1. Managing Business Processes: Design and Improvement Cheng Li, Ph.D. California State University, Los Angeles January 2001

2. The Process Focus The changing emphasis of management practices: from individual activities to process Background: –Local optimization is inadequate. –Activities are increasingly integrated.

3. What is the business process approach? A work process: a set of related activities that adds value and provides a service to a customer. The process focus: –integrative –cross-functional –customer orientation

4. What is covered? Business Process Improvement Business Process Modeling Process Structure Total Quality Management Business Process Reengineering

5. Business Process Improvement

6. What is business process improvement? Process Improvement: how to do our work better in terms of customer satisfaction, cost reduction, and self-fulfillment, etc. Related Process Management Theories: –Reengineering (Michael Hammer) –Continuous improvement or TQM –BPI: Business Process Improvement (James Harrington)

7. The Four Phases of Process Improvement Description Analysis Design Implementation

8. Process Description Customers Activities –Primary (value-adding) activities –Supporting (non-value-adding) activities Work flow Policies and constraints Output: process flowcharts & description

9. Process Analysis Identify potential improvement areas –sources of information: internal and external –problems and causes Identify related work processes and prioritize improvement projects Output: major problems, causes of the problems, targeted work processes

10. Process Design Customer requirements –e.g. telephone repair: short down time, when it can be repaired, convenient hours, short waiting time Design parameters –e.g. telephone repair: training of the operators, computer systems, # technicians Relationships between requirements and parameters

11. QFD: Quality Function Deployment Example: a relationship matrix

12. Process Design (cont.) Generating ideas Evaluating alternatives Designing the new process Setting policies and controls Other issues: feedback mechanism, justification of the new process

13. Implementation Planning Work process changes Policy changes Organizational changes Training Promotion and education

14. Business Process Modeling

15. Description of the Process –Flowchart: procedures, policies and constraints –Data on process flow Queuing Theory Simulation

16. Basic Techniques: Process Flowchart e.g. student registration process –get a copy of class schedule –select classes, consult advisor if necessary –make payment –wait for authorization: pin number, time window –call the system –register, etc.

17. Process Flowchart: symbols Examples: Action/Operation Decision (If …) Delay Transportation

18. Process Modeling Languages QPL: Quality Process Language by Gary Born

19. Process Modeling Languages Process, input, output, the process owner, and authorities Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier

20. Quality Process Language Unchanged and Changed Output: –list of bids: unchanged –selected supplier: changed Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier

21. Quality Process Language Process Owner: a person or a machine responsible for execution of processes Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier

22. Quality Process Language Process Owner: variable Choice of purchasing officer Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier

23. Quality Process Language Authorities: provide rules and guidance on how to process information Purchasing procedures Evaluate Bids ---------------- Purchasing Officer list of bids Selected supplier

24. Modeling Information Information is the link between processes. Classifying information based on versions to keep. Channel: temporary Information Store: only the current version Archive: current and previous versions

25. Modeling Information Symbols: I channel Information Store Archive

26. Queuing Theory System Characteristics –Population source: finite, infinite –No. of servers –Arrival and service patterns: e.g. exponential distribution for inter-arrival time –Queue discipline: e.g. first-come-first-serve

27. Queuing Theory Performance Measurement: e.g. infinite source, single server, exponential inter- arrival and service times, first-come-first- serve: –System utilization –Average no. of customers: in line and in system –Average waiting time: in line and in system

28. Queuing Theory Procedure: –describe the process –collect data on incoming and service patterns –find formulas and/or tables, software to calculate performance measures

29. Process Structure

30. Strategic Positioning through Process Structure Complexity: –e.g. preparation process: fast food vs. gourmet food Divergence: degree of customization, the amount of discretion or freedom allowed –e.g. H&R Block vs. CPA firms –e.g. Options for Mercedes vs. for Camry

31. Competitive Advantages through Process Structure Competitive Advantages Competitive Strategies e.g. Sam’s Club vs. Nordstrom –layout, selection, service process, personnel Competitive Strategy and Structural Positioning

32. Example: Structural Alternatives for a Family Restaurant Lower no reservations self-seating, menu on board customer fills out form pre-prepared, no substitute, limited to 4 choices Current take reservation seat guests, give menus Serve water and bread Take orders Prepare orders: salad (4), entrée (15) Higher specific table selection recite menu, describe entrees and specials assortment of hot breads at table, taken personally individually prepared

33. Generic Approaches to Service System Design Production Line Approach –limited Discretionary Action of Personnel –division of labor –substitution of technology for people –service standardization

34. Generic Approaches to Service System Design Customer as Coproducer –substitution of customer labor for provider labor –smoothing service demand

35. Generic Approaches to Service System Design Customer Contact Approach –Degree of customer contact –Separation of high- and low-contact operations

36. Total Quality Management

37. TQM/Continuous Improvement The Concept of Total Quality The Dynamics of Quality Improvement: continuous improvement vs. tradeoff balancing Employee Involvement Emphasis on Customer Satisfaction

38. Statistical Process Control Emphasis on the process instead of the product/material Focus on “prevention”

39. Statistical Process Control Control Charts: –Mean Chart –Range Chart –p-Chart –c-Chart Process Capability Process Capability Index

40. Other TQM Tools Check sheet Scatter diagram Histogram (frequency) Pareto chart Control chart Cause-and-effect diagram

41. Business Process Reengineering

42. Evolution vs. Revolution Bottom-up vs. Top-down Break the routine: –habits –assumptions –values

43. Reengineering: Assumption Busting Problem: a specific performance shortcoming of the process Rule: A specific aspect of the process design that causes the problem Assumption: a belief about the environment that gives rise to the rule

44. Reengineering: Assumption Busting Example: Problem: Customers don’t know when the repair can be done. Rule: The operator does not have the authority to schedule technicians. Assumption: The operator does not know where the problem is and does not have information about technicians’ schedules.

45. Overcoming Resistance to Change Resistance is natural and inevitable: expect it Resistance doesn’t always show its face: find it Resistance has many motivations: understand it Deal with people’s concerns rather than their arguments: confront it There’s no one way to deal with resistance: manage it

46. The Key Mechanisms for Overcoming Resistance Incentives: positive and negative Information: dispel uncertainty and fear Intervention: one-on-one connections Indoctrination: make change seem inevitable Involvement: make people part of the effort

47. The Ten Principles of Communications Segment the audience Use multiple channels Use multiple voices Be clear Communicate, communicate, communicate

48. The Ten Principles of Communications (cont.) Honesty is the only policy Use emotions, not just logic Heal, console, encourage Make the message tangible Listen, listen, listen

49. The People Side of Processes People are the most important asset Empowerment –a sense of achievement in what is accomplished –a sense of control over the means of production –a pace of work which is appropriate for both the worker and what is produced

50. The People Side of Processes Csikeszentmihalyi (1990): elements of enjoyable work: –capable of completing the task and allowed full control –able to concentrate entirely on the work in hand –clear goals –immediate feedback –deep involvement: free from everyday worries, unaware of time –“Our sense of self disappears, only to return with added strength when the task is finished.”

51. The People Side of Processes Consultation: part of empowerment Teamwork: –size: small enough so that individual effort can make a difference –organization –conflict resolution –responsibility and authority –team dynamics –cultural background