Are You Confused about Business Processes?
There’s a lot of talk today about business processes. We throw around terms like Business Process Improvement; Business Process Outsourcing; Business Process Management; Business Process Optimization; Business Process Automation, just to name a few. But, just what are we talking about when we refer to business processes? While a “process” is defined as a series of actions or steps taken in order to achieve a goal, the definition of a business process is a bit more refined.
Davenport & Short (1990) define business process as "a set of logically related tasks performed to achieve a defined business outcome." A process is "a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization (emphasis mine)" (Davenport 1993). In their view processes have two important characteristics: (i) They have customers (internal or external), (ii) They cross organizational boundaries, i.e., they occur across or between organizational subunits.
Thus, a process is a specific ordering of work activities across time and space, with a beginning and an end, and clearly defined inputs and outputs: a structure for action. ... Taking a process approach implies adopting the customer’s point of view. Processes are the structure by which an organization does what is necessary to produce value for its customers.”
Following Davenport's definition of a process we can conclude that a process must have clearly defined boundaries, input and output, that it consists of smaller parts, activities, which are ordered in time and space, that there must be a receiver of the process outcome- a customer - and that the transformation taking place within the process must add customer value.
Common Business Processes
According to BizManualz, every organization has a common set of Five Core Business Processes that must exist in order to function. They are:
- Sales & Marketing
- Accounting & Technology
- Quality & Product/Service Delivery
- Management, HR & Finance
- Product Development
While these five core business process are sufficient for a small business, as a business grows and becomes more complex, the five core processes quickly grow to become ten. Each of the core small business processes splits into two, becoming these Ten Core Business Processes:
- Customer Strategy & Relationships (Marketing)
- Employee Development & Satisfaction (Human Resources)
- Quality, Process Improvement & Change Management
- Financial Analysis, Reporting, & Capital Management
- Management Responsibility
- Customer Acquisition (Sales)
- Product Development
- Product/Service Delivery
- Accounting Management
- Technology Management (Computer & IT)
In the latter part of the twentieth century, management guru Peter Drucker focused much of his work on simplification and decentralization of processes, which led to the concept of Business Process Outsourcing. He also coined the concept of the "knowledge worker — as differentiated from manual workers — and how knowledge management would become part of an entity's processes.
Rummler & Brache (1995) differentiated between primary and support processes:
- Processes that result in a product or service that is received by an organization's external customer are called primary processes
- Processes that produce products which are invisible to the external customer but essential to the effective management of the business are called support processes.
Today, we often refer to this differentiation as “front-office” processes vs “back-office” processes.
Rummler & Brache also viewed processes as being embedded in some form of organizational structure, often crossing departmental lines, and as frequently ranging across several business functions.
Business processes can and do vary across industry verticals today, yet there is much similarity among departmental business processes, even across verticals. The primary (front office) processes tend to be more industry-specific, while the support, (back office) processes tend to be similar regardless of industry. For instance, sales processes will be industry specific, while accounts payable processes generally require much the same process regardless of company or industry.
Is a Process the Same as a Procedure?
In a word, no!
The ISO 9001:2015 standard (Quality management systems — Fundamentals and vocabulary) defines the concept of Business Process as: “A set of related or interacting activities, which transform inputs into outputs”.
The ISO 9001: 2015 says that a Procedure is: “specified way to carry out an activity or a process”. When you have a process that must happen in a specific way, and you specify how it happens, you have a procedure. The procedure is mandatory and is necessary to develop any Quality Management System. Not all processes need to have a procedure; and, the same process may have one or several procedures associated with it.
The Importance of Business Processes
The need and the advantages of a business process are quite apparent in large organizations. A process forms the lifeline for any business and helps it streamline individual activities and make sure that resources are put to their optimum use. Smaller businesses sometimes find establishing business process priorities more difficult, leaving too many businesses are still conducting business “on the fly.”
“Ad-hoc decision making and figuring out processes as we go keeps us agile,” says one small business manager, who worries that his competition is gaining on him. “We’d fall further behind if we had to stop and figure out formal processes.”
Ad-hoc solutions may provide immediate customer response when you’re a small business with a few customers and a few employees. But if you haven’t thought ahead to how you’ll scale your business processes as you grow, you’ll soon be like our friend above – working over-time to “figure out things as you go” and falling further behind.
Key reasons for having well-defined business process are to:
- Identify which tasks are important to your larger business goals
- Streamline them to improve efficiency
- Streamline communication between people/functions/departments to accomplish specific tasks
- Set a hierarchy of approvals wherever relevant in order to ensure accountability and an optimum use of resources
- Keep chaos from creeping into your day-to-day operations
- Standardize a set of procedures to complete tasks that really matter to your business
Every business needs Business Processes and Business Process Management to get more work done, easier, faster and cheaper. Think of it like this:
- the less you have to think about the “steps” in a process;
- the less you have to process by hand; and,
- the more automatic the checks and balances –
the better the engine of the organization runs! It’s like an automobile engine –a well-tuned engine will propel your car further, more economically and more safely than one that stalls-out because the tuning is faulty.