Process Debt 101: A comprehensive guide to understand Process Debt.

Outline:

1. Intro
2. What is a Business Process?
3. What is an ideal Process & F**ked up Process??
4. What is Process Debt?
5. Examples of Process Debt?
6. What causes process debt?
7. Types of Process Debt?
8. Why remove Process Debt from your business?
9. How Process Debt affects AI & Automation Success?
10. How do you fix process debt?
11. How we helped our clients remove Process Debt?
12. Conclusion

1. Introduction:

I’m sure you’ve seen companies where work is happening slowly and employees never cared to put their best in, and I’m also sure you’ve seen companies where things were happening at a blazing fast speed and employees felt excited about contributing to the business.?

But what separates the former from the latter? The answer is Process debt. Before we jump into Process Debt, let's first understand what a Business Process is.

2. What is a Business Process?

A business is a group of people that coordinate their work to create value & a business process is a sequence of activities designed to create something of value by these people. A business process has a start point, an end point and a series of activities in between.

It is a systematic and standardised way of accomplishing a particular task or set of tasks, often involving multiple departments or teams. Examples of business processes include order-to-cash, procure-to-pay, and hire-to-retire, among others.

How well we do these processes, how long they take, how accurate they are has a big impact on the success of a business.

Here is a simple video explaining the concept of business Process in 2 minutes:

3. What is an ideal Process & F**ked up Process?

Here are some characteristics of a F**ked up Process.

• There are bottlenecks in your workflows.
• Your team is blaming each other for unfinished work.
• There are manual errors happening everywhere in the process.
• Your team keeps complaining about doing the same repetitive tasks every day.

Here is how an ideal Process looks like:

• No bottlenecks in the system.
• No member would do the same job again & again.
• The process would be foolproof to avoid manual errors altogether.
• Your team would not have to blame each other for unfinished work.?
• Nobody would be dependent on each other to complete their work.

4. What is Process Debt?

Process Debt is the main difference between f***ed up processes & ideal processes. It is any work done that does not add value to the customer or the business.

It is the accumulation of inefficient, outdated, or redundant processes within your business workflows over time. It occurs when a process takes longer to complete than its optimal or intended duration, resulting in wasted time, effort, and resources.

If it’s been a while since you’ve audited a process from beginning to end, there is a huge chance Process Debt is present there in the form of bottlenecks, inefficient steps, and unnecessary actions.

5. Examples of Process Debt?

An excellent example of process debt is when the Sales Team has a fantastic CRM Tool but still relies on Excel + Phone + Pen and Paper to track leads and make sales “because that worked for them all these years.

Processes having Process Debts:

• Processes, saving money but wasting time.
• Processes, saving time, but wasting money.
• Inefficient processes which consume resources.
• Missing processes which can lead to confusion, lack of direction.
• Processes, set with good intentions, but are difficult to adopt, causing low morale.

Few real life examples of Process Debts in different businesses:

a: Manual Inventory Management Process

Company A, a retail business, relied on a manual inventory management process that involved handwritten records and physical counts of products in stock. This outdated method led to discrepancies in inventory levels, stockouts of popular items, and overstock of slow-moving products. As a result, Company A faced lost sales opportunities, increased storage costs, and dissatisfied customers due to delayed or incorrect orders.

b: Paper-based Procurement System

Company B, a manufacturing firm, had a paper-based procurement system that required multiple approval signatures on physical purchase orders from stakeholders. This manual process was time-consuming, prone to errors, and lacked visibility into procurement status & spending patterns. As a result, Company B experienced delays in acquiring necessary materials, inefficient allocation of funds, and difficulties in tracking purchases.

c: Inefficient Customer Support Workflow

Company C, a technology company, had an inefficient customer support workflow that involved multiple handoffs between departments, redundant data entry & lack of integration. This fragmented process led to delays in resolving customer issues, duplicate responses to inquiries, and inconsistent service quality. As a consequence, Company C faced declining customer satisfaction, increased customer churn, and higher support costs.

