharp eye or a sharp pencil. These businesses hang around longer than they should.” Consequently, leaders put businesses into three categories: growth, core businesses, and businesses that needed to be restructured. The second initiative was to develop a growth strategy that would determine how the company would invest its resources in the businesses. It chose to focus future investments in four growth industries: health care, electronics, performance materials, and energy and process industries. APCI created a growth board that reviewed opportunities to invest in these industries. A project to implement a single instance of SAP started in 2001 and was the driving force to APCI becoming process-focused. Leaders learned from Michael 20 21 Hammer and Deloitte Consulting that organizations that succeed in SAP implementation do so because they see the project as process implementation, whereas organizations that fail see it as an IT tool implementation. The organization rallied around the idea that SAP implementation was a series of processes enabled by a tool rather than the other way around. The company also wanted to ensure that the SAP and process work was focused on the customer and not an internally focused effort. Before proceeding, APCI launched a customer loyalty process and a scorecard to measure customer feedback. The process continues today. APCI cycles through approximately 5,000 customers located in all regions of the world and uses the data to define base customer requirements for the processes SAP is enabling. Company leaders introduced the concept of process management as the third axis of management, in addition to business units and functions (Figure 22). Business units dictate where employees work; this axis includes strategy, identification of customers, etc., and functions dictate what employees do, such as sales, engineering, customer service, accounting, etc. As the third axis, processes dictate how employees work together to serve customers. Accordingly, APCI examined the concept of the connectivity of jobs. Historically, the company had a tendency to isolate jobs and hand off responsibilities. The company is currently minimizing handoffs and recognizing that individuals need to be responsible for an end-to-end process. 19 lthough EPS is an important performance driver, operating return on net assets is the most A important. All employees know what the target is and know where the company stands in relation to the target. They are beginning to understand person by person what they can do to contribute to it. 20 www.hammerandco.com/about.asp (retrieved February 2005). 21 www.deloitte.com (retrieved February 2005). 86 Business Process Management • ©2005 APQC Air Products Global Process Management A Third Dimension in Management BUSINESSES (Business unit, region, focused on P&L’s and markerts) W or k “Best Company to Invest In” FUNCTIONS (Departments, Centers of Excellence) • Businesses determine where we work. • Functions describe what we do. “Best Company to Work For” • Processes focus on how we do our work. PROCESSES (Source, make, fulfill, etc.) “Best Company to Buy From” Figure 22 As the organization implemented SAP, became a process-focused organization, and developed and communicated the concept of “one company” throughout, its 22 leaders attempted to converge processes. Because the chemicals businesses and gas businesses had different processes in various areas of the world, convergence became one of the most fundamental principles in process management for APCI. Leaders wanted those who were doing similar jobs to do them in a similar way as a means to drive efficiency and effectiveness. Bill Cantwell, the vice president of the supply chain, said that the challenge was great because the executives were “constantly running into the not-invented-here syndrome.” As they were implementing a major release of SAP, they stopped the implementation for a two-month period to focus on process convergence. Stopping cost the company $12 million, but the executives knew they could not succeed until processes were converged. By configuring six transaction models in SAP, APCI has been successful in convergence. 22 “ Convergence” does not mean that everyone in the company does everything the same way, but instead means that employees may have one of six different ways of working (depending on the kind of business). For example, if employees produce and sell a bulk material, they have a unique model to converge around. Business Process Management • ©2005 APQC 87 Air Products The Executive Process Owners To underscore the importance of process as the third axis of management, Jones appointed executive process owners to lead the effort. Executive process owners are vice presidents of the company and are also the functional heads of major departments. Their functional role is concerned with functional excellence and their cost center. According to Cantwell, in their new role, executive process owners needed to: • articulate a process vision with key metrics, • document the end-to-end process, • sponsor process convergence decisions, and • lead as a process zealot. In addition, according to Cantwell, the company has taken all IT spending from the businesses and given it to the process owners. The process owners are responsible for all process convergence activities. For example, one process owner ensures that all orders are processed one way. The job of the owner of the “fulfill” process (or “order to cash”) is to drive convergence across the company. Likewise, the process owners of “make,” “sell,” and “source” (or “requisition to pay”) all have the obligation to converge. The process owner role is concerned with the effectiveness and efficiency of the end-to-end process across many functions. “Effectiveness” means that the process owner ensures that the output of their processes is delivering the right value to APCI customers and business owners. “Efficiency” means driving costs down by focusing on cycle time, re-work, etc. By being accountable for end-to-end work, process owners can re-align how work is done, especially at the functional interfaces, in order to improve productivity and make it easier for employees to perform their work, not just work smarter and faster in the old, inefficient process. Process Principles Early in the “Deliver the Difference” journey, John Jones and Bill Cantwell established a set of fundamental process principles, some of which follow. • Business processes will be simple, standardized, and global; enabled by a single instance of SAP and governed through a global process board. • Customer responsiveness, operational efficiency, and cycle times are all important. • Value creation will be focused on the enterprise versus any individual business. • Collaboration becomes the norm. Global Process Board APCI has identified 13 global processes, each of which is led by a global process management team. The executive process owners from each global process 88 Business Process Management • ©2005 APQC Air Products management team meet regularly as a global process board. The global process board is responsible for documenting process design, identifying key performance indicators, training, managing best practices (e.g., the best practices in implementing process management), and resolving issues across the global process management teams. Under each executive process owner, APCI has created full-time positions called process managers. The process managers are essential to the global process management effort. In addition to the global process board, APCI has a global supply chain board to drive the efficiency of the supply chain. The company delineates the role of each board so that none of the responsibilities are overlapping. Process Management Road Map The company uses a four-pronged process management model that includes process leadership, design, performance, and improvement, with SAP in the center. APCI is involved in a one-instance SAP implementation, and much of the process management activity is centered around it. This model is embedded in a road map to help communicate process management to the organization (Figure 23). Education and Training To help instill this understanding of and focus on process management, training concerning processes, ERP, and supply chains is a key element of APCI’s approach. For example, APCI offers employees a training class called “Introduction to Process Management.” Facilitators begin the classes by discussing the meaning of processes and the attributes of a processfocused organization. They rally around Introduction to Process Management Course Road Map “Future State” “Top 10 List” Process Leadership Process Design Process Improvement Process Performance A ProcessFocused Organization 4 Keys to Managing Processes The Business Case for Process Why Process? Why Process Now? The 7 “Powers of Process” Power #8— APCI’s “Secret Weapon” Process Basics Business Process Management • ©2005 APQC Figure 23 89 Air Products one simple, common definition of what a work process is: an organized group of related activities that work together to create value for the customer. A process has to be organized (i.e., designed and then documented). It has to work with other processes, which requires cross-functional roles, and it needs to deliver something of value to the company by contributing to being the best place to work for, the best company to buy from, or the best company to invest in. It is end-to-end work, not piecemeal. Facilitators make a business case for process management and explain why it is important to the company. The course includes instruction about Michael Hammer’s “Seven Powers of Process.” The course uses the road map diagram as a training tool to help participants understand where the company is today and where it is going as an organization (Figure 23, page 89). The road ends at an image of Mt. Everest, which signifies the future state of a process-focused organization. The Mt. Everest image indicates that process thinking is a higher view of the business. Through process thinking, employees can have a better understanding of how the entire business is operating and see the company from the eyes of the customer. The road map helps the trainees realize that process management cannot be implemented all at once. The company has traveled the “road” for more than four years. The trainees understand how to build a foundation for process management, according to Bill Ney, program manager and global process owner for performance measurement, and take each step one at a time. BPM Design To leverage business value, APCI focuses on process leadership, process design, process performance (measurement), and APCI’s Process Management Model: then process improvement (which are continuous A Continuous Loop improvement and knowledge management activities). As visualized in Figure 24, these capabilities form a continuous loop, and each is closely related to SAP implementation. Process Process Leadership Design Process Performance Process Improvement Figure 24 90 The step of business process management design involves: • identifying enterprise processes, • defining process owner accountabilities and assigning enterprise process owners, • building capabilities to achieve and sustain business value, and • establishing clear interface roles. APCI examines each one individually. Business Process Management • ©2005 APQC Air Products The Basic Steps In 1999 Diehl attended a conference hosted by Michael Hammer. Hammer had a simple message: If you are going to become a business process enterprise, even at a regional level, first identify the processes that make up your company’s work. Second, assign ownership of the processes end to end. Third, begin to measure them. Fourth, start to improve them based on the measures. “Finally,” Diehl said, “it is one thing to measure and assign process owner accountabilities. But what about the interfaces with other people like the business owners or the functional owners who had some of that authority and responsibility before? We have to recognize that there is a power-shift going on. How do you deal with that interface and have peaceful co-existence going forward as you introduce this new way of managing your business?” One answer is that process owners own their global process designs, and the business and functional owners operate using these converged, one company designs. Service level agreements begin to emerge among them. Enterprise Process Blueprint APCI currently has 13 global processes. A subset of the processes forms the supply chain, a chain that contains much of the company’s value. Diehl said, “It is the epicenter, if you will, of our global process model.” (See Figure 25.) APCI’s Enterprise Process Blueprint In January 2004 each process in Figure 25 had a longer, more Align Enterprise Process Blueprint complicated name; for example, “make” was “produce products and Supply Chain services.” In seeking Plan external guidance, Innovate which APCI routinely does to benchmark and Customers Source Make Fulfill speed improvements, Sell APCI adopted a concept from the Supply Chain Build Operations Reference Council. APCI managers liked the People Finance Information Environment Governance shortened names in the council’s supply chain Figure 25 process model, which uses one-word terms such as “plan,” “source,” and “make.” Knowing that simplicity would help convey the message of “what we do,” they adopted that idea. Business Process Management • ©2005 APQC 91 Air Products APCI also has a capital equipment business (an engineering business) that builds capital plants costing from $100,000 to more than $100 million. It has a separate supply chain called “build,” which focuses on this work. Each supply chain includes requisitioning of raw materials, sourcing, and purchasing. It also includes receiving at the plants and paying the suppliers. APCI’s manufacturing facilities start the conversion process, and maintenance processes are also in the supply chain. The end of the “make” process is the finished goods inventory. New orders come into “fulfill,” are picked from the finished goods inventories, and then are scheduled and delivered. Invoices are sent out after delivery and are paid. The process ends when cash is deposited in the bank and customers are satisfied Figure 25 (page 91) shows the seven customer-facing processes, which are the processes of the supply chain plus two additional processes: 1. “Innovate,” the new-product development process formerly known as “create and improve offerings,” begins with new ideas and ends with a new marketplace offering. 2. “Sell,” formerly “find, win, and retain customers,” goes from a lead through a proposal and a contract and ends when the customer is on-stream. Once onstream, the customer is served by the supply chain. The supply chain is supported by fundamental corporate support areas such as “people” (HR), “finance,” “information,” “environment,” and “governance” (corporate governance including law and corporate secretaries). Rounding out the list of the global processes is “align,” a leadership process that sits atop the others. The process was formerly called “develop and commit to enterprise plans.” The align process develops the five- and ten-year plans and has a three-year planning process called “plan and commit.” It also controls mergers and acquisitions. In summary, the enterprise process blueprint shows the seven customer-facing and the five enabling processes as well as a single leadership process, for a total of 13 global processes. The company has commissioned global process teams for 10 of the 13 in order to concentrate on where most of the money and customer impact are. The other 3 processes (“align,” “environment,” and “governance”) are slated to be addressed later. The current version of the blueprint appears frequently on APCI intranet Web sites. The blueprint represents the work of 19,900 people. Employees can identify where they work in the model, and the blueprint is used in new-hire orientation and other employee communication sessions. The model has been evolving for four years and, with some minor changes, is withstanding the test of time, Diehl said. 92 Business Process Management • ©2005 APQC Air Products “We have very intelligent and questioning people, and we are pretty much locked in on this.” Process Governance Structure Process leaders do not simply own the design of the process; that is only the beginning of their accountabilities. They are also responsible for the measurement, performance, and improvement of the process. Executive process owners could not manage entire processes on their own. Initially, they were asked by the CEO to form the global process management teams that would work with the SAP team to develop the infrastructure necessary to deliver the full benefits of SAP implementation. In addition, they would oversee the orderly transition of the SAP development activities from the SAP project teams to the ongoing global process management teams as the implementation rolled out. (See Figure 26 for the organization of the global process management teams.) All convergence decisions are transferred to the executive process owners and their teams, and they manage and own the process designs enabled by SAP going forward. APCI process leaders benchmarked other companies that had formed global process management teams. As a result, it developed a common structure led by an executive process o w n e r . Currently, the company has 10 official global process management teams. The process manager acts as a lieutenant, a day-to-day overseer of the process. He or she is involved in the details of measurement, design, education, and training. Global Process Management Team Structure at APCI Global Process Board/ Global Supply Chain Board Executive Process Owner Executive Process Owner ProcessManager Owner IT Account Manager ExecutiveProcess IT Account Manager Process Manager IT Account Manager Process Manager Global Process Global Process Global Process Owner Owner Owner Global Process Global Process Global Process Owner Owner Owner Global Process Global Process Global Process Owner Owner Owner Executive Process Owner Integrated Supply Chain SAP team E-business Business Process Management • ©2005 APQC IT Account Manager Global Process Owner Process Manager Global Process Owner Enterprise Design Owners Global Process Management Team Global Process Owner Regional or Sub-process Owners (As required) Figure 26 93 Air Products The IT account manager, representing the IT organization, is focused on making sure both the SAP and the legacy systems for all the IT spend (and the applications that support the process) are addressed. Each process is too big to be managed globally by one person, so the process is divided into three or four sub-processes owned by global process owners. For example, for the “plan” process, one global process owner is responsible for sales and operations planning and another is responsible for inventory management. The process also has regional and sub-process owners as required. An enterprise design owner has a detailed understanding of the SAP configuration in the global process. Finally, some people outside of the team are regularly involved in the global process. This may include representation from the integrated supply chain team, the SAP team that feeds the particular process, or e-business. E-business is another form of technology enabling the processes, since external Web sites often act as windows on these processes that allow customers to access services, products, and information directly. Process leaders from the different teams meet on a monthly basis and drive commonality around global process management issues. Process Design in a Process-focused Organization Process designs require documentation that provides clear understanding and agreement regarding what work is to be done within and across the global processes. Just as important as product specifications, process designs help the company resolve customer complaints, take orders, deliver products, and collect money. The company requires processes be documented consistently so the employees in France, the United States, and Taiwan can have a global process that they can understand and perform consistently. Using as unifying enablers a robust architecture, a single repository, common end-to-end process responsibility, organizational roles, and consistent terminology, the company can consistently control, store, and make documentation available so that processes are replicable, efficient, and value-driven. Robust architecture—The company uses a multiple-level architecture and is able to drill down into the process. It uses a standard set of symbols and a standard set of six elements that make up a complete process design. It has adopted many elements of the Supply Chain Operations Reference Council’s architecture and uses common terminology. In 2001 it had approximately six ways to document processes; today 94 Business Process Management • ©2005 APQC Air Products it has one. (The company trains employees to use this architecture and uses ARIS 23 as its modeling tool. ) Repository and document control —All process documents should reside in one location. The company does not want an ISO documentation repository, a process design for effectiveness and efficiency repository, and a Sarbanes-Oxley documentation repository. Launched but not yet fully deployed, its single repository is a Web-based tool, using a Microsoft SharePoint server. End-to-end connections —Processes are fitted into the architecture so that employees can see the connectedness, for example, going across the entire supply chain. The company also defines clear process levels to prevent employees from jumping between levels when they document processes. Employees need to understand supply chain variations and the appropriate end-to-end process. Organization —APCI needs employees who can read process maps, create a map, design a process, and model a process. Practically every employee needs to be able to read process maps. Training is provided to readers as needed. Employees can take a two-hour course on how to read a standard map, and a three-day course teaches employees how to map a process. Currently, approximately 600 employees have taken the three-day course. Consistent terminology —The company consistently uses ARIS symbols. Most people in the company use the low-cost Visio tool, a common Microsoft software product. They can use Visio to work with processes and generate new ideas. Then, once the process is locked in and the executive process owner approves it, an ARIS expert can put it into the more sophisticated ARIS process model. The company knows the value of standards, said Diehl. It has common naming and numbering systems and uses the outside Supply Chain Operations Reference Council reference model for numbering; the numbering system is also being made compatible with Sarbanes-Oxley documentation requirements. Along with the council, it leverages other models that follow standards, such as the APQC Process Classification Framework , so that it can compare best practices internally as well as with other organizations. SM Process Measurement in a Process-focused Organization The global process management teams assess processes using specific performance measures and targets. The key performance indicators of a process are leading indicators and predict performance. If a team measures increases in new customer signings, then it can predict revenue generation six months from now. If signings 23 Produced by IDS Sheer (www.ids-scheer.com). Business Process Management • ©2005 APQC 95 Air Products are going down today, that predictive process measure alerts the team to take action now to prevent future revenue decrease. For APCI, key performance indicators predict financial and customer value. Process key performance indicators are regularly reviewed and acted on at business and process reviews. A business review is generally held monthly to examine those key performance indicators in the context of the business. Business measures and process measures are integrated at this meeting. APCI plans to have real-time, global key performance indicators in place as a critical element of its process and supply chain focus. With SAP, the company has the potential to implement real-time global key performance indicators. In 2003 teams were looking at scorecards to review their measures every quarter. Now, with its new dashboard (described in a later section), teams are reviewing monthly. According to Diehl, the company is striving for real-time measures because the sooner the teams know about potential trouble, the sooner they can act to get back on track. The company is implementing a Web-based tool so that process key performance indicator results can be communicated to each employee. The goal is to allow every employee’s performance goals to be aligned with a few key performance indicators that they see on their portal when they open their PC. They can interact to find out where their team is performing on a key performance indicator and provide feedback to the process team about ideas they have to improve that indicator and how the team might work better together. (An example of this capability follows in the discussion of supply chain measurement.) The company links its key performance indicators together. It has a corporate scorecard with 10 key performance indicators that the chairman and executive committee use. It also has a line-of-sight to the process and functional scorecards and to the strategic business unit scorecards. Process Improvement in a Process-focused Organization When a team has its design capability in place, has its processes documented, is performing to the process, and is measuring actual versus target performance, the company looks first at what is going well. Diehl said: “We try not to jump to the negative. If one region is losing fewer accounts to the competition than another region, we want to understand and share that best practice.” If the team recognizes a gap between the value of the key performance indicator and the target, then it performs a root-cause analysis. Figure 27 shows that the team has two options on the left hand side: either the process is correct and the execution is the problem or the process itself needs to be redesigned. 96 Business Process Management • ©2005 APQC Air Products Process Management Model Cause Analysis Gap CREATE AND IMPLEMENT SOLUTIONS • Improve execution • Process redesign Success • Continuous improvement • Knowledge management Process Improvement SHARE BEST PRACTICES • Knowledge management MEASURE ACTUAL VERSUS TARGET PERFORMANCE Process Performance DESIGN AND IMPLEMENT PROCESSES Process Design APCI STRATEGIES, BUSINESS MODELS, BUSINESS PLANS, CHANGE MANAGEMENT Process Leadership Figure 27 Continuous Improvement and Knowledge Management APCI’s “one company” continuous improvement model is a merger of Six Sigma and Lean management principles. In some companies, Lean groups and Six Sigma groups work side by side, and each group reports its benefits independently. In 2002 APCI determined to combine the two, even though some employees felt strongly about one and some about the other. According to Diehl, the model merges the best of Six Sigma with the best elements of Lean: Six Sigma is strong in planning and looking across processes to determine where the best opportunities for improvement are, and Lean provides excellent continuous improvement tools. The continuous improvement model has five steps: prepare, analyze and prioritize, plan, implement, and learn. It enables teams to use a variety of tools to solve problems in untraditional ways. Continuous improvement has topdown leadership; businesses or processes do not begin until the top leader agrees. Continuous improvement is tied to the annual planning cycle. Continuous improvement tools are plentiful and varied. They include both hard and soft tools adopted from Six Sigma, Lean, and other sources. Teams use Kaizen methods, value-stream mapping, and many more. The company has a five-step change model with several tools including a stakeholder analysis tool. Business Process Management • ©2005 APQC 97 Air Products “Deliver the Difference” mandates an environment of knowledge sharing and reuse in globally connected communities. Knowledge is shared through a variety of communities such as communities of interest, communities of practice, centers of excellence, aligned organizations, and integrated work processes. Knowledge management activities are organized around four key capabilities: collaboration, idea management, best practices transfer, and learning. Figure 28 shows how knowledge management and continuous improvement are integrated with process management using the following steps: 1.W h e n w o r k i n g Applying CI and KM to Global Process Management on process improvements, APCI uses key 4. Improvements are Process sustained by process Process performance Design Leadership documentation and Collaboration indicators to 4 KPI monitoring. measure how the work process is Process Process Idea Performance Improvement performing relative Management to speed, waste, and PM effectiveness. From 1 Best Practice these measures, it 3 Transfer determines what process elements need to improve. Learning 2.C o n t i n u o u s 2 improvement is KM applied to the work Prepare Prioritize Implement Learn Plan process to improve it. Cycle Tied to Operating Plan CI 3.T h e c o m p a n y applies knowledge Figure 28 management to share the best processes and practices. 4.Improvements are sustained by documenting processes and monitoring key performance indicators. A Vision for Collaboration Collaboration is essential for maintaining a unified outlook, and corporate leaders share a vision for collaboration, said Diehl. They believe that process owners should have high-performing processes using the best designs and the best practices. In turn, the process owners should be supporting the businesses in achieving their goals because the businesses are executing these common processes. 98 Business Process Management • ©2005 APQC Air Products Process owners must have well-established, actively aligned, and collaborative relationships with the business units and their leaders. Process owners develop and share critical key performance indicators and targets with the business units, and they are continually identifying opportunities to improve processes across the businesses. APCI does not want to only deploy continuous improvement projects inside businesses because they cannot be leveraged. Projects have more value if they are done at a global process level. Business and process leaders select major process improvement projects together. Another important area of collaboration among business leaders and process owner is consistent employee communication. For four years, APCI has cascaded communications throughout the organization. Three times a year, leaders meet with the top 50 executives worldwide. They in turn communicate to the top 600 leaders in the company. The top 600 communicate down to the rest of the organization. Leaders think of it as a waterfall effect. Measuring Maturity APCI believes that the higher a process is in the maturity model, the better the link to business value. (The company has used a maturity model developed by Kevin 24 McCormack. ) Processes are designated with the following levels of maturity: • Ad hoc (Score 1.0 to 2.0)—Processes are unstructured and ill-defined. Process measures are not in place, and the jobs and organizational structures are based on the traditional functions, not horizontal processes. Individual heroics and “working around the system” are what makes things happen. • Defined (Score 2.0 to 3.0) —Basic processes are defined and documented. Changes to these processes must now go through a formal procedure. Jobs and organizational structures include a process aspect but remain basically traditional. Representatives from functions meet regularly to coordinate with each other concerning process activities but only as representatives of their traditional functions. • Linked (Score 3.0 to 4.0) —This is the breakthrough level. Managers employ process management with strategic intent. Broad process jobs and structures are put in place outside of traditional functions. Cooperation between intracompany functions, vendors, and customers takes the form of teams that share common process measures and goals. • Integrated (Score 4.0 to 5.0) —The company, its vendors, and suppliers take cooperation to the process level. Organizational structures and jobs are based on processes, and traditional functions—as they relate to the supply chain—begin to disappear altogether. Process measures and management systems are deeply embedded in the organization. Advanced process management practices take shape. 24 Business Process Orientation: Gaining the E-Business Competitive Advantage, K.P. McCormack and W.C. Johnson, St. Lucie Press, 2001. Business Process Management • ©2005 APQC 99 Air Products In 2003 APCI surveyed 100 of its top managers—the top 50 in the corporate hierarchy plus another 50 thought leaders. The survey asked: Where do you think we are on this model? The average score was 3.2. McCormack’s benchmark data showed that APCI was below the average of leading process-focused companies, whose average score was 3.5. McCormack and APCI’s process leaders concluded that, to drive its process efforts up the maturity scale, the company should concentrate on process measurement, process design, and role clarity. In this way, the company used a maturity model to focus its priorities to build company capabilities. Implementing and Sustaining BPM The company can no longer maximize its productivity and customer satisfaction by focusing on individual global processes; it is changing its focus to the points where the processes intersect and where they link end-to-end. This is where it has found the biggest areas for improvement. The first group of processes that it decided to focus on was the supply chain processes: plan, source, make, and fulfill. Approximately 80 percent of the cost-of-goods-sold go through this chain. “That is where the money is,” said Diehl, “and we are trying to follow the money for business value. After all, our customers depend on the output of our supply chain processes.” The supply chain organization includes all process management, continuous improvement, and SAP activities. The chairman has seven direct reports including the vice president of the supply chain. Reporting to the vice president of the supply chain is a group of both traditional functions and global processes. Annually, APCI purchases approximately $3.5 billion of goods, equipment, and raw materials. It has an SAP project, a global customer service organization, a customer engagement team, a customer loyalty team, and the “sell” global process management team. The names of the boxes in the lower level of the chart indicate a major change in how APCI operates as a company. It is changing the names of organizations to verbs as an indication of what is important. The organizational chart names are a mixture between processes and functions; the company is creating a balance between the two. Integrating Global Processes Through a Supply Chain Focus The company developed a supply chain planning capability that it organized to take advantage of the visibility of data that SAP was providing. Because the new group wanted to drive supply chain processes to the highest level of maturity possible, it called itself “integrated supply chain.” According to Tom Ward, the vice president of the integrated supply chain, businesses were on the verge of mutiny when the company first introduced a supply chain focus in late 2003. To overcome resistance, the CEO had to visibly support the effort. 