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Juhani
Anttila
MANAGING BUSINESS PROCESSES
Abstract Professional process approach is a great opportunity to all organizations for enhancing business performance and realizing quality of management in a modern way. This text highlights how to integrate process management to be a seamless part of overall business management. The approach presented here is a profound insight of innovative and comprehensive process management. Also practical methodologies, e.g. for strategic and operational process management, process documentation, and process performance evaluation and improvement, are considered. This methodology is applicable in all kinds of organizations, including private small and big companies, public service providers, and third sector not-for-profit organizations. The approach is based on practical experiences during nearly 20 recent years in different kinds of organizations in different countries. Process management is a comprehensive business management issue and it involves application of multidisciplinary principles and practices. Historical development of process approach Systematic process ideas were used already in the activities of ancient societies thousands years ago. The process concept is also often referred to in the cases of natural development. Statistical process control started in 1920's at Western Electric Company by Walter Shewhart. Through industrialization processes became an everyday concept in so called process industry. From 1980's process methodology has been used for computers' internal activities according to the structured analysis and design technique (SADT). In a large scale and comprehensively, however, business process approach has been used for the benefits of business management for less than twenty years, and during that time a lot of practical means have been developed for managing business processes. In these approaches, especially learning from system theory and system dynamics has been valuable. To the well-known international standards ISO 9000 for ensuring and improving quality of management, process concept was introduced in the 1990's. Process concept and business management Processes in general adhere to all kinds of activities or operations
made by people or automatic means. In fact, originally the process
concept just denotes any kind of productive doing. Basic activities
that exit in all organizations may be called as "elementary processes".
They typically include: When the elementary processes within an organization are linked with achieving organization's business results, one may talk about business processes. Different organizations may use different expressions for these processes, e.g. basic, core, or key processes. Very often, however, these different and not-standardized terms are confusing, and, in fact, they are not really needed in practice. Normally it is enough to use the concept "business process" only. Business processes imply continuously running inter-linked business activities. Business projects are singular processes for unique business tasks. Typically business processes cross the borders of organizational units. Organization's business processes and organizational structure are orthogonal dimensions of management. Organization's overall business performance is the result of managerial solutions both in processes and structures. Naturally the structures should support the processes. Structural questions of business processes have become an interesting management issue in order to increase effectiveness and efficiency of organizational operations. However, there are some cases where structural aspects, e.g. organization charts and formal process diagrams, have been harmfully overly emphasized in process management. Processes should be the primary issue and structure a secondary one. Major motivation in organizations for strengthening process-focus
in the development of business management is based on the following
challenges: Due to its business significance, process management is a comprehensive business management issue by its basic nature. Today, however, truly effective and efficient process management implies radical changes to the established management thinking and structures in many organizations. General development of the process approach within an organization starts typically from strong vertically organized functional business units, organizational "silos", and with a clear need to improve the effectiveness and efficiency and customer-focus through horizontal streamlining of activities within the organization. The rigid traditional functional structure of organizations is normally originated from the old scientific management school. Challenge for development means movement towards emphasis on horizontal business processes for realizing products to the customers. Also needs of the other stakeholders should be taken into consideration. During this development the role of vertical functions is changing to competence centers to support the business processes. This development is always in practice a long-term development journey in organizations. Organization-widely networked business processes A comprehensive system of business processes covers the whole organization, and practically all work in organization is done through processes. Business systems consist of networks of interlinked business processes. Thus, processes are the basis for the success and growth of enterprises. All mutually value-adding or "Win-Win" interactions and transactions between an organization and its stakeholders take place through processes. Even the quality of public services and quality of the society at large are originated in the processes of different organizations within the society. A four level business-infrastructure model is useful for managing
a comprehensive system of business processes within any organization.