6. What causes process debt?

It can emerge due to any one of the reasons:

• Lack of standardisation: Inconsistency, lack of clarity and lack of context in how tasks are performed leads to inefficiencies and confusion.
• Manual workarounds: Relying on temporary fixes instead of addressing root issues perpetuates process debt as an activity that has outlived its benefits is repeatedly performed.
• Legacy systems: Outdated technologies and software hinder streamlined processes.
• Overcomplicated workflows: Complex procedures can slow down operations and increase the risk of errors.
• Siloed information: Inaccessible or scattered data complicates decision-making and process optimization.
• Inadequate training: Insufficient education on processes and tools can lead to suboptimal utilization.
• Resistance to change: Failure to adapt to new technologies and methodologies can impede process improvement efforts.

7. Types of Process Debt?

With our expertise of helping 50+ companies get rid of process debt in the last 4 years, we have identified 8 different types of Process Debt.

A: Dependencies on People - Reliance on key individuals slows processes.

B: Manual Work & Errors - Manual tasks increase error rates and inefficiency.

C: Bottlenecks - Process slowdowns due to limited capacity at critical points.

D: Poor Accountability - Lack of ownership leads to unmet responsibilities.

E: Repetition & Duplication of Work - Redundant tasks waste time and resources.

F: Poor Prioritization - Misaligned priorities disrupt workflow effectiveness.

G: Communication - Ineffective communication causes misunderstandings.

H: Lack of Internal Business Data - Insufficient data impedes informed decision-making.

8. Why remove Process Debt from your business?

You must be wondering if Process Debt is really that big of a threat for your business. It is a form of debt you may not have considered till now but you are probably accumulating more of it.?

On the micro-level, this may mean a customer lost to a slow turnaround for a quote or bug fix. On a larger scale, this could mean losing first mover position in the market by being too slow to adopt to changing market conditions.

Here are 8 of the worst case scenarios if you don't eliminate Process Debt from your business.

• Decreased Productivity: Inefficient processes lead to wasted time and effort, hindering productivity.
• Increased Costs: Process debt can result in higher operational expenses and resource wastage.
• Customer Dissatisfaction: Ineffective processes may lead to poor service quality and dissatisfied customers.
• Lost Opportunities: Inefficient workflows can cause missed opportunities for growth and success.
• Reduced Competitiveness: Companies with process debt may struggle to keep up with more efficient competitors.
• Compliance Issues: Outdated processes may lead to non-compliance with regulations or industry standards.
• Employee Frustration: Cumbersome processes can demotivate and frustrate employees, impacting morale.
• Reputation Damage: Persistent process debt can tarnish a company's reputation and brand image.

9. How Process Debt affects AI & Automation Success?

Process Debt can affect AI and automation success in many ways:

1. Hinders integration: Process debt can create obstacles in integrating AI and automation technologies effectively into existing workflows, limiting their full potential.
2. Increases errors: Cumulative inefficiencies and bottlenecks from process debt can lead to inaccurate data inputs and outputs in AI and automation systems, reducing overall efficiency and reliability.
3. Slows down implementation: Addressing process debt is essential for successful AI and automation deployment, as outdated or inefficient processes can impede the adoption and optimization of these technologies.

In a recent HBR article, it highlighted that without tackling process debt, companies won’t be able to realise the massive potential of technologies like AI.

It gave an example of a Fortune 50 consumer products company where the reporting and analytics activities were being done manually across several functions and lines of business. More than 100,000 reports were produced across these businesses and functions, with 70% of the time spent on data gathering, analysis, and producing reports.?

There was a huge Process Debt present inside the company, so they initiated a global program to help tackle their process debt. Instead of rushing to use technology to automate existing reports, they asked fundamental questions about what reporting is needed, why, and how they could pivot this set of activities to growth while reducing costs.

It led to A 70% reduction in the number of reports produced & a 50% reduction in costs for reporting activities across functions.

To get the most out of automation & AI, businesses first have to remove existing Process debts from their Processes before using AI & Automation.