100 Business Process Management • ©2005 APQC Air Products Ward was assigned to head the integrated supply chain group to focus on building capabilities, solutions, and global strategies on a “one company” basis. According to Ward, this involved more than just planning; the group cuts across all the supply chains and determines the most effective ways to run a global supply chain. It is not, nor will it ever be, a big team. Its people are deployed globally and have skills in continuous improvement, process management, data management, and SAP. Within each of the businesses, a supply chain director has been assigned to drive the supply chain activities for that business. To create the “one company” approach, they align everything that they do with what the integrated supply chain team does at the enterprise level. Because the integrated supply chain team is responsible for continuous improvement, each business has the same responsibility. Because the integrated supply chain team instills foundational capabilities at the enterprise level, the businesses deploy these capabilities at their level. The integrated supply chain team has a supply chain key performance indicator dashboard at the enterprise level; the businesses use the same measurement dashboard. Ward’s task became to create the focus while not adding overhead. The reason for the supply chain focus is that the processes that compose the chain spend $4.6 billion annually. “It is the core set of processes where the money is,” said Ward. A challenge was not to focus on the supply chain by creating a whole separate structure; the company wanted to work with the existing organizations. It wanted to leverage the existing continuous improvement, process management, and knowledge management infrastructure. It reorganized without spending any new money; in fact, it reduced costs due to overlapping activities. Ward uses the pipeline in Figure 29 to help employees envision the supply chain. It portrays a pipeline with no bends or constrictions in which goods and services go to customers seamlessly, and it is running on the back of a single instance of SAP. Images such Pipeline to Our Customers as these are valuable for training and communications. The company’s goal is to have 13 percent operating return on net assets by 2007. It is driving a program to triple productivity based on Business Process Management • ©2005 APQC Supplier Plan Source Make Fulfill Customer’s Customer Customer Leverage the Single Instance SAP Platform Figure 29 101 Air Products APCI’s historic rate. The supply chain teams play a critical role by continuously improving the supply chain and reducing functional costs. People first tried to meet the goals by simply reducing service levels and not worrying about effectiveness. To prevent a slippage in effectiveness, the company is now entering into service level agreements with its functions and businesses. The integrated supply chain group will meet its goals by simplifying, standardizing, shortening, and sharing processes—a mandate from the “Deliver the Difference” vision. Its leaders are concentrating both on educating the employees (especially the middle managers) and on funding approximately 1,700 projects. It manages each one using color-coded status indicators. With processes defined and deployed, it can focus on measuring and monitoring results. The integrated supply chain group is involved in some foundational projects. One is the sales and operations planning process, a rudimentary process that was built in the early days of SAP. Either businesses were not using it or they were modifying it to meet their needs. In 2004 the integrated supply chain created a second version that has been well-received. It is now implementing a “one company” enterprise tool to enable this process so that every business that runs the process can use the same tool. To enable a process with an IT tool, the team uses the same disciplined approach that the company uses for its SAP project: Bring all businesses in, write a blueprint, develop a consistent design, and require everyone to use it the same way. Evaluation and Results The company no longer tracks separate lists of benefits (SAP benefits, continuous improvement benefits, etc.). All benefits are managed through one instrument called the “one company” improvement tool, or Idea Tracker. It sits on a platform built in 2003 for knowledge management and now supports all businesses and functions. It is helping the company move away from a paper-based environment (spreadsheets, PowerPoints, Word documents, special reports, etc.) The intranet-based Idea Tracker tool was developed simply to track new ideas until they became projects. APCI added the capability to monitor and log the benefits of ongoing projects. The company developed a rigorous definition regarding what a benefit is (e.g., a onetime benefit, an ongoing benefit, an avoided cost, or a reduced cost). Idea Tracker captures whether the project impacts the profit and loss statement or the balance sheet. Employees enter information about ideas or projects into the tool. The organization requires that all projects that are complete be documented in Idea Tracker so that the cumulative benefits can be tracked across the company and 102 Business Process Management • ©2005 APQC Air Products the owner of the idea can get credit for the results. In the future, all businesses and functions will be required to enter their approved but not-yet-started projects to be able to provide an organization-wide benefits forecast. The company measures its success based on two result areas: increases in productivity as shown on the profit and loss statement and increases in customer loyalty scores. Incentive compensation is designed to reward people based on the performance of the company as a whole and not on the performance of the business—a system that Cantwell said encourages convergence. APCI has not drawn a direct line between customer loyalty scores and incentive compensation. Customer loyalty is a leading indicator, a means to an end. Results and Progress Under “Deliver a Difference” The company’s values come directly from “Deliver the Difference.” In adherence to those principles, the company has: • begun a single instance implementation of SAP and established 10 global processes, • consolidated global organizations under single managers, • established an annual customer loyalty survey for each business in each region, • doubled the rate of hard productivity savings in 2004 and is on target to triple the rate in 2005, and • created regional shared service centers. The Supply Chain Dashboard The supply chain dashboard is available to all employees through an intranet portal. Drilling down through the portal by clicking on a performance measurement link leads the employee to an option to review the supply chain key performance indicators. The 17 key performance indicators are aligned with “Deliver the Difference” values and are categorized under the goals of best company to: buy from (customer value), work for (operational leadership), and invest in (shareholder value). Down arrows indicate a trend in the wrong direction, and up arrows indicate a trend in the right direction. Some icons allow the reader to drill down further for more information. Businesses have business-level targets. The target of the vice president of the supply chain at the enterprise level is a sum of the targets of all the businesses that he supports. The Effect of BPM Implementation—Customer Loyalty Example APCI measures 54 individual customer characteristics; an example is illustrated in Figure 30 (page 104). Business Process Management • ©2005 APQC 103 Air Products Customer Loyalty SAP Recovery Evident in Germany Key Drivers—Differentiators (from the customer’s perspective) • Ease of doing business • Respond and resolve problems • Lower cost of business Customer Loyalty Germany • Manage activities in an integrated fashion • Increase productivity and efficiency Business Basics—”table stakes” • Consistent reliable product SAP Go Live • Delivery as committed • Complete and accurate invoicing Currently Note: Vulnerable = Indifferent + At Risk Customers Figure 30 The characteristics are broken up into a number of different categories. Some are “table stakes;” that is, the company receives no value for differentiating itself in these areas and considers it the cost of doing business. However, if the company achieves in the area of key drivers, then it receives benefits and increased customer loyalty. For example, during its first SAP release in Germany, APCI surveyed its customers both before and after the implementation. Using this data, it kept a focus on its customers as the new process and ERP system bugs were worked out. As illustrated in Figure 30, the company did suffer a performance dip in customer satisfaction as the new ERP system was implemented but actually increased its performance to higher levels after a period of time. Each of the 17 businesses is required to survey their customers annually. Businesses work on the one or two high-priority areas that customers indicate need improvement. Based on survey results, APCI categorizes its customers as: secure, favorable (the largest category), indifferent, and at-risk. The indifferent and the at-risk customers are recognized as a group called “vulnerable.” The secure customers typically not only give 100 percent of their business to APCI but also are willing to recommend 104 Business Process Management • ©2005 APQC Air Products the company to another customer. Customers of the businesses going through SAP implementation (and the accompanying process convergence) began to receive different invoices and their prices and units of measure changed. The company matched their survey responses to the changes that were occurring. The company considers the results of this study carefully because possibly the unprofitable customers are becoming more vulnerable—a fact that is not necessarily bad. APCI tries to ensure that its important and profitable customers are driven into the secure category and tries to move unprofitable customers to profitability by changing their service offerings based on the price that they are willing to pay. Lessons Learned “Our single instance ERP system has been a great catalyst for the company because trying to implement business process management and become a processfocused organization without a big catalyst or a lever for change would be more daunting than it has been.” —George Diehl, global director of the Process Management COE APCI’s concept of “one company” jump-started global process management. Cantwell said that before “Deliver the Difference,” the organization was influenced by what seemed to be the initiative-of-the-month. Consequently, employees found prioritizing difficult. APCI was a decentralized enterprise; it had its gases business, chemicals business, and equipment business. It operated in Europe and the United States and was developing a business in Asia, and employees often operated as though they were in an independent organization. APCI had 34 legacy systems to process customer transactions, five ways to manage quality, and three ways to conduct continuous improvement activities. APCI has many success factors in place, among them the use of enablers such as continuous improvement, knowledge management, customer loyalty, segmentation, business rules, and e-business. Frequent benchmarking was also a factor. The company benchmarks for credibility and speed. It benchmarked the procedures necessary to form process teams and document processes. Key Findings Process owners should be clear about what they are not going to do. APCI process owners are tempted to try to do too much. The global process board focuses the process owners on the priorities and initiatives and then drives the initiatives throughout the company. Resistance from middle management to a process focus has been, and continues to be, very strong, according to Cantwell. Middle managers feel the brunt of change and, he said, 40 percent of them may not make it because they do not have the skills to operate in the new world. The company has learned to manage change Business Process Management • ©2005 APQC 105 Air Products proactively. It recognizes before it begins where to expect the resistance. Because change takes so long, convincing people to change is difficult. Many will not be in the same job long enough to see the fruits of their labor; organization leaders thus pave the way for the success of successors and must rely on employees doing the right thing just for the sake of doing the right thing. The company converged processes concurrently with SAP implementation. SAP gave the work teams hard deadlines that they had to meet, and the SAP project artificially imposed the deadlines. A motivator in meeting deadlines came from the estimation that delaying SAP implementation would cost the company $6 million per month. APCI has made a conscious decision not to distract employees from SAP implementation by implementing other initiatives such as customer relationship management. Its philosophy is to be SAP-centric and not include vendors or capabilities that are not integrated into SAP—because to do so would require upgrading SAP, which would require that all interfaces with other applications be redone. Cantwell said: “We are not at all interested in looking at a lot of boutique solutions to bolt onto SAP. If SAP has it, we’ll use it.” Mapping and maintaining processes can be expensive. The company carefully balances business value versus elegant solutions. Employees have a tendency to map everything and document all processes. Leaders continue to tell employees to prioritize and avoid documenting, for instance, how to forklift something in a plant. Global process teams have been asked to identify the five processes that they are working to improve. • • • • • APCI has also learned to: focus on a few measurable initiatives, avoid creating a bureaucracy and overhead, define what it will and will not resource each year to keep process owners from being conflicted, integrate change plans into project plans and anticipate resistance from middle management, and communicate frequently to leaders and then let them cascade and customize the message. Suggestions for Success Cantwell said that APCI is cautiously optimistic that it will be successful in the long term by focusing on process as an integral part of its strategy. Its leaders have a few suggestions that will help others transform their organizations. • Do not do everything at once. Lay a foundation, and constantly build on what came before. The company recognizes and stifles the desire to jump to the answer too quickly. 106 Business Process Management • ©2005 APQC Air Products • • • • • • • As you go step-by-step, sequence events with dedicated resources. Transformation cannot be a part-time job. Find a number of employees and isolate them to drive the initiative. Cantwell said: “Somebody’s life has to depend on this being successful. If you can say, ‘Well, I did not quite get to this,’ or ‘Let me show you all of the other good things I have done, so we did not really get to this,’ you will not be successful.” Cantwell suggested dividing the work, isolating a few steps, dedicating resources to them, creating credibility in the organization by meeting milestones, and moving to the next step. Manage change aggressively. Anticipate resistance and deal with it early to gain acceptance that the change has value. Concentrate on visibility and velocity. By implementing a single instance of SAP, the company increased visibility of information. By increasing its focus on processes, it has achieved faster cycle times. Also concentrate on simplicity. Take complexity out of the business. Historically, APCI made its business complex by customizing products for the benefit of customers, but customers were not paying for the customization. Focus on both effectiveness and efficiency. Realize that the transformation process is never complete. Keep a customer focus. APCI has learned during the first four years of its process-focused evolution that focusing on IT systems and processes can make a company internally focused. If it does not also have a metric to focus on customer responsiveness to the transformation, then it will lose those customers. One suggestion for success rises to the top, and all of the APCI site visit hosts consider it essential: Obtain CEO support. Moving to a process-focused organization requires too much change to accomplish without the strong endorsement of the CEO. Employees’ jobs and environments change. For them to be able to buy in, they must recognize that the CEO is behind it and intends to make it happen. Cantwell provided an example of its necessity. “Process convergence, driving people to change the way they do things, is exceptionally challenging for an organization, especially when it is not a good solution for an individual business. What typically happens in that business is that managers say, ‘No way am I doing it. You are increasing my cost structure, and you are decreasing my effectiveness.’ The managers inside the business bring it up to their general manager, the vice president of the business, who will always support them. The issue continues to be escalated until it arrives on the desk of the CEO. The CEO must say ‘I don’t care if it is worse for your business; this is what I want for the company to succeed.’ If the buck does not stop at the CEO level, there is always going to be someone to override convergence.” Goals and Plans By the end of first quarter 2005, 80 percent of the company will be operating with SAP. APCI’s Asia operations will have SAP in 2006. Business Process Management • ©2005 APQC 107 Air Products Ward said that APCI believes that its BPM infrastructure and tools are mostly in place, positioning it for future success. In his cover letter in APCI’s 2004 annual report, John Jones concludes with this paragraph: All of the groundwork we have laid since 2000—restructuring our portfolio, resourcing our growth businesses and focusing on work process improvement— paid off in fiscal 2004. Those four years presented great challenges for Air Products, but our focus and desire to win came through. And this will continue into fiscal 2005 and beyond. …There’s still much important work left to do. Our strategies will help drive top-line growth and return on capital. And it will be our passion that delivers that difference. 108 Business Process Management • ©2005 APQC Business Process Management C o o r s Coors Brewing Co. In 1873 Adolph Coors founded Coors Brewing Co. in Golden, Colo. Since 1993, W. Leo Kiely III has been its president and chief executive officer, the first non-family member to lead the company. Coors employs approximately 8,500 people worldwide and produces roughly 32.7 million barrels of product, which translates into around $4 billion in annual net sales. Coors products are sold in more than 40 countries. The company is the third largest brewer in the United States and is among the top 10 brewers in net sales in the world. Currently, Coors has two 25 business units, one in the United Kingdom and one in the United States. Coors shareholders approved a merger with Molson Inc. February 1, 2005, which will likely create the Molson Coors Brewing Co. The new company would have combined revenues of $6 billion and control three well-known brands: Coors Light, Carling, and Molson Canadian. The goal of the merger would be to find and leverage $175 million in synergies. Business process management would have a role in both identifying the synergies and integrating one company with the other. BPM Strategy, Structure, and Funding “When we began this journey three years ago, I would not have imagined that we would be identified in a best-practice study.” —Mara Swan, chief people officer Historically, Coors has not been process-oriented. Before CEO Kiely arrived, business was conducted ad hoc and when employees left, they took the institutional knowledge with them. In 2002 Coors streamlined IT and implemented SAP because it believed that positive change could come through good IT business process 25 When the following case study refers to “the enterprise,” it is referring to the United States only. In 2005 the company will be exporting BPM under a module for a global HR system. Business Process Management • ©2005 APQC 109 C o o r s management. However, it realized that the human component was important to change. Even with technology in place, mistakes occur when employees do not adapt their behaviors to the technology. Management charged HR with implementing BPM and Chief People Officer Mara Swan with focusing on the human component of BPM. Swan’s philosophy is to concentrate on the outcomes and the human component rather than on the tools of BPM. Coors hires team members who often have experience working in consulting firms such as Andersen and Accenture Ltd. They are often experts in process and change management and act in the role of internal consultants. The BPM team leader reports directly to the chief people officer. Projects that the team currently participates in include ViPER (supply chain procurement), world-class operations (WCO), enduring focus (SAP implementation), and greyhound (HR System Implementation). These projects are supported by ARISTM, IDS Scheer’s business modeling tool. Corporate leaders envision the BPM team as a feeder organization. The team hires talented individuals from the outside who model business practices. As part of their career plans, team members often transfer into other areas of responsibility in the organization within two or three years. The BPM team supplements its work force with consultants that are contract employees. Coors trains them under the tutelage of one of the seasoned employees. BPM Team Mission The mission of the BPM team is: to develop and implement an evolutionary, high-performance (flexible and responsive) process structure, aligned with Coors’ program/business goals, that facilitates the use of knowledge assets by our stakeholders for leveraging competitive advantage and innovation potential. BPM at Coors Brewing Company is essential for achieving process clarity and capability across the enterprise to enable and ensure the delivery of 4th generation expectations of quality to our distributors, retailers, and consumers. This architecture is the blueprint for systematically and completely defining and documenting the organization’s current (baseline) and desired (target) environment. Relationship Between IT and HR in Implementing BPM In its role of driving human performance, HR is serving as a bridge between IT and the organization. The power of the role is that it can act independently to do what is best for the enterprise; it is not beholden to either side. An example of the HR role concerns the Cornerstone Project, a supply chain initiative that went live in 2003. HR successfully negotiated between the entrenched positions of the managers of both supply chain and IT, convinced them to change, 110 Business Process Management • ©2005 APQC C o o r s and contributed to the success of the project overall. Coors’ Vision Coors’ vision statement includes “To win long-term in the beer business, we must be an agile, high performance company that is great at those things that are key to winning in beer.” To be great, the company must: • delight beer drinkers with great, drinkable beers; • build great brands with each new generation; • build big, high-share markets; • attack costs and invest in growth; and • engage and inspire its people. Swan said that BPM is key to achieving the last two points: attacking costs and investing in growth and engaging and inspiring people. “When people know what is expected of them and what the path to success is, they know how to win. Often a disconnect exists between what management thinks ‘great’ looks like and what employees think ‘great’ looks like,” she said. BPM has helped Coors understand how many people are needed to do a job and how individuals should be recruited and trained for jobs. Having BPM in HR has allowed the organization to tie the performance systems with the work done. Before SAP systems are implemented, Bonacci is able to prevent walls being built between process management (“the The Route to BPM at Coors work”) and performance management (“the Where we are now Where we want to go rewards”). The ultimate goal is less organizational waste. • Simulation V Business Process Management Vision Figure 31 is a diagram created cooperatively by Coors and IDS Scheer, Coors’ BPM tool supplier, to help people visualize the primary components of BPM. Coors is currently on Step II, business process engineering, but it is transitioning I Drawing Process Development (not architectured) • Visio • PowerPoint • Word Business Process Management • ©2005 APQC II • Process Cost Analyzer • ARIS Toolset (Charting, Reporting, Animation) Business Process Analysis Business Process Engineering ARIS • Toolset • Easy Design • Web Design • Web Publisher Business Process Monitoring III IV • ARIS PPM • SAP NetWeaver (PPM) Business Process Execution • NetWeaver Figure 31 111 C o o r s into both steps III and IV, business process execution and monitoring. In September 2004 the team successfully piloted ARIS TM PPM (process performance manager). The PPM software measures transactions within SAP or any other system in order to monitor the process. The pilot identified discrepancies between the way the work was supposed to be done and the way that repairs and work orders were actually being executed. This technology allows Coors to know when employees enter the system, how they conduct transactions screen by screen, and how long it takes for them to complete the task. The intent is not that “big brother is watching,” but rather to drive human performance, determine whether the right person is doing the job, and provide information for the hiring process. (For more information on this pilot, see “Controlling Implementation Example— Breakdown Maintenance,” page 125.) Currently Coors does not measure offline activity and work done through manual systems. However, in 2005 the company’s intent is to implement a work flow component through NetWeaverTM that will begin to address work performed manually. Engagement Model Between 2003 and the present, the BPM team faced and solved three challenges as they engaged the business units (Figure 32). Figure 32: BPM Challenges in Enterprise-wide Engagement at Coors Problem 112 Manifestation Solution BPM team members had different backgrounds and used various languages and terminologies. They used Visio in different ways. The team could not effectively mesh information from the business units; it discovered differences in definitions and leveling. The team standardized terms and adopted a common methodology for conducting process and change work. It moved to a common system for modeling (ARIS). The BPM team did not know what the clients’ expectations were. The clients did not know how to measure success. The team developed an engagement contract process that outlined what the client needed to know and established the expectations for the project. The organization was functional, and the leaders did not have systems thinking. Leaders of some of the business units did not know how they fit into the organization. They were unaware of how changes in their processes affected other units’ processes. The team developed an enterprise framework model that outlined the company’s five core processes and the subprocesses that supported the core processes. It determined who has process ownership for each of the areas. Any time the team has an engagement, it introduces the enterprise model and helps the client understand which of the processes that the project will affect. Business Process Management • ©2005 APQC C o o r s Tools and Methodology Coors has selected IDS Scheer’s ARIS software for modeling and managing its business processes. The ARIS toolset supports the xBML™ methodology and Coors’ approach to business modeling. The tool was in place before the BPM team began to transition away from using Visio. The company is currently using ARIS Version 6.2. The Gartner Group (the leading provider of research and analysis in the global IT industry, according to Bonacci), in surveys several years running, has rated ARIS as a recognized market leader in business modeling tools. ARIS is aimed at modeling all aspects of complex business and can model processes, data, organizations, systems, information, products, knowledge, business objectives, and information flows. • ARIS 6.2 Web Designer allows enterprise-wide and cross-company design of business processes online. • The ARIS Toolset allows process analysis and reporting, simulations of resource utilization, and activity-based cost calculations. • ARIS Web Publisher allows quick communication of process models globally via the Internet and intranet. Although most of the businesses have transitioned from using Visio to ARIS, occasionally, the BPM team receives a Visio diagram that describes a process. It tells the business that the process needs to be in ARIS as soon as possible so that it is integrated with the enterprise. The businesses themselves actually own the models, but the BPM team is responsible for the integrity of the models because it must be able to use them in its reports. The BPM team owns the modeling software and skill, and although material exists in various locations throughout the company, it will all eventually be anchored under the BPM team umbrella. The BPM team has been focusing on the businesses and is just beginning to focus on the technology. In its models, it routinely identifies the applications that the businesses use to support their activities. The IT function has different views of managing processes than the other business units do. Coors is pursuing the purchase of IDS Scheer’s IT City Planning, and ARIS supports it. IT City Planning provides various views: one applicable for IS personnel, one applicable for data managers, one applicable to IT personnel, etc. Using it, groups can understand from a systems perspective what is being done. The BPM team examines the applications that businesses are using and asks “what IT processes is this application supporting?” The ARIS graphics have an object that identifies the IT process. The BPM team can associate the IT process to the business process by connecting the two. Then Business Process Management • ©2005 APQC 113 C o o r s it can determine in which server and area the application resides. It can model the information flow between the applications. The BPM team acts as a bridge between the IT function and the other business units. IT has business partners in each of the business areas and has been a great advocate of the BPM team, according to Bonacci. Currently, the BPM consultants are working with IT to develop a strategy to resolve helpdesk tickets for Level 1, Level 2, and Level 3 support issues. When the business initiates a helpdesk ticket, the goal is for IT to be able to access the appropriate process model and pinpoint where the problem is. By having the entire IT linkage sitting under the business process, IT can drill down, follow the flow, and isolate the problem. The BPM team recognizes that this capability is far from perfect, but Coors is using training resources to make the pinpointing effective. The Cornerstone project was a $50 million supply chain SAP implementation project. The company had processes everywhere—in people’s heads and in every format imaginable. Business people brought their processes into the workshops that trained them to model. Because the xBML language is so business-friendly, facilitators could use it to ask the simple questions: who, what, when, and where. Coors is currently significantly project-focused. The business units and groups that have not had a project recently may have not been touched by the BPM group. However, eventually the group will work with all Coors employees as they strive to become more process-focused. BPM Design Enterprise Model Coors BPM is a top-down methodology. Figure 33 is the current Coors enterprise model. The left column of the model is “Level 0” (the highest strategic level), and it contains the five core business processes: manage the beer business, create customer demand, generate revenue, execute the supply chain, and support the beer business. Level 1 lists the business areas that support each core process. For the job of managing the beer business, Coors must: establish the business direction, manage the public policy environment, sustain the corporate entity (trademarks and brands), provide enterprise excellence (quality), and manage corporate assets. Coors began developing its enterprise model in 2003. The first rendition lacked an enterprise perspective and focused on projects. It lacked key areas of the Coors business. 114 Business Process Management • ©2005 APQC C o o r s Coors U.S. Business Enterprise Model–2005 Manage Beer Business Establish Business Direction Create Consumer Demand Understand Comments Generate Revenue Manage Key Accounts Execute Supply Chain Plan Supply Chain Support Beer Business Leverage Human Capital Sustain Corporate Entity Manage Public Policy Environment Develop Brand Plans Manage Wholesalers Source Materials and Services Manage Safety, Health, and Environment Manage Product/ Package Life Cycle Execute Brand Plans Perform Order Management Provide Customer Support Manufacture Product Ensure IT Excellence Manage Corporate Assets Provide Enterprise Excellence Ensure Legal Adherence Deliver Product Ensure Financial Excellence Manage Sales Performance Return Goods Manage Support Services Figure 33 Evolution to the current enterprise model was facilitated by industry benchmarking. The team incorporated Deloitte’s industry print enterprise model, SAP reference models, Coors end-to-end process structure, and SCOR (Supply Chain Operations Reference) models. These well-established models provided credibility when the team presented the model to senior management. As the enterprise model was evolving, Bonacci met with the CEO monthly to give him a strategic overview of the business management process. The CEO focuses on initiatives that have an impact on the business and how they affect business results. Because the CEO did not have time to concentrate on all of the details of modeling, Bonacci gave him short examples of how business process management work was affecting the ongoing projects such as Cornerstone. In one instance in that project, BPM efforts saved three positions on the verge of elimination—three jobs in which the employees’ knowledge was critical to business process and results. Once the CEO fully understood modeling, he directed that it be done in all business units. Bonacci notes that during the time that process modeling was evolving the team found more process overlaps than gaps in processes. Many times, two areas are Business Process Management • ©2005 APQC 115 C o o r s involved in the same process. When overlaps exist, the executives work to resolve the problems. Process Ownership The processes are owned by the businesses. The architecture and models are controlled by the BPM team. The models are dynamic due to ongoing process work. Levels include: • “0”—core business processes, • “1”—processes owned by senior vice presidents, • “2”—processes owned by vice presidents or directors, • “3”—processes owned by directors or managers, and • “4”—processes owned by anyone (manager, team, or individual). Some Level 1 processes are owned by two senior vice presidents. The BPM team made a conscious decision not to assign a name to Level 0 because it wanted buy-in from everyone involved. Diagram icons on the desktop version of the model indicate that the user can drill down further into the process to find additional information. The first six months that the BPM team embarked on enterprise modeling, the team kept a low profile. Bonacci said, “We ran silent and deep; we did not surface until we could show a small victory.” However, Cornerstone was so massive that it had its own momentum. The team had so much work to do to catch up on the project, and working on it provided needed credibility for the team. As it ran multiple projects, it further recognized the need to build the enterprise model. Coors has a highly tenured work force with many individuals due to retire within the next five years. Top management understood this issue, but until the work of the BPM team, were unable to understand how to prevent the loss of knowledge. With the use of the Coors enterprise process framework, employees can drill down into processes to access subprocesses. Business areas within the enterprise model have been color coded to show the progress of process documentation: • red for undocumented processes, • yellow for processes being documented, and • green for well-documented processes. Figure 34 demonstrates the color coding. Because the BPM team worked so comprehensively on the supply chain in order to cut the cost per barrel of beer, the processes to execute the supply chain are green with one exception. Processes 116 Business Process Management • ©2005 APQC C o o r s Color Coding for Process Documentation at Coors Manage Beer Business Create Consumer Demand Establish Business Direction Sustain Corporate Entity Manage Public Policy Environment Understand Comments Develop Brand Plans Manage Corporate Assets Provide Enterprise Excellence Manage Product/ Package Life Cycle Execute Brand Plans Generate Revenue Manage Key Accounts Manage Wholesalers Perform Order Management Provide Customer Support Manage Sales Performance Execute Supply Chain Plan Supply Chain Source Materials and Services Manufacture Product Deliver Product Return Goods Support Beer Business Leverage Human Capital Manage Safety, Health, and Environment Ensure IT Excellence Ensure Legal Adherence Ensure Financial Excellence Manage Support Services KEY Undocumented Processes Process Documentation in Progress Process Well Documented Figure 34 to manage the beer business are mostly red because process documentation is less mature. BPM Players • • • • Many in Coors are involved in the enterprise model. Internal BPM consultants lead process modeling workshops and provide training and guidance on modeling methods and standards. A business architect provides training and guidance on modeling methods and standards and ensures models are compliant with the company’s business modeling standards. He or she integrates project-developed models into the Coors enterprise model. The process owner works in the business and acts as a subject matter expert. Subject matter experts provide process expertise and actively participate in process modeling workshops. Business Process Management • ©2005 APQC 117 C o o r s • • • ARIS process stewards are selected from the business units and trained by the BPM consultants to use the ARIS tool. The stewards are custodians of the models and provide process support for continuous improvement once the project team disbands. In the future, the role of the process steward will increase; the stewards will be trained to do much of the modeling work. However, Coors does not plan to decentralize to the extent that stewards will be able to place changes directly into the ARIS model. An ARIS administrator resides in IT and keeps the system upgraded and running. He or she establishes the project database structure, performs Web publishing activities, and handles ARIS software technical issues. Coors has a tight partnership with customers and suppliers and solicits their feedback on how to do activities better. In Cornerstone, Coors involved its distributors because the supply chain process design affected them. Coors provides its customers and suppliers with process training when applicable, and they are involved in business roll-out activities. If project teams want to work with the models, then they are allowed to take an extract and make changes on a separate database. If businesses would like to make permanent process changes, then the changes go back through the BPM consultant to ensure that they are compliant with standards before they are merged into the enterprise model. Coors does develop duplicate information, but these cases are caught as the BPM team marries the process. Bonacci says that most companies design their organizational charts based on the best knowledge of where the organization should be in the future. Using its models, Coors is able to do organizational design based on processes. The Modeling Procedure Business process modeling depicts Coors process DNA, so to speak. It describes process information about the organization explicitly in terms of: • what it does —modeling begins by determining the activity and its purpose in order provide the stability necessary to go forward with the modeling procedure; • when it is done—time frame; • where it is done—location; • who does it—person; • which information is generated or needed; and • how, which depicts the process flow. Based on the activities already identified, this model demonstrates how the activities fit together and depend on one another. After the process flow is depicted, the team moves on to identify who is responsible, what applications are used, and where the work is done. 118 Business Process Management • ©2005 APQC C o o r s Debra Boykin, business architect, said, “We are painting a picture, a story of their business. They do not have to understand the diagramming mechanics to actually own the process.” When the team was newly established, it was successful in a few businesses that were open to the process. These areas became champions, and the BPM team gained successes through them. The core modeling competency sits with the BPM team, and the group works with the subject matter experts. Boykin recommends this approach because the group can handle changes and upgrades in modeling. She believes that business modeling requires a special skill set, and it is better to have knowledgeable BPM consultants facilitating the business process management activities. Another advantage to having the modeling skills concentrated in the BPM team is that precise reporting can be done only if the models themselves have integrity (the leveling is correct, there is apples-to-apples comparison, etc). The team has quality standards, and it filters the modeling work that businesses submit to it. Coors does have the process stewards in the businesses so that the businesses do not have to return to the consultants to make process updates. Coors began stabilizing the model in 2003 and is currently moving into the control phase. Pilot programs have validated PPM and NetWeaver (to some extent). The BPM team has a track record of successful projects, which are detailed in Figure 35. Figure 35: Coors BPM Team’s Completed Projects Purpose Number of Process Methods Cornerstone SAP implementation for the supply chain 136 Molson Joint Venture To help Coors distribute Molson in the United States 25 LIMS Laboratory Information Management System Implementation 6 Asset Care To define these robust processes 98 Its list of current projects is detailed in Figure 36 (page 120). The next step is to use the reports produced by the tools in Six Sigma-like initiatives and move toward total control of the processes. Business Process Management • ©2005 APQC 119 C o o r s Figure 36: Coors BPM Team’s Current (2005) Projects Purpose Number of Process Methods Greyhound This is an implementation of a HR worldwide system. 