This process framework consists of the following four business activity/management
levels that have remarkable importance in managing the organization
towards sustainable success: Detailed corporate-wide business system may be described by using
a business process framework. Typically that consists of four major
domains of business processes: All business processes of an organization take up their operational positions within these domains. That means that within a business there may typically be some 30 … 40 major business processes all together. The business process structure is, however, always a business dedicated issue. Those business processes that are directly linked with external customers or other important stakeholders have the primary importance. Each of the organization's business processes consists hierarchically of sub-processes, activities, and tasks. Critical process chains within organization's business framework are the chains of individual business processes, e.g. from-market-to-market and from-customer-to-customer. Process management All business results are achieved through managing business processes. A major challenge for top management is to convert a traditional vertically emphasized and hierarchical functional organization into an approach consistently and effectively strengthening horizontally interlinked and interacting activities (i.e. business processes). That means that top management's significant responsibilities include not only business results but also how the work is done in business processes. They should arrange prerequisites for effective and efficient process realization. Thus, process management is an extension to the traditional management school of management by objectives (MBO). Both strategic and operational management level are involved in this approach, the strategic one focusing on managing the network of inter-linked business processes (i.e. the whole business system) and the operational one on managing single processes and projects. Process management as a management approach has a remarkable role in both "getting better" (strategic change) and "earning money" (operational run). Proved experiences demonstrate that although process management is an incredibly simple thing, its implementation seems very difficult because it always puts a strain on the organization's customary practices of leadership. Development of the business processes and their management is a long-term effort and should take into account realities of business environments in question. Today truly effective and efficient process management implies a radical change to the traditional established management thinking and structures in organizations. Strategic management process has a particular position among all business processes. The whole process approach within an organization is originated in decisions and measures taken in that process by the business leaders of an organization. Process management implies how the strategic and operational business
objectives are carried out through business processes. A good, well-known
and simple model for all kind managing including process management
is so called PDCA (Plan - Do - Check - Act) model. According to that
model business operations are managed by feedback through measurements.
There are in fact three PDCA loops: Management of the whole process network of a business includes traditional responsibilities of the business management, e.g. using business plans, action plans, business performance assessments, and regular business reviews. It is essential, that the business system is understood here especially as a network of business processes and not only as functional units (organizational "silos"). The scope of managing individual processes consists of process planning, control of the operation, performance improvement, and quality assurance. Bases for a process management are the process plan, process performance assessment (process auditing), and monitoring process performance indicators. Most practical means to support organization-wide management of business
processes are:
Figure 1. Elements of a process plan Products are outputs from business processes Organizations may produce many kinds of products including: From conceptual point of view the ISO 9000 standard definition of a product is recommended. Product is defined as result of processes. All products include both intended elements and also unintended elements. Intended part of a product is aimed at fulfilling customers' needs and expectations. Unintended elements are often harmful and therefore should be avoided. These results are achieved by adequate process management. Service means a product produced by activities at the interface between supplier and customer, and by supplier's internal activities. Thus, services are always produces by both supplier's and customer's processes. All products include services. In fact, there never may be any product without service-elements. In general, there are two categories of services, those provides by human resources and those by automatic means of the interface processes. Satisfaction of the customer follows from the benefits or added-value produced to the user by a product. Customer value is based on the three major product elements (goods, human service, and mechanistic or automatic service) and their overall characteristics and performance. Depending on the composition of a product, the different elements have different contribution to the customer value. Achieving quality through managing business processes Management of business processes is definitely the most important and practical subject matter in order to get quality happen in all kinds of organizations. That is also emphasized by the well-known and recognized ISO 9000 standards for quality of management. Organizations' quality efforts aim at sustainable success and excellent business performance in fulfilling the needs of all stakeholders. The business leaders have the principal responsibility for quality realization. All this is included in the general concept of quality management (QM). Quality management equals, in fact, quality of management, and in this context the role of business process management is crucial. Quality integration is the principal strategy for an effective and efficient quality management. It implies that all quality related activities are embedded within normal business management activities. Thus, according to process approach quality is in practice realized through business processes, and quality management through managing business processes. Quality integration means also that distinct quality management systems are no more needed or not even justified. In fact, they may be harmful. A real quality management system is just the same as well-managed system of business processes. Quality assurance (QA) is for creating and strengthening confidence among organization's customers and it is in a natural way based on the performance of business processes. Quality assurance is principally related to communication between an organization and its customers (figure 2). Quality assurance can be seen as a value-adding part (i.e. a service-element) in company's products-offerings. The new e-business process technology with effective interactive features creates radically new cutting-edge solutions (e.g. "e-certificate") for quality assurance. E-certificate consists of Internet site(s) or portal solution providing for assurance that a product produced by an organization conforms to an agreed standard or specification. It gives also an opportunity to personalize and create partnership-dedicated efficient solution with interactive extranet technology.
