Process Management in The Boardroom

The success of CEOs like Sam Walton (WalMart), Fred West (federal Express), Herb Kelleher (Southwest Airlines) and Jack Welch (GE) has been pretty amazing. They have delivered some outstanding results for their shareholders. Unlike many CEOs they have delivered this through customer understanding rather than pure financial and risk- based management approaches. The result is not only that costs are kept under control for enhanced productivity, but also that sales revenues have grown impressively above the norm.

In the current climate there is much focus on Process of Business Process and the how and why it is needed in order to improve and transform business. For the most part, however, the responsibility for doing the work and delivering the results has been delegated down the organization, or in some cases outsourced altogether.

There is no doubt that a well-managed process- centric company is more agile, more able to keep costs under control and to better understand the value of any investment it might make. But are such companies in a better position to deliver real growth? My contention is that, in the final analysis, revenue growth will deliver the ultimate long-term returns that investors seek, while also providing the security of employment that employees want. To merely utilize Business Process Management (BPM) in any form purely as a strategy for cost or risk reduction is to squander the real competitive advantages that it can bring.

It is also pertinent to ask at this stage if boards of directors really believe that, when outsourcing under the label BPO (Business Process Outsourcing), they are really outsourcing processes? A quick scan through the financial and business press will reveal many deals, but in reality these firms are just outsourcing departments or functions based on the traditional structure. Indeed, for many organizations outsourcing processes is probably impossible. Why? Because few organizations have actually mapped their business processes – and, if they don't know what or where the processes are in the organization, then how can they be outsourced?

On the other hand, if process-centric management enables greater agility and better financial control, then you can see the value in making use of techniques in this area. Presumably all can agree that revenue growth is key to long-term financial success. That is the truth emphasized by the customer-centricity of the CEOs mentioned above; each attributes much of his success to an intimate relationship with and understanding of customer needs.

Perhaps it seems that the combination of customers and process equates with increased revenue. Certainly these two factors have a major bearing, but studying successful organizations brings out another two factors as well - those of culture and organization itself. It appears that the equation for long-term success looks more like:

Customer Knowledge + Customer-Centric Processes + Culture of Service + Customer-Oriented Organization = Superior Profitable Revenue Growth

The business model looked at in this way shows that it is not a responsibility to be delegated or outsourced. This equation should be managed from and by the CEO and the board of directors.

Outsourcing of non-care activity has a valuable part to play in serving customers and investors efficiently; all customers want to know that they are getting products and services at the best possible price. But customers do not expect the responsibility for serving them to be outsourced.

Process Management can, of course, be delegated within an organization. Indeed, in some ways this leads to far better execution; the further down the organization you go the better people are able to address any inefficiency. But again customers expect management to take the ultimate responsibility for ensuring that all parts of the organization operate as single coordinated units. Process Management that uses the customer as key focus and customer-related metrics as the key measures tends to simplify organizations, leading to lower costs and better service. The customer benefit is clear, meaning that supplier and customer are more likely to continue to do business in the future (and with customers more likely to tell others about the supplier's virtues).

Customer knowledge is not about surveys and second-hand evidence; it is about meeting customers to understand their real problems and needs – and then using this knowledge to develop products and services. It is about creating an intimate relationship in which customers are truly valued.

Directors need to answer a question or two. You may be a top-tier member of numerous frequent flier and hotel guest programmes, but how valued do you really feel? When did you last meet with or talk to the executives of those companies? It is not enough to go spouting words and putting out gold loyalty cards. Customers appreciate suppliers that provide the most important commodity of all - someone's time and a listening ear that responds with action.

The CEOs mentioned at the start are each reported to spend upwards of 30% of their time meeting with and talking to customers. The rest of their customer input comes not from management, but from the front-line staff who deal with customers everyday; these staff are such a valuable source of information, but are usually treated as just some kind of blunt instrument.