43 ViPER This is the purchase-to-pay system implementation. ~50 Enduring Focus This is a financial SAP implementation. 50 This is the Shenandoah build-out. Currently, Coors does not brew beer in its Shenandoah Virginia facility; it ships it incomplete from Golden and blends and packages it there. Shenandoah will become a complete brewery in late 2005. 82 Jefferson 26 Sarbanes-Oxley Process modeling enabled this project. Auditors used the process models to expedite the findings of how Coors is doing business. Rules of Engagement Business process owners have the responsibility to understand, target, measure, benchmark, envision, and report out on the process. They also approve process changes. The extent to which the businesses hold employees accountable for managing processes varies. The operations unit and asset care unit do an excellent job, according to Bonacci, and supply chain is making significant progress toward tying processes into performance measures. HR should be supporting and training the businesses to hold employees accountable but is not able to fully do so yet. Executives are not currently held accountable for processes; the highest management is involved in mergers and acquisitions. However, the vice presidents and directors, especially those in operations, are definitely involved in holding people accountable for process management. In 2005 the company will try to get process management on performance reviews and have employees’ job descriptions updated based on process. Bonacci said, “Everyone’s job has changed because of SAP; everyone has more analytics in their work. And surprisingly, accountability is bottom-up as well as top-down.” 26 120 The Sarbanes-Oxley Act of 2002 prescribes how public companies should be audited. Business Process Management • ©2005 APQC C o o r s BPM’s Role in Enabling Sarbanes-Oxley ARIS process documentation allows for the enterprise-wide reporting of Sarbanes-Oxley control activities by activity owner and executor. Process reusability ensures that Sarbanes-Oxley documentation remains current. In the past, when the BPM staff was not available to facilitate, teams did their work in Visio. However, most of the work has now been moved into the ARIS model. When Deloitte was helping implement a Sarbanes-Oxley reporting structure at Coors, it did most of the process documentation work in Visio because the BPM team did not have the staff to provide ARIS expertise. However, in supply chain and operations, where the Cornerstone project modeling was already done, the teams reused the ARIS models. Deloitte’s risk control tracking system tool currently contains the Sarbanes-Oxley testing information, but Bonacci says said that the BPM team would like to move to IDS Sheer’s Sarbanes-Oxley audit management tool, which would tie in perfectly to ARIS. Prioritization Coors rolls up projects enterprise-wide so that groups such as the BPM team have a clear line of sight and know what is important. Coors has an annual capital planning cycle; in May of each year, strategists receive input from all organizations concerning what capital projects need to be done. They present the projects to management, and the chief people officer has a seat at the table. The selected projects are sent to the CEO, who prioritizes them in November based on marketing and sales issues. IT has its budget and funds the capital projects based on the list. In June of each year, IT tells the BPM team leader what projects it is recommending so that he can plan to staff the projects. Bonacci asks whether the projects are chargeable. If the answer is yes and there are not enough full-time BPM consultants available to perform the work, then he is able to arrange to hire contractors. If the contractors prove their capability and fit in with the culture, then he may hire them permanently after approximately six months on the job. If they do not fit in, they leave. The BPM team has more work than it can handle. It prioritizes by judging what is best for the company. The BPM team considers SAP implementations a high priority, and although the team is tied to large-scale implementations, callers do ask for advice or for services on smaller projects. Although most of the BPM team’s work is project driven, these callers ask for help in determining how to improve their processes. Bonacci said, “We try to help everybody, because it is better for the company.” The caller may be given parameters or guidelines; for example, a caller may be offered 10 hours of consultant time for four months. Business Process Management • ©2005 APQC 121 C o o r s The Budget of the BPM Team The BPM team charges 80 percent of its time out to the businesses on capital projects. Employee vacations and benefits come from the HR budget. Some of the team’s tasks, recognized as “missionary work,” is not charged out. Institutionalizing Process Excellence • • • Coors has institutionalized process excellence by leveraging the following. A common business modeling methodology called BusinessGenetics® xBML has created a consistent, focused business modeling effort. Business modeling standards promote a single, consistent, and reusable process format. A business modeling standards council defines and promotes consistent business modeling practices within the enterprise, and a business process modeling handbook serves as a quick reference guide. Executive leadership is accountable for process excellence and continued improvement. Senior process owners (director level and above) develop process improvement and process performance framework for their business areas. Each executive leadership team member is establishing a process excellence board for his or her business. Executive leadership and senior process owners leverage the investment in xBML and ARIS by continuing to promote their use for all process improvement initiatives, re-engineering efforts, and system development projects. Coors is in the process of implementing a process excellence governance board, which acts as strategic advisers for BPM. When the company makes process changes at the lowest level, people who are affected meet to understand how it will have an impact on both downstream and upstream work. Those affected by the work are then contacted so that they understand the change. Another job of the board is to prioritize change. Before the board was in operation, someone would have a bright idea and make a change not understanding how others would be affected. “Ideas are vital, but they must be looked at from a systems perspective,” said Bonacci. The governance board also prevents duplicate efforts. Currently, according to Bonacci, the board is not as successful as it could be because it is pushed from the ground up rather than from the top down. Bonacci would like have Level 1 process owners to assess the effectiveness of the processes, but their participation has been limited, even though they buy in to the concept. The company is on the verge of linking processes to its overall performance scorecard. Before it is successful in the task, it must smooth out some turf battles and identify the pieces of the processes that are on the scorecard. 122 Business Process Management • ©2005 APQC C o o r s Measuring Maturity Coors measures maturity using the following stair-step model, adopted from Paul Harmon of BPTrends. • Initiate —This process is ad hoc. Few activities are explicitly defined. Success depends on individual efforts. The stage is prevalent in entrepreneurial organizations and new divisions that do things any way they can to get started. • Replicate—Basic project management processes are established to track costs and stay on schedule. The necessary discipline is in place to repeat earlier successes. As organizations become more mature, they begin to conceptualize business processes and seek to organize them, repeat successes, and measure results. • Define—The process for both management and development is documented, standardized, and integrated by an organization methodology. • Manage—Detailed measures of the process and product quality are collected. Both the process and products are quantitatively understood and controlled. • Optimize—Continuous process improvement is enabled by quantitative feedback for the process and from piloting innovative new ideals and technologies. In most of the models, the company is in either the replication or definition stage. Implementing and Sustaining BPM “Before initiatives are rolled out to the entire company, they are proved in key areas. Coors works the mistakes out before universal acceptance. The culture is not accepting of the idea that ‘this is the next new program and it is going to save us all.’ Programs must have a winning track record.” —Mara Swan, chief people officer Marketing and Communicating BPM Swan advocates marketing business process management. “Most business people are not process-oriented. They are experience-oriented. They do the same thing over and over, even repeating bad experiences. Marketing means putting BPM into a language that everyone can understand.” In the beginning, some employees in the business units were somewhat resistant to using ARIS because they did not fully understand the BPM method. As a result, the team realized the need for a more user-friendly vernacular, and the members of the BPM team made a point to explain all aspects of the technology carefully and simply. Debra Boykin said that now they speak to the business units in a language that is friendly. Boykin believes it is important to put the models together in a way that the business people understand what they are doing. The BPM team is most successful when it is brought in early in a project so it understands from the beginning what the business unit needs to do and what Business Process Management • ©2005 APQC 123 C o o r s IT solutions will be required. The team interfaces with the subject matter expert frequently so he/she is not working in isolation. Additionally, it is important to note that the composition of the project teams may vary based upon project purpose. Analysis Implementation Example—Project Jefferson Coors leverages its enterprise process model to drive job design, training and development, and headcount analysis. Project Jefferson is the Shenandoah, Va., expansion that will increase the company’s brewing capacity; the BPM team successfully completed an analysis project at the location. The Shenandoah buildout process modeling initiative had a top-down approach. The business requested help from the BPM team to define the scope of the build-out using the enterprise model. The team concluded that the scope involved executing the supply chain at Level 0 and then sourcing material and services and manufacturing products at Level 1. The Golden, Colo. facility had developed some of the manufacturing processes that were reused, but many processes were developed from scratch. The BPM team helped the business identify the scope. The project involved modeling 42 process areas. Step 1 was to develop a process model that captured (as function attributes in ARIS) task responsibility, system, type (brewing, raw material, or utility), time, and frequency. The BPM consultant and the subject matter expert worked on the models part time over a period of six months. They periodically reviewed them with the process’ core team, a group that included engineers, operations, and brewing experts. (Because the subject matter expert had the bulk of process knowledge and the BPM consultant had the ARIS experience, most of the work was done by the two individuals rather than in a team setting.) Step 2 was to create a custom ARIS report in Microsoft Excel to show activity by role and function attributes. Step 3 was to analyze the data. ARIS process documentation defined the operator requirements for the new brewery with 736 tasks modeled and the total number of hours necessary to do each task determined. In some cases, the hours necessary are estimated. Businesses are always challenged to properly estimate the time they spend in problem solving. The task is difficult because no one can identify the problems that will occur in advance. The team used the information to determine how many operators it would need to hire to run the plant. The next step of the project will be organizational design. Shenandoah will also plan training based on process models, and the work instructions and directions will come directly from the process models. 124 Business Process Management • ©2005 APQC C o o r s The plant will brew its first beer in November 2006. Already, the BPM team can demonstrate that it has provided value in Project Jefferson. Its future-state process models for new operations have been used as inputs to plant, process, and people design. The engineers used the models in their design reviews to ensure that they had not missed procuring needed equipment. IT requires the system design to write the plant automation software and code. The work of the team enabled Shenandoah to have a common language that is aligned to strategic business models and standards. Controlling Implementation Example—Breakdown Maintenance Business process controlling means aggressively managing the efficiency of running business processes. Coors leadership believes that business processes that cannot be measured cannot be improved. Industry research shows that business process metrics are vital to the success of the business. To achieve process optimization, Coors must clearly understand what it is doing. Coors conducted a pilot on a small, self-contained asset care process called “perform breakdown maintenance.” The breakdown work order process is critical for Coors to identify reactive, instead of preemptive, maintenance activities. Without accurate information, Coors has no idea how plants are performing. The process had 20 activities. A small dedicated staff in the business conducted the pilot. The executive for asset care identified key performance indicators to focus on: • number of breakdowns in a certain time frame, • cycle times from malfunction start to end, • whether equipment history is recorded, and • costs (labor, material, and outside services). The pilot used SAP-RQ1 data, work orders (ZBRK), and notifications (M2) from January 1, 2004 to July 29, 2004. The pilot team used a dashboard of production data as an entry point or window into the organization. Figure 37 (page 126) is an example from the breakdown maintenance dashboard, which is the front end to the PPM tool. Technology is currently available in the United Kingdom to transmit dashboard data to a Blackberry or cell phone by alerting the process manager of his process status. This particular technology will soon be available in the United States. PPM will be the monitoring component of SAP’s NetWeaver application. Through the pilot, the team was able to determine that one of its plants had an extremely long turnaround time that it could improve. The team could view data down to the work-center and customer levels. Additional dashboard graphics include such dimensions as average downtime, turnaround time, and lag time. Business Process Management • ©2005 APQC 125 C o o r s Coors Breakdown Maintenance Quality Dashboard Example Equipment history Notification accuracy Equipment history recorded properly? Notification entered accurately? 80 80 90 93.814 50 90 54.992 100 50 100 Ratio history is recorded (%) Ratio notification is entered accurately (%) Recording back to production? Work order confirmation Equipment recorded back to production? Work orders confirmed? 90 95.1 58.575 99 100 Ratio equipment recorded back to production (%) 50 50 100 Ratio work orders confirmed (%) Figure 37 The ARIS PPM technology captures the actual process flow and (based on time stamps) graphically produces that flow. The team can analyze the actual flow against the designed flow to determine process compliance. This technology also has the capability of identifying the person who performed the activity. The information helps managers determine whether an employee has the proper skill set for the task being performed and if the employee needs training. In the close examination of the 20 activities, the pilot team found inefficiencies that, when corrected, would save the company money. The team found that the accuracy of monthly metrics was compromised when required information was not entered properly on breakdown work orders. It discovered that the SAP tool, in which Coors had invested, was not being fully utilized. Breakdown work orders were left open for days after the work had been completed. Significant savings were realized by closing work orders properly. Although the PPM pilot only used SAP data, it is important to note that it can also incorporate other data sources (anything that captures time stamps). Process Analysis Example—Retention and Strategic Staffing In 2004 the company was laying employees off as it was implementing SAP. HR and the business were conducting this large redesign in a silo. The BPM team manager learned of the layoffs in a staff meeting. Because modeling had been done, 126 Business Process Management • ©2005 APQC C o o r s he was able to find the job titles and the roles of those about to be laid off. He informed HR and the business that if they let three of the people go, they would not have anyone else in the company capable of executing certain task necessary to take SAP live: Modeling allowed for the discovery that they were needed. On the other hand, the company was able to let some employees in Memphis go because modeling showed that others in the organization shared their skills. Regarding Six Sigma Six Sigma does not currently play a role in BPM at Coors. Bonacci said that, whereas Six Sigma is strong in specific endeavors, the business process management group handles large-scale change projects that impact a majority of the Coors Brewing Company. Six Sigma is not as effective in handling the large-scale projects. Part of Six Sigma is measuring results. Even though they do not call their activities Six Sigma, the BPM team works with business units after projects have been implemented to help them determine how they are going to measure the human performance component of the initiative. For example, after SAP implementations, members helped business units mine data so they could understand which people were using SAP well. Evaluation and Results Measurement of Employee Engagement HR should be able to explain how employees add value to the company, how to increase their productivity, and what information they need to do their jobs. Employee engagement springs from these factors. Employment process–focused Kenexa recently replaced Gallup as Coors’ vendor for this measurement. Monitoring Processes—The Benefits of PPM Controlling processes based on process performance indicators leads to cost reduction. PPM has an early warning system for deviations from planned values, and the deviations can be communicated to management through Blackberry and mobile phone technology. PPM leads to improvements in internal and external customer satisfaction and facilitates benchmarking of internal and external process performance. Process owners see how long various processes are taking and can recognize opportunities for improvement. PPM provides visualization of not only the designed process but also the executed process. Process owners no longer have to guess what is happening. Financial benefit The BPM team’s budget is approximately $1.1 million annually. It estimates that it has saved Coors more than $3 million on the Cornerstone project alone by simply catching situations through modeling that would have remained unidentified. It Business Process Management • ©2005 APQC 127 C o o r s discovered $2 million in reverse logistics. Much of the labor of the team is capitalized and can be seen in the capital return on investment of specific projects. The BPM team’s role is not only in modeling but also in re-engineering the processes that need to become more efficient. The LIMS project dragged on for four years, said Boykin, and had three different project leads. The BPM team took it over and was able to complete it in three months. The company recognized the savings. Stage-gate Process Any IT-funded or capital project must go through a stage-gate process. The BPM director signs off on whether the process documentation work has been performed. If the work is not complete, then the BPM director and the BPM team assess the hours required to document the processes. If an in-house BPM resource is not available, then an external BPM resource will be contracted. Most members of the BPM team are directly charged to capital projects. In some cases, the team’s work results in the project not going forward because it does not make sense to spend the money. Value of the Enterprise Model • • • • The Coors enterprise model: allows the company to build upon existing knowledge, facilitates representation of process integration, is reusable for new projects, and enables Sarbanes-Oxley compliance. ARIS process documentation allows enterprise-wide reporting of SarbanesOxley control activities by activity owner and executor. Accuracy of Modeling An after-action report, produced in January 2004 following the SAP implementation, enabled BPM to achieve credibility with top management (i.e., senior vice presidents of operations, supply chain, and IT). Before implementation, it had developed 98 models in a three-month period. After implementation, the models were reviewed by businesses and subject matter experts and found to be 90 percent accurate. Without the models and their schematics, the organization would have been guessing whether problems were due to people, process, or technology issues. Anecdotal Evidence of the Value of Modeling Bonacci related a story that occurred during a modeling meeting three months before the implementation of SAP. The purpose of the meeting was to understand the supply chain. During an interaction between the planning group and the plant planners a surprising fact was revealed. A member of the planning group spent 128 Business Process Management • ©2005 APQC C o o r s 30 hours a week producing a single report that he routinely handed to the plant planners to guide their production of beer. The plant planners said they do not even look at the report. They base their level of production on a different report. It was a report that the member of the planning group spent 30 minutes a week preparing. The incidental adjusting of the expectation of the two siloed businesses saved the company money. Lessons Learned “We manage change successfully because we use modeling to understand who individually is feeling the impact of a change. We roll up the individual models to the team level, the division level, and so on.” —Bob Bonacci, BPM leader • • • • • • • • • • BPM and the BPM team evolved internally to: maximize the return on investment of IT (SAP) implementations, develop enterprise-wide process integration and alignment, shorten the business cycle, remove process complexities and eliminate process overlaps and ineffectiveness, drive human performance (roles, responsibilities, and job descriptions), be able to describe process information in explicit terms (common organizational vocabulary), provide the business with a reusable asset for impact analysis and decision making, support organization redesign, facilitate a successful change management approach, and feed the knowledge management system. The BPM team leader had the responsibility of achieving buy-in from the business. “BPM would fail without management buy in,” said Bonacci. “We would have many models and no place to store them.” The BPM team needs to go further to drive human performance, says Bonacci. If the Molson acquisition occurs, then the team will support the organization in its re-design and change management. Change management teams make a mistake when they do not hold company leaders themselves accountable for change. Bonacci said, “The only change management mistake our team made was to do too good of a job. We took the responsibility away from director- and vice presidential–level leaders.” Key Success Factors Business Process Management • ©2005 APQC 129 C o o r s • • • • • • Coors BPM shared many key success factors. It has worked quickly. The BPM team formed in November 2002, and currently, BPM predominates in the company in the United States. Swan hopes to see it implemented throughout the world before long. The location of the BPM team in HR allows the team to concentrate on changes in human behavior as well as on systems. The BPM team connects its work to strategy. Swan believes that companies make a mistake when they undergo change management as it relates to HR and adopt BPM without understanding its connection to the business strategy. The BPM team has an excellent working relationship with IT. The BPM team created an enterprise model as an umbrella over all process work. It developed a common language that helps not only process owners but also consultants that come in from outside Coors. The BPM team uses a contract to prepare businesses to begin projects. With the contract in place, all parties agree on what their expectations of one another are. Key Findings—Tools and Methodology Before BPM, Coors had systems implementation failures with SAP, and it had some shortcomings in the implementation of laboratory information management systems. This systems implementation had been in progress for four years before the BPM team became involved. The team piloted its modeling methodology and ARIS tool on the project. It was effective in modeling but not in change management. The experience demonstrated a need for a more structured approach to managing change. Post-BPM project successes have demonstrated the need for a top-down, structured approach. The BPM team has been heavily involved in Cornerstone’s after-action work. It identified what was and was not effective from a BPM approach. Since 2003, Coors has invested to take control of its business processes. According to Bonacci, its Visio world was chaotic. Bonacci said that Visio is adequate for the moment in time that the work is being done, but if the author of the Visio leaves, the tool loses effectiveness. He noted that the BPM team truly knows the business better than the business owners do. However, because of the modeling tools, information repositories, and the fact that the team has pushed the ownership of the models off to the businesses, any member of the BPM team or any subject matter expert can leave tomorrow with no effect on the processes. ARIS has been a key enabler to Coors’ BPM success. 130 Business Process Management • ©2005 APQC C o o r s Suggestions for Success The BPM team has a few suggestions that may help others on the road to managing processes well. • Begin with an enterprise model. Determine best practices by examining existing industry models (SAP, Deloitte Industry Print, SCOR, etc.). Create a baseline model for the organization, and validate the model with the business. Socialize it throughout the company. • Ensure that the business enterprise model incorporates industry standards and best practices. • Sell the enterprise model. Bonacci worked for a year to socialize the enterprise model to the Coors executives. He then concentrated on the third, fourth, and fifth levels of the company: the vice presidents, directors, and managers. • Have a top-down modeling approach. Bottom-up approaches create unintegrated process fragments. • To avoid turf wars, communicate carefully with process owners. Some process boundaries are blurred. The BPM team would not advise new process managers to begin by concentrating on clarifying process boundaries. However, the decision depends on the culture of each company. “Pick your battles,” Bonacci said. In Coors, “Many people think they own many processes. Marketing bleeds into sales, sales bleeds into marketing. Because the work was immature, the team determined not to fight the fight, because that would kill process management faster than anything. And that is not the intent of the work; the intent of the work is to make Coors a better place to work and to lower the cost per barrel.” • Have an enterprise-wide approach. Plan to eventually encompass all areas of the business and link all process models and stores in one enterprise database. Analytics can be run on the enterprise data or be project-specific, and enterprise models can be published on the intranet for enterprise-wide access. • Have the methodology that supports BPM. The methodology facilitates transition from design to executable work flow. • Set up a governance board (a process council). Coors remains a company organized by function and does process work within the context of the functional organization. The team found that certain organizations belong in different units. The planning group, for example, is currently in the supply chain, but it is responsible for reporting to the plant planners and should be in operations, according to Bonacci. Goals and Plans • • • HR’s vision is for Coors to become a company where: processes are central to the overall management, management is organized to ensure business processes run efficiently and deliver value to customers, processes are aligned to corporate strategies and business objectives, Business Process Management • ©2005 APQC 131 C o o r s • • • metrics are created to monitor and optimize business process performance, processes are accessible worldwide via the Internet, and quality control programs are integrated and relied upon to improve the efficiency and consistency of processes. According to Bonacci, the power of the information that the BPM consultant generates with the businesses should be attractive to the HR generalists. The generalists should want to know if the right people are in the right job. The BPM consulting group will seek to have the HR generalist much more involved than they are currently. HR is currently more reactive; BPM could make HR more proactive. According to Bonacci, “It is impossible to outsource properly unless the BPM work has been done.” The outsource provider needs the details and the rules of engagement. Coors recently outsourced some of its benefits processes and is now in the process of outsourcing other HR duties. Bonacci said, “The modeling has been done; it’s easy now.” Because of internal changes, top management may be more involved with BPM in the near future. Coors is transitioning to a corporate center concept. It will be moving the executives and vice presidents out of the building in Golden, Colo. to downtown Denver. Their jobs are changing; their operational duties will give way to strategic improvement and charting the direction of the organization. Accountability will be driven down into the organization. After the transition, they will be able to think about things such as insourcing, outsourcing, core competencies, and process. They will be able to support the BPM initiatives better. Due to its success, the BPM team is busier than ever and in demand. In 2005 Coors hopes to integrate SAP NetWeaver (a BPM system for monitoring, configuring and control, and business process execution) into its BPM practice. The plans of Coors and the BPM team include helping with mergers and acquisitions. (For legal reasons, Coors is not able to begin work documenting processes until merger finalization.) However, in the case of the Molson merger, it has already identified its counterparts in the other company and knows that Molson processes are documented in Visio or are undocumented and in the heads of the employees. Therefore, the BPM team will be meeting with individuals at fairly low levels (levels 3 and 4) to define the terminology of the work done at Molson. 132 Business Process Management • ©2005 APQC Business Process Management D e e r e & C o . Deere & Co. H eadquartered in Moline, Ill., Deere & Co. is the world’s leading manufacturer of agricultural and forestry equipment and a leading manufacturer of equipment used for construction, lawn, grounds, and turf care. John Deere also manufactures engines used in heavy equipment and provides worldwide financial services; it has one of the largest global credit organizations in the world. Deere was founded in 1837 and now employs 46,000 employees globally. This 167-year-old company differentiates itself based on products, where quality and continuous improvement are deeply rooted in its heritage. Founder John Deere stated, “I will never put my name on a product that does not have in it the best that is in me.” In the years since its founding, Deere has remained committed to continuous improvement. It is this longstanding commitment that frames Deere’s focus on business process management (BPM). BPM Strategy, Structure, and Funding Evolution of Process Management Deere has implemented numerous continuous improvement concepts and ideas that, over the past century, have focused on manufacturing operations, statistical process control on Deere’s manufacturing floor, and quality management (e.g., documenting and auditing policies, procedures, and processes primarily). A widespread Total Quality Management effort, for instance, involved each business unit using its own approach following many gurus such as Joseph M. Juran and Dr. W. Edwards Deming. Deere also participated in cross-industry research teams that involved leading Japanese Total Quality Management expertise and European ideas and tools for quality and innovation. This brought new ideas to the company such as quality function deployment, strategic and integrated planning, problem-solving techniques, and master planning. Quality managers then joined in what Deere considered an Business Process Management • ©2005 APQC 133 D e e r e & C o . early community of practice: a collaborative network across the world in which these quality experts shared ideas on a monthly, quarterly, and semiannual basis via face-to-face meetings or teleconference. ISO certification and supplier quality became a strong focus (with all manufacturing and many non-manufacturing facilities ISO-certified today), and according to Mary Lou Kotecki of Deere’s Worldwide Customer Support, in the 1980s the company “became seriously focused on process management from the standpoint of understanding, improving, measuring, and managing processes.” In 1990 the Malcolm Baldrige National Quality Award criteria were introduced to Deere and provided a holistic view of quality for the entire organization. These criteria triggered senior leadership to pursue a more expansive approach to looking 27 at quality throughout the organization. As a result of its work in Total Quality Management and Baldrige, Deere’s 1990s were focused on: • continuous improvement initiatives, • process management, • team focus, • understanding employees and employee satisfaction, • process re-engineering, • Kaizen in factories, • rapid continuous improvement projects (in which the diagnosis and solution are carried out in factories over a one-week period), • continuous improvement pay plan (for wage workers to replace the standard hour plan), • factory master planning, and • executive and division quality councils. Quality councils were formed in individual units and at the enterprise level in the mid 1990s. The CEO formed the Executive Quality Council, which consisted of his direct reports. This council chose to conduct a Baldrige self-assessment. The self-assessment generated a candid look at the whole enterprise and resulted in identification of improvement opportunities. As a result of the self-assessment, the Executive Quality Council identified four major enterprise areas to focus on that link to the Baldrige criteria for performance excellence (Figure 38): 1. a work force planning and development quality initiative, 2. supply management, 27 134 specific group within the corporation, the enterprise group, was trained by Michael Hammer A and provided assistance and support throughout the world on large and small reengineering projects. Business Process Management • ©2005 APQC D e e r e & C o . Baldrige Criteria for Performance Excellence Customer/Market-Focused Strategy and Action Plans 5 2 HR Development/ Management Strategic Planning 1 7 Business Results Leadership 6 3 Process Management Customer Focus • Customer focus quality initiatives • Work force planning and development quality initiative 4 • Supply management • BPE quality initiatives Information and Analysis Figure 38 3. business process excellence, and 4. a customer-focused quality initiative. Business process excellence, specifically, was selected to address the following concerns. • Deere was facing significant competitive threats. • Deere needed to improve new product quality. • There were ever-increasing customer expectations meeting Deere in the marketplace. • Deere was determined to obtain employee satisfaction and attain world-class performance. • Deere believed the cost of poor quality was too high. • Deere sought positive financial results. The chairman assigned two agricultural division presidents—one of whom (Bob Lane) currently serves as Deere chairman and CEO—to carry out the business process excellence initiative. Business Process Management • ©2005 APQC 135 D e e r e & C o . Business Process Excellence As one of the four initiatives identified by the Executive Quality Council, business process excellence was an integral part of Deere’s emphasis on quality at the highest level. Focused on process management and improvement, the business process excellence initiative was established as: • a means to rapidly and dramatically change business results and enhance customer value; • a common language, framework, and methodology; • Six Sigma–embedded concepts and practices; and • a unifying tool for all aspects of how Deere does business. The initiative was sharply focused on several elements beginning in the late 1990s: • genuine value—both a philosophy and a goal for Deere, it involved adding value to the chosen customer base by providing goods and services that have genuine value as customers define it; • Baldrige model and self-assessment—all factories, branches, and units conducted self-assessments; • a significant increase in resources dedicated to continuous quality improvement teams and documented results; • process management; and • the organization-wide balanced scorecard—business process excellence results were linked to the corporate-level performance scorecard. Business Process Excellence Design “BPM Organization” Roles Overview The roles responsible for designing and implementing business process excellence (BPE) have evolved since Deere began its BPE initiative. The organization began by designing a BPE Council that represented all business units and oversaw a dayto-day core team, which worked full time for six months and was responsible for designing the BPE methodology for process management and improvement. Once the core team designed the methodology, the original structure dissolved, and Deere assigned a Business Unit Quality Council (for each business), which reported to the Executive Quality Council and an executive champion to take responsibility for following the methodology and carrying the BPE process-focused philosophy and improvement projects into the businesses. During this transition to the businesses, Deere established a Center of Excellence to coordinate BPE activities and share successes. Once the transition was complete and the BPE philosophy was embedded at Deere, the COE disbanded and the businesses absorbed full responsibility for not only their respective BPE initiatives (overseen by their Business Unit Quality Council) but also enterprise-wide coordination. To ensure coordination and consistency across Deere today, business 136 Business Process Management • ©2005 APQC D e e r e & C o . unit executives serve on the four enterprise-wide executive councils responsible for BPE activities within the four core processes (i.e., customer acquisition, product delivery, order fulfillment, and customer support) discussed later in this case study. These four core process councils and the business unit quality councils are overseen by the Executive Quality Council, which has ultimate responsibility for BPE. No central BPE organization has full-time responsibility for enterprise-wide BPE activities. Initial BPE Roles—Responsible for Designing Methodology Executive Quality Council established a structure to support the business process excellence (BPE) initiative. Reporting to the Executive Quality Council was the BPE Council; carrying out day-to-day activities and reporting to the BPE Council was a core team. • BPE Council—The council comprised directors and vice presidents representing all areas of the organization (strategic business units and corporate staff). Its purpose was to consistently manage processes in order to enhance genuine value; provide a standard methodology for process improvement design, measurement, selection, and targeting; and exceed customer expectations for quality and value. Its goal was to achieve a 50 percent reduction in defects and a 20 percent improvement in cycle time annually across the organization. • BPE core team—The core team included: one team member from each major business unit, two corporate staff members, a facilitator, a project leader, and an executive champion. Two outside consultants were also involved; one advised the project leader, and the other served to critique the core team’s work deliverables. The core team was responsible for developing and deploying business process excellence methods, documentation, training, metrics, and structure. Methodology The business process excellence core team—along with process experts, statisticians, and other internal experts—examined internal best practices and benchmarked companies such as Dell Inc., AlliedSignal, General Electric Co., MasterCard Inc., DuPont, and American Standard Companies Inc. Using this information, the core team then developed a common language for business process excellence throughout the organization. This common language was called Deere’s AIM IMPACT model28, which embedded two distinct processes: AIM for process management and IMPACT for process design and improvement (Figure 39, page 138). • AIM —Align business and processes, initiate a project, and manage performance. 