Figure 2. Quality assurance through business processes and innovative QA services to the customer Modern business environments and process management Today process management calls for responding to the realities of the modern business environments and especially nowadays the needs for managing variety and agility. E.g. the new e-business environments require a more advanced methodology for process management than before. There are three main categories regarding variableness in process
activities (figure 3):
All of these categories are inherent in all business processes and their activities. These categories differ from each others in the degree of freedom that is characterizing the activity. Mechanistic aspects are highly disciplined tasks, e.g. keeping delivery-deadlines in the order-delivery process. Organic aspects relate e.g. to interactions with the business partners. Dynamic aspects typically reflect spontaneous human activities in on-time situations. Process management should take into account that all these variableness modes and to be addressed appropriately in a process network as a whole and in individual processes. However, depending on the type and purpose of the process a certain mode of activity may have a clear emphasis. These different modes should also be taken into account in the process documentation. Process automation with information systems helps typically only mechanistic activities in processes. However, new interactive information technology gives possibilities also for more flexible operations carried out by people. A key challenge to leaders and managers and to the process experts is that managing feedback loop needs to be much faster than the business system's (processes') response time. Managing complexity is a requirement of every process, and it goes
beyond simplistic tools. Modern business environments require especially
understanding that organizations consist of complex responsive processes
of relating. Also interactions and transactions between different
organizations take place through this kind of processes. Managing
complex responsive business processes of relating includes three essential
aspects: It is very easy to accept that really all business processes have
these features. This is also reason to the major problem of process
management. Management of the processes cannot be based only on explicit
information with 100% certainty or agreement: One single business process may include activities representing all these different areas defined in the Stacey matrix. One simple management approach is not sufficient to manage all differing features of a business process if you are really striving for an excellent process performance. Appropriate management actions should be selected based on the degree of certainty and level of agreement on the issue in question. An effective management of complex responsive process of relating
requires explicit consideration of the following three elements: These aspects are essential when the operation of networked organizations is considered where processes of different organizations are cooperating. If the relating processes are not clearly identified (process plans), the situation fall into pieces of interacting process-internal actors, and even may develop towards chaos or anarchy. People in business processes A critical issue for process performance and process management is the operation of individual human performers within processes, and how they understand their roles in the process-scope and the overall aims of the process they are involved with. There should not be any conflicts between person's activities in a business process and his/her internal mental process. Process owner is the key person in managing operationally a business process. In fact, there could be no process management without a process owner. He/she is responsible for drafting the process plan to be accepted by the management of the business. One of the most difficult questions in practice is the clear understanding of roles of the process owners and line managers. There is always a potential risk of conflicting interests between them. Chances to prevent and resolve these conflicts in an effective Win/Win-manner depend basically on the clarity in business concept and targets, responsibility definitions, procedures of compensation, rewarding, and incentives. The role of business leader (e.g. a business unit director) for process
management consists of: Integrating process management with business management means that business processes are operating naturally without any additional or artificial tricks, procedures, or systems in natural and real operational environments. This style of operating is fundamentally based on awareness within the responsible resources and organization(s) at large. Process awareness is most essential topic for realizing business process management in practical cases. The awareness is not at all any simple thing. It is a profound totality of physical, psychological, and philosophical aspects of sensations, perceptions, ideas, attitudes, and feelings related to individuals or groups having knowledge of the business processes and their management, at any given time, or within a given time span. In time dimension, developing of the knowledge and learning become crucial aspects. It may be recognized different depth-levels of intellectual behavior in knowledge and learning. Explicit knowledge, e.g. documentation, is only a very minor part because most of the knowledge is implicit (or tacit) in this context. There are always also complex connections between consciousness and unconsciousness (sub-consciousness). Situation is still more complicated when one is considering possibilities of the collective consciousness and collective unconsciousness. In many organizations the full-fledged utilization of process management towards business success is deficient as concepts, modes of thinking, and practices including management tools and infrastructures have