Business Process Management

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.
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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
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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.
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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
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•
•
•
•
•
•
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.
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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
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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
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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.
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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
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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
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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
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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.
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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
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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
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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.
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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
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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
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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
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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.
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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.
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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
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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
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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
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•
•
•
•
•
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
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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
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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
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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.
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Business Process Management • ©2005 APQC
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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
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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.
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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
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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.
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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.
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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.
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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
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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
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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
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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).
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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
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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
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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.
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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,
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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,
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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
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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
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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
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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
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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
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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)
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20%
N/A
Not at all
Little
Some
Great
Very Great
Figure 17
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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
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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)
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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
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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.
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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
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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
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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.
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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.
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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.
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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).
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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.
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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.
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•
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
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www.sixsigmatutorial.com/BPM/BPM.aspx (retrieved August 2004).
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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
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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
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www.iso.org/iso/en/ISOOnline.openerpage (retrieved February 2005).
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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
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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
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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.
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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.
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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
•
•
•
•
•
•
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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.
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•
•
•
•
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.
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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
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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.
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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.
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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
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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
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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).
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Business Process Management • ©2005 APQC
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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.
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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
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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
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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
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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
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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.
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“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
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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
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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
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Business Process Management • ©2005 APQC
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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.
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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.
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“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.
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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.
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Business Process Orientation: Gaining the E-Business Competitive Advantage, K.P. McCormack and
W.C. Johnson, St. Lucie Press, 2001.
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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.
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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
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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
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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).
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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
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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
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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.
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•
•
•
•
•
•
•
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.
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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.
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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
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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,
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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
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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.
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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
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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.
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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
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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
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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.
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•
•
•
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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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,
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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
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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
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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
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•
•
•
•
•
•
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.
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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,
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•
•
•
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.
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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
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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,
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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.
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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.
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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
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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.
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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.
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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,
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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.
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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.
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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
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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.
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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,
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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.
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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.
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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
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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
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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
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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
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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
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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
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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.
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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
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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.
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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.
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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.
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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.
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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
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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
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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).
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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).
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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.
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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.”
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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.
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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
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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.
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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
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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,
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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).
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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.
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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
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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
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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.
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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
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•
– 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.
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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
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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
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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
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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;
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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
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•
•
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
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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
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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.
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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
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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
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•
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
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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
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Figure 55
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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.”
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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
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•
•
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.
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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.
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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.
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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
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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.
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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
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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
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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
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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
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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.
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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
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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.
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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
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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.
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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
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A charting software by RFF electronics: http://www.rff.com/.
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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.
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•
•
•
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
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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
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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
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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
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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.
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ccording to http://www.coso.org/, COSO is a voluntary organization dedicated to improving
A
the quality of financial reporting.
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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.
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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.
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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.”
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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
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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
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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
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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
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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
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