28 lements such as planning, prioritization, process management, improvement, design E technologies, problem solving, project management, statistical methods, decision-making tools, and a variety of other tools and ideas are embedded in this model. Business Process Management • ©2005 APQC 137 D e e r e & C o . BPE Methodology A I M Align Business and Processes Team Recognition Process Management Initiate Project Map and Measure Process Development Achieve Results Control M anage Performance I M P A C T Process Design/Improvement Figure 39 • IMPACT—Initiate a project, map and measure progress, process development, achieve results, control, and provide team recognition. After the initial six months of full-time involvement in which the model was developed, core team members continued to serve in a part-time advisory role to the businesses and assist with training until enough people were developed to take on the BPE training role. Organization to Implement the BPE Methodology in the Businesses To carry the business process excellence philosophy and methodology throughout the organization, Deere installed a new structure in each business unit. A Business Unit Quality Council, corporate staff, and an executive champion became responsible for each business unit’s BPE initiatives (e.g., training, projects). Internal process experts called “Master Process Pros” (Deere’s equivalent to Six Sigma Black Belts) helped lead process improvement project teams and were responsible for prioritizing, selecting, and planning projects, as well as measuring the results. Master Process Pros reported to the Business Unit Quality Council and executive champion. An “IMPACT Team Process Pro” role was also created to act similarly to a Six Sigma Green Belt in supporting BPE efforts and the Master Process Pros. 138 Business Process Management • ©2005 APQC D e e r e & C o . Originally, Deere created a Center of Excellence to coordinate all BPE activities and share success across the enterprise. It was responsible for organizing best practices forums, gathering external best practices, training, tracking performance, and evolving the BPE initiative. It assessed BPE success in a number of ways. 1. Results of all projects sponsored by the business process excellence initiative were reported on a quarterly basis and reviewed by all units in which the projects took place, the BPE Council, and the Executive Quality Council. 2. The Center of Excellence also assessed acceptance of BPE initiatives through surveys of unit managers and the process community. 3. The Center of Excellence used acceptance quotient studies, which were based on a series of carefully drafted questions that could be aligned with external benchmarking studies and applied across the organization. These surveys were executed through radio control dials so the Center of Excellence could quickly, easily, and anonymously gather information from large groups of people involved in the business process excellence initiative across the world. The surveys gauged the status of engagement and commitment to change, and the results highlighted the strengths of deployment as well as the barriers that needed to be overcome in each particular area. On the basis of feedback, actions were identified and taken. Once using the AIM IMPACT model became “how Deere does business,” the Center of Excellence disbanded and responsibility was pushed out to the businesses and overseen by the respective business unit quality councils and the Executive Quality Council. The concepts and methods encompassed within the business process excellence initiative, as they were initially designed, continue today. Process focus and the use of BPE practices, standards, and approaches continue to be carried out in Deere’s various divisions and units. For example, Deere’s Commercial and Consumer Equipment divisions follow the original model throughout all operations; other divisions have implemented BPE within specific units. Numerous Master Process Pros and IMPACT Team Process Pros continue to work across the organization. A Function Compared to Process Focus As with most companies, Deere is centralized from some perspectives and decentralized from others. As a result, the company deploys activities using a matrix approach (Figure 40, page 140), and process management follows that same model. For example, a team leader of a product development or delivery process would include team members from all the processes listed vertically in Figure 40. Those individuals, however, report to functional groups (manufacturing, engineering, marketing, etc.). Although the vast majority of individuals report to a function, Business Process Management • ©2005 APQC 139 D e e r e & C o . Functional Roles vs. Process Management A Balance of Function and Process Management Finance and Accounting Quality Human Resources R II RI Marketing Engineering Manufacturing Function Managed Leadership Process Managed Customer Acquisition Product Delivery Order Fulfillment Customer Support Channel Management Business Matrix Customer Focused Human Resources Information Technology Business Acquisition Figure 40 Deere makes it eminently clear that each person works within a process with specific process goals (paying claims, helping a dealer, etc.). (Master Process Pros and IMPACT Team Process Pros are held accountable for process activities but report to functions as well.) At divisional and departmental levels, processes have clearly defined ownership. Although process ownership is not a full-time responsibility at the enterprise level, it is generally a full-time role in the divisions and their functional groups. Process owners are responsible for process design, measurement, achievement of annual targets, and changes to the process. Functional and process ownership often reside in the same person; this, in Deere’s experience, has proven to be the most successful. Many process owners came from the original BPE core team and were assigned process ownership of functional areas; those process owners that report to into functional heads have tended to meet more resistance. In the spirit of learning, one Deere financial services group experimented with creating a process-focused enterprise that was successfully structured along process lines for two to three years before reverting to a matrix as a result of leadership change. 140 Business Process Management • ©2005 APQC D e e r e & C o . Defined Processes – Deere’s Enterprise Business Model The Executive Quality Council spent considerable time developing Deere’s enterprise business model. The initial work began in Deere’s re-engineering group 29 (trained by Michael Hammer’s organization ), which worked on the model for two years; they tested it on an equipment division and then refined it based on lessons learned and Total Quality Management principles. The final model, in Figure 41, has core processes focused on business environment and customers supported by enabling processes. It also depicts the relationship of leadership, measurement, and supplier processes. Deere’s Enterprise Business Model Worldwide Business Environment Deere & Co. Competitors, Governments Regulations and Requirements, Standards, Economics Customer’s Process Needs Business Controlling Process Processes that direct and tune other processes Core Processes Processes that create value for the external customer Customer Acquisition Product Delivery Order Fulfillment Customer Support Enabling Processes Processes that supply resources to other processes Channel Management Supply Management Human Resources Leadership Process Information Technology Application Business Acquisition Business Measurement Process Processes that monitor and report the results of other processes Supplier’s Process Figure 41 Executive councils are in place at the enterprise level for all four core processes: 30 customer acquisition, product delivery, order fulfillment, and customer support. These councils have representatives from all divisions to ensure consistent standards; all councils meet regularly (at least quarterly face to face but also regularly by 29 30 http://www.hammerandco.com/about.asp Along with each Business Unit Quality Council, these executive councils report to the Executive Quality Council. Business Process Management • ©2005 APQC 141 D e e r e & C o . teleconference), and some have communities of practice in place. Councils leverage internal best practices, but they are beginning to look beyond company borders for ideas. Training Initially Deere established the following training requirements it believed important for deploying the AIM IMPACT model. This training was provided by the Center of Excellence and the BPE core team. • Leadership—16 hours AIM/project interaction • Master Process Pros—120 hours in the classroom, plus four to nine months of project work • Process Pros —60 hours in the classroom, plus two to six months of project work • Improvement teams—two to eight hours in the classroom, plus project work • All employees—two hours of awareness training What evolved was a much more rigorous and comprehensive curriculum for each level. Certification is required for Master Process Pros and IMPACT Team Process Pros, which involves facilitation of business process excellence projects. Case studies are used to provide experiential learning in the classroom. Mentoring and coaching is provided where needed. Currently, the only remaining centralized training is focused on Six Sigma, but efforts are being made to expand those offerings. Integration of Change Management Kotecki agreed with Michael Hammer’s summation that the hardest problems in the age of processes are not technical in nature; they revolve around people and organizational change. To best prepare for changes associated with business process excellence, Deere included on its BPE core team several people with advanced degrees and certifications in organizational development. As a result, the organization was able to develop a change approach through which it could embed change tools and techniques in the AIM IMPACT model (refer to triangles embedded in Figure 42). With communication a requirement at every stage, the model’s steps follow. • Initiate the project–Prepare for change. • Map and measure progress–Connect to a shared need. • Process development–Envision the future and plan for change. • Achieve results–Engage and involve. • Control–Respond to results. • Team recognition–Reward for change. Mandatory training courses for all people involved with BPE and every manager throughout the company were included in Deere’s change management tool kit. The company wanted everyone to fully understand the ramifications of trying to implement a project when change management is not considered. Another 142 Business Process Management • ©2005 APQC D e e r e & C o . Integrity of Change Management Business Process Excellence Communicate Align Business and Process Prepare for Change Initiate Project Plan for Change Connect to a Shared Need Vision the Future Process Development Map and Measure Manage Performance Engage and Involve Achieve Results Team Recognition Control Reward for Change Respond to Results Support the Change Communicate Communicate Figure 42 tool Deere found very helpful was applying stakeholder analysis at various times throughout the project. From the business process excellence initiative’s inception, many changes have taken place. Varying emphasis, too, resulted from leadership changes. Today’s leadership has been a strong proponent of BPE and process management. Use of BPE in Geographical Alignment, Acquisitions, and Outsourcing Although business process excellence has been most widely deployed in the United States, Kotecki said that differences in geography products and systems have not had a significant impact. The greatest constraints to global deployment have been limited resources such as Master Process Pros. BPE has not been used for outsourcing decisions, but it has been used extensively to plan and implement various shared services such as accounts payable/receivable and human resources, and it has been used to centralize customer services such as in Worldwide Ag Customer Support. Also, BPE is integral to developing new ideas such as Deere’s creation of an internal career development system. Knowledge Sharing Deere has created a Web site portal and enjoyed great success with centralizing a repository of information for process definitions and maps, templates/forms, guest speaker presentations, contacts, and frequently asked questions. Frequent teleconferences also help share knowledge and experiences across the globe. Business Process Management • ©2005 APQC 143 D e e r e & C o . In addition, maps for each defined process are available to any employee online. Along with the maps are definitions, a template of tools, links to standard policies and procedures, and drill-down maps. Process owners are responsible for regularly updating the documentation within the process maps. Implementing and Sustaining BPM “It is clear that process management is integral to our culture of continuous improvement. …Through the years, Deere has willingly experimented with new ideas, technology, and tools in order to synthesize and implement the practices that raise the level of performance. …As in most organizations, Deere has had to balance its decisions in order to put practices in place that best provide customers with genuine value and attain customer satisfaction.” — Mary Lou Kotecki Once the enterprise business model was developed, Deere business units began drilling down into the four core processes. The different business units are at varying stages in implementation. The remainder of this case study focuses solely on how one business unit successfully implemented one of Deere’s four core processes (customer support) and a supporting process (contact management). Customer support within Worldwide Ag is addressed in this case study to demonstrate how the enterprise process model cascades to a division level core process that is designed and deployed worldwide. An additional example concerning the evolution and definition of one of customer support’s enabling processes, contact management, is set forth to illustrate process management, measurement, and improvement associated with these specific processes. Evolution of Customer Support Process: Embracing Change Worldwide Ag embraced the opportunity to change its customer support because its Ag Quality Council identified product support as a key to retention and future growth. The Ag Quality Council comprises key unit managers that reflect significant cross-functional leadership. When the council looked at fundamental process principles and evaluated the division’s businesses using Baldrige criteria, it found significant gaps and variance in performance. One problem area identified was “product support” (later termed “customer support”); the reason for the gap was new competition that provided a higher degree of customer support, which posed a strategic competitive threat. At the same time, technology was increasing in Deere products as well as those of similar industries; thus, customer expectations were growing, and Deere knew it needed to recalibrate to meet those expectations. In response to this competitive threat, the Ag Quality Council in January 1998 put together a full-time, cross-functional team (marketing, finance, manufacturing, 144 Business Process Management • ©2005 APQC D e e r e & C o . etc.) of approximately 10 people plus two enterprise business process excellence facilitators. When the team first started, executives told members to conduct benchmarking and find out what other companies were doing right. Said Tom Shelton, Deere customer support administration and shared services, “I’m here to tell you …the very first thing you need to do is go focus on the customer. The customer is not even that good at figuring out what he wants, so how can you assume your competitor has it figured out? I’m not saying that benchmarking is not important—it is. But the first thing to do is to focus on the customer.” According to Shelton, the team was challenged to look at the marketplace and “surpass anything competitors [were] doing—or anything they [were] capable of doing.” Although the team was empowered to paint with a broad brush, senior management monitored the team’s activities and helped remove barriers. Senior management provided guidance and helped the team stay on track, facilitate dealer groups, and perform other activities to get approval of concepts. The team first mapped current subprocesses and determined strengths and gaps. It then surveyed customers, dealers, distributors, company employees, and leadership globally—1,000 people in 26 countries. Its challenge was to condense the immense amount of data into manageable findings, categorize expectations, and distill key themes for what customers would need in the future. From this effort, the team developed a conceptual foundation showing integration of processes impacting customer perception of support; this, said Shelton, turned out to be a “very powerful piece of information” because Deere rediscovered the criticality of relationships. The company learned that customers did not want just a fast fix. Shelton said: “You need to do things in a certain, distinct way. We need to say what we mean and consistently do what we say. The company must replicate that behavior again, again, and again until we establish a stability of expectation on the customer’s part.” This behavior establishes credibility and trust in the brand. Lastly, the team defined a vision of the circumstances Deere would like to exist: Customers demand John Deere products and services because of the relationships developed through the delivery of superior customer support. Along with this emphasis on relationships came the shift from product support to customer support. Shelton said, “As we make that fundamental, philosophical shift, we moved beyond thinking of customer support as parts and labor repair, but in terms of more complete solutions for customers.” Today, the vision is evolving to one in which relationships are further enhanced through better integrated systems and solutions for customers—an evolution that resulted from some of the fundamental research on process management. Business Process Management • ©2005 APQC 145 D e e r e & C o . As the team began to design the new customer support process, it created new key subprocesses, such as problem resolution and contact management, which were required to achieve its vision. The team relied on a large number of subject matter experts from around the globe to ensure it had the cohesion needed to design these processes. Shelton said the team could not have created the processes in isolation. “We facilitated, coordinated, provided vision and guidance, and pushed the envelope; but they provided the information used in process redesign.” The team conducted numerous drill-down sessions with these subject matter experts. It held week-long sessions to explain what the team was trying to accomplish, refine processes and subprocesses, and clearly establish a purpose and succession of key activities for each process/subprocess. New processes were mapped in accordance with the business process excellence standards to ensure consistency; having standards helped in communication. The team then tested concepts with a specific dealer review group from the United States and Canada, as well as ad hoc reviews with dealers in other countries. They used that input to further refine the processes. Deere knew this expansive effort required constant communication regarding where it was going, why, and what this might mean. The team reported bimonthly to the leadership group charged with oversight. Also integral were targeted reviews with specific stakeholders. This stakeholder analysis was part of the communication plan intended to accelerate acceptance of new concepts; it helped identify resistance and assess where support was needed. Two team members focused solely on stakeholder analysis, often spending one-onone time with these people of influence. Shelton said. “You’ve got to understand who those people are in the organization and their fundamental philosophies. When you are designing with one hand, you’d better have the other hand on their pulse the entire time.” Necessary to implementing new processes was incorporating rewards in the change model. Deere linked the process model all the way down to individuals through annual performance management objectives. Deere’s channel partners— the dealers—were also encouraged to participate in Deere’s process management through counseling, annual reviews, and accountability measures of performance. To take that accountability to a higher level, a Deere team benchmarked best practices of companies such as Ford Motor Co. and Chrysler Corp. and is implementing new dealer standards and metrics. 146 Business Process Management • ©2005 APQC D e e r e & C o . Customer Support Process Design – Recommendations and Approval The Worldwide Ag customer support process recommendations were first presented in summer 1999. When the team first formed in January 1998, it had received a lot of pressure to complete an implementation plan in six months but had pushed for more time to adequately design processes across numerous integrated subprocesses. Instead, the team released recommendations in stages. Contact management process owner Mike Pasold said this is a valuable lesson: It is imperative that the process model be designed as a set of integrated processes and not in pieces because each process impacts another. Shelton said the initial 18 months were critical to systemic, sustainable change. After 18 months of full-time commitment, the team rolled out recommendations for 13 processes: four customer support processes, seven enabling processes, and two guiding and measurement processes. Included in the team’s presentation to executive management (the Worldwide Ag division president and his senior vice presidents) were measures to apply, preliminary organizational implications, and an implementation plan. Shelton said executives were shocked at the enormous complexity, change, and cost but also intrigued. Executives requested a more detailed cost analysis. With a price tag in the tens of millions, executives asked the team to conduct a detailed financial analysis and find a way to sequence the implementation that would allow the company to pay as it proceeded. Five months later, the team detailed its analysis, and management was hesitant to proceed with the unprecedented reorganization. But with the competitive threats growing in the marketplace and a number of leadership changes in 2000, the team’s message had taken root. The team received approval to begin limited implementation. By September 2000, senior management had followed the team’s recommendation to create a vice president role to integrate the process team and functional organization. The team then finalized the new process design down to a more actionable level and refined touch points, maps, and metrics. Additionally, because it knew the customer support process does not function in isolation, the team expanded its reach to integrate with other core customer processes: acquisition, product delivery, and order fulfillment. Implementation of the new processes and organizational changes began early 2001, with a projected end date in 2006. One of the last scheduled changes was within the marketing organization, which the team understood would be one of the most difficult. However, economic changes required an earlier consolidation of marketing that moved quickly due to the process work already conducted by the team. As a result, Worldwide Ag Customer Support implemented the vast majority Business Process Management • ©2005 APQC 147 D e e r e & C o . of its process changes by 2003. The end design was a customer support process model with: • four channel partner processes (i.e., processes that create value for external customers), • seven company-enabling processes (i.e., processes that supply resources to other processes), • controlling processes (i.e., processes that direct and tune other processes), and • measurement processes (i.e., the process that ensures process metrics provide the data necessary to drive business results). According to Shelton, the four “core processes” that pertain to Deere’s channel partners (i.e., dealers) and customers must be fully supported by the enabling processes (the seven illustrated in Figure 43) in order to work successfully. These core and enabling processes are supported by a “controlling process” (i.e., leadership and planning) and “measurement process” (i.e., measurement). Each process has a process owner with authority and responsibility for process design changes, metrics, research and development requirements, etc. The leadership and planning process is critical to ensure oversight, guidance, alignment, and prioritization. Measurement is important in gauging process results and assessing the metrics themselves; this Customer Support Process Model Controlling Process Processes that direct and tune other processes Core Processes Processes that create value for the external customer Product Set-up/ Delivery Adjust Repair and Replace Parts Procurement Product Life Cycle Cost Management Company Enabling Processes Processes that supply resources to other processes Channel Partner Development and Support Support Information and Training Contact Management Leadership and Planning Information Technology Solutions Management Problem Resolution Measurement Process Process that assures process metrics provide the data necessary to drive business results Measurement Marketing (Parts and Services) Reimbursement Figure 43 148 Business Process Management • ©2005 APQC D e e r e & C o . process is important to not only crunch data but also differentiate performance: Is it execution or process design? Overarching the Worldwide Ag division’s customer support process is the Customer Support Council, one of the four enterprise-wide core process executive councils, represented by key leaders from each Deere division. Thus, all divisions have agreed upon the enterprise-wide customer support model, and the leadership and planning process is the same. At a lower level of detail, however, the divisions have autonomy to diverge as necessary. Contact Management: Design of an Enabling Process Deere considers contact management one of its best examples of process management. This process began from scratch rather than as a redesigned functional organization because customers did not directly contact the company prior to Deere’s reorganization and focus on process. (Customers would directly contact dealers and, occasionally, a territory or division manager.) Deere’s focus on customer relationships created the need to enable the customer to talk directly to the company. Thus the contact management process was born. Process owner Pasold emphasized that to create success, relationships are important with not only customers but also employees. He said, “Getting the right people to implement the process is just as important as anything you can do.” Deere cultivated skilled, well-paid, and highly trained employees and then provided them with the vision and an explanation of what the process accomplishes. In assessing its existing processes in which customers were touched across the company (e.g., dealers, credit bureau, Web site, headquarters, and regional offices), Deere found it had 121 different points of customer contact, little to no documentation of solutions, and three main themes in customer opinions (from the 1,000 customers surveyed). 1. Positive relationships—Customers find this an important part of the experience. Were they taken care of? Did someone follow up? 2. Machine operational availability and performance—Customers expect products to perform (i.e., with nature of business, downtime is especially costly). 3. Information availability —Customers expect operations and technical manuals published in their language; this had not always been the case at Deere. These customer themes became Deere’s contact center customer and business requirements. Deere then further defined the attributes of superior customer support. 1. Dealers who are able to deliver superior product support 2. A company that supports dealers in the area of product support 3. A dealer and company that listens and responds to customer requests Business Process Management • ©2005 APQC 149 D e e r e & C o . 4. 5. 6. 7. A product that delivers the expected uptime availability A product that delivers the expected performance Access to parts when and where needed Access to information when and where needed Deere used those seven attributes to design new Ag Customer Support Contact Center processes. Following a SIPOC (supplier, inputs, process, outputs, and customers) macro work flow chart, Deere defined where each process began and ended, the steps in the process, and its purpose (Figure 44). It then mapped the processes and subprocesses using Visio and mapping standards (e.g., standard activity boxes and standard colors to denote differences among company, channel partner, and customer processes). Some maps were mapped at a higher level at first and then “drill downs” were conducted to get into greater detail once implementation began. The team held regular meetings to review the process in sections and discuss how to improve processes. By receiving these maps, Pasold said, new employees could fully understand their jobs and how to accomplish their goals. Deere’s Use of SIPOC Process Name: CONTACT MANAGEMENT Process Begins: When a formal contact has been made to or from the company about an issue, question, or concern Process Ends: Issue, question, or concern has been resolved satisfactorily Process Purpose: To enable product support information flow as needed and to support other product support processes Suppliers Inputs Customer Channel partner Company Issue, question, or concern Contact information (profile and history) Ownership and priority determined Response information Company request for contact Transaction completed Process Outputs Routing and Acknowledgement Request Assessment Development, Delivery, Recording, and Response Proactive Contact Customers Contact recorded Customer Determination of urgency and ownership Channel partner Company Response developed Response delivered Solution recorded Proactive contact completed Customer satisfied Follow-up Figure 44 150 Business Process Management • ©2005 APQC D e e r e & C o . Using a SIPOC flow chart and mapping the processes highlighted the need to segment processes first by touch points (customer group, dealer group, and technical assistance group) and then by levels of information: • Level I–general public information, • Level II–proprietary known information (solution known), and • Level III–unknown or confidential information (escalation of issue for resolution, e.g., typically escalated to factory for product issue). This structure helped Deere better serve its customers. After these levels were designed as a “contact center call tree” in Visio, Deere laid existing technology on top to facilitate the processes. It began by leveraging its Parts division Avaya technology, which was being utilized at only 5 percent; today seven divisions use the same automated call router, and the centralized contact numbers are published to dealers and customers. Evaluation and Results Contact Management: Design of Metrics “Metrics are driven by the processes. You must have the processes designed—you have to understand what the process is before you get your metrics. Then the continuous improvement is driven by the metrics.” —Mike Pasold, contact management process owner Deere created metrics to fit the contact management processes. Although the contact management process design team would have liked a toolbox of metrics to accompany process design, it found that off-the-shelf metrics did not exist to fit the newly designed process. Most important, said Pasold, “You cannot get to the metrics unless you do the process first.” Once the detail is defined, then one can ask, “How am I going to measure that?” Deere developed a seven-step approach (to document metrics for each process. • Step 1: Map the process. • Step 2: What must happen? • Step 3: Why measure it? • Step 4: How will you measure it? • Step 5: How will you collect the data? (Who will collect it?) • Step 6: What is the baseline? • Step 7: Who will monitor? Deere’s team of two to three supervisors documented sheets of process metrics for all its contact management process maps. (Refer to Figure 45, page 152 for an example of metric documentation for the contact management routing and acknowledgement process for a dealer technical assistance case [DTAC].) Even where it did not have software to capture the metric, Deere documented the desired metric so that it could try to seek the software needed. Deere’s current Web-based Business Process Management • ©2005 APQC 151 D e e r e & C o . Documenting Metrics Using Seven-Step Approach Process Name: Contact Management Routing and Acknowledgement Step 1: Map the Process Step 2: What must happen? Step 4: How will you measure it? Step 3: Why measure it? Leading metric for customer satisfaction. Also used for staffing/training consideration 1 Wait time for agent after being assigned 2 Base metric to Count the number of cases establish resource we actually receive requirements 3 Cases get re-directed Appropriate agent/ department works on issue, problem, question Quality answer To assure customer satisfaction 4 Step 5: How will you collect the data? Step 6: What is the baseline? Step 7: Who will monitor? DTAC = assigned to own Report writer Quintus 90-97% customer Level II DTAC By number of contacts per month, DTAC are T3 and E3 cases DTAC Quintus Variable Level II DTAC Percentage of cases redirected DTAC Quintus Variable Level II DTAC Survey contacts (resolved?) DTAC = percentage of cases re-opened To be established Level II DTAC Figure 45 metrics software is a result of this documentation. (Through IT enablement, data collection time has decreased significantly and enabled most time to be spent on analysis.) Pasold said designing metrics in this approach was necessary and easy once they started. For example, the DTAC measure is collected and reviewed on a monthly basis and used to make resource/staffing decisions (i.e., employees are flexed out of different process areas based on metrics and comparison against a baseline). Once the team had completed metrics documentation, it went back to its process maps and included yellow circles to denote metrics collected at that place and time within that specific activity in that Visio map swim lane. Metrics targets first started out as estimates, but these were fine-tuned as Deere implemented and started gathering metrics. Measures are updated continually based on changing goals; they fall into three basic measures of quality, cost, and cycle time. Most process measures are “dashboard” or leading measurements; many are incorporated into the business scorecard that is divided into business requirements and customer requirements. The scorecard is monitored, and the processes and 152 Business Process Management • ©2005 APQC D e e r e & C o . measures are changed as needed. When measures are reported to senior management, anomalies are explained. Initially, measures were much more numerous and detailed; over time, Deere has been able to change measures that drove the wrong behavior and focus on the most critical measures. Deere plans to continue to narrow its number of measures to the critical few. Since implementing its new contact management enabling process, Deere has seen success in many areas. One example has been in the number of dealer technical assistance cases. Prior to the new process, this number increased by 3.5 percent per month; after implementing contact management, Deere has a net decrease of 13.5 percent over the past three years. Pasold attributes this to documentation, efficient routing, and dealer coaching—all results of standard processes. He said, “That kind of turns it around and gives it some real value—business results from implementing processes. That means fewer cases, fewer people to take cases, faster response times to customers delivered by dealers. That is the ultimate of where we want to get to—so that dealers can fix the problems faster.” Process Integration and Metrics The evolution of the contact management measures started as a bottom-up approach, but the measures link to what the division and the enterprise is trying to accomplish. As explained previously, Deere’s customer support process model (Figure 43) depicts the core, enabling, leadership and planning, and measurement processes. These were defined and mapped using the SIPOC macro work flow chart in the following order: 1. Core processes for channel partners were defined. 