not been properly internalized. Understanding the whole issue at hand is, however, a prerequisite for its utilization. Good training and coaching based on the company's own systematic process management model provides a much faster way to understanding than an approach based on trial and error. A superior result in the training is reached through training provided by an internal as compared to an external trainer. This leverage effect is manifold if the providers of such coaching are the leaders of the company. Very often today through traditional formal process related training and education one can achieve only very basics of knowledge required in practice. In order to avoid these problems one should approach from separate training / education events or programs to continuous learning process integrated with normal business process operations. On-the-job learning offers cost-effective way to link learning to the organizational needs and priorities both at operator and manager levels. Organizational and personal learning are prerequisites for enhancing process awareness and skills. Modern learning environments are to facilitate effective and efficient knowledge-intensive and networked learning activities. The aim of the new approach in learning is to improve learning through improving interactive communication, and building social knowledge within organizations. These environments provide means for learning through improving interactive and collaborative communication of management, and building social knowledge and intelligence. Information and knowledge in business processes Business documentation is the traditional way to manage information and knowledge in businesses and also in business processes. Documentation should be a dynamic and high-value-adding activity. Documentation is needed for achieving required business targets, for evaluating the business system including its deployment and related results, for realizing quality assurance for customers' confidence, and for facilitating performance improvement. Process documentation is an essential part of the whole business management documentation. Process management procedure document is the core document for a business integrated process management approach. It describes organization's process management model as a whole and refers to appropriate procedure documents for description of details. Different principles, tasks, and responsibilities for process management are described according to the corporate-wide process framework, and revised as necessary. Detailed process documents include process plans, procedure and method documents, operational records, and training documents. The most important documents for a particular process consist of process plan, process environment description (i.e. linkages of the process to other processes or actors), and process flow diagram of the major activities of the process. Requirements for documentation and relating methodology originate in strategic and operational needs of the business, and the different user-groups, including process owner, process operators, process developers, and associated IT experts developing IT support for processes. Consistency of different needs of documentation is required. These documents also fulfill the needs of quality management and quality assurance and thus no distinct quality documents, e.g. quality manuals or procedure documents, are needed any more. Very often in business process approaches, especially quality professionals have placed stress on documentation. Often they have referred to requirements of ISO 9000 standards or quality award criteria. However, the real requirements for documentation come only from business needs of the processes, not from standards which present only guidance or general models. Nowadays many human activities within business processes have been replaced by automatic IT solutions. Process automation is an important challenge in using information technology in the development of business processes and their management. Benefits of those investments should be evaluated from customer value, cost reduction, and real option value points of view. A Service-Oriented Architecture, SOA, has been developed for automating many manual and paper-based activities of business processes. SOA applications are particularly to respond to agility requirements in business processes. Agility has in this context two meanings: a) To enable fast process responsiveness in busy business environments, and b) To facilitate fast changes in business process development by providing incrementally automated activities to business processes with standardized interfaces. Practices for documentation for managing business processes have
developed from passive and separate documents to dynamic and flexible
systems for leveraging usage of information and knowledge for collaborative
group work. Old solutions of process documentation (which however
are still used in many organizations) include: In today's dynamic process environments stable and stiff documentation structures are no more adequate but instead of that flexible and collaborative information and communication arrangements are necessary. These may be realized especially through modern information technology of social collaborative networking. In business environments there are lots of needs to share process
information and knowledge among managers, employees, and business
stakeholders. In order to manage situation, organizations have invested
in IT solutions. However the development and use of the IT solutions
has been problematic in practice. Many IT applications have made the
jobs of people more complex and difficult, rather than simplifying
their work. Effective use of modern information and communication
technology gives completely new possibilities especially strengthening
applications in the area of tacit knowledge that, in fact, covers
the most important biggest part of business knowledge. These new solutions
