Projects Targeting High-Value Processes

Projects focusing on high-value process improvement are critical internal projects for any organization...definitely not something to be taken lightly. Because an organization's financial and human resources are limited, and because risk is inherent in complex project, companies must target the processes that have the potential to create the greatest value. The goal is to get the right process right. As the project manager tasked with leading a process improvement project, you must be at the forefront of getting the right requirements and targeting the right processes. There are questions to ask - and they aren't always easy ones. Let's begin looking at these here in this first part of the series ... The first questions to ask are ...

• Which process or processes create the greatest stakeholder value and represent the greatest opportunity for improvement?
• Which processes are critical to strategic alignment?

These are the processes that need to be targeted for the continuous improvement project - dig deep with your project customer even if it's an internal customer.

Focusing on the wrong process can be fatal.

One disastrous example of focusing on the wrong processes ... A major U.S. insurance company was noted for its pioneering efforts in reengineering, having extensively redesigned the process of issuing new policies. However, to perfect that process, the company had to divert human and technological resources from its investment-management process. It ultimately failed to manage critical risks in its real-estate investment portfolio (a different process), and ended up in receivership.

Sometimes it's nearly impossible to see where we've been shortsighted in our discussions, Q&A, and investigations in general. However, a full assessment of the overall affect of any change actions to be implemented must be taken. Remember, you can't always improve one part of the company without weakening another ... be aware.

Determine which processes are critical for strategic alignment.

Understand the company's core competencies, sources of competitive differentiation and strategic direction. The choice of strategy will often shape the choice of process to target.

In addition to strategic importance of a process, consider the size of the improvement opportunity.

Look for processes where dramatic improvement in efficiency and effectiveness can be made. Efficiency focuses on cost-cutting and operational improvements, such as reduced cycle time. Effectiveness focuses on growth potential and customer service. Identify and evaluate both kinds of opportunities prior to deciding which processes to target.

Target high-opportunity processes; improve processes that are performing well.

Target processes that are both strategic and where there is high opportunity for improvement (in terms of efficiency and/or effectiveness). Processes that are strategic and performing well should continue to be enhanced through continuous improvement. Even better: If strategic processes are performing well, look for ways to extend them. That is, apply the lessons learned from these processes to other internal processes. Or, market these core capabilities externally.

Limit the effort devoted to processes that do not directly enable the strategic objectives of the company.

As a rule of thumb, outsource activities that have a large opportunity for improvement but are not core competencies of the company. For tactical processes that are performing well, invest only enough effort to ensure that they continue to perform well.

Don't underestimate the importance of tactical processes.

Sometimes, addressing an enabling process is the most important thing a company can do. One example ... Fast-growing high-tech companies often have difficulty finding enough technical talent to fill all their positions. The key is to hire experience while still building your training and staff development processes.

What is tactical to one company may be strategic to another.

For example ... Payroll is secondary at most companies, but it is strategic to companies that make their living processing payrolls for other companies.

What is the Process's VT/ET (value-adding time divided by elapsed time)?

Use VT/ET to gauge the size of opportunity in terms of queue times and handoffs. In this formula, value-adding time (VT) represents the time that actually goes into performing a task. Elapsed time (ET) represents the time that passes between the beginning and end of the task. Ideally VT/ET should equal 1 - there should be no 'wait time' in the process. In reality, VT/ET is usually far less. One example ... . Insurance giant Aetna analyzed its insurance policy application process and found that its VT was 26 minutes, while its ET was 28 days - a VT/ET of .0006.

The VT/ET ratio helps prioritize process-improvement efforts and creates a sense of urgency around the change. During the redesign of a process, VT/ET can be calculated for both the old and new approaches. If the new ratio is closer to 1, it suggests that the redesign is on the right track.

There are three kinds of work: value-added, non-value-added and waste. Processes with large amounts of waste and non-value-added work are candidates for improvement. Aim to increase the 'density' of work - that is, the proportion of value-added activities within the overall mix.

How does the targeted process affect other processes?

Processes don't operate in isolation.

Be careful not to optimize one process at the expense of others. A real-life exampled of this ... For a telecommunications company, billing is the most expensive activity. One telecommunications company attempted to reduce its billing costs by shortening the messages on customer bills, thus using less paper. Customers, confused by the cryptic messages they saw, flooded the company's call center with questions. Billing costs fell, but overall costs rose.

Keep in mind the big picture of all the processes.

The benefits of improving one process may be lost if other processes remain unchanged. An example ... An electronics manufacturer redesigned its production process so that it could turn out finished goods in four hours (its competitors took weeks). But because other critical processes (shipping, order entry, etc.) had not been redesigned and integrated, new products just sat in the warehouse. There was really no net benefit to the company or its customers.

Integrate early and often.

Identify key interdependencies or 'integration points' with other processes early in a process-improvement effort, and factor them into redesign efforts. For example, if the Develop Products and Services process is improved and shortened and you can identify and show this in your production schedule using a tool like Seavus' Project Viewer, a likely integration point with the Generate Demand process might be the time frame and approach for preparing salespeople to sell new products. The project manager needs to form an integration team whose charter is to address interdependencies, and stay abreast of changes as process redesigns evolve.

As we continue this series in part 3 looking at projects that target high-value processes within the organization, let's consider two more questions ... .Is the size of the change proportional to the benefit of the change AND does the organization even have the capacity to change at the planned pace required by the project?

Is the Magnitude of the Change Proportional to the Benefit?

There are three categories of process change: Streamlining, Business Process Reengineering and Strategic Engineering.

These three types fall along a continuum, with risk and investment - as well as reward - increasing as the change effort becomes more strategic. The appropriate type of change depends on the scope and nature of the process initiative.

Use a portfolio of change strategies.

Companies sometimes develop an attachment to one change approach (TQM, reengineering, etc. for example) and try to apply it to every situation. Don't fall into the 'I have a hammer, so everything looks like a nail' syndrome. At times, several different approaches may be needed. Here's an example of what I mean ... A company that sells clothes by catalog might target a core process such as Order Fulfillment for reengineering. At the same time, it might outsource a tactical/enabling process such as Help Desk Support for IT users, and streamline the process by which customers return merchandise. No one approach is appropriate for all processes. And it does depend on the business process and the overall business model. And be certain that they process to evaluate these strategies is built into your project schedule and shared using a collaborative tool such as Seavus Project Viewer.

Does the Organization have the Capacity to Change at the Planned Pace?

Companies vary in their capacity to change.

Plans for process improvement must be tailored to each company's circumstances. Timing, approach, participants and other factors may differ depending on a company's culture and history. The best process designs may fail if the effort exceeds the amount of change a company can handle.

Don't push blindly for big change.

Assess how much change has occurred, how recently it has occurred and how successful it has been. Successful change efforts tend to make the organization receptive to more change. Conversely, a company that has recently been through a traumatic and disappointing change effort is a poor candidate for another round of major change and your project is almost certain to suffer as a result.

Capacity to change evolves over time - assess it on a regular basis.

A company can build - or lose - its capacity to change. By reexamining that capacity from time to time, process professionals can make sure that change efforts stay in sync with capacity. And you can then properly time efforts on your project and properly set expectations as well.

If change capacity is low, think about 'quick hits.'

Small but visible successes that don't take a lot of time and resources can build momentum for broader change.