A culture of service appears to be sadly lacking in the Western business world these days. There is so much focus on numbers that staff have forgotten how to serve. Yet companies like Tesco and Virgin stand out, not only for their financial success, but also because these results have come about through a deep-rooted culture of serving customers well. This trait is evident in many Asian companies. As a customer, how fast will you choose to move your spend to organizations that do understand service?

The culture of service also touches on the issue of delegation. While you can't delegate the overall responsibility for customers, you can at least empower staff to resolve customer issues at the point of impact, without the need to refer to management. You can ensure that staff work with processes that are designed to enable them to serve customers better. And you can change reward structures so that staff are better rewarded for serving customers than for hitting purely financial targets or other non-customer relevant KPIs (Key Performance Indicators).

A culture of service is also far easier to achieve if you take the time to change your organization chart from a functional hierarchy to one that is organized along process lines. This will enable your teams to support customers better.

The combination of these changes is what enabled those four celebrated CEOs - Sam, Fred, Herb and Jack - to grow more successful organizations than others in the same market. But these Americans are not alone, for as noted Virgin's Richard Branson and Tesco's Terry Leahy share many of these beliefs. The list could also feature leaders like Sergey Brin and Larry Page of Google, Bill Gates of Microsoft, and Andy Grove of Intel – and there are several others. All are examples of what can be achieved if the responsibility for business and process management begins in the boardroom and is married to successful customer outcomes throughout the business.

Product Innovation Alive and Well (and Living in Scotland!)

For many years now I have watched UK Software industry seem to wither away. The software jobs being outsourced around the world or pulled back to "Head Office" locations. There has never been an issue of inventiveness, just one of funding and cost. So it was with great pleasure that last week I had the opportunity to meet with Graham Twaddle and some of his team at Corporate Modelling (www.corporatemodelling.com) in Glasgow.

As I thought about it, it struck me that in some ways perhaps Scotland is more the home of UK software development than "Silicon Valley" in the South of England. In the area of Business Process, we already have CRM/BPM vendor Graham Technology, and in the Simulation space Simul8 (www.simul8) and I am sure many others that I don't know of. To my family north of the border this would of course surprise no-one because of Scotland's long history of invention – Television, Telephone, The Steam Engine, Iron Bridge, The Kelvin Scale of Temperature being among the more significant, while of course Golf may be the most popular!

So to Corporate Modelling, I have to say that while the name was familiar, the company was not. I was put on to them by an old friend at Forrester, who suggested that I should talk to them. The first thing that surprised me was their pedigree. CEO/CTO Graham Twaddle has spent quite a number of years in the Business Process space and is credited as the driving force behind the success of Sherwood Internationals achievements in the process arena, especially within the insurance and finance sectors, he and his team have an amazing amount of experience in this area. In fact many of the people at Corporate Modelling were part of the core team that developed and supported the Amarta and LogicWare systems. Graham also co-authored a book, Business Process Implementation, way back in 1997 with Michael Jackson of Jackson Structured Programming fame.

So it is with a deep understanding on the insurance business and a track record in delivering solutions to that sector, which Corporate Modelling sets out to address the Business and Process needs of an organization. There offerings include a range of products, covering everything from the modeling, through to the implementation and monitoring, not just of business processes, but of rules and all the other associated parts of an organization that are needed to deliver successful monitoring and change programs.

The company, although in relative infancy, is already starting to build quite a reputation for delivering programs and systems that meet the needs of the 21^st century businesses.

Another area of interest for the company is grid computing and they are leading, along with Microsoft, the Financial Services Grid Initiative, which seems to offer some promising solutions to age old problems, you can learn more about this at www.fsgrid.com

With the number of vendors in the BPM space being high and the names fluctuating it would be easy to suggest that there may not be room for another, but given the background and pedigree of the team at Corporate Modelling it would be foolish to ignore them. Their strength comes not just from the technology, but also from their deep understanding of their target audience, not something that can be said of many of the vendors in the space.