include: Portal is a single, Web-based interface into the world of heterogeneous and incompatible information and knowledge sources distributed across the telecommunication network. Negative point is that portals are rather complex and expensive investments and therefore suitable primarily for big organizations. Modern Web-operated social networking applications are simple and cheap solutions. Their strengths include customizable applications that allow process groups to work simultaneously on sharing individual knowledge and to create new mutual knowledge inside and globally outside the organization. It is essential from the business process management's point of view to facilitate to combine explicit performance information measured/monitored from the processes with the tacit understanding of the business as a whole by the business leaders. Process performance evaluation and improvement Process performance is considered both from strategic and from operational point of view. Strategic performance management of processes is related to the whole organization's business success and consists of vision- and strategy-based measures (e.g. as described with balanced strategy card methodology) and evaluations of the overall process performance in the whole organization. Needs of operational process performance measures for daily management are focused on diagnostics and analysis for corrective and preventive actions. For those purposes there are effective and efficient monitoring and analyzing procedures. Overall process performance is a fuzzy concept. Process performance evaluation consists of strategic assessment of the whole business performance (process network) adhering especially to performance excellence models (quality awards criteria), and operational assessment of individual processes by using process audits according to the general ISO 19011 auditing standard (figure 4). Assessment results are useful both for company-internal process improvement towards business excellence and quality assurance for customers' confidence.
Figure 4. Presentation of the results of the process audits Process performance improvement is carried out according to a systematic methodology including both breakthrough and incremental continual improvement according to the methodology described e.g. in the ISO 9004 standard. Also benchmarking methodology is used in this context. A strategic objective for the organization is the achievement of
continual improvement to improve performance and benefit to interested
parties. That is done by improving business process performance. There
are two fundamental approaches for improvement activity based on business
processes as defined e.g. by the ISO 9004 standard according to the
PDCA model: ISO 9004 standard and performance excellence models provide ideas and guidance for improving performance of business processes. Information Technology Infrastructure Library (ITIL) provides comprehensive
non-proprietary informative material for improving business processes
particularly for high quality IT services provision. The library consists
of best practices for service strategies, service design, service
introduction, service operation, and continuous service improvement.
In details practices cover: In addition to ITIL, another reference for developing and improving business processes is eTOM, Enhanced Telecom Operations Map. The eTOM is a guidebook particularly for telecommunications industry. However, it may be used as reference material also for other industries. eTOM describes the full scope of business processes required by a service provider and defines key elements and how they interact. Comprehensive enhancement of a business process approach The ultimate goal of the process management is to ensure controlled and continually enhanced business performance. Mental framework of a learning organization provides a good model for a deep understanding and effective development of the process management as a company-wide issue (figure 5). The framework covers both running the current business ("Domain of action") and improving the overall business performance ("Domain of change"). Domain of the current business actions consists of guiding ideas and principles, managerial tools and methodology, and managerial infrastructure for process management, which are, in fact, the cornerstones for a consistent and successful business establishment. Domain of change aims at changing the way to act, or in other words changing business processes and their management practices. That includes sensibility to new awareness, changes in attitudes and beliefs, and training and education for new skills and competences.
Figure 5. Mental framework of a learning organization for developing an integrated process management approach. Domain of action: running the current business, domain of change: enhancing the business performance Conclusions Wide experiences prove that process management is an incredibly simple thing, but its implementation seems very difficult in practice because it always puts a strain on the renewals in organization's leadership. This is very often possible to happen genuinely only through real business crises. Development of the business processes and their management is a long-term effort and should take into account realities of business environments in question. References 1. Anttila J and Vakkuri J: ISO 9000 for the creative leader, Sonera
Corporation, Helsinki 2001 [This material has been presented in different forms in different seminars or conferences, e.g. in St.Petersburg, Russia 1998 (several seminars); Riga, Latvia 1998; Tallukka, Finland 2000; Kuopio, Finland 2001; Istanbul, Turkey 2001; Ostrava, Czech Republic 2002; Mumbai and New Delhi, India 2003; and Tallinn, Estonia 2000 and 2003]
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Figure 3. Variety
modes of different complexity level and different requirements for
variety (degree of freedom). These different modes are relevant in
all practical business processes. 