2. Enabling processes to service customers were defined. 3. Core and enabling processes were mapped. 4. Leadership and planning processes were mapped. In this process, Deere discovered a gap resulting from lack of measures. 5. Measures were established using two approaches. a.Bottom up —This seven-step approach establishes which process steps the organization wants to measure. b.Top down—The metric tree tool (referred to as CTQ, or “Critical to Quality” flowdown) identifies factors that impact customer factors and drills down to the next level of factors so that a metric tree is created. Colors are used to code the “level” at which those metrics are collected; those colors on the metric tree correspond to the colors in scorecards. Business Process Management • ©2005 APQC 153 D e e r e & C o . The seven-step approach identifies process measures, and the metric tree then helps prioritize those measures and link them to customer requirements. Those two tools and the information compiled into them were reconciled and used to create scorecards. • Leadership scorecard—This is primarily composed of lagging indicators (i.e., those that measure results or outcomes of the processes) such as customer satisfaction levels and financial results. • Process scorecard—Each process has a process scorecard with some lagging but primarily leading indicators (i.e., those metrics that are linked to outcomes but are more operational and predictive in nature). By using the metric tree, process scorecards and metrics used at the lowest level (e.g., individual representatives within contact management) can be directly linked back to customer requirements, which ultimately support top-level objectives. For example, individual objectives feed into the contact center’s metrics, which are tied to the original seven customer attributes for customer support, which link to division objectives, which link to the enterprise objectives; an employee’s measures are limited to those process metrics that the individual can directly impact but which ultimately impact leadership metrics. Scorecards are compiled and reviewed on a monthly basis; however, behind each leadership and process scorecard, operational measures are taken on a more regular basis and can be reviewed daily, weekly, or as often as needed. The leadership team and process owners conduct monthly reviews of the leadership scorecard and the process scorecards to identify gaps in performance. When process owners identify gaps, they then determine whether an improvement is required in individual performance or through a process change. Improvements When an individual’s performance goals are changed, those changes are incorporated into the individual’s performance management objectives. This performance management system is an enterprise-wide system where each employee identifies his/her performance goals for both process and project daily work. These goals are monitored throughout the year. If a process is changed, then the process map is updated and linked directly back to the process scorecards. Individuals’ performance management objectives are also updated and linked clearly to the new process operational measures. In the case where process improvement requires resources beyond the scope of the process owner (i.e., a cross-functional project) or beyond the threshold previously 154 Business Process Management • ©2005 APQC D e e r e & C o . established, a formal project is launched. The formal project is documented in a project workbook, which has several sections: • project proposal sheet that defines the project scope, the outcome, the proposed work, and high-level resource requirements; • cost-benefit analysis that is summarized in net present value (NPV) calculation; and • links to process metrics and business requirements. Thus, when a project is undertaken, it must be linked to metrics, measures, and business requirements. Projects originate as either process improvements or as a result of the leadership and planning process, where a change in strategy, marketplace, business requirements, etc. can spawn a project. Data from project workbooks are used to create a score the leadership team uses to prioritize the most valuable projects to the organization. The project prioritization score includes not only financial impact but also the impact on customer and business requirements. “In this way, it is superior to a lot of prioritization processes done traditionally where the main metric is financial performance because we know there are certain things you can do that you know will positively impact the customer, but you can’t put a financial figure on it,” said Louise Hales, who is responsible for customer support analysis at Deere. The leadership team prioritizes the projects into a project list that employees adhere to. This list is tied to expense and capital budgets and performance. Hales said: “The project workbook brings together all the factors necessary to make a decision on what should be worked on. The projects are then incorporated into individuals’ performance management goals and then [individuals] are measured on their impact and their effectiveness of working on the projects, which have already been linked to business and customer requirements.” Once the project is complete, the results of the project are summarized into three areas: 1. results compared to what the project set out to achieve, 2. impact on business and customer requirements and the corresponding metrics, and 3. lessons learned from project. These results impact the scorecards and are used for future decisions. Deere’s project management and project prioritization system is a continuous loop. Workbooks are spawned from processes and leadership/planning; projects are prioritized and integrated with metrics; the project results are then captured, and the information from the project results are then fed back into the process work to help with future process decisions. Business Process Management • ©2005 APQC 155 D e e r e & C o . According to Hales, integrating process and metrics has resulted in the following: • alignment of individual/process goals and results with company strategies, business requirements, and customer requirements; • prioritization of project work; • funding of these initiatives; • improved measurement; • improved results; and • continuous improvement in processes and project work. Lessons Learned “We aspire to distinctively serve customers—those linked to the land—through a great business, a business as great as our products. To achieve this aspiration, our strategy is: exceptional performance, disciplined growth, [and] aligned teamwork.” —Bob Lane, chairman and CEO Deere parts planning process owner Tom Zmuda quoted CEO Lane in demonstrating how the organization has taken the original promise of its founder and continued to embellish and improve upon it in the spirit of continuous improvement. Deere’s commitment to business process excellence is one with that spirit. Success factors and the lessons Deere learned along this BPE journey are summarized below. Business Process Management • • • Continuous improvement is a key element of the Deere culture. John Deere as a learning organization strives to leverage knowledge. John Deere continually balances dualities such as centralization and decentralization in all its endeavors. Today, no central BPM core team has fulltime responsibility for enterprise-wide BPE activities; this is decentralized into the businesses and integrated and overseen by the executive councils. Initially, it was important to have high-level support, build the body of knowledge centrally, and begin decentralizing into the operations/businesses. Zmuda said this began as a centralized and focused effort that became decentralized and incorporated into the daily mode of operations. Process Design • • • 156 Always start with the customer, not competitors. During process design, determine the ideal design and then deal with technology and cost constraints after the visionary process is formulated. Fully leverage subject matter experts from all levels. Business Process Management • ©2005 APQC D e e r e & C o . • Develop a communication plan early and follow it. Zmuda said it is very important to continuously communicate to leadership and across the organization about expectations as well as progress. Process Development • • • • Processes must accommodate business and customer requirements. Zmuda said, “If you don’t know what you have to deliver, it is virtually impossible to design a process that will deliver those outputs.” Organizational structure is driven by process. Often the design team was encouraged to just reorganize and then design the process, but, Zmuda said, “It doesn’t work that way. You have to very clearly understand process roles and responsibilities before you can even begin to design an organization to support that structure.” Metrics are driven by process. Organizations should not try to force feed traditional metrics into processes. “Metrics have to be based upon the processes you deploy and how well they meet those customer and business requirements,” said Zmuda. By helping to identify gaps, metrics “become the tools you need that really make a difference in the eyes of the customer.” Continuous improvement is driven by metrics. Measurement and Integration • • • Measures are critical to aligning processes to strategies and linking to individual performance. Deere has spent a lot of time to ensure individuals have a clear line of sight to where the division and the organization are trying to go. It helps individuals understand how they make a difference in getting there. The development of measures is ongoing. Projects are prioritized based on their impact on customer and business requirements. Zmuda said that the tremendous amount of work that Hales and her colleagues have put into the measurement and project prioritization processes have had a significant impact on business process excellence success; these help quantify results and use human resources and capital most effectively. Business Process Management • ©2005 APQC 157 Business Process Management NGST Northrop Grumman Space Technology Northrop Grumman Corp. The acquisitions of Litton Industries Inc., Newport News Inc., and TRW Inc. made Northrop Grumman Corp. (NGC) the No. 1 shipbuilder and the No. 2 U.S. defense contractor (behind Lockheed Martin Corp.). The organization operates in seven sectors: • Electronic Systems (radar, navigation, and communications), • Information Technology (computer systems, services, and training), • Integrated Systems (aircraft), • Ship Systems (Avondale and Ingalls shipyard, military/commercial ships), • Newport News (nuclear submarines and carriers), • Mission Systems (command and control systems and missiles), and • Space Technology (military/civil space technology). High-profile products include the B-2 stealth bomber, amphibious assault ships, and oil tankers. Due to this breadth of expertise, NGC has a significant advantage among competitors. In December 2002 NGC’s shareholders approved TRW’s merger with the company; TRW Space & Electronics became Northrop Grumman Space Technology (NGST). Until that time, NGC had not had a space business. Northrop Grumman’s acquisition of TRW’s space business added the final piece of the puzzle. It can now proclaim it builds products ranging from under seas to cyberspace. NGST is the sector that is participating in the study as a best-practice partner. As a whole, NGC employs approximately 125,000 and had total sales of $29.9 billion in 2004; it operates in 25 countries and across the United States. Although some NGC sectors provide commercial work, NGST is principally a government contractor. Business Process Management • ©2005 APQC 159 NGST According to NGST Vice President of Mission Assurance and Chief Engineer Dick Croxall, TRW was primarily an automotive company, not an aerospace company, prior to its merger with NGC. Although its Space & Electronics division was a leading aerospace provider and had won four major programs shortly before the merger, Croxall questioned whether TRW could have sustained competitiveness with the Boeing Co. and Lockheed Martin in the space markets due to the lack of “critical influence and certain financial support.” Thus, he said, the merger with NGC was very significant, and central to realizing the benefits from NGST’s perspective was NGC encouraging the sector to continue along its journey begun in business process management. Said Croxall, “The fact that we were able to bring with us and continue business process management and the Six Sigma initiative—and actually reinforce it as part of Northrop Grumman—has been a huge advantage.” Northrop Grumman Space Technology NGST employs approximately 9,000 people, with 2004 sales of more than $3 billion—a 50 percent growth since 2002. With its upsurge in sales, it has been challenged with building its work force as it pursues process initiatives and drives execution. It is headquartered in Redondo Beach, Calif., on a campus called Space Park. It considers its self-containment an advantage in its business process management (BPM) initiatives, with nearly everyone housed in the same location and all reporting to one sector president. NGST is a leading producer of satellites, lasers, and electronics systems. Croxall said it intends to keep its preeminent market position with its satellite systems, and its broad-based business in lasers (including extremely sophisticated missile defense) has become an NGC priority. It has electronic systems for a variety of applications, spanning commercial, government, defense, and more; its CNI Avionics is control navigation and identification electronics mostly for aircraft. This very diverse, technology-based company is highly developmental: its operations are approximately 80 percent development and 20 percent production. As such, its Six Sigma and business process challenge has been to look at all its functions—not only manufacturing and production but also engineering, laboratories, and everything else that affects its ability to develop technology and perform on its programs. It has embraced and met that challenge in a revolutionary way. BPM Strategy, Structure, and Funding I think there is a real success story in how this company went about doing it and. …This required a revolution in the organizational structure here at Space Park—and that was not easy. …But it was one of the key enablers to making Six Sigma and business process management happen. —Dick Croxall, vice president of mission assurance and chief engineer 160 Business Process Management • ©2005 APQC NGST Focus on Technology and Performance The organization’s focus has been on technology and performance. Croxall said it considers its technology focus a differentiator for the company: Maintaining intellectual property and capital in key technology areas has contributed to four major programs wins in three years. Croxall said that these were won principally because NGST is able to develop, manage, and improve technologies that enhance system performance. The organization’s emphasis on performance spreads across three areas. 1. World-class people —The organization has always prided itself on having the best people in the industry for both technology and engineering. “That has paid good dividends over the years,” said Croxall, who considers this “another piece of the puzzle.” 2. Program execution —The focus in 2005 is on program execution. NGST’s definition of mission success is to ensure that everything works 100 percent and is delivered on cost and schedule. Delivering on cost and schedule is “an execution problem,” according to Croxall. “Every process associated with execution, including things like program planning and risk management, can be dropped straight to the bottom line of mission success. So every process in this sector is examined for its contribution to mission success in that context.” 3. Six Sigma and business process management—NGST has employed Six Sigma as its comprehensive process improvement methodology with BPM as the foundation and context. According to Six Sigma Vice President Ron Smith, Six Sigma has been the primary lever for evolving the population toward a process-based culture, “From the beginning, we followed the wise advice of our consultants: ‘Use one drum, and beat it loudly.’” 1. 2. 3. 4. 5. 6. The NGST portfolio comprises six businesses: ISR (intelligence, surveillance, and reconnaissance), the most significant part of NGST business that will continue to be a driver in the current world situation, which demands increasingly better and different intelligence; Civil Space, which includes NASA (National Aeronautics and Space Administration) science and exploration missions and NOAA (National Oceanographic and Atmospheric Administration) programs; Satellite Communications, where NGST operates as a major payload and technology provider; Missile & Space Defense, a technologically sophisticated business; Software Defined Radios; and Technology & Other. Each of the businesses has a variety of programs housed under their respective umbrellas. One example of a program in Civil Space is the James Webb Space Telescope, the successor to the Hubble Space Telescope, which is beginning to reach the end of its life; the James Webb will have a 6x resolution improvement Business Process Management • ©2005 APQC 161 NGST in space observations. Another program example is AEHF (Advanced Extremely High Frequency), within Satellite Communications, that serves as the primary military security and communications satellite. Technology developed with other projects enables such large, multiple-mission platforms that dump a lot of data to the ground. ISR’s NPOESS (National Polar-orbiting Operational Environmental Satellite System) is a joint effort of NASA and NOAA, with a multiple-mission and multiuser capability that represents a cross-agency effort that leverages synergies and technology. Cross-boundary thinking among agency customers, which in the past had different requirements and maintained separate systems, is encouraged by NGST; it is working to ensure program and business synergies are fully leveraged with customers as well as within NGST. By embracing Six Sigma and business process management, NGST is normalizing its processes across businesses to most effectively apply people and technology to customer solutions. NGST Mission Achievement NGST’s mission is to “be a complete system provider for advanced space and defense markets, leveraging our industry-leading technologies, products and people to drive robust, profitable growth.” Croxall said the organization prides itself on developing highly complex, one-of-a-kind systems that address challenging performance requirements and achieve 100 percent on-orbit mission success (a goal it has hit for 25 years). But, Croxall said, to achieve its mission of leveraging synergies internally, this “absolutely requires that you have standard processes and people that can work across functional lines. That is fundamentally why we have driven toward process management improvement.” Thus began the organization’s journey through Six Sigma and BPM, which started at TRW, changed NGST, and carried over into NGC sister sectors. Process-based Reorganization In late 2001 the organization started a revolution. To facilitate implementation of Six Sigma and BPM initiatives, it realigned by processes. The previous organization had six divisions with varying combinations of programs, program management, engineering, production, business development, and technology development. Process owners resided in multiple places, had varying approaches to problem solving, often conducted business in widely divergent ways, and possessed multiple systems and technologies. Streamlined under single process owners, the new structure aligned under five core process areas: business development, technology development, programs, engineering, and production (Figure 46). 162 Business Process Management • ©2005 APQC NGST NGST’s Process-based Reorganization Old Organizations • Implemented in late 2001 to enable Six Sigma and BPM implementation • Single process owner can make prompt decisions and top-down improvements, and is accountable for process performance Core Bus Devel DSD E&TD S&TD TPD S&LPD New Core Process Alignment • Intact organizations facilitate standard processes, knowledge transfer, and communication Bus Devel Tech Devel Programs Engineering Production ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 46 The reorganization by process involved installing single process owners to make prompt decisions and top-down improvements and charging them with process performance accountability. The philosophy for this radical restructuring was that intact organizations facilitate standard processes and knowledge transfer and communication. As of January 2005 NGST had defined approximately 1,600 processes, every one of which has a single owner. Placing a high value on quality, processes, and process improvements was absolutely necessary, according to Smith. Improving processes was “very instrumental in terms of what we are after here: we’re after improved performance. Our main objective is improving performance of our business practices and applying those practices to our sector’s business.” NGST’s Process-centric Organization Today’s NGST organization is process-centric. Fourteen processes report directly to the NGST president: five core processes, six sector enabling processes, and three corporate enabling processes (Figure 47, page 164). Business Process Management • ©2005 APQC 163 NGST NGST’s Process-centric Organization President Sector Enabling Processes Business Management Human Resources Planning and Administration Six Sigma Mission Assurance and Chief Engineer Corporate Enabling Processes Internal Information Services Communications Law Internal Audit Core Processes Programs Business Development Technology Development Engineering Production and Supply Chain ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 47 Until his promotion to NGC chief financial officer, Wes Bush served as NGST president and lead champion of the BPM initiatives. Croxall said Bush was “a great leader for us and an absolute champion of process…and business process management.” Continuing the work begun by his predecessor, Bush drove these process changes from the top. All previously scattered process ownership was centralized under the president’s direct reports. For instance, all program management processes—and thus all program managers—report to the vice president of programs. Similarly, the previously disparate engineering staffs and production and supply chain staffs came together into consolidated organizations with single vice presidents leading them. NGST is a matrix organization in the sense that the programs’ management staffs report to the programs organization and draw their talent from the other organizations (engineering, production and supply chain, etc.) as required. In a similar matrix relationship, the enabling processes support all core processes. As a government contractor, NGST has mostly cost-plus programs, but it is moving them more toward a fixed-price treatment that helps drive efficient execution. 164 Business Process Management • ©2005 APQC NGST Business Transformation Business transformation at NGST started midway through 2001, when the organization realized it was well-positioned to grow its business far beyond what it had been in the past. Increasing program complexity and competitive environment combined with a need to enhance operating efficiencies and agility resulted in NGST changing the way it did business. At the time, NGST was chasing four multi-billion-dollar programs. Said Smith, “Our concern wasn’t so much that we might lose those; the concern was that we might win them.” Despite the organization’s business plan to hire smart people, train those people on the job, and send those bright people off to apply their findings to the business, NGST was finding large inconsistencies in terms of the quality of implementation of its programs. “So we felt that if we were going to grow the business, the first thing we needed to do was to take those best practices, define them, standardize them, and comprehensively and consistently apply those processes to all the programs that we supported,” said Smith. “And I think that was really instrumental in terms of the reorganization that occurred, the implementation of Six Sigma as we have applied it—for the simple purpose of improving the way we perform our business.” According to Smith, Six Sigma was selected as the transformation framework because it was process-based, Six Sigma projects drive change with customerfocused outcomes, and the define/measure/improve (i.e., DMAIC) methodology fit well with the population’s engineering mindset. With more than 50 percent of its employees being engineers and scientists and 27 percent holding advanced degrees, NGST anticipated this data-driven approach would be a positive cultural fit as well as provide much-needed focus on process. According to Smith, a processbased approach was critical. “When we started down this path and we looked at our processes…we found that we had 30-plus ways of calculating pi. So ‘optionalism’ was fraught throughout the organization.” Another unique aspect of Six Sigma that appealed to NGST was its ability to tie business improvements back to how the business is operated and measure the improvements. By taking the Six Sigma methodology and tailoring it to its needs, NGST accomplished what Smith calls “a transformation of our culture, which was really key to having long-term success.” Integration and Synergies with NGC A year after TRW launched Six Sigma, it was acquired by NGC in December 2002 and faced what Smith called a defining moment. He said the whole population, already skeptical, “was looking to see if NGST was going to blink or if NGC would make all of this go away so everyone could go back to optionalistic behavior.” Business Process Management • ©2005 APQC 165 NGST The opposite happened. NGC encouraged NGST to continue down its Six Sigma and BPM path. Additionally, the other six Northrop Grumman sectors were interested in understanding NGST’s best practices. In having that dialogue, NGST validated its efforts through outside feedback and found it had a very strong, robust Six Sigma implementation. Smith said that validation was encouraging and important to NGST’s success, and the integration with NGC resulted in many cross-sector collaboration and sharing opportunities: Six Sigma training, joint improvement projects, Black Belt assignments, and knowledge transfer. From a change management standpoint, this was critical, said Smith. “I tell you that if we had blinked, that whole population would have thrown it all in and gone back to the ways they had done before.” At the time of the integration, some NGC sectors had been involved in process improvement initiatives while others had not; today most sectors are engaged in some form of BPM. NGST has been called upon to help some of those organizations institute process improvement initiatives based upon its work. For example, NGST has trained Ship Systems on Six Sigma; now that sector is conducting its own training, certifying Black Belts, and conducting projects. From a corporate standpoint, NGST has helped NGC as well; most recently, one of its Master Black Belts in training transitioned to NGC for a 12-month assignment to help implement its corporate ACE (Achieving Competitive Excellence) program, which is being pushed by the CEO. Thus, Smith said, NGST is receiving affirmation that it is on the right track and having an impact on the larger corporation. NGC has a robust corporate focus on sharing best practices through its Enterprise Excellence Council, knowledge management initiative, cross-sector communities of practice, and its ACE program initiatives. BPM Design We have smart people. When you add strong, solid processes to them, then you can achieve a level of growth and quality that our customers expect. —Ron Smith, vice president of Six Sigma Unlike most other organizations, NGST really has one customer: the government, for which NGST is responsible for achieving important missions. Its reputation with that customer can drive its business in highly positive or negative ways. The customer expects good, quality products. NGST’s business is such that it is constantly pushed to develop new, complex products without a lot of history (often building only two or three products within a program), interject increasingly sophisticated technology, achieve missions that could not be achieved before, and get it right the first time. 166 Business Process Management • ©2005 APQC NGST In order to meet these demands, NGST executives took a hard look at processes because it realized it was not performing consistently across its programs. It put a three-pronged, customer-focused BPM process in place to achieve consistency (Figure 48). BPM at NGST DM DM Improve existing processes so that their outputs meet customer requirements N A LE Six Sigma nd Ca AD V AI Design new products and processes that meet customer needs Process Management Process owners control and manage processes to meet business goals Six Sigma success starts with Process Management ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 48 Smith said the emphasis is on process management, which NGST considers most important to its Six Sigma program. Reorganizing the organization around processes and enabling and empowering process owners allowed NGST to carry through the improvements it was trying to achieve. In a matrix organization, process owners are in a unique position to broadly view all programs; giving them full ownership ensures those processes are consistently followed. That is why the new structure has been so important to NGST, said Smith. Having a name associated and responsible for each of the 1,600 processes has been a cornerstone for the organization’s longer-term success. Smith said process ownership “is key for any of our process improvement initiatives, and it is certainly driving our Six Sigma success.” Implementing the Six Sigma program and its focus on process would not have been possible, though, without the commitment from the top. NGST knew this Business Process Management • ©2005 APQC 167 NGST would be a critical component based on its past record in process improvements as well as industry lessons learned. Throughout its 3.5-year journey, the NGST Six Sigma program has been at the top of leadership’s priorities, said Smith. NGST began by defining its 15 highest-impact problems and implementing its first Six Sigma projects to address those important issues. The NGST president and all vice presidents were among the first to go through the Six Sigma training, each becoming a Green Belt; they were responsible for personally championing and actively overseeing the first 15 Six Sigma projects and then sponsoring numerous other projects. They committed funds and resources and installed a Six Sigma organization with a vice president to head it, which gave it equal standing with core and other enabling process areas. Smith said it was a level of commitment that was demonstrated by actions and dollars, as well as the position to make sure that it was visibly important and seated at the table where NGST decisions were being made. This push from the top was critical to giving the organization a process focus and sustaining the business reorganization that Smith said turned NGST upside down in “the biggest change I have seen in the 22 years I have been here.” With 9,000 employees who had heard it all before, NGST consciously secured executive commitment to ensure the success it is enjoying today. NGST’s BPM Framework Although top-level commitment has been the overarching element of NGST’s success, it is one of several components that comprise the BPM framework NGST built to help sustain its new process focus. Other factors in the organization’s success are: process definition; dashboards; strategic and customer focus; methodology and tools; change management; process “greening,” a methodology in which NGST categorizes its process maturity; and infrastructure (Figure 49). NGST’s process framework, Smith said, is analogous to the structure of a house, with the top team’s overarching commitment, resource allocation, and organizational focus like the roof that contains and shelters everything inside. Central to the structure is its pillar of strategic and customer focus, which keeps process management activities tied to the business objectives. Flanking that pillar are other essential structural elements: process definition, which ensures standard, communicated processes and interfaces; dashboards, which display meaningful collections of measures critical to determining the operating health of the processes; methodology and tools that enable process improvement; and change management to ensure that improvements truly “stick.” All these pillars stand on the foundation of “process greening,” a five-step model NGST employs for driving process maturity; the term greening is derived from the set of criteria used to assess and communicate progress on a red, yellow, and green scale. 