Process Re-engineering

In the previous newsletter, I discussed continuous improvement, which is typically associated with evolutionary change. Sometimes, you just need to implement revolutionary change in your business. Process re-engineering is used to revamp critical business enterprise processes when drastic change is called for, but it is also used in manufacturing to change the way value added activities are done. In the early 90s I wrote the process re-engineering training module for Zenger Miller as part of our TQM efforts at Black & Decker. The primary focus of this training was to analyze and design workflows between organizations, which is consistent with my view of business processes being horizontal, as discussed earlier. The difference between then and now is that technology plays a much more significant role and the training module I created would no longer be up to the task. In process reengineering, cross-functional teams of people are chartered to understand the following:

1. What business problem are we trying to solve: Profitability, customer satisfaction, quality, employee issues or, and most importantly, satisfying the need of our MIG?

2. What does the process do now and how effective (indicated through measurement) is it?

3. What does it need to do in the future?

4. How does technology play a role in this process?

5. What gaps will re-engineering this process address?

6. What are the best practices in this process?

Answering these questions provides a set of objectives for the process re-engineering effort. It is critical that this first step be done so that when it comes time to provide justification, it is clear to senior leadership why they need to make the recommended changes and what the expected ROI will be. The basic steps in process re-engineering are:

1. Create a cross-functional team with a leader and a project charter.

2. Identify the start and end of the process so it is clear to everyone what the team will be working on.

3. Identify the objectives of the effort: What does success look like?

4. Collect data on the performance of the process so you can track improvements later.

5. Map out the workflow for the process.

6. Identify and list the failure points in the process (remember that most failures occur at the handoff between functions), and categorize them:

a. People

b. Process

c. Technology

7. Identify strategic gaps, operating gaps and RedOps.

8. Create a list of best practices and map those against what you currently do.

9. Identify the technologies required to support the new process and leverage existing ones.

10. Create a new workflow:

a. Identify required changes to people, process, and technology.

b. Identify projects that are required to create the new process.

11. Create an implementation roadmap.

12. Define how this new process impacts the MIG and the implementation of the business strategy.

13. Identify cost, timing, and ROI.

14. Charter cross-functional implementation team(s) to do the implementation.

This is a tried-and-true approach to process re-engineering. It has never failed me.

In one project for a $500M healthcare data company we identified over 350 RedOps in a primary business process. In this case, it made no sense to try and address each RedOp individually. In fact, no one RedOp could justify re-engineering the process or be important enough to get people’s attention and realign their priorities to work on it. Collectively, these RedOps told us that the end-to-end process had serious issues. Huddling with the team, we identified six projects that were a combination of tweaks to supporting technologies and changes in workflows. These six projects addressed more than 60% of those failure points and realized more than $22M in cost improvements. Not bad for six weeks of work. The client was ecstatic, to say the least.

There are a lot of steps here and each one of them is an important part of success. In process re-engineering, we use three primary tools: Value Stream Mapping, the Brown Paper Exercise and Kaizen (see resource section for links to more information on these tools). Value Stream Mapping (VSM) identifies workflow, worktime for each element, wasted efforts, unnecessary lead/lag times, bottlenecks, and shadow systems. Shadow systems are those Excel spreadsheets, cheat sheets, and reference documents that are used to make up for the shortfalls in the process or supporting technologies.

The Brown Paper Exercise can be applied to any business process. In the Brown Paper Exercise, we put brown paper on the wall and fully document the process with the process owners and various subject matter experts in technology and other functional areas. Process owners know what is happening, and they are keen to do this exercise. It is usually lively and fun. Using printouts of computer screens, policies, reports, and sticky notes, we create a detailed workflow with the process owners showing how every step works and how it is dependent on some other step or some other person. As we continue with the exercise, we put red sticky notes on the brown paper to show where the RedOps are as shown in the next figure. These are process failure points that need to be addressed in the process redesign. Workflow indicators are put onto the brown paper, and we often find loops of reporting, approvals, and data checking that are unnecessary. These are easily and routinely fixed during the session.

Figure 31 Brown Paper Exercise

The result of this exercise is that the process owners often say:

1. “I didn’t know you needed that.”

2. “Try to do it this way.”

3. “Our technology can do this for you and here is how.”

4. “I can fix that now.”

5. “Here are some ideas on how to fix this.”

I have never had a project where we did not find immediate process improvements from the Brown Paper Exercise, and I have done hundreds of these. The other interesting by-product of this exercise is that the process owners are the ones making the change recommendations, which builds buy-in and support for the required change management. This is an example of employee engagement which leads to alignment and agreement to the changes. Because the projects are tied to the MIG and company strategies, the process is also an important aspect of engaging stakeholders across the business. Do not underestimate the power of this exercise.

Once the Brown Paper Exercise is completed, the results are then transferred to the Value Stream Map. The team puts together the project plans, team charters, and the justification for their recommendations. We always have the teams present the results to senior leaders. Many of them have not done that before and are quite nervous, but they always do well and feel more important and appreciated afterwards.

After this has been done, the third tool we often use for process reengineering is the Kaizen event which was mentioned earlier in this book. To refresh your memory, Kaizen events, typically done over a weeklong period, are designed to quickly make changes to processes. They are effectively used in any business or manufacturing process and always yield meaningful results. I always kickoff Kaizen events with significant challenges such as:

1. Reduce lead time by 80%.

2. Realize a 50% cost improvement.

3. Improve yield by 65%.

4. Eliminate 50% of wasted effort.

5. Free up $2M in working capital.

These might seem like unachievable goals (I seldom negotiate goals with the team.), but once they agree, they are aligned and serious about achieving them. I typically take it one step further and sweeten the pot. I offer the team a blank check of $5,000 with the caveat that they must spend it during the event. I’ve seen many creative uses of that money as the teams try unusual ways to achieve the objectives. I also offer a bonus to each team member if they achieve the objective. Kaizen events have provided some of my fondest memories of watching proud people who have never been given a say, see meaningful results from their contributions, along with the glimmer of an organization developing a “Culture of Strategic Execution?”.

After reading this section, you should be thinking about:

1. Do we have processes in our business that do not work well and need to be re-engineered?

2. How do we do process re-engineering?

3. Can we take more advantage of VSM, Kaizen, and the Brown Paper Exercise to engage a larger part of our organization in achieving our MIG?

4. How do we get started?