10. How do you fix process debt?

• Conduct a thorough process audit: Identify inefficiencies and bottlenecks to pinpoint areas for improvement. You must figure out where Process Debt is present in your business.
• Standardize and streamline workflows: Develop a lean, contextual understanding around each of your processes, its benefits and what-If scenarios (what happens in absence of such a process?). Establish clear, consistent processes to minimize variations and reduce waste.
• Invest in modern technologies: Upgrade legacy systems and implement tools that streamline operations and automate repetitive tasks. Adopt the new process! Ultimately, acknowledge and let go of some of the older ways of working, with the mindset that it was good while it lasted.
• Foster a culture of continuous improvement: Encourage employees to suggest and implement process enhancements. Conduct Periodic introspection of each process - How to make such a process even leaner? What are the gaps? How to run this process in auto mode? Do such an exercise with all the right set of stakeholders.
• Provide comprehensive training: Educate staff on efficient processes and how to utilize new technologies effectively.
• Embrace collaboration and communication: Break down silos and encourage cross-departmental cooperation to improve overall processes.
• Monitor and measure performance: Establish KPIs to track the impact of process improvements and identify areas needing further attention.
• Beg, borrow, steal: Challenge some existing processes. Let a small group run a proof of success with the new, or enhanced or alternate processes.

11. How we helped our clients remove Process Debt?

A: Jay Krishnanunny, CEO, The Everyday Bowl

The following Process Debts were present in Jay's business:

1. Dependency on the admin(Jay) to prepare a list of orders with meal and delivery address.

2. It was manual work to print stickers for orders which generated errors of about 8%.

3. Repetition of the same sort of work everyday for every order.

We eliminated the Process Debts in the following ways:

1. Automatic kitchen order tickets eliminated the need of admin to prepare order separately for every consumer everyday which reduced dependency.

2. App data automated the print stickers which simplified the work and reduced the manual errors to only 1%.

3. The process being automated reduced repetition of the same work.

B: Deepsikha Jain, CEO, Friestofit

The following Process Debts were present in Deepsikha's business:

1. Manually handling the plans, timetable, management without any automation.

2. Lack of internal data management of clients without a centralized database.

3. Poor prioritization on workflow and whom to respond at what priority resulted in delayed responses and missed opportunities.

We eliminated the Process Debts in the following ways:

1. Fully automated app managed processes like membership, timetable, diet plans for clients. This reduced her manual work and she could focus more on growing the business.

2. Analytics of client data helped in managing the database and improved her workflow with much easier steps.

3. Notifications and automated messages avoided negligence of clients, improved response time and improved customer satisfaction.

C: Andrea Lasalandra, CEO, TheFrontBest

The following Process Debts were present in Andrea's business:

1. Dependency of the staff on the owner (Andrea) for procedures and workflow.

2. SOPs, coaching, tracking of performance was manual which consumed a lot of time & energy.

3. There was a communication gap between the staff members as to who is supposed to do what and when in the hotel.

We eliminated the Process Debts in the following ways:

1. A handbook was created which made the staff more independent to carry out all the procedures on their own.

2. We automated the processes and direct instructions were sent to the staff reducing manual work.

3. The instructional handbook and digitisation bridged the communication gap between managers and staff members.

12. Conclusion:

EVERY company has PROCESS DEBTS. Once you hire more and more people, you place yourself on the path to PROCESS DEBTS. Over time, it escalates from minor irritations to significant roadblocks as a company scales.

Don't let PROCESS DEBT hinder your company's growth. Find out where PROCESS DEBT is present in your business & start taking continuous actions to eliminate it from your business.

Do you need help in eliminating Process Debt from your business? Join our exclusive Whatsapp community to get insights from our approach of eliminating Process Debt & get elimination of 1 Process Debt for free every weekday for 1 community member. Sounds interesting? DM "Process" & I will send the access to exclusive community.

At Modernizing Processes, we are dedicated to identifying and eliminating these Process Debt from the root cause, to ensure your company operates without any process debt. If you want expert guidance on eliminating Process Debt from your business, book a free 30 min Process Strategy call with me.