Are You Really Doing BPM

In Europe as in the States, the conference market around Business Process Management (BPM) has been buzzing for a while. They can be great places to mix with "real people" and to hear what they are actually doing rather than what we the analysts and commentators suggest they are doing. The contrast between events can be quite startling. While the something like the GBPF event was a full blown conference with a mix of expert input and user case studies, the Gartner events have mainly analysts and, the IQPC Exchange was made up almost entirely user case studies, and focused on the financial sector.

What I found particularly interesting at the latter, was that over 80% of the audience claimed to be doing BPM, while less than 5% saw it as involving the executives. There can be no doubt that with over 20 highly interesting user case studies and presentations being made, serious work is obviously being undertaken. But, in my mind this begs the question "Are they really doing BPM?"

Listening to the presentations, many from some of Europe's leading financial institutions, it very quickly became apparent that companies who focus on Business Process can deliver some quite amazing bottom line business results. At the same time however it also became apparent that many of the projects undertaken were focused mainly on workflow and process automation. I guess in an industry that deals with low margins and high transaction costs that even the smallest saving multiplies the benefits to a point where the apparent savings are huge. But, again the question by simply focusing on the cheaper, faster better school of process are they really doing BPM?

It was the banks from South Africa and India that particularly impressed me. Companies from these Countries talked far more about BPM as an enabler. They saw BPM as a way for them to identity new and different ways of doing business, a way of creating white space between them and their competitors. It was this desire to seek new and innovative ways of doing business that both impressed and scared me. For, if we too cannot rise to that challenge then the chances are that we will increasingly lose market share to these more innovative companies. Of course, they too were also saving money through automation as well it was simply that they did not see it as the end goal.

As an aside I heard a great line from the Director of an Irish Bank "We did not set out to save costs or improve revenue, we set out to improve customer service. But as a result we wound up making far larger savings and drove revenues far higher than we might ever have expected." a great lesson in the value of focusing on the customer.

It is this focus on the customer that perhaps truly differentiates those doing real BPM work from those who are just focused on process mapping, documentation and automation. These are the companies who are really looking at themselves from the outside in and questioning everything they do and asking whether it really makes a difference in the eyes of the customer.

This external focus is one of the key points in BPM, others would include the fact that it is a management discipline and therefore needs to be supported by if not driven by the most senior levels of management within an organization. Additionally, if you are truly doing BPM then you must be looking across functions, not just carrying out incremental process improvements within them. Of course, incremental improvements are not to be belittled or ignored, they play a valuable part in consistent improvement, but neither should they be confused with true BPM.

I should point out that while these comments are aimed quite generally, some of the presenters were from companies who were achieving stunning results and had organized themselves in such a way that they were able to combine all of the various facets of process in such a way as to provide an extremely comprehensive toolkit. Again for example I can recollect a South African Bank who had created a specialist team whose role was to facilitate and mentor process teams, taking with them high level views of the business to put context around any given project. This team is also trained in techniques like Six Sigma and so is able to assist teams in creating measures, whilst also having the ability to encourage creative thinking in order to ensure that all solutions are considered, not just the obvious ones.

In summary, if you are working on process improvement or automation and delivering business benefit you are to be applauded, improvement is never a one shot process. If you are simply automating the existing processes without questioning them, then you may either be carrying unnecessary overhead or missing out on greater opportunities.

If the program you are working on does not create a culture of change within your organization then the chances are that you may find that people quickly slip into old habits and you can't retain the gains you make. People and culture are talked of as a cornerstone in process projects but very often get forgotten. I prefer to think of it as a three legged stool – the legs being made of People, Process and Systems – if only two are present (whichever two) then you don't have anything as it will simply collapse.

Lastly true BPM as we have said requires cross functional thinking and management, if you are not looking across your whole organization through the eyes of the customer, then the chances are that you are not really undertaking BPM. Of course in not doing so you are not alone, as we said at the beginning, the vast majority of projects being undertaken today under the guise of BPM are still nothing more than functionally based process optimization projects, and there lies the challenge – can history really judge whether BPM as a paradigm was successful or not when in reality we simply used the name and carried on doing what we always did?

Note: This article first appeared in June 2004 on Mark McGregor's "Postcard from Europe" Series of articles on BPTrends