chapter 8

THE BACKGROUND TO PROCESS CHANGE

THE PROCESS-STRATEGY MATRIX

A PROCESS REDESIGN METHODOLOGY

PROCESS COMMODITISATION

We have seen how processes, together with

relationships and structures make up the organisation’s
configuration. Processes are fundamental to the way
organisations work and how they deliver strategy.
Therefore it is important that processes are subject to
review and improvement.

BUSINESS
PROCESSES

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 THE BACKGROUND TO PROCESS CHANGE

The background to The process- A process redesign Process

process change strategy matrix methodology commoditisation

Business processes and business process re-engineering play vital roles in enabling an organisation to
implement its strategies successfully.

Value chains Change management

Project management
Supply chain Business Process
management Re-engineering
Quality management
(Six Sigma methodology)

Information technology Information technology

(Software packages, eg ERP) (e-business opportunities)

The organisation The Rummler-Brache methodology

Inputs Outputs Processes must be seen as cross-functional wholes. 9 areas of
People Goods concern, defined by 3 structual levels and three perspectives.
Materials Services
Money Profits
Information Taxes
The organisation is an open system. It interacts with its Harmon’s approach
¡ Improvement projects should be tied to specific corporate goals,
environment and is itself made up of processes that interact both
within its boundary and across it.The efficiency of these processes
(or subsystems) is always a major target for improvement. or else focus will be lost.
Business Process Reengineering ¡ There must by ‘buy-in’ by managers and staffs. This requires
‘Fundamental rethink and radical redesign of business change management and alignment of incentives.
processes to achieve dramatic improvements’. ¡ IT is vital: IT specialists must take a strategic view; line
Workflow systems and Enterprise Resource Planning managers must understand IT.
Automate existing processes – no specific redesign Terminology
Software engineering approach Process improvement is a tactical, incremental technique.
Emphasises system, efficiency and consistency. Attempts to Process re-engineering is for strategic, fundamental change.
substitute for human intervention. Process redesign is for intermediate scale significant change.

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Context
Business processes are critical to an organisation’s success in producing its goods and services.
This session both provides a review of established techniques for looking at business procedures
and introduces the latest ideas from Harmon and Rummler and Brache.

8: Business processes 111

 THE PROCESS-STRATEGY MATRIX

The background to The process- A process redesign Process

process change strategy matrix methodology commoditisation

This analyses processes in terms of their complexity on one axis and their strategic importance on the other.

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Context
All processes must work but some are strategically more important than others. Similarly, some are
easier to improve than others. This approach helps to decide what to do about problem areas.

Learning example 8.1

Advanced Structures plc designs and manufactures small batches of sophisticated mechanical
components for high-stress applications, using exotic and difficult-to-work materials. Where do you
think production processes would fit on Harmon’s process-strategy matrix?

Solution 8.1

8: Business processes 113

 A PROCESS REDESIGN METHODOLOGY
The background to
process change
Harman describes a five phase methodology
for process redesign and the organisational
setting required for it to work.
The Setting
¡
The organisation should be structured
around its systems and processes rather
than functionally
¡ The process architecture committee
reports to the strategic apex and is
responsible for the effectiveness of
processes overall
¡ The process redesign committee is set up
to oversee a redesign project and to
achieve ‘buy in’. It has representatives from
all the departments involved
¡ The project sponsor is the manager of the
process being redesigned
¡ The project facilitator is the project
manager and is neutral between groups.
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The process- A process redesign Process
strategy matrix methodology commoditisation
The Methodology
1 Planning
Project charter defines goals, scope and roles. Project redesign team nominated.
Detailed project plan produced including time and cost budgets.
2 Analysing the existing process
May not be needed if:
¡ Full system documentation already exists ¡ There is no existing process
¡ Radical change makes it unnecessary
Requires full process documentation, including goals, inputs, activities, outputs,
performance, incentives and how the process is managed. Project goals and
assumptions are then re-examined.
3 Designing the new process
Possible solutions are considered and the best chosen. May require simulation of
proposals. Must be fully documented. Must obtain management approval.
4 Development
Functional and resource implications followed through: training, IT, job
specifications designed. Overall change to a process structure may be made at
this stage: this is a project in itself.
5 Transition
Depends on change management. Merges into routine monitoring.
Context
Once an organisation has identified a new process design, it then needs to establish a methodology
for how the redesign can be managed.

Learning example 8.2

Can you see any potential disadvantages to this very systematic approach to process management?

Solution 8.2

8: Business processes 115

 PROCESS COMMODITISATION

The background to The process- A process redesign Process

process change strategy matrix methodology commoditisation

Outsourcing
¡ Reduces the workload on managers, enabling concentration on core competences
¡ Exploits suppliers’ economies of scale, knowledge and experience
¡ May be a core competence itself
Getting the best from outsourcing depends on relationship management
¡ Specification of services and standards
¡ Performance measurement
¡ Ability to adjust elsewhere if standards not achieved
Davenport says adoption of process standards (eg quality standards) will enable more processes to be
outsourced. This implies:
¡ Process costs fall
¡ Offshoring of jobs accelerates
¡ Competition basis changes
¡ Process quality improves

Advantages and disadvantages of outsourcing

Advantages Disadvantages

¡ Cost saving; exploit contractor’s economies of
scale
¡ Increase effectiveness if supplier has higher
levels of expertise
¡ Focus on core activities/competencies
¡ Can deliver change more quickly than re-
organising in-house
¡ Creation of customer/contractor relationship
formalises cost control
¡ Finding a single supplier who can manage
complex processes in full
¡ Confidentiality issues may prevent firms
outsourcing whole processes
¡ Potential loss of control especially re quality.
¡ Tied to inflexible, long term contracts
¡ Dependent on suppliers (supplier bargaining
power)

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Context
Outsourcing can bring a number of benefits to an organisation, but its processes need to be
standardised before they can be outsourced.

Learning example 8.3

Discuss any examples of outsourcing you are familiar with.

Solution 8.3

8: Business processes 117

 Reinforcement
Study Text chapter 8

Review section 1.3 of the Study Text, and note the link between business
processes and the value chain

Expand notes on business process re-engineering (paras 1.4 and 1.5 of the
Study Text, including sub-paras)

Attempt Quick Quiz

Attempt Question 8 from the Exam Question Bank

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