168 Business Process Management • ©2005 APQC NGST NGST’s BPM Framework Top Team Driven Commitment/Resources/Organizational Focus Process Definition Dashboards Strategic and Customer Focus Methodology and Tools Change Management Standard, well communicated processes and interfaces Measure performance Link performance to customer and business objectives Make improvements and quantify benefits Ensure changes implemented and benefits realized Process and Checklists Metrics/ Standards Review–initiate actions to meet performance targets Enforce Process Greening Infrastructure ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 49 Implementing and Sustaining BPM Process users: that is really where the rubber meets the road. If people do not use the processes as defined, our efforts are in vain. And our intent is to make it easy, give an intuitive access to the process, make it so water flows down hill, [and] put it in a way that people want to use the processes. —Andy Abranches, Master Black Belt NGST Master Black Belt Andy Abranches said: “We have had a lot of success over the last three years. But putting this thing together we faced a lot of decisions, challenges, and elements to implement.” He summed up BPM program core Business Process Management • ©2005 APQC 169 NGST elements as program evolution, people (leadership, Six Sigma program office, and sector stakeholders), infrastructure (processes, systems, and training), and operational evolution. Program Evolution The Six Sigma program was not a separate entity in 2001. It was an idea generated by the leadership team, the NGST president, and his vice presidents, who came together and made key choices responsible for the transition in the following years and success in the longer term, said Abranches (Figure 50). Business Process Management Evolution 2002 2001 2004 2003 2005 Leadership Top-team-driven is critical for commitment/resources/overcoming resistance Reorganization Vision Commitment Program Office Training quotas By process Project quotas Project participation as a requirement for promotion Tangible results and customer feedback drive top team commitment VP Six Sigma VP engagement Measurable results Customer involvement Local partner Full-time Black Belts Focus Process area leads Leadership development program Enterprise content, processes, and training drive culture change Training Greening/Process mapping Dashboards Projects Infrastructure StartIt! training Strategic framework Depth Control tollgates/Process audits Content and process drive infrastructure Online dashboards/framework StartIt! projects Project track PRC Expanded tools Control tollgates ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 50 One of these decisions was the reorganization, which began in late 2001. These 14 top-level processes (Level 0 is the president level, Level 1 is the vice president level, etc.) were defined by the NGST president and his vice presidents, by looking at the organization’s value chain—“the things we do from developing business to delivering products,” said Smith. After this top level defined their processes, 170 Business Process Management • ©2005 APQC NGST they pushed those down to next level (Level 2) to continue defining processes progressively lower into the organization. Smith said, “As we’ve gone down, like a tree, it grew to be around 1,600 processes when all was said and done. It was a process of pushing it down and pushing training down and educating the process owner and having them define their process.” (Today these processes are defined, in a comprehensive indentured process list, down to Level 5 and Level 6.) Training was the next important step to develop a critical mass, enforce top leadership’s focus, and accomplish a specific number of high-impact projects that represented a balance between strategic and business needs. (NGST has since met its goal of training more than 40 percent of the organization—the tipping point, according to Abranches.) The Six Sigma organization was focused on launching projects, then dashboards, strategic framework (2002 to 2003), and greening and process mapping (2003 to 2004). By 2004, the program office had evolved to the point of auditing existing projects and continuing to push deeper into the organization to ensure every employee understands how to contribute; Abranches said this “depth” is the focus moving forward. People—NGST Leadership Team The NGST leadership team has been responsible for strategic direction and tactical support. It all began with them in a critical dialogue involving arguments and discussions of how they could support BPM and avert failure. One of the pieces of paper on which this initial group brainstormed is kept in NGST’s Space Park headquarters to remind everyone of this important point in the organization’s history. Today, the leadership team plays a vital role as the steering committee to champion process management efforts. This steering committee is chaired by the NGST president, facilitated by the vice president of Six Sigma, and comprises all core and enabling process vice presidents: engineering, production and supply chain, technology development, programs, mission assurance, business management (CFO), planning and administration, human resources, and internal information systems. Abranches said the committee is responsible for driving ideas, critiquing ideas and actions, asking questions, “keeping us honest,” and ensuring Six Sigma efforts are implemented in the right way and kept on track. Initially, the leadership team was more directly involved and doing most of the work; over time, they have been able to provide strategic direction and oversight while the Six Sigma program office and others in the organization translated their ideas into action (Figure 51, page 172). Business Process Management • ©2005 APQC 171 NGST People–NGST Leadership Team CEO commitment to process-based business through use of Six Sigma. Forms Six Sigma program office and executive level steering committee Approved process maturity criteria (Greening) Defined strategic initiatives Made project and training commitments Program Maturity Committed to process maturity goals Defined enterprise-level process map Selected external consultant to provide objective feedback 2001 2003 Developed enterprise dashboard 2005 Executing projects facilitated leadership buy-in and commitment ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 51 People—Six Sigma Program Office The Six Sigma program office comprises fixed- and rotational-based resources. Fixed-base resources consist of the following: • Operations—These resources are responsible for communications and driving changes for such issues as how dashboards are put in place across the sector and enterprise. • Resource management—These personnel are responsible for managing resources, for example deciding how the program office deploys Black Belts in different locations. • Training management —This group manages NGST’s extensive Six Sigma and BPM training initiatives. They have trained more than 30 percent of the employee population, from top leadership down. • Business management, Master Black Belts, and support staff dedicated to the program office. 172 Business Process Management • ©2005 APQC NGST Abranches said much more important than the fixed base are those rotational personnel; they help the program office partner with process areas via dedicated Black Belts. These rotational employees are those 40 to 45 future leaders identified by the business vice presidents, who offer up their highest-potential employees to a two-year commitment in the Six Sigma program office as part of a formalized development process. These employees transfer into the program office (and are paid for by the program office) to train as Black Belts, working on assignments during their two years: project execution, mentor to Green Belts, instructor, process area lead or local partner, and special assignments. When taking on the role of process area lead or local partner, Black-Belts-intraining work closely with process owners to not only understand responsibilities but also help the process owner fully embrace the process framework; they help define processes, eliminate overlap between different areas’ processes, and instill process thinking. Abranches said, “Our intent is to recognize leaders within the organization, bring them into Six Sigma for two years, and then put them back into positions of leadership where they can sustain this change and continue to accelerate it.” Abranches said that the program office “is really a partnership between this organization and the core process areas that have been doing the design and the development of our technology and products.” Working closely with the process areas and then customers and suppliers, the program office can achieve its mission: “Six Sigma: customer-oriented, data-driven, together we make the difference.” People—Sector Stakeholders-at-Large NGST stakeholders-at-large are those people in the various processes across the business, who fall into two major groups: process owners and process users. Process owners have the authority and accountability for the overall health and performance of a process; they are responsible for documenting, communicating, measuring, enforcing, and improving their respective processes. This responsibility is depicted in a continuous loop: define, measure, review, and improve/enforce (which feeds back into the definition stage). Everyone in the sector is considered a process user; some of them happen to be process owners as well. Users are responsible for asking questions, providing feedback on process problems, and performing the process as documented. The intent is for users to have easy, intuitive access to processes, checklists, templates, and tools. Including people from these process areas on the teams driving change has been highly beneficial. They become part of the Green Belt team looking at the process Business Process Management • ©2005 APQC 173 NGST and suggesting improvements. In addition to providing this local involvement, feedback mechanisms have been instrumental as well. Process users need the opportunity and responsibility to provide feedback on process problems so they can be fixed, said Abranches. Abranches said all prior process improvement initiatives were bottom-up and did not prove successful; thus, this effort was for “leadership by example”—a show of commitment from the top down. With its emphasis on top-down engagement, NGST consciously chose to roll out its 80-hour Green Belt training and project engagement with those priorities in mind. To date, Green Belt training and improvement projects have been completed by 97 percent of vice presidents and directors, 56 percent of managers and supervisors, 23 percent of exempt individual contributors, and 4 percent of nonexempt employees. Infrastructure—Processes: Process Improvement Projects Figure 52 illustrates the process NGST uses for project selection, prioritization, training, execution, and control. Infrastructure–Processes Project Selection • Project charters proposed by process areas • Review and approval of projects before training • Evaluation criteria: – Improves a regularly performed process – Defined and feasible scope – Tangible payback – Solution not assumed or known Team Training • Year-round training program • Attend training as part of project participation • Two-week course on process management tools and Six Sigma methodology Project Execution and Control • BB mentor provides assisstance on methodology and tools • Tollgate approval throughout project Certification • Established criteria for levels of certification: – Green Belt – Black Belt – Master Black Belt • Award payment for first time project completion ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 52 174 Improvement Control • Formalized process for reviewing implementation effectiveness and control • Validates business benefits and identifies potential future improvement efforts Projects originate in the process areas, where process owners and users (sometimes with the assistance of Black Belts) come up with project ideas for improvement opportunities. The first step is charter creation; this document is recorded electronically in NGST’s database of process improvement projects, called “StartIt!,” which requires the originator to provide such information as project goal, process problem, business benefits, dollar impact to the organization, scope, and preliminary metrics identified as potentials Business Process Management • ©2005 APQC NGST for being able to monitor the process once the improvement is made. (These are all original assumptions based on business processes as the initiator understands them at the beginning; NGST recognizes that this will change and expects the team to continue to update this living document throughout the project.) Once the charter is created, the proposed project goes through a review process. Six Sigma Training Manager Marissa Dempsey said some of the core and enabling process areas have a more formalized review process than others; once this process matures, all process areas will have a formal review. Once the project charter is approved internally within the process area, it goes to the Six Sigma program office and is reviewed by an evaluation team composed of Black Belts representing core and enabling process organizations and the Six Sigma program office. The project charter review evaluates problem statement, scope, business impact, and funding. Dempsey said the evaluation team wants to ensure that project teams coming in for training will know what problem they are trying to solve so that the team is set up to succeed. In addition, all projects are scrutinized for impact. “We spend a lot of time looking at the business impact and looking at the business case they’ve developed,” said Dempsey. “Is it reasonable? Is it plausible? We do have a minimum business threshold: $400,000 to be realized over two years.” Funding is also a consideration; the evaluation team prioritizes project selection based on types of funding as well as projected benefits. Projects are sometimes denied because the originator needs to provide more information, restructure a team, or better scope/define the problem. Thus, this is a dialogue between the review process and the actual process owner who submitted it to get a tight charter before training can be launched. Once the projects are approved, teams go into training. “I often refer to it as project training,” said Dempsey. “The reason is that we are not training individuals. They actually need to be on a project team that is approved to go into training.” All team members attend training together. As teams begin training, and throughout that four weeks of the training window and beyond, the teams are executing projects. They engage in Six Sigma DMAIC (define, measure, analyze, improve, and control) training and conduct the first four phases. They work through each of the different steps of the methodology, passing through a tollgate at the end of each phase. The tollgate reviews are attended by the Black Belt mentoring them on the project, the process owner, the process champion, and others as needed to ensure the team has made progress on the project, adhered to the methodology, achieved results, and are continuing on the right path. Business Process Management • ©2005 APQC 175 NGST When the team finishes the “improve” phase, the project and team membership is considered closed; all team members are then certified as Green Belts. This certification is accompanied by a $500 cash award payment for first-time project completion. “It is part of our way at the organizational level to thank them for their contribution to benefiting our business,” said Dempsey. In addition to this tangible benefit, people are given other incentives through the HR system. As part of the top-down commitment, NGST has embedded Green Belt certification in its performance and promotion process. Getting a Green Belt certification is tracked in the system and managed and maintained for reporting functions as well. The “control” phase happens after the project team’s work is completed. Once the team has recommended some improvement to the process owner, and the process owner has agreed to the improvement plan, it then becomes the process owner’s responsibility to implement. Sometimes, project team members are actually involved in the improvement; in some cases, a cross-functional team is responsible. The process owner is responsible for the final (control) tollgate in the DMAIC methodology, ensuring metrics identified by the project team are being tracked and benefits realized. Dempsey said benefits are not always realized to the extent anticipated; this provides a great opportunity for new projects, and sometimes projects do not get implemented for various reasons (business change, outsource of process, etc.). Infrastructure—Processes: People Selection and Development Master Black Belts and Black Belts are prestigious roles in the organization. They are part of a leadership development program, which has a structure and activity set to build skills, round out knowledge, and help understand the process management methodology. They support process management activities: stabilization, maturation, and improvement. Some of the appointments Black Belts hold in this two-year time frame are specifically geared for them to learn new and different areas of the organization and gain a more holistic understanding so that they are able to add even greater benefit to the overall NGST organization at the end of the development program. With its prior history of less-than-successful improvement initiatives, Dempsey said the organization was prepared to combat the change management issues from the inception. In addition to its executive commitment and top-down rule, it waged a “really aggressive communication campaign” as part of its change management plan. • Training to a critical mass to support adoption and internalization • Financial support across the organization • Intensive, evolving communications to reinforce organizational change and share successes – 2001: Awareness and leadership commitment 176 Business Process Management • ©2005 APQC NGST • – 2002: Practice of Six Sigma – 2003: Strategy and project results – 2004: Process management context Educate organization on the need to change and expectations It set up an intranet site that gave easy access to all process management information. Also, Dempsey said NGST tried to make sure over the years that it had a different message in mind, starting in 2001 with awareness and leadership commitment evolving through success stories to the 2005 focus on communicating how Six Sigma fits within the overall concept of process management (talking more about dashboards and process greening). Infrastructure—Business Results Accounting In addition to the process improvement benefits projections the project initiator captures in the StartIt! database charter document, he or she is required to update financials (anticipated and realized) as the project progresses through the DMAIC phases. Benefits are included for a forecast window comprising the project initiation year, plus two years. (The database can accommodate a five-year window in cases where it is needed for processes with longer cycle times.) Using the StartIt! database ensures version control and provides filtering and roll-up capability for executive reports. Specifically, project business case benefits that must be documented in each DMAIC phase follow. • Define—benefits estimated • Measure • Analyze—benefits updated to reflect focused project scope • Improve—benefits finalized with identification of specific improvement • Control—benefits updated/revalidated Benefits are independently validated by business management personnel; each team is assigned a business management representative who is responsible for reviewing and approving financials before project completion. Improvement projects can be funded in three primary ways: program office overhead, functional organization overhead, and specific benefiting contracts (i.e., programs). The Six Sigma program office funds a certain number of projects to help promote Green Belt training; each of the core/enabling process areas are given an allocation of those projects. Process areas (e.g., engineering) and programs (e.g., James Webb Space Telescope) are also expected to fund a certain number of projects out of their budgets. Business Process Management • ©2005 APQC 177 NGST Infrastructure—IT Systems NGST’s StartIt! database provides a much larger role beyond financial tracking: • management and accounting of improvement efforts; • automated project tracking, data capture, and notification/work flow for phase approvals; • training and certification tracking; • automated class management, invitations, and confirmations; and • real-time status and data capture. NGST uses the StartIt! database from project conception through closure. Today it houses information for more than 1,000 projects (including some that were never started or were discontinued following reviews). The database pages guide the projects through all the phases of the DMAIC methodology. It serves as a repository for all project information, including the most recent status briefings. Teams can use the database for reference information, by leveraging lessons learned from earlier improvements. Dempsey said that with respect to metrics or any part of the DMAIC methodology, StartIt! provides “a great opportunity for folks to get some of that information directly from previous teams and reuse and build upon it.” The database also assists the training office in managing class enrollment, scheduling, automated notification, and Green Belt certification and award tracking. Infrastructure—Training Operations NGST’s training objective is “to equip project teams with a working knowledge of process management and continuous improvement tools and resources sufficient to continue through the training system, complete an effective improvement project, and obtain certification.” NGST has three classrooms on campus that hold a total of approximately 100 students. It runs classes throughout the entire year, staggered so that at any given time it typically has two classes running simultaneously. Its training material has been customized to its industry: high tech and skewed to engineering. The two-week training program is split as follows: one week of training, followed by three weeks of project work, and concluded by a final week of training before the team conducts the remaining project work. This allows for just-in-time training and pacing the team members for the information they receive. Training instructors are Black Belts; classroom instruction is part of the Black Belt development process. Dempsey said this is a great opportunity from a leadership standpoint: It allows Black Belts to begin with rote instruction working directly from the materials, and transition more to being a discussion leader and facilitator. “By the time they are done teaching, they are engaging more with the class and really doing more of a facilitation role,” said Dempsey. “Both skills are things that 178 Business Process Management • ©2005 APQC NGST we think are real valuable to them as they continue in their progression in leadership within the organization.” This participation is part of NGST’s mantra to learn, do, and teach: Black Belts go through training, work on projects, mentor and assist other teams with projects, and finally, serve as a teacher in the Six Sigma program office. Training materials and instruction evolved with NGST’s BPM maturity. Initially, materials were purchased and used verbatim from a consulting company, and consultants taught DMAIC classes. With time to certify Black Belts and gain a better understanding of materials, the organization made significant customizations to the training material and began co-teaching classes. It has since included process management tools in training and, with the expertise grown in-house, all classes are now taught by internal training experts. NGST is currently updating all training materials to allow it to teach not only DMAIC, but also DMADV (define, measure, analyze, design, verify) and Lean. It plans to further customize its DMAIC materials and expand upon process management to help people better understand how everything ties together. Dempsey said the training mantra for 2005 is “the right tool for the right problem with the right team.” Thus, it is no longer looking at every project as DMAIC; instead, it is recognizing the differences among the projects. Also, she said that with the addition of new training material, the organization will evolve along a path similar to the one it took with DMAIC, by co-teaching and then eventually taking over the training responsibility internally. Core System Elements: Concept of Operations NGST’s operational evolution of its Six Sigma and BPM initiative is detailed in Figure 53 (page 180). Leadership commitment and external expertise were key in the planning phase, said Abranches. Building the infrastructure helped set the stage in the establishment phase. Abranches said reaping the benefits began in execution, where change management grew strong roots. At this point, he said, people recognized that BPM “is here to stay—and at some point, I am going to have to participate.” Most often in his experience, the skeptics ended up enjoying training and actively engaging in the projects. “It gives you a good feeling when someone sees the value of what they are doing,” said Abranches. Lastly, the strategic stage, where NGST is today, is focused on strengthening links. Abranches said, “We have good links with business strategy, but we want Business Process Management • ©2005 APQC 179 NGST Figure 53: NGST’s Operational Evolution of Its Six Sigma and BPM Initiative Planning Stage: April to October 2001 (7 months) • Get the leadership team committed — Why we need this — How we will ensure it will not fail • Kick off initiative and make key decisions • Involve external consultants to provide best practices and outside perspective on our operations • Hire external Master Black Belts Establishment Stage: November 2001 to December 2002 (14 months) • Set up the program office • Involve consultants (teaching, guidance, etc.) • Establish infrastructure Execution Stage: January 2003 to December 2004 (24 months) • • • • Rotate Black Belt role Establish organization-wide realization: “We aren’t going away” Solidify processes Expand infrastructure Strategic Stage: January 2005 and Beyond • • • • • • Strengthen links with business strategy Make visible business results Provide business flexibility Interact with customers/suppliers Increase consultant involvement for tool growth Deeper into the organization: “Engage every employee every day” them to be stronger.” It also wants more visible business results, he said. Although the leadership team recognizes that this has been a major change, moving forward it wants to ensure that the technician working on a small part of a satellite has a better understanding that by using the process, he/she impacts results and business growth. Dashboards and intense communication are part of the plan to accomplish that. Business flexibility is also key in this stage; with its dependence on defense budgets, NGST wants to ensure its processes will withstand potential downturns. Although some customer and supplier interaction has taken place to date, NGST wants to integrate these processes on a much larger scale. Evaluation and Results Conservatively, we have seen five to six times ROI. —Dick Croxall, vice president of Mission Assurance and chief engineer 180 Business Process Management • ©2005 APQC NGST Business Impact Example - Design Engineering Process Improvements With the nature of its business, NGST cannot afford mistakes. According to Master Black Belt Anne Young, with its excellent on-orbit success record, the company prides itself on quality—and is good at catching mistakes. At which point in the process mistakes are caught, however, makes a tremendous difference in cost; NGST found process management plays a critical role. One of the first projects identified by NGST for its Six Sigma program was a process design engineering issue related to one tiny chip called ASIC (applicationspecific integrated circuit). Young said focusing on process management in design engineering was critical at NGST because numerous internal variations in process compounded the initial variations in customer requirements. She said it was important to take the customer requirements as is and look at what could be done to improve the processes over which NGST has control so that “we have a quality product that’s consistent. With variations, you never really know what you are getting in the end.” Although NGST was good at catching mistakes before products went into orbit, it was catching these in integration and testing—at a much greater cost (and schedule penalty) than catching them earlier in the design process. In examining its design engineering process, NGST scrutinized the number of electrical design escapes (a design flaw that causes interruption outside of the engineering process where the root cause is ultimately attributed to the engineering process—that is, a design flaw that is found outside the NGST design process) identified in testing and found that 82 percent were attributable to no established process (i.e., no documentation) or process noncompliance (i.e., some documentation exists, but optionalism is pervasive). “Without a clearly defined process, we really didn’t know what the true root cause was of our defects,” said Young. When launching Six Sigma and looking for highest-impact projects, ASIC was a prime candidate because the ASIC chip was used in a number of NGST programs, and design escapes related to it had significant potential for causing cost and schedule overruns. In one program, ASIC design escapes had resulted in a $9 million overrun and months of schedule delay, whereas in another program, no problems existed. With a third program scheduled to begin that would use 19 complex ASIC designs, the decision was made to investigate what caused one program to have problems with the ASIC designs and another to have none. Using Six Sigma methodologies, NGST looked closely at the ASIC design process and found, like most other engineering processes: • ASIC design successes and failures were dependent on individuals; • individual variations in process flow led to increased risk of defects and escapes; Business Process Management • ©2005 APQC 181 NGST • • lack of process documentation, compliance, and accountability was common; and design methodology was mostly driven by schedule and cost pressures. “Without having control, people may skip steps that they don’t know are lessons learned in another program…and that could cost a lot,” said Young. “If you…fix a problem early on in the design phase, that could cost you $10,000 to fix; if you wait until [testing], it could cost as much as millions. So the cost difference is exponential.” NGST launched a series of improvement projects to rectify these process engineering variations. ASIC has such a complex design, it took more than one team to document the entire process in depth and detail. Although the process is not yet perfect, said Young, what is significant is that NGST has put a process in place to capture defects earlier. People clearly understand that each iteration from manufacturing defect back to redesign and retesting costs an average of $1.5 million and six months of lost time. By learning from its mistakes in the project with $9 million overrun, NGST was able to immediately impact the new program coming on board. For example, in the cases of just two of its 19 required ASIC designs, identification of 12 to 13 defects per design while the chip was still in the design stage avoided approximately $6 million of rework cost and 24 to 36 months of schedule impact that would have been necessary if the defects were found after the ASICs went into production. Young said what has been really important in having this process in place is making the process accessible, as well as communicating it, providing training, and incorporating lessons learned. (When defects are caught, NGST analyzes the root cause and improves the process toward a higher sigma.) BPM Synergies with ISO, CMMI, and SOX Director of Safety and Mission Assurance Systems Dan Inlow said NGST has received numerous benefits from BPM, some of which it had not originally intended. Most importantly, it has found its BPM philosophy is congruent with and enables the following. • AS9100 Certification (Quality Management System for Aerospace) 1. Customer-focused organization 2. Leadership 3. Involvement of people 4.Process approach 5.Systems approach to management 6.Continual process improvement 7.Factual approach to decision making 8. Mutually beneficial supplier relationships 182 Business Process Management • ©2005 APQC NGST • • Software CMMI® Level 5 1. Initial 2. Managed 3. Defined 4. Quantitatively managed 5. Optimized Sarbanes-Oxley compliance 1. Standard processes easier to document 2. Process mapping facilitated discussion with auditors Inlow said the AS9100 principles, which are specifically applicable to aerospace companies, are the same as ISO 9001, with four of the eight (principles four through seven, highlighted in the preceding list) directly related to process management. NGST had been working with ISO since 1995. When it moved in 2004 to AS9100, which added a few more requirements, it found the transition easy due to the groundwork provided by BPM efforts. It found the same was true for its software development efforts. Rather than progress from a Level 3 (defined) to Level 4 (quantitatively managed) in software development using its maturity framework of choice, CMMI® (Capability Maturity Model® Integration), NGST leveraged its existing Six Sigma process and defined processes, measures, and improvements in order to progress directly to Level 5 (optimized, the highest level of maturity). One of the primary differences between levels 4 and 5 is the ability to demonstrate process capability and predictability, with Level 5 focused on improvements and driving business objectives. “Because of what we had with Six Sigma in place, we had the process improvements in place, and the leader of the CMMI effort actually assessed process gaps then set up a whole suite of Six Sigma projects that focused on key improvements and provided a lot of evidence. And we were able to go directly to Level 5,” said Inlow. “So that was a big success, and it was along the same line as the BPM philosophy.” Lastly, Inlow said, BPM has provided yet another valuable, ancillary benefit. Through the standardization of processes for BPM, and specifically process mapping, NGST could easily discuss and explain compliance efforts with auditors. NGST Strategic Framework In designing and implementing its Six Sigma efforts, NGST set up a strategic framework by which it could translate sector commitments down to the employee level and prioritize and focus Six Sigma efforts. It accomplished this through strategic Business Process Management • ©2005 APQC 183 NGST decomposition, which breaks down sector objectives into the primary operational drivers that will effect change. • Level 1 —Business objectives stated as sector performance measures (lagging indicators) • Level 2—Key drivers, or processes, where performance will drive Level 1 business objectives • Level 3 —Operational drivers (illustrated in process area dashboards) that translate sector goals into something employees can understand and affect (leading indicators that link back up to business results) Figure 54 illustrates one example. Program performance, instrumental to NGST success, is one of its top five sector commitments. NGST broke that down into three key drivers: cost, schedule, and technical performance; mission performance; and management performance. One of those key drivers—cost, schedule, and technical performance—can be decomposed to a list of operational drivers, including design cost. Associated with design cost are four process metrics: requirements definition, Linking Objectives to Processes Drivers Commitments (Big Y’s) Financial Performance Processes Accurate Estimate of Work Cost, schedule, and technical performance Program Planning and Control Rqmts. Def., Stability, and Flow Design Cost Growth Program Performance On-time Delivery of Designs Mission Performance Requisition Definition Preliminary Design In-process Design Quality Cost/Quality/On-time SW Business Transformation NG Integration Production and Test Cost Detailed Design On-time Delivery of HW Management Performance In-process Mfg Quality Test, Verification, Validation Design Integration Top-down approach links process performance to business objectives ©2001-2005 Northrop Grumman Space and Mission Systems Corp Figure 54 184 Business Process Management • ©2005 APQC NGST preliminary design, detailed design, and design integration. Each process has an owner. Inlow said this strategic framework breaks down the NGST president’s commitments into “something that a process owner can actually monitor and be able to perform to.” To better communicate this framework and achieve results, NGST automated these metrics and portrayed them in a dashboard, which is located on the company’s intranet accessible by all employees. Thus, any employee can navigate up or down in the metrics hierarchy and understand his/her process metrics and how those tie in to the top-level dashboard. Another benefit of this linkage of dashboards is providing employees a better understanding of how their individual performance affects overall performance and is tied to top-level commitments. NGST has aligned its individual performance goals with corporate goals; thus, employees can see how actions associated with their dashboards can impact top-level performance and employees’ “success share” goals. Process Greening Maturity Model Along with its need for the strategic framework to translate top-level goals to each employee, NGST recognized the need to measure maturity of its processes. Thus, it came up with a methodology it calls its “greening,” in which it categorizes its maturity (similar to the CMMI model) on a red, yellow, and green scale based upon its progress in five categories: process, checklists, metrics/standards, review, and enforce. It defines mature status (green) as processes that are managed quantitatively, but it does not yet include the notion of optimizing as does the CMMI. For each of the processes on its indentured process list of more than 1,600, process owners continually assess and categorize the process; greening targets are established for each process area. Inlow said the key to success with the model was each executive setting commitments and requiring process maturity goals for each area. Additionally, NGST’s Greening Web site enables tracking and monitoring every step of the way, which reinforces the message: A comprehensive process focus and accountability promotes a process culture. Inlow said this has succeeded in driving process maturity, “This was a very strategic thing that enabled us to start maturing our processes and to enable some of those things such as dashboards to start working.” Process Resource Center As mentioned previously, NGST considers the accessibility of process information a critical enabler for change management and transitioning its culture to a process focus. Improving employee access to information was one of the first Six Sigma projects, and it was championed by the NGST president. Business Process Management • ©2005 APQC 185 NGST One output of this project was a standard template for Web sites. On that template used across the organization are four links across the top, all related to process: dashboards, knowledge management, the Process Resource Center, and the Six Sigma Web site. Thus, employees can quickly and easily link to process information. Within its first 15 Six Sigma projects, NGST quickly realized the need for enabling tools enterprise-wide. Said Six Sigma Communications Manager Amy Graham, “Even with only 15 projects, it was already starting to be painful managing all the information manually. When we saw ramp up, when we realized we were going to be training 1,000 employees a year and conducting 200 projects a year, we knew we had some challenges and we had better pay attention to the infrastructure. So pretty early on we did that.” The process management infrastructure NGST built to meet that need is headquartered in the Process Resource Center, an intranet portal for process information, documentation, and tools. This online portal originated within the engineering function as the Design Resource Center to help design engineers easily obtain any process information they needed to work effectively. Viewing the Design Resource Center as an internal best practice, NGST management elevated and expanded it to become an enterprise-wide resource: the Process Resource Center, a one-stop shop for process information that is playing an important role in NGST’s BPM progress. Using the Process Resource Center, employees can access in one location: Six Sigma project database (StartIt!), policy manuals, preventive action board Web site, process training, waiver process, process documentation and mapping, dashboards, and indentured process list and greening tool. Graham said that these documents and tools on the Process Resource Center support NGST’s process management cycle to define, measure, review, and improve and enforce. Step 1: Define • Process mapping tool—This tool illustrates NGST’s indentured process maps, starting with the top core and enabling processes and linking consecutively lower into the hierarchy of processes. Each process map links to other processes for which it has inputs or outputs. Graham said one of the key functions of the process map is to provide documentation: “It is a place to go to find the documents. There are other pathways, but this a nice graphical interface for the users.” The site houses templates and checklists, which define how processes are performed; it also houses process description documents, which