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The Process Audit , BY Michael Hammer

The Process Audit

Michael Hammer

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Business has embraced process management as a way of life. New and controversial when I first described the concept 17 years ago in the pages of this magazine (see �Reengineering Work: Don�t Automate, Obliterate,� HBR July�August 1990), the process-based approach to transformation is now used routinely by enterprises all over the world. Few executives question the idea that redesigning business processes�work that runs from end to end across an enterprise�can lead to dramatic enhancements in performance, enabling organizations to deliver greater value to customers in ways that also generate higher profits for shareholders. In virtually every industry, companies of all sizes have achieved extraordinary improvements in cost, quality, speed, profitability, and other key areas by focusing on, measuring, and redesigning their customer-facing and internal processes.

Sadly, however, casualties litter the road. Since 2000, I have personally observed hundreds of companies try to rejuvenate themselves by creating or redesigning business processes. In spite of their intentions and investments, many have made slow or little progress. Even businesses that succeeded in transforming themselves have found the endeavor arduous and harrowing. All change projects are tough to pull off, but process-based change is particularly difficult. Contrary to widespread assumptions, designing new business processes involves more than rearranging work flows�who does what tasks, in what locations, and in what sequence. To make new processes work, companies must redefine jobs more broadly, increase training to support those jobs and enable decision making by frontline personnel, and redirect reward systems to focus on processes as well as outcomes. As if that weren�t enough, enterprises also have to reshape organizational cultures to emphasize teamwork, personal accountability, and the customer�s importance; redefine roles and responsibilities so that managers oversee processes instead of activities and develop people rather than supervise them; and realign information systems so they help cross-functional processes work smoothly rather than simply support departments.

In most of the companies I studied, executives were floundering. They realized that they needed to change many things to harness the power of processes, but they were unsure about what exactly needed to be changed, by how much, and when. Their uncertainty was manifest in hesitant decisions and confused planning, in endless debates and unproductive discussions, in unwarranted complacency and equally unwarranted despair, in errors and rework, in delays and abandoned efforts. People kept asking one another questions such as, Did we start with the right thing? How do we know we are making progress? What will the organization look like when we finish? Moreover, executives, especially when they work in different functions, often disagree about the factors that aid process-based transformations. Each has a pet idea based on his or her expertise. Like the six blind men and the elephant, one focuses on technology, another on human resource issues, a third on organizational structure, and so on, creating confusion and conflict. Managers also have a tendency to swing from wild optimism that developing new processes will be painless to unremitting gloom that the task is hopeless. Without knowing what they must concentrate on and when, executives have been unable to master the science of transforming business processes.

Five years ago, I started a research project in conjunction with the Phoenix Consortium�a group of leading companies with which I work closely�to develop a process implementation road map. My aim was to create a framework that would help executives comprehend, plan, and assess process-based transformation efforts. Over time, I identified two distinct groups of characteristics that are needed for business processes to perform well and to sustain that performance (see the exhibit �The Process and Enterprise Maturity Model�). One set of features applies to individual processes. Theseprocess enablers�determine how well a process is able to function over time. They encompass the comprehensiveness of a process�s design, the abilities of the people who operate the process, the appointment of a top-level process owner to oversee the process�s implementation and performance, the match between the organization�s information and management systems and the process�s needs, and the quality of the metrics that the company uses to measure process performance. My research shows that not all organizations are equally prepared to put these enablers in place. Companies that are able to do so possess important�enterprisewide capabilities:�Their senior executives support a focus on processes; their employees greatly value customers, teamwork, and personal accountability; they employ people who know how to redesign processes; and they are well organized to tackle complex projects.

The Process and Enterprise Maturity ModelCompanies need to ensure that their business processes become more mature�in other words, that they are capable of delivering higher performance over time. To make that happen, companies must develop two kinds of characteristics:�process enablers,�which pertain to individual processes, and�enterprise capabilities,�which apply to entire organizations.There are five process enablers�Design:�The comprehensiveness of the specification of how the process is to be executed.Performers:�The people who execute the process, particularly in terms of their skills and knowledge.Owner:�A senior executive who has responsibility for the process and its results.Infrastructure:�Information and management systems that support the process.Metrics:�The measures the company uses to track the process�s performance.

�and four enterprise capabilities.

Leadership:�Senior executives who support the creation of processes.

Culture:�The values of customer focus, teamwork, personal accountability, and a willingness to change.

Expertise:�Skills in, and methodology for, process redesign.

Governance:�Mechanisms for managing complex projects and change initiatives.

Companies can use their evaluations of the enablers and capabilities, in tandem, to plan and assess the progress of process-based transformations.

Together, the enablers and capabilities provide an effective way for companies to plan and evaluate process-based transformations. I presented the model�s first version to the Phoenix Consortium�s members in 2004, and they tested and revised it extensively. In 2006, I finalized the framework, which I call the Process and Enterprise Maturity Model (PEMM). In the following pages, I discuss the five process enablers and four enterprise capabilities in detail. I also show how companies that use PEMM can take the task of process transformation out of the arena of intuition and mystery and subject it to measurement, evaluation, improvement, and replication.

Can Your Processes Deliver High Performance?

My two decades of experience with business processes have taught me that form influences function�that is, process design determines performance. By design, I mean the specification of which people must perform what tasks, in what order, in what location, under what circumstances, with what information, and to what degree of precision. Certainly, companies can use techniques such as Six Sigma and TQM to ensure that employees execute processes correctly. However, redesigning processes is often the only way to improve their performance dramatically. Doing so eliminates many of the nonvalue-adding activities that are the source of costs, errors, and delays and helps companies come up with process innovations (see my article �Deep Change: How Operational Innovation Can Transform Your Company,� HBR April 2004).

Although process redesign is no longer the terra incognita it once was, one issue stubbornly persists: Most companies tend to overlay new processes on already established functional organizations. However, the appurtenances of a traditional organization�such as job definitions, performance measurement systems, and managerial hierarchies�don�t always support high-performance processes. For instance, senior executives might encourage managers to create a cross-functional process but then prevent them from altering the company�s performance measurement system appropriately. That�s shortsighted. The revamped business process needs employees to focus on a broad, common outcome; if the organization measures performance as it has always done, it will reward people for focusing on narrow, functional goals. How can the process live up to its potential under those circumstances? Companies will invest in retraining employees to work in a new process, but they balk at footing the bill for helping people understand how the process works as a whole. If employees don�t know the context in which they work, they will be prone to making decisions that aren�t in the best interests of the entire process. Similarly, leaders will try to create processes without altering managerial responsibilities. That�s problematic, too. A high-performance process extends across functional boundaries, so a senior executive must supervise it. Without such a person, the process won�t gain traction within the organization.

While studying organizations that were implementing new processes, I kept track of their errors of omission. I also analyzed the various factors that were necessary to sustain business processes. I tested both lists over several years and winnowed them down to the five characteristics that I find are essential for any process to perform well. A process must have a well-specified�design;�otherwise, the people performing it won�t know what to do or when. The people who execute the process, theperformers,�must have appropriate skills and knowledge; otherwise, they won�t be able to implement the design. There has to be an�owner,�a senior executive who has the responsibility and authority to ensure that the process delivers results; otherwise, it will fall between the cracks. The company must align its�infrastructure,�such as information technologies and HR systems, to support the process; otherwise, they will impede its performance. Finally, the company must develop and use the right�metrics�to assess the performance of the process over time; otherwise, it won�t deliver the right results. These enablers give a process the potential to deliver high performance.

source�http://hbr.org/2007/04/the-process-audit

 

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