are in a standard format (defined by one of the Six Sigma projects) that seeks to elicit 186 Business Process Management • ©2005 APQC NGST procedures to conduct the process, roles and responsibilities, and metrics that indicate process performance. Step 2: Measure • Enterprise dashboard—The current dashboard tool is one NGST created for the short term. Due to the initial tool’s limited capability, the organization is in the process of transitioning to a set of two off-the-shelf products: ActiveStrategy EnterpriseTM for metrics display and management and Informatica PowerCenter, which can be integrated with back-end (i.e., source) systems to convert data into a form usable by ActiveStrategy. As described earlier, placing the dashboards online in the Process Resource Center allows all employees access to dashboards for NGST’s five overarching commitments as well as operational drivers to help individuals understand how their performance ultimately impacts overall performance. From each operational driver, employees can link to related process measures, process maps, and Six Sigma projects that are improving performance of that process. Step 3: Review • Preventive action board Web site—Preventive action boards are a common review methodology used by process owners. This Web site location documents some of the guidelines and houses minutes, related documents, and action items kept for each PAB. Step 4: Improve/Enforce • Six Sigma Web site—The • Six Sigma Web site is the central repository for all process improvement information. From there, people in training can easily access key information needed to support their process improvement activities. The Web site contains all Six Sigma contacts, such as Black Belts, a link to the StartIt! database, project guidelines, links to file shares for housing project documentation and work-in-process, an array of tools and templates, and all training materials (which can be accessed before, during, and after training). In addition, the Web site is used to publish and store many of the communications that have helped shape NGST’s BPM culture, such as the articles that are posted every Friday on a variety of process-related topics. StartIt! database —This database originated in a sister organization at TRW (which was also acquired by NGC); these two sectors have since shared enhancements where applicable. Graham said NGST has spent a lot of time and effort to continue developing this tool because “it is the heartbeat of our processes for Six Sigma.” It is a complex, role-based system, allowing access to only those functions the user performs (e.g., project lead, training manager, and Black Belt). It houses every Six Sigma project originated (though not necessarily implemented or completed) and all of the data associated with each project: charter (team members, the business case, metrics, and customer and supplier Business Process Management • ©2005 APQC 187 NGST • representatives); training; financials; project documentation (e.g., status briefing each team is required to update in order to complete a project phase); and an interactive, role-based approval process conducted through the system (i.e., for each phase, specific approval is required from the program office, business manager, etc.). It has filtering and reporting capability for all this information related to more than 1,000 projects and 3,500 trainees. As mentioned previously, the StartIt! database also is used for managing training classes and registration. The system generates automated e-mail reminders associated with tasks like training invitations and project approvals. Greening tool —Placing the greening tool online allows employees to track process maturity progress; it is NGST’s process report card. Each process has a score and an owner accountable for that score. Graham said the company started out with practically all processes categorized as reds, when few processes were standardized and documented. It has since made substantial progress, which is easily visible through this tool. Employees can use the tool to navigate through the indentured process list and access operational definitions and links to process documentation. Graham said the integration of all these tools makes the Process Resource Center a valuable resource—and a reinforcement of the process culture—for employees. She continued that NGST intends to further increase this value: “We are building a comprehensive and integrated suite of tools. The more we go down this path, the more we make links from tool to tool. The ultimate goal would be that to the process users it is all seamless. They should be able to get whatever they need easily.” Business Impact—Business Process Evaluation and ERP Implementation With all the process-focused improvement activity taking place, NGST recognized that its systems needed to be able to support the change. Enterprise Resource Planning (ERP) Program Manager Matt Reynolds said it is his job to help bring the sector forward through these system changes, moving NGST from what he calls a “spaghetti map” of systems, many of which are 30-year-old legacy systems, to an ERP system that enables the process changes rather than hampers them. Reflecting its process focus, NGST decided in 2003 to create a long-term enterprise systems strategy. This decision was supported at the top. Reynolds said, at the time, NGST’s president Wes Bush made it clear that the focus was on processes, not the tool. “Our sector president said, ‘First and foremost, I don’t want this to be about tool selection. I want us to understand our processes, then I want us to go figure out what tool is going to support the way we want to run the business.’” Thus, Reynolds said, the process focus “filters through everything we do, including how we choose our system. We put it in the charter early on, right at the 188 Business Process Management • ©2005 APQC NGST top, that we are going to use Six Sigma resources and tools to help us figure out this answer.” Reynolds and his team developed a long-term strategy and short-term tactical plan to get there. • • • 55. The business process evaluation goals for NGST’s ERP team follow. Use Six Sigma resources and tools to understand existing business processes and create a vision and desired business model for NGST to run its business in the future. Develop a long-term, enterprise strategy that supports the vision and desired business model and reduces total cost of ownership and the operational risks of legacy environments. Develop a tactical plan that achieves the strategic objectives supported by a business case that demonstrates a return on investment and affordability. The process-driven evaluation NGST used to select a tool is illustrated in Figure Reynolds said it was important to look at the processes first to build a business case for this large investment. Initially, however, when the ERP team was beginning its activity in the business analysis phase, process mapping at NGST was in its infancy, so the team borrowed Black Belts from the Six Sigma office and conducted workshops with core and enabling process owners to define processes as they were and as they should be. They were able to leverage Six Sigma work already completed by areas Business Process Evaluation Activity Vision Completed: July 2003 Business Analysis • 324 processes mapped • >300 systems identified • Hackett benchmarking Process Requirements August 2003 Requirements Analysis • Comprehensive systems requirements • Linked to process mapping Evaluate Options October 2003 Fit/Gap Analysis • Sector site visits • Vendor evaluations Cost/Benefit December 2003 Business Case Analysis • 7 scenarios • Leverage NG ERP experience Action January 2004 Strategic Road Map Six Sigma Projects Tactical Plan Budget • Six Sigma Pugh Matrix Process-driven evaluation preceded tool selection ©2001-2005 Northrop Grumman Space and Mission Systems Corp Business Process Management • ©2005 APQC Figure 55 189 NGST such as business management, engineering, and production. Full- and half-day workshops were facilitated by Black Belts and targeted process areas such as accounting/financial/reporting/payroll, financial planning, contracts, pricing, project planning and controls, resources administration and management, planning and administration, business development, technology development, and materials management (procurement, inventory, and materials requirement planning). Reynolds said part of that work they did in mapping those more-than 300 processes helped inform the enterprise process map that exists today. The real takeaway, Reynolds said, is that the team’s comprehensive evaluation was all process-driven. “We did those process maps and then we defined our systems requirements document that we used to evaluate the candidate alternatives from a systems standpoint,” he said. “But we took the step of taking every requirement on the system requirements document and mapping it to a process.” Thus, every requirement existed because it had a process behind it. Another benefit was that in the original mapping work, the team was able to examine some processes that had not been examined before and make suggestions for Six Sigma projects; in fact, some Six Sigma projects that support systems development are currently sponsored by the ERP office. ERP implementation As a result of its process-based evaluation, NGST selected SAP as the tool to support processes and replace the “spaghetti” network of systems with one system that covers a broad range of functionality, from business management to operations, business development, and customer relationship management. It is ready to kick off phase one, financial implementation, which will allow it to replace 150 systems and move into SAP by early 2006. It anticipates a lot of work ahead in each of these phases, but Reynolds said NGST’s process management culture has made this effort easier in terms of selection and execution. Having clear process owners, standard processes, understood interfaces, and awareness of stakeholders’ and users’ needs is creating a smoother transition to a new system. Process gaps have surfaced during this activity and raised questions for NGST about how to proceed in areas such as cost and schedule integration, collecting and managing process costs, and simulation analysis. These issues have been turned into DMADV Six Sigma projects to help NGST design the process in the ERP tool. “There has been great synergy between Six Sigma and the ERP system,” said Reynolds. “I always like to say that an ERP solution is really a good marriage between systems and process. There has always been someone from the Six Sigma office involved with the ERP evaluation and implementation; it is a very good relationship.” 190 Business Process Management • ©2005 APQC NGST Lessons Learned Actions conveyed commitment more strongly than words. I can’t say that enough. —Ron Smith, Six Sigma vice president Smith cites the following as enabling factors that helped drive BPM implementation. • Changes were clearly driven from the top. NGST considers this a key enabler to the success it has seen thus far. • Smith said the level of commitment for process-based organizational restructuring was “absolutely necessary” to achieve standardized processes across NGST. Also, it signaled to employees an enormous level of commitment on the part of management. • NGST created a separate Six Sigma program organization, headed by a vice president empowered to drive change, with the budget to be successful. This was significant in demonstrating the organization’s level of importance and its leader’s role in participating in key business decisions along with the other vice presidents. • Hiring expert consultants and Master Black Belts with experience at leading practitioners was important. This was a big finding for an organization accustomed to being more insular and self-sufficient, said Smith. Learning from others’ mistakes and drawing upon outside expertise were important to the program, especially in getting started. • It was important to have a robust training program focused on classes of project teams, not individuals. “We thought it very important that we not train folks for the sake of training,” said Smith. “We train them with a focus toward improving our business.” • Early executive team training, leadership, and engagement of project champions were critical. This links back to top-down leadership and walking the talk by engaging those people with the most influence and sending them through the training first. • The best employees were selected to be full-time Black Belts. This was another indication of top-level commitment. • Meaningful, high-impact projects were selected. At NGST, projects must be designed to have an impact on the business, which is demonstrated by meeting the business case requirements and a $400,000 ROI threshold. • NGST built an enabling infrastructure and tools to support effective process management. Smith said: “Infrastructure is just as important because you can have the greatest process, but if …the data associated with that process …are not available, it won’t be successful.” He said that as organizations mature their processes, they should anticipate needs and mature their infrastructure as well. • NGST created a single, Web-based location for accessing process information and documentation. The Process Resource Center provides a great example Business Process Management • ©2005 APQC 191 NGST • • of knowledge sharing and communication by serving as a key enabler in transitioning the organization to a process-focused culture. Compensation and rewards were designed to support implementation of the process culture. Smith said, “Carrots do work,” and this change also showed a level of commitment from the top team to “put their money where their mouth is.” Additionally, as Croxall said, simple rewards like recognizing people individually for their efforts are powerful. “Our president, Wes Bush, was exceptionally good at bringing people together, making sure he knew every person, and congratulating them for achieving their goals. That is as big a reward as you can give.” Since its Six Sigma program inception, NGST extensively, continually communicated themes and results. This communication piece is critical, said Smith: “Keep it in front of constituents and users. Let them know it is important, that we are making progress, and that we hear them.” NGST is proud of what it calls a “good program.” Its formula has worked well. Upon closer examination, Smith and Graham suggested the following might have accelerated efforts if the organization had been more aggressive in: • Providing a more flexible, practical process improvement toolset earlier. Initial training formats were limited, focusing solely on DMAIC to get the organization’s attention. Now that NGST has completed and interjected into the organization 600 to 700 Six Sigma projects, the training toolset is being expanded. Since training was the primary vehicle used to change the culture, Smith said broadening the training toolset earlier to include other approaches such as DMADV or Lean might have resulted in touching a broader array of people across the array of NGST processes. • Rolling out enterprise tools such as dashboards more comprehensively. Initially, some processes defined dashboards before implementing Six Sigma projects, whereas others did not. And the latter groups are playing catch-up today. Smith said had they first focused on implementing dashboards across the organization, NGST’s BPM efforts might be further along. “Having a dashboard forces you to think about what is important in your organization: what are truly important and perceptive measures that allow you to understand how well your organization is operating.” • Focusing on process control earlier. In early projects, some process owners were unsure what to do with new responsibilities for implementing process changes delivered by project teams; thus, some projects languished a while before implementation—lost time that Smith said could have been avoided if NGST had provided more prompt process owner training to ensure a smoother transition from the improvement phase to the control phase of Six Sigma projects. 192 Business Process Management • ©2005 APQC NGST Croxall added that an initial cultural barrier, propagated by a common misconception about Six Sigma, was the belief that Six Sigma can be applied only to products—not processes. “Every process has a product, and that is the way you go at it,” said Croxall. “And our whole strategy is to force all these process defects, and therefore product defects, way back into the earlier part of the product life cycle.” Smith said it is great to look at what NGST has accomplished, but it is also important to look forward in terms of where the organization believes it needs to go to further improve its process management and process mission. Looking forward, NGST plans to: • Evolve/Improve ongoing initiatives: –Implement an expanded toolset. Expanding to tools such as DMADV will help ensure NGST has the right tool for the right problem. –Evolve infrastructure tools to enable further integration into the culture. Improving tools such as dashboards will allow NGST employees to spend less time getting the data and more time analyzing and taking action. –Increase performance-driven management practices to improve performance. The goal is to push dashboard use further down into the organization so that process owners at lower levels can regularly review and manage their data and make process improvements based on the information, which ultimately will link top-level goals directly to lowest-level process improvements. • Institute process improvement methodologies as a core strategy to operate the business: – Operationalize strategic initiatives. –Increase the percentage of strategic projects derived from NGST objectives. NGST is increasing the number of Six Sigma projects aimed at improving top-level objectives; for instance, it has kicked off six projects in the last five months to improve operating margins, an objective set by the president. • Expand focus to include market-driven trends (competitive, technological, social, and economic). NGST wants to be more anticipatory of the market and provide solutions to challenges “prior to our customers and suppliers even knowing that they are going to be issues,” said Smith. “We are going to…get ahead of the competitors in terms of having solutions that avoid problems and also create new opportunities.” Part of the strategy will be greater involvement of customers and suppliers. Business Process Management • ©2005 APQC 193 Business Process Management OMI Operations Management International Inc. Operations Management International Inc. (OMI) is a leader in the management of water and wastewater facilities, offering a wide range of services for customers in government and industry. Its diversified services and solutions portfolio includes municipal water and wastewater treatment, industrial pretreatment, industrial waste treatment, public works, and utilities. OMI’s range of services includes project conception and development, design, financing, construction, and operations. OMI offers the systems, the experience, and the people to successfully manage all public works functions. OMI has experienced steady growth in utility operations, maintenance, and management services; as of 2005 it has a staff of more than 1,400 highly skilled, trained professionals and operates more than 180 facilities around the world including projects in the Americas, the Middle East, and Asia. OMI attributes its growth to the high-quality services it provides at the lowest possible cost and to its dedication to customer satisfaction. OMI’s Obsessed with Quality philosophy formalizes its single-minded dedication to service. Its demonstrated commitment to providing the highest-quality services in the industry has resulted in an increasing number of awards of excellence each year, including the 2000 Malcolm Baldrige National Quality Award. Headquartered in Englewood, Colo., OMI was founded in 1980 by CH2M HILL Companie, Ltd., an employee-owned group of firms with a focus on fullservice project delivery. The OMI/CH2M HILL team now has more than 14,000 employees on six continents. Business Process Management • ©2005 APQC 195 OMI BPM Strategy, Structure, and Funding Evolution of Business Process Management At OMI, business process management fits into a long journey of process improvement. OMI was founded in 1980, and in 1986 OMI’s president, Don Evans, introduced a vision that focused on organizational and process improvements. Four years later, Evans realized OMI’s continuing growth required a new management strategy that would enable OMI to stand out among its growing number of competitors. Evans hired an independent consultant to explore different approaches to process improvement and growth management. OMI’s consultant recommended using the Malcolm Baldrige Criteria for 31 Performance Excellence as a starting point for improving the organization. OMI leadership quickly formed focus teams around the categories of the award criteria. One of the teams focused explicitly on process improvement. For OMI, this was the beginning of a comprehensive and integrated approach to process management. At the same time, OMI also began a training process sharing the same name as its vision: Obsessed with Quality. This was a cultural-based training process that helped people across OMI’s project facilities learn how to work in teams, measure progress, track improvement, and manage customer service. Obsessed with Quality was quickly adopted as a foundational philosophy for the organization. Applying the Baldrige framework, combined with Obsessed with Quality, led to a corporate-wide focus on continuous improvement. In 1992 and 1994 OMI completed Baldrige self-assessments in order to obtain valuable feedback. Also during this time, positions for a full-time quality leader and a full-time quality trainer were created to help further the organization’s efforts. OMI adopted an approach called Quality as a Business Strategy (QBS) in 1997. QBS represents a leadership system that implements W. Edwards Deming’s philosophy on TQM (Total Quality Management). It is led by the organization’s top management and focuses on viewing and measuring the organization as a system, obtaining information from customers and other stakeholders, planning for improvement, and managing improvement initiatives. Over the course of two years, OMI’s executive leaders met quarterly to research the QBS system and apply it as OMI’s business planning model. At OMI, QBS continues to drive all major process improvement management efforts. OMI applied for the Baldrige award in 1997/1998 and addressed feedback from the applications to implement additional improvements to QBS. One key finding 31 196 www.quality.nist.gov. Business Process Management • ©2005 APQC OMI from the Baldrige process was that OMI did not have a linked and aligned system of leadership and management in the organization. OMI leaders also believed that there was a strong need to streamline its efforts, prioritize projects, and focus on improvements that would have the greatest impact to the organization. The enterprise-wide implementation of QBS was deployed in 1999. OMI created a purpose statement, a family of measures, and a linkage of processes model to support its approach. The linkage of processes model was created by OMI’s executive leaders and validated by line managers to ensure that the processes match how OMI operated its business functions. Prior to receiving the Malcolm Baldrige National Quality Award in 2000, OMI engaged in internal and external benchmarking, ISO 9002 certification, and full-scale deployment of QBS. Five years later, OMI’s 180 facilities implement standardized processes that are identified in the linkage of processes model, and all major business improvement initiatives are linked to the organization’s strategic goals. BPM Strategy and Approach OMI has five strategic imperatives that guide and direct all aspects of the organization, including QBS. 1. Performance excellence—Enhance performance results by meeting contractual and regulatory obligations through perfect compliance or perfect reporting of noncompliance, achieving financial plan, leveraging quality and safety processes, addressing opportunities and challenges immediately, and leading the industry in setting standards for outstanding service. 2. Growth and diversification—Achieve profitable growth by expanding business to new and current customers and developing high-potential markets and new service offerings that meet customers’ needs. 3. Organizational capacity and capability —Increase the capacity and capability of the organization by emphasizing its culture of ownership and quality, investing in training and developing associates, and retaining and recruiting talent to broaden the organization’s capabilities. 4. Customer satisfaction —Expand the focus on customers by broadening and deepening relationships within customers’ organizations, expanding the solutions provided to them, and delivering award-winning service. 5. Collaboration—Provide value to customers and shareholders by collaborating across CH2M HILL’s business units, offering flexible solutions that fulfill diverse customer needs, and actively supporting CH2M HILL’s vision. The performance excellence imperative directly relates to process management. All process improvements are linked to these strategic imperatives. Business Process Management • ©2005 APQC 197 OMI Quality as a Business Strategy and the Linkage of Processes Model The quality as a business strategy model is OMI’s driving philosophy that incorporates BPM. Figure 56 depicts QBS. Quality as a Business Strategy 1 3 Beliefs System for Obtaining Information Vision (Customer Focus) Purpose Mission 2a Organization Viewed as a System 2b Family of Measures 4 Planning Strategic Objectives Improvement Efforts Resources 5 Managing Improvement Efforts Three Basic Questions Act Plan Study Do Figure 56 As illustrated, QBS entails five key activities: establish a purpose (mission, beliefs, and vision), view organization as a system and establish a family of measures, create a system for obtaining information (customer focus), plan (strategic imperatives, improvement efforts, and resources), and manage improvement efforts (using the plan, do, study, act model). Through these five activities, QBS enables OMI to view and measure the organization as a system and links OMI’s family of measures to planning and managing improvement efforts. At the heart of QBS is the linkage of processes model, OMI’s enterprise business process management model. The linkage of processes model identifies more than 150 processes that are central to the organization; the linkage of processes model combines the strategic Level 1 processes (i.e., the organization’s top level) down 198 Business Process Management • ©2005 APQC OMI to the more detailed Level 3 (i.e., the directorate level). Figure 57 illustrates the conceptual framework of the linkage of processes model. Linkage of Processes Model Conceptual Framework CH2M HILL Strategy DRIVER Feedback and Planning Supplies CORE/VALUE CREATION Customers Mainstay Deliver Projects Acquire Projects People Technology Systems Renew Existing Projects SUPPORT Support Processes Sfaety, Training and Development, Human Resources, Procurement, F&A, Legal/Contracts, QA/QC, Communication, BD&P Support, Administration, Information Technology Shared Services Figure 57 The top processes in the linkage of processes model are referred to as the enabler and driver processes for the organization. Measurement, strategic planning, feedback, research, financial planning, and communication processes are outlined and identified as the key drivers. OMI’s core, value-creating processes are located in the center of the model and focus on acquiring, delivering, and renewing contracts. These are the processes that enable OMI to deliver services to customers. The acquisition of new projects requires processes to market services, negotiate contracts, and engage in general due diligence that must be completed prior to submitting a contract. To deliver projects, each of OMI’s 180 facilities is required to implement each of the standardized processes (and the corresponding procedures for people, technology, and project management) located in the center of the mainstay processes. OMI also has 10 Business Process Management • ©2005 APQC 199 OMI management systems that are documented and standard requirements needed to create an effective project infrastructure. The bottom of the linkage of processes model incorporates traditional support processes associated with common business functions, such as procurement, communications, safety, technical support, finance and accounting, training and development, human resources, information technology, and corporate administration. The linkage of processes model is updated annually during OMI’s quality as a business planning session that is driven by OMI’s executive leadership team. The leadership team consists of five executives: OMI’s CEO, chief financial officer, vice president of human resources, senior vice president of project delivery, and senior vice president of project development. Although the linkage of processes model is formally updated annually, it may be revised two to three times each year as processes are changed or redesigned. Business Process Management Drivers OMI Quality Director Adam Cohen cites five key drivers that led the organization to pursue business process management. First, as noted earlier, the decision to deploy the Baldrige performance excellence criteria provided the impetus for business process management (BPM). Process improvement was a focus area of one of the Baldrige teams, and during this time the organization began to embrace the concept of a comprehensive, integrated approach to process management improvement. Moreover, one of the first activities with the Baldrige process required OMI to list its key activities for improvement. Eventually, OMI decided to align process improvements with its strategy, which clearly helped drive BPM throughout the organization. Second, OMI’s BPM strategy was influenced by insights obtained from the Baldrige self-assessments and applications. OMI realized a need for a defined approach to systematic improvement within the organization. Another key finding was that improvement initiatives need to be aligned with strategy and attached to metrics and action plans. Third, the diversity within OMI’s operations also played a large role in driving BPM. Geographic diversity of field projects and service-level diversity were significant challenges within OMI. Field projects often varied in size, type of project, scope, and clients. Whereas one project may employ three individuals and operate out of a mobile trailer, another project may have more than 80 employees and operate multiple facilities. Projects also vary greatly in terms of scope. At several locations, OMI employees are responsible for maintaining the entire public works 200 Business Process Management • ©2005 APQC OMI departments. With about 180 facilities at 130 locations, OMI clearly needed a BPM strategy that would address its diversity of operations. The underlying goal was to design a system that accounted for this diversity while still enabling various OMI locations to have the same look and feel. Resource scarcity, both human and financial, was the fourth driving force for BPM. Almost all of OMI’s approximately 1,400 employees serve on 180 projects; only 40 to 50 individuals work at the corporate level and provide corporate back office support for other employees. Financially, a relatively low percentage of OMI’s revenue is spent on overhead and administrative costs. A fifth, yet equally important, driver of BPM is linked to OMI’s demonstrated history of continuous improvement. When OMI began its process improvement journey in the 1980s, President Don Evans realized OMI, then with $50 million in revenues, needed to differentiate itself from its $60-billion competitors. A strategy that focused on process improvement, quality, and business process management enabled OMI to stand out in its industry. Internal and External Requirements of BPM BPM is driven by a set of customer and internal requirements. On the customer side, OMI’s BPM requirements are driven by direct cost savings, environmental compliance, employee development, and consistency of service and safety. Customers that contract with OMI, for example, expect 10 percent to 20 percent cost savings. Environmental compliance is also important because many customers shift regulatory issues and responsibilities to OMI. The company assumes this challenge but knows BPM is required to help the organization build processes that help manage those environmental risks. Likewise, employee development issues in terms of unions, training, and retention are aided by BPM efforts. A number of internal requirements drive BPM: strategic alignment, resource scarcity, standardization, indirect cost savings, and systematic improvement. When OMI first began its process improvement initiatives, the organization was attempting to track approximately 100 process improvements throughout the organization. OMI leaders realized implementing 100 process improvements with a corporate focus was unrealistic. Instead, OMI now focuses on three to 10 initiatives that align directly with the organization’s strategy to implement on an annual basis. Standardization is another driver of BPM. OMI’s facilities share similar traits in terms of functions and operations. Although these locations may vary greatly in terms of size, equipment and treatment processes, number of employees, and scope, each OMI facility must reflect the overall OMI system and fulfill standard Business Process Management • ©2005 APQC 201 OMI operational requirements. Human resources, accounting, reporting, and process results are standardized at each location through a project family of measures. OMI’s BPM approach must remain flexible enough to account for the diversity of locations, yet at the same time, provide guidance that enables each facility to function as an OMI system. BPM must also contribute to indirect cost savings at OMI. While the percentage of overhead to revenue decreases or remains relatively stable year-toyear, organizational growth increases approximately 15 percent. BPM Approach and Deployment There are three basic elements that frame OMI’s BPM approach. 1. BPM is used for the design and redesign of processes, products, and services to fulfill customer needs. 2. BPM enables OMI to perform as a system and optimize the system of processes to match needs that result from customer, regulatory, employee, or supplier feedback. 3. BPM incorporates methods to ensure that changes result in real improvement and meet the strategic imperatives of the organization. BPM is deployed through the linkage of processes modeling approach at the corporate level in order to map the key drivers and enablers, create core value, and support processes for the organization. OMI also uses the linkage of processes model to plan annual system-wide improvements. The linkage of processes model is aligned with a balanced scorecard and two- to five-year strategic imperatives. Finally, OMI empowers focus and task teams to plan and implement company-wide BPM deployment. Involving Stakeholders in BPM Employees, partners, customers, and suppliers participate in OMI’s process improvements. Employees often participate as process owners, improvement initiative team leaders, or focus or task team members. OMI has created several opportunities that enable employees to provide input and feedback on process improvements. Customer feedback tools help incorporate key customer inputs. Likewise, suppliers engage in the process and help define and implement requirements for deployment and improvement. BPM Funding BPM did not have an initial business case at OMI; executive leadership created the drive for process improvement in the 1990s. The initial funding of quality improvement initiatives was one percent of OMI’s total revenue. In 2005 BPM is funded with approximately one-half percent of total revenue. Improvement initiatives are funded individually each year. Other process improvements are funded from operational budgets. 202 Business Process Management • ©2005 APQC OMI BPM Design “When you look across the organization, you see an organizational approach to process management, not a mandated approach for everything in the organization. I think that is really an important differentiation for what OMI does in its processes.” —Adam P. Cohen, quality director Viewing the organization as a system Viewing the organization as a system requires OMI to understand the major processes and products in the organization. It also requires clear documentation on how these processes link together to form a system. The ability to establish the key measures of performance for the system is equally important. OMI uses the linkage of processes model to improve how the organization functions as a system. Determining Requirements Figure 58 summarizes a number of inputs that generate OMI’s requirements for process improvement. Determining Requirements Family of measures External customer surveys, focus groups, summits, and scorecards CH2M HILL strategy and directives Purpose and vision statements Baldrige assessment feedback Analysis, grouping, Market analysis Requirements and summarizing Audit results Internal surveys Review improvement initiatives New technology and regulations Information from suppliers Figure 58 Business Process Management • ©2005 APQC 203 OMI For example, as illustrated, surveys, internal and external feedback, market analysis, and OMI’s purpose and vision are linked to its key requirements. OMI will examine each of these inputs to determine what will become its key focus requirements. Selecting Process Improvements OMI uses the Baldrige framework as a catalyst when selecting its process improvements in order to maintain an organizational focus—an alignment with strategy and purpose—on performance improvement. OMI focuses on processes that either enable the strategy or are part of the standardized processes that every field project must implement. Cohen said, “I would recommend using the Baldrige criteria as a systematic, comprehensive wraparound method to test how your organization is doing.” For OMI, Baldrige helps focus the organization on certain elements within the organizational system, which results in an intent focus on three to 10 improvement initiatives annually. OMI identifies which processes to improve during its annual QBS strategyplanning meeting. At this time, a corporate sponsor, leader, and team are assigned to the process improvement initiative. As a first step, the improvement initiative sponsor and team leader complete a charter that lists members, a sponsor, and leaders and defines the purpose of the initiative in terms of expected accomplishments, processes impacted, and measures of success. Budget and funding are allocated at this time. Generally, resources are allocated through a functional budget. For example, if OMI wanted to improve health and safety processes, then the health and safety manager’s budget may receive additional funds under a separate task. If the initiative involves a new process design or a new service, then a separate improvement budget is created. The executive sponsor in charge of each improvement initiative is responsible for all funding decisions. When chartering its process improvement initiatives, OMI executives ask three key questions. 1. What are we trying to accomplish? 2. How will we know that a change is an improvement? 3. What change can we make that will result in an improvement? Focusing on these questions enables OMI leaders to later identify appropriate measures to ensure that improvements occur. Monthly management and leadership reviews are conducted for each of the strategic improvement initiatives. Each sponsor must update the status of the initiative during the meeting. This meeting is important because it connects the executive leader directly with strategy deployment. The results of this meeting are shared with OMI’s senior management team on a monthly basis. 204 Business Process Management • ©2005 APQC OMI Determining the top 10 improvement initiatives is an exercise conducted in the annual QBS planning meeting by multiplying the following two factors: 1. Strategic weighting—Executives in the annual planning meeting are divided into teams along the lines of the five strategic imperatives. Each team is asked to weight (i.e., “10” for most impact, “5” for moderate impact, and “1” for little to no impact) every process according to its potential contribution to each of the five imperatives. 2. Linkage of process ratings (i.e., maturity model ranking)—Process owners are required to rank the status of each process using a six-point scale (listed below) denoting process maturity; this ranking is validated by executives for objectivity. I.The process is not defined. The process needs to be designed and documented. II.There is a general understanding of the process by those who work in it. No formal documentation or process standards exist. And no formal work to improve the process has been undertaken recently. III.The process has been defined, and the intent is understood. Documentation of the process exists to include flow charts, standards, checklists, procedures, training manuals, etc. IV.The process is well-defined, and measures are in place. Customer feedback is solicited and used to fine-tune the process. Graphs and charts are used to evaluate the process and learn from the measures. V.The process has been formally improved within the last year. Ongoing measures are used to track progress, and process documentation is kept upto-date. Customer feedback is solicited and used to fine-tune the process routinely. VI.Key measures of the process and process outcomes are predictable. Customer feedback is solicited and used to fine-tune the process routinely. Control charts are used to monitor performance, and the process consistently meets the needs and expectations of customers. Process documentation is kept up-to-date. After substantial discussion, processes that have the highest strategic weightings and the lowest process scores are selected as the organization’s strategic imperatives for the year. (Results are depicted in a graphical display, with the lowest-performing but highest-impact processes in the upper right quadrant.) As noted, OMI selects 10 process improvements each year. From this list, three to four processes are given the highest priority. There is some continuity of improvement initiatives, but priorities shift or are refined due to organizational changes or improvements. Most process improvements are implemented in a 12- to 24-month timeframe as part of a two- to five-year strategic plan. During this time, emphasis may change due to shifting strategic Business Process Management • ©2005 APQC 205 OMI imperatives, which may be modified annually due to the needs of the organization and customers and the desire to enter different markets. Six-Step Approach for Designing and Improving Processes OMI uses a six-step approach for designing and improving its processes. The process is similar to the Six Sigma DMAIC (define, measure, analyze, improve and control) approach; however, it is not as rigorous. This is because the process needs to be simple enough to be adapted to OMI’s varying locations. All of OMI’s employees are introduced to the approach during quality training. 1. 2. 3. 4. 5. 6. OMI’s six-step approach for designing and improving processes follows. Charter Plan Do (pilot test, defect/rework, reduction activities) Study (analyze data) Act Review Progress (the results of which link back to “plan” in a continuous loop) OMI provides guidance to help implement its six-step approach in the form of chartering templates, training, and mentoring for each of these process steps. Aligning Measures OMI’s BPM initiatives are clearly aligned to the organization’s family of measures. OMI uses a balanced scorecard approach to track measures related to finance, operations, employees, and customers/market. Whereas hundreds of measures are collected at the micro level (collected across OMI’s project facilities), OMI has identified approximately 30 macro-level corporate measures that fall into the four balanced scorecard categories. Each BPM improvement effort identifies and monitors 10 measures (i.e., targets for improvement) that roll up and link to this corporate scorecard. Process Ownership Each of OMI’s 150 processes has an assigned process owner. About 35 employees own all of OMI’s processes. Process owners are generally executives, managers, line managers, or supervisors from various OMI functions, including accounting, finance, sales, human resources, and operations. Process owners are assigned based on natural operational responsibilities. Approximately three-quarters of processes fall into an individual’s natural job duties. Process owners are responsible for documentation, measurement, feedback, and improvements associated with their respective processes. Process owners are also required to validate the linkage of processes model on an annual basis. 206 Business Process Management • ©2005 APQC OMI OMI uses a blended approach to enable effective process management. For example, all process owners and employees receive general quality improvement training. In addition, a manager-employee coaching relationship helps employees understand OMI’s standardized processes and the impact the individual can have on process improvement. A process owner’s manual and process improvement focus teams provide support as well. Process owners experience lack of competencies, varying process mapping and measurement skills, and competing priorities. Although BPM is part of many owners’ jobs, it is not a full-time responsibility. Because owners are usually responsible for one or more processes and can be overloaded, improvement initiative prioritization can be difficult. According to Cohen, process owners are also limited by OMI’s technology. They must dial in to gain remote access to data housed in the main office’s LAN-based IT infrastructure. Additionally, with only 350 PCs distributed among 1,400 employees, there is limited access to OMI’s intranet. OMI created training and technology tools to help overcome these barriers. Specifically, OMI provides team leaders assistance with process mapping and additional training to increase competencies. In addition, by documenting the highest-priority processes in the organization, OMI is able to assuage competing priorities. OMI has increased e-mail usage and LAN file storage and provides simple 32 software tools (such as Word, Excel, PowerPoint, and RFFlow ) that help process owners. BPM Roles and Resources Operational management is the responsibility of a full-time quality director with a 25 percent commitment to BPM. Process improvement focus teams, which currently consist of seven individuals, help support OMI’s strategy in a volunteer capacity and spend one to two hours each month on BPM initiatives. Business processes are managed through a series of tools and methods. These include: • monthly management review for improvement initiatives (for design or improvement of key processes), • improvement initiative charters, • process owner’s manual and tools, and • process ratings. Formal Reference Model for BPM Evaluation OMI uses a formal reference model for BPM evaluation. Using the Baldrige framework, OMI recently completed a self-assessment that enabled all OMI 32 A charting software by RFF electronics: http://www.rff.com/. Business Process Management • ©2005 APQC 207 OMI employees and leaders to provide input on process improvements. The online survey was completed by approximately 30 percent of the organization. The self-assessment criteria focused on key questions such as: • Do work processes create value for customers and key stakeholders? • Are performance measures and indicators used to improve daily work processes? • Does process management minimize overall costs associated with inspection, testing, and audits? • Are processes in place to prevent defects and rework? • Do processes use input from customers, suppliers, and partners to effectively address business and operational requirements? • Do processes incorporate new technology and operation knowledge into business and operational processes? OMI also completed formal Baldrige applications in 1997, 1998, and 2000 and self-assessments in 1993, 1995, 2002, and 2004. External and Internal Inputs to BPM There are a number of external and internal inputs to BPM. External customers provide input to process design and redesign through biannual surveys, project review interviews, and customer focus groups. Customer surveys are supplemented with six-month customer scorecards to gather additional customer feedback. Focus groups and customer interviews enable OMI to gather key knowledge on changes in contracts, markets, or competitors. Overall, customer feedback helps OMI understand core value and delivery processes that are reviewed during planning sessions. Suppliers also provide input on processes through strategic alliance requirements, supplier scorecards, and feedback. OMI uses these tools to change processes to meet supplier needs. Internal customer inputs to process design and redesign come from three main sources: the QBS annual planning session, internal customer feedback, and Baldrige self-assessments. Addressing Differences and Exceptions to Process Implementation One challenge of BPM is to account for the varying needs of facilities. Differences and exceptions among locations are managed using the project linkage of processes model. Specifically, OMI designed its processes to reflect the lowest common denominator and incorporates enterprise processes that are customized for field use. OMI also provides toolkits, guidance memos, and onsite training for new or redesigned processes. 208 Business Process Management • ©2005 APQC OMI • • • OMI incorporates systems into the linkage of processes model through: the identification of 10 key management system “families,” guidance and emphasis for implementation, and verification of implementation through self-assessment or on-site audits. OMI addresses uniqueness of sites through customization. Even mandated processes allow for a certain level of customization to ensure flexibility. BPM Enabling Tools and Technology • • • OMI uses several tools to enable BPM: Linkage of process model —The linkage of processes model provides consistency and direction to BPM, helps plan for improvement and assists in problem solving, and aids in identifying process gaps or breakdowns. By providing training and general linkage of processes model orientation to all employees, OMI is able to consistently use this model as an effective BPM tool, said Cohen. Process owners’ manual—The manual is not needed as much today, but it has been an important enabling tool that provided guidelines and standards for all process owners to set expectations and ensure consistency. Process improvement team and task teams —These teams are increasingly important as they help direct training and provide support for process owners at the project level. BPM is supported with a minimal technology infrastructure. All processes in the linkage of processes model are created using RFFlow. All BPM documentation resides on a central network located at OMI headquarters in Denver. Overall, managing the linkage of processes model specifically, and BPM in general, is a manual process. Using technology to support BPM remains a challenge in OMI’s environment. Due to the nature of client facilities, most OMI users connect with remote dialin access. Additionally, OMI has a number of nonintegrated tools across the organization and a lack of intranet access in many locations—all opportunities for improvement in enabling BPM through technology. Implementing and Sustaining BPM “When you enlist someone to be on a quality improvement team and you tell them that they are impacting the system for the entire organization, that is a big deal. Being involved in one of the ten initiatives each year means you directly impact change at OMI, and our employees recognize this.” —Adam P. Cohen, quality director Business Process Management • ©2005 APQC 209 OMI Staging BPM Implementation OMI implemented BPM over the course of approximately 10 years. Several key milestones were effective in helping the organization implement BPM. For example, the formation of focus teams in 1992 was a key to fostering a culture of continuous improvement. The introduction of QBS was another key turning point for the organization. However, it was mainly the expansion of QBS in 1999 to 2002 that set the stage for BPM implementation. During this time, OMI included high potentials along with the next level of leadership to provide input to QBS. The creation of the linkage of processes model and tools such as the process owner manual were also important in moving BPM forward. A new CEO and CFO named in 2004 and a shared services model are influencing another stage of BPM implementation. OMI continues to use QBS to invigorate process improvements throughout the organization. Transitioning to Systems Thinking Learning to view the organization as a system was critical to OMI’s strategy. To do this, OMI had to transition away from the traditional paradigm that focused on functional budgets, the notion that process problems are created by people, and the assumption that process owners are sole authorities for processes. System thinking required OMI to recognize the system (not people) creates problems and customers (as opposed to process owners) know best. Budgets also needed to be distributed based on initiatives. This transition to a new systems paradigm was initiated through leadership socialization and reinforced by Obsessed with Quality training. There are still a number of challenges as OMI continues to focus on systems thinking, including inconsistency of application and deployment, varying competencies of process owners and employees, and technology barriers. Communication Strategies and Activities There are a number of BPM communication strategies in place at OMI. Toplevel leadership (50 to 60 individuals) receives a full copy of the annual plan. OMI realizes this may pose a competitive risk if a member of the leadership team leaves the organization; however, this is a risk the organization is willing to assume in order to gain buy-in and reinforcement at the top levels of the organization. The rest of the organization receives a simplified copy of the QBS annual plan. The process owners’ manual is also critical to communicate and drive BPM. All process owners receive this 15-page manual, which is designed to assist them with the management and improvement of their processes. Distributed in both paper and CD form, the manual is simple enough for owners to quickly reference and 210 Business Process Management • ©2005 APQC OMI provides guidance on the process, internal and external customers, process measures, measuring, and customer feedback collection. Although newsletters and e-mails are beneficial in sharing information on BPM activities, not all employees have access to e-mail (at remote sites); thus, OMI has found creative platforms in communicating strategy. For example, the organization recently used employee paychecks as a communication tool by attaching a sticker to the outside of the envelope. This is a low-cost way to communicate key BPM activities to all employees. QBS implementation, risk assessment and management, project review, and process improvement teams are additional activities and teams that further promote communication throughout the organization. These activities provide valuable forums to share information and knowledge on BPM. Change Management OMI used several change management techniques to support BPM. Focusing on systems processes, instilling a continuous improvement mentality, and defining the value of BPM to employees have been critical to OMI’s change management strategy. Management influences behavioral changes through viewing the organization as a system rather than a collection of processes that are affected by individuals. In the event of a process breakdown, for example, OMI is careful to focus on retraining and providing additional resources for improvement. OMI has also instilled a mentality of continuous improvement through training courses, according to Cohen. Although there is no direct accountability from employees to BPM, process improvement is built into the job descriptions of all employees at some level. Annual performance reviews require employees to state how they contributed to process improvement. Process owners often keep track of process improvements on an informal basis and report improvements during their annual review. Attaching measures to BPM is another critical element to fostering behavioral changes in the organization. OMI adheres to the mantra that what gets measured gets managed and links BPM efforts to a defined set of measures. Moreover, OMI tracks and reports these measures during formal meetings and shares results with the executive leadership team. Finally, OMI spends a considerable amount of time helping employees understand the value of BPM. This is accomplished by promoting BPM to employees. Process owners serve as BPM champions and are responsible for Business Process Management • ©2005 APQC 211 OMI explaining why improving, documenting, and measuring the process are beneficial to both employees and the organization. Process leaders must also be able to communicate how BPM affects the employee both directly and indirectly. In some cases, the process owner is able to actually demonstrate concrete improvements in terms of financial impacts. Cohen said this is a valuable resource that helps employees recognize BPM has value in everyday business functions. There are still some cultural barriers to BPM that OMI continues to address. Finding the right measures, for example, is a continuous process. Also, because BPM is often not explicitly part of an individual’s job description, it can be difficult to hold employees accountable for process improvements. Establish a System to Obtain Information Cohen said the system for obtaining information that feeds the front part of the process is critical (and is the OMI operations vice president’s favorite part of the process). “He recognized that if you want the right outcomes, you have to spend time reviewing these inputs,” Cohen recalls. Cohen recommends that organizations focusing on BPM establish a system to obtain this highly relevant information. Ideally, this system should: • identify present and future customers; • gather information that matches the needs of the organization; • obtain information about relevant suppliers, employees, marketplace, technology, and regulations needs; • communicate information throughout the organization; and • analyze information to guide planning and improvement efforts. Achieving a Process Orientation OMI achieves its process orientation through quality process training, QBS annual planning and implementation, risk assessment questionnaires and business unit ratings, risk- and process-based project reviews, linkage of metrics to team bonus, and teamwork awards. OMI provides training through courses and mentoring. OMI University provides supervisory and management-level employees with training focused on OMI’s key processes. Process improvement initiatives are evaluated each year. New process owners are mentored by an existing process owner or functional leader. (In most cases, the functional leader is a process owner.) Cohen considers quality training and mentoring critical to the successful deployment of OMI’s BPM strategy. Risk assessment questionnaires and business unit ratings combined with risk- and process-based reviews provide a process focus to the work force. OMI’s 212 Business Process Management • ©2005 APQC OMI risk assessment questionnaire is completed using the Committee of Sponsoring 33 Organizations (COSO) framework to address process risks that affect line operations. In conjunction with this, each project manager is required to rate the significance of these risks to the organization; the organization then builds process improvements that mitigate these risks. Projects rated as the highest risks receive on-site peer reviews, and those project managers for low-risk projects must complete self-assessments. The linkage of mandatory process metrics to a team cash bonus translates process importance into tangible rewards. The process metrics enable OMI to ensure that projects are meeting mandatory objectives. Bonuses are assigned based on the ability to meet mandatory standards associated with safety, finance, environmental compliance, and employee development. The cash bonus is attached to a team’s ability to collectively achieve project goals. Another way process orientation is nurtured is through teamwork awards. Presidential teamwork awards recognize achievements on process improvements and results at a corporate level. At the project level, teams are recognized for improved customer satisfaction through community involvement and measured outcomes. Evaluation and Results Measures, Process Improvements, and Results As discussed previously, OMI uses QBS to prioritize improvements and align measures with process improvement initiatives. Each improvement initiative has targets linked to a defined family of measures. OMI plans improvements in an annual QBS planning workshop and then monitors progress throughout the year. Figure 59 (page 214) illustrates the QBS process for improvement planning. Measures are defined for improvement initiatives in a charter, and each measure is tied to OMI’s corporate family of measures and/or relevant strategic imperatives. Using a balanced scorecard approach, OMI’s family of measures is separated into financial, customer and markets, operations, and employees. There are approximately 30 corporate metrics defined in OMI’s family of measures. Although not every OMI project site impacts all metrics in the corporate family of metrics, there are a minimum of 10 metrics that apply to every project. Mandatory metrics are formulated around OMI’s management systems processes, which include safety, quality, finance, human resources, operations, maintenance, and compliance and reporting. 33 ccording to http://www.coso.org/, COSO is a voluntary organization dedicated to improving A the quality of financial reporting. Business Process Management • ©2005 APQC 213 OMI QBS Process for Improvement Planning Study Inputs Develop/Refine Strategic Imperatives Compare Processes to Imperatives Identify Processes to Improve Develop and Fund Investment Initiatives Develop Charters for Initiatives Monitor Progress Family of Measures and Management Review Figure 59 Each improvement initiative must provide baseline metrics and target performance metrics in the initiative charter. The improvement initiative sponsor and team are challenged to determine exactly what kind of results and outcomes will result from the process improvement. The charter also outlines where the process is linked in the linkage of processes model and defines resource needs, the budget, a time frame, and potential constraints. Project metrics vary by project based on financial situations, number of associates, and size and scope of project. Project metrics are determined in partnership with project leaders and management leaders on an annual basis. The project team is responsible for creating a plan to achieve process results. Metrics are tracked and collected on a monthly, quarterly, and an annual basis. All measures are managed by a corporate coordinator who compiles metrics and creates controls charts. Process owners, facilities, and regions also supply metrics. The executive leadership team reviews family of measures data on a monthly basis. 214 Business Process Management • ©2005 APQC OMI Improvement initiative implementation is tracked using a 10-point scale. New process improvements generally receive a lower score, which indicates the process is not yet implemented. As the initiative progresses, it receives a higher score indicating it is close to implementation. Initiative sponsors are required to track and rank implementation during monthly meetings. Adding Value OMI has realized both direct and indirect value from BPM. For example, OMI directly attributes improvements in its family of measures to BPM. Also, BPM has led to increased effectiveness and efficiency of processes, produced a stronger focus on resource utilization, and resulted in improved internal audit findings. Importantly, it has led to a perception of value to not only the top executives but also individuals in the organization. Cohen said the CEO considers the linkage of processes model and process management to be the lifeblood of OMI’s strategy. Although individuals may find it challenging at times, they recognize it as critical, Cohen added. Indirectly, the value exists as well, through improved customer satisfaction ratings and indirect cost savings and control of overhead expenditures. Several process areas have achieved significant results from OMI’s BPM approach. To demonstrate improvement, OMI tracks performance prior to a process improvement against actual results after process changes are implemented. The prediction of environmental discharge permit excursions per project provides a noteworthy example of demonstrated process improvement. In this case, OMI tracked the number of permit excursions per project on a quarterly basis. Prior to process improvements, the average number of controllable permit excursions per plan was higher than the organization allowed; implementing improvements in reporting and compliance processes resulted in significant reductions. OMI uses external benchmarking data to track its performance and demonstrate how process implementations have a positive effect on the organization’s bottom line. In one example, it benchmarked health and safety processes against both bestin-class and competitor safety results before and after process improvements to prove it was producing tangible results. Some of OMI’s process improvements are linked to financial gains. For example, a redesign of OMI’s supplier alliance approach achieved between $500,000 and $750,000 cost savings annually. With or without direct financial results, OMI knows BPM is adding value and achieving the organization’s mission, according to Cohen. By linking strategy, values, processes, measures, and process improvements, OMI has seen success. Business Process Management • ©2005 APQC 215 OMI Cohen said, “Since we started this process of identifying our key priority processes and making improvements, there have been a lot of changes, especially in some areas such as enhancing the environment.” Lessons Learned At OMI, BPM is linked to its corporate strategy of continuous improvement. Accordingly, OMI continues to refine its BPM approach by building from its strong foundation of process improvement. • • • • • The lessons learned at OMI follow. Focus on process, not people. Improve the overall system. Link, align, and focus improvement efforts. Address highest-leverage processes. Support a focus on business results. OMI continues its efforts to overcome the following challenges to the BPM initiative. • Lack of resources creates fatigue and impacts momentum for BPM within the organization. • Lack of accountability in terms of direct links to job descriptions and annual appraisals often leads to inconsistency. • Informal communication and training de-emphasizes the significance of BPM. • Unintegrated tools and technology limitations restrict documentation and knowledge capture and sharing throughout the organization. In the future, OMI plans to re-charter and re-invent process improvement teams. The organization is currently assigning a process improvement focus team to its 10 management systems to improve the way OMI’s project facilities operate. OMI also plans to explore additional links within the linkage of processes model to document where processes are connected. Using additional BPM technology as an enabler is another area OMI hopes to explore. There is a continued shift to prioritizing improvement initiatives. The organization has experienced success with further prioritizing its 10 initiatives to three to five initiatives per year. In 2004, for example, OMI focused on three initiatives to implement and then pushed their cycle times to ensure implementation. Importantly, Cohen said, the organization needs to challenge itself to think outside of its constraints (e.g., strategy, executives, and expectations), “When you put structure around something and as you develop a history, you can fall into patterns. …And it is so hard to push out of that. What we need to do is build into this process time to think outside the box.” 216 Business Process Management • ©2005 APQC Business Process Management Index Business Process Management • ©2005 APQC 217 Business Process Management I n d e x Index (Includes topics for section headings and figures) Air Products and Chemicals Inc, pages 83-108 APCI’s Delivering the Difference Road Map, Figure 21, page 85 APCI’s Enterprise Process Blueprint, Figure 25, page 91 APCI’s Process Management Model: A Continuous Loop, Figure 24, page 90 Applying CI and KM to Global Process Management, Figure 28, page 98 BPM Design, pages 90-100 BPM Strategy, Structure, and Funding, pages 84-90 Customer Loyalty, Figure 30, page 104 Evaluation and Results, pages 102-105 Global Process Management Team Structure at APCI, Figure 26, page 93 Global Process Management, Figure 22, page 87 Implementing and Sustaining BPM, pages 100-102 Introduction to Process Management Course Road Map, Figure 23, page 89 Lessons Learned, pages 105-108 Pipeline to Our Customers, Figure 29, page 101 Process Management Model, Figure 27, page 97 APCI’s Delivering the Difference Road Map, Figure 21, page 85 APCI’s Enterprise Process Blueprint, Figure 13, page 44 and Figure 25, page 91 APCI’s Process Management Model: A Continuous Loop, Figure 24, page 90 Applying CI and KM to Global Process Management, Figure 28, page 98 APQC “Process” History , Figure 2, page 23 Average Rating of BPM Initiative on Objectives , Figure 4, page 31 Baldrige Criteria for Performance Excellence, Figure 38, page 135 BPE Methodology, Figure 39, page 138 BPM at NGST , Figure 48, page 167 BPM Benefits Delivery Against Expectation, Figure 20, page 72 BPM Benefits, pages 24-27 BPM Challenges and Lessons Learned, pages 73-76 BPM Challenges in Enterprise-wide Engagement at Coors , Figure 32, page 112 Business Process Management • ©2005 APQC 219 I n d e x BPM Design at Air Products, pages 90-100 at Coors, pages 114-123 at NGST, pages 166-169 at OMI, pages 203-209 BPM Initiative Improvements over Baseline, Figure 19, page 71 BPM Strategy, Structure, and Funding at Air Products, pages 84-90 at Coors, pages 109-114 at Deere, pages 133-136 at NGST, pages 160-166 at OMI, pages 196-203 Business Case for BPM, pages 37-39 Business Process Evaluation Activity, Figure 55, page 189 Business Process Excellence Design at Deere, pages 136-144 Business Process Management Evolution, Figure 50, page 170 Business Process Measures, pages 65-70 Color Coding for Process Documentation at Coors , Figure 34, page 117 Coors BPM Team’s Completed Projects, Figure 35, page 119 Coors Breakdown Maintenance Quality Dashboard Example, Figure 37, page 126 Coors Brewing Co., pages 109-132 BPM Challenges in Enterprise-wide Engagement at Coors, Figure 32, page 112 BPM Design, pages 114-123 BPM Strategy, Structure, and Funding, pages 109-114 Color Coding for Process Documentation at Coors, Figure 34, page 117 Coors BPM Team’s Completed Projects, Figure 35, page 119 Coors BPM Team’s Current (2005) Projects, Figure 36, page 120 Coors Breakdown Maintenance Quality Dashboard Example, Figure 37, page 126 Coors U.S. Business Enterprise Model—2005, Figure 33, page 115 Evaluation and Results, pages 127-129 Implementing and Sustaining BPM, pages 123-127 Lessons Learned, pages 129-132 The Route to BPM at Coors, Figure 31, page 111 Coors U.S. Business Enterprise Model—2005, Figure 33, page 115 Critical Success Factors, pages 27-28 Customer Loyalty, Figure 3, page 26 and Figure 30, page 104 Customer Support Process Model, Figure 43, page 148 Deere & Co. , pages 133-157 Baldrige Criteria for Performance Excellence, Figure 38, page 135 BPE Methodology, Figure 39, page 138 BPM Strategy, Structure, and Funding, pages 133-136 220 Business Process Management • ©2005 APQC I n d e x Business Process Excellence Design, pages 136-144 Customer Support Process Model, Figure 43, page 148 Deere’s Enterprise Business Model, Figure 41, page 141 Deere’s Use of SIPOC, Figure 44, page 150 Documenting Metrics Using Seven-Step Approach, Figure 45, page 152 Evaluation and Results, pages 151-156 Functional Roles vs. Process Management, Figure 40, page 140 Implementing and Sustaining BPM, pages 144-151 Integrity of Change Management, Figure 42, page 143 Lessons Learned, pages 156-157 Deere’s Enterprise Business Model, Figure 12, page 44 and Figure 41, page 141 Deere’s Use of SIPOC, Figure 44, page 150 Determining Requirements, Figure 58, page 203 Developing a Common Language, pages 21-22 Discipline for Process Improvement, pages 62-64 Documenting Metrics Using Seven-Step Approach, Figure 45, page 152 Evaluation and Results at Air Products, pages 102-105 at Coors, pages 127-129 at Deere, pages 151-156 at NGST, pages 180-191 at OMI, pages 213-216 Extent of Functional Area Integration with BPM , Figure 7, page 35 Final Thoughts on BPM , pages 78-80 Funcional Roles vs. Process Management , Figure 5, page 32 and 140 Figure 40, page Funding for BPM Initiative , Figure 10, page 38 Global Process Management Team Structure at APCI, Figure 26, page 93 Global Process Management, Figure 6, page 33 and Figure 22, page 87 Implementing and Sustaining BPM at Air Products, pages 100-102 at Coors, pages 123-127 at Deere, pages 144-151 at NGST, pages 169-180 at OMI, pages 209-213 Industry Breakdown for the 30 Participating Organizations, Figure 1, page 12 Infrastructure—Processes, Figure 52, page 174 Initial BPM Funding Request, Figure 9, page 38 Integration of BPM Overview and Work Force Management, Figure 17, page 57 Integrity of Change Management , Figure 42, page 143 Introduction to Process Management Course Road Map, Figure 23, page 89 Involvement of Leadership and Staff in BPM Initiative , Figure 8, page 36 and Figure 16, page 53 Business Process Management • ©2005 APQC 221 I n d e x Key Elements of BPM Design, pages 42-50 Lessons Learned at Air Products, pages 105-108 at Coors, pages 129-132 at Deere, pages 156-157 at NGST, pages 191-193 at OMI, page 216 Leveraging the BPM Framework to Drive Implementation, pages 51-62 Linkage of Processes Model Conceptual Framework, Figure 57, page 199 Linking Objectives to Processes, Figure 54, page 184 NGST’s BPM Framework, Figure 49, page 169 NGST’s Operational Evolution of Six Sigma and BPM Initiative, Figure 53, page 180 NGST’s Process-centric Organization, Figure 47, page 164 Northrop Grumman Process-based Reorganization, Figure 46, page 163 Northrop Grumman Space Technology, pages 159-193 BPM at NGST, Figure 48, page 167 BPM Design, pages 166-169 BPM Strategy, Structure, and Funding, pages 160-166 Business Process Evaluation Activity, Figure 55, page 189 Business Process Management Evolution, Figure 50, page 170 Evaluation and Results, pages 180-191 Implementing and Sustaining BPM, pages 169-180 Infrastructure—Processes, Figure 52, page 174 Lessons Learned, pages 191-193 Linking Objectives to Processes, Figure 54, page 184 NGST’s BPM Framework, Figure 49, page 169 NGST’s Operational Evolution of Six Sigma and BPM Initiative, Figure 53, page 180 NGST’s Process-centric Organization, Figure 47, page 164 Northrop Grumman Process-based Reorganization, Figure 46, page 163 People—NGST Leadership Team, Figure 51, page 172 Operations Management International Inc., pages 195-216 BPM Design, pages 203-209 BPM Strategy, Structure, and Funding, pages 196-203 Determining Requirements, Figure 58, page 203 Evaluation and Results, pages 213-216 Implementing and Sustaining BPM, pages 209-213 Lessons Learned, page 216 Linkage of Processes Model Conceptual Framework, Figure 57, page 199 QBS Process for Improvement Planning, Figure 59, page 214 Quality as Business Strategy, Figure 56, page 198 People—NGST Leadership Team , Figure 51, page 172 Pipeline to Our Customers, Figure 29, page 101 222 Business Process Management • ©2005 APQC I n d e x Process Management Model, Figure 27, page 97 Processes/Activities Integrated as Part of BPM Initiative, Figure 15, page 51 Progress: A Result of Focus on Strategy and People , pages 50-51 QBS Process for Improvement Planning, Figure 59, page 214 Quality as Business Strategy, Figure 56, page 198 Responsibilities of Enterprise Process Owners, Figure 14, page 47 Results: Revenue, Profits, and Customers, pages 70-72 Senior Management Commitment, pages 35-37 Status of BPM Implementation Activities, Figure 11, page 42 Strategic Alignment: Play Under the Main Tent, pages 30-31 Success Factors for BPM, pages 76-77 Summary Chapter 1, page 28 Chapter 2, page 39 The Art of Matrix Management, pages 31-34 The Origins of BPM , pages 23-24 The Route to BPM at Coors , Figure 31, page 111 Value Creation Defines the Course of BPM Integration, pages 34-35 Work Force Involvement with BPM Initiative, Figure 18, page 59 Business Process Management • ©2005 APQC 223 Business Business Process Management A best-practice report from 1 6 # - * $ " 5 * 0 / 4 123 North Post Oak Lane, Third Floor Houston, Texas 77024-7797 800-776-9676 • +1-713-681-4020 www.apqc.org • apqcinfo@apqc.org ISBN-10: 1-932546-51-0 ISBN-13: 978-1-932546-51-4