How to Cash-In on Business Process Improvement


How to Cash-In on Business Process Improvement

A primary motivator behind any attempt at Business Process Improvement (BPI) or systems upgrades is to see measurable and tangible results. These results may include reduced operating costs, fewer errors/defects, improved customer satisfaction, cycle time or profitability. The average Business process contains about 80% non-value added activity. This translates to a potential “Gold Mine” of opportunities for most manufacturing, service delivery or government organizations. Focused attempts to increase the efficiency of workflows may net a 60% reduction in steps with corresponding reductions in cycle time. Similar savings projections are not uncommon for automated systems. These bottom line results would warm the cockles of any senior executive’s heart.

Unfortunately, actual experience reveals that CEOs and CFOs frequently are repeatedly frustrated by investing time and money in hardware, software or consultants, hearing pie-in-the-sky promises only to realize little if anything during post-implementation analysis. Yet when intelligent and reasonable people logically examine the improved system, the savings should be real. This article describes what has happened to the projected savings that seem to evaporate after a process has been improved or the automated system put in place. The piece will also explore what can be done to realize these benefits before they disappear.

Back in the days of the “Efficiency Expert” the issue was fairly simple and clear cut. If the improved system could save the equivalent of ten full time employees, you got out the old meat axe and lopped ten hard working loyal people from the organization’s payroll. While this approach was straight forward, it was not without draw backs. Staff experiencing these purges fell into 2 categories. The first group is composed of the “Victims.” These people did nothing wrong yet paid a very high price for organizational inefficiency. They are gone and so are their skills and experience. The second group of staff is called the “Angry Survivors.” “Angry Survivors” saw what happened to their friends and teammates, wondering when it will be their turn. Loyalty to the organization is gone. Future attempts to optimize operations will be met with passive aggressive and overt resistance.

So conducting an immediate reduction in force is a definite approach to get bottom line savings. However, it is tantamount to Continuous Improvement suicide and is not a wise option. Some organizations realize this and take a more humane approach by using attrition to achieve the savings that would be produced by a reduction in force. This option is flawed for two reasons. First, attrition is random unless there is a targeted “Golden Parachute” incentive. Random attrition may not get you the savings in the places where the improvements occur. Reshuffling the human resource deck is not always a good or practical option. The other problem with attrition is that it takes time. When a process has been improved through the elimination of large amounts of time and waste, staff resources have been given the gift of additional time. If the organization waits several months for attrition to occur the organization will probably have to back fill the positions. People will be busy with no time to spare. Savings projected with the implementation of the improved process or system seems to have vanished over a short period of time. It is as if someone places his/her hand in a pond. Even though the hand displaces water when the person’s hand is withdrawn the waters close as if the hand were never there.

So how can the organization cash-in on these promised savings without destroying the morale and loyalty of the workforce? There are several techniques that we will explore. The first evolves from a brilliant and witty British Professor, Cyril Northcote Parkinson. Parkinson gives us a simple but powerful concept that has become known as “Parkinson’s Law.” Simply stated, “Work expands to fill the time available for its completion.” As a Business Process Improvement consultant with 33 years experience, I have seen Parkinson’s Law validated time-and -time again. At the beginning of my career I had a client that was in the disability insurance business. The organization was about to undergo a significant expansion due to the acquisition of a new program. In what appeared to be good prior planning the organization hired about 20 new professional staff to process the projected workload. The Claims Examiners were hired well in advance of the start of the new program. The game plan was to train the new staff and let them function with a reduced caseload for six months. The normal caseload was 100 pending claims. Experienced Claims Examiners could handle this workload comfortably. After training, the new staff would receive intake until the caseload peaked at 25. The caseload would be maintained at that level for four months then gradually increased to 100 by the 6th month. Knowing the workings of “Parkinson’s Law”, I strongly advised the leadership of the organization against this strategy. My advice was disregarded and 25 pending claims became a full caseload for the new Claim Examiners. It was not because the new hires were lazy or lacking in skills, intelligence or motivation, it was “Parkinson’s Law” in action.

Lack of understanding of “Parkinson’s Law” causes many great process improvement initiatives and systems upgrades to come apart at the seams. Any operational improvement will eliminate non-value-added activity or automate manual duties. If we fail to substitute high-value added activity for the eliminated tasks “Parkinson’s Law” comes into play and any gains made via improved efficiency are lost to the inexorable mechanics of Parkinson. Accordingly, when savings are first projected through the improved system or workflow we must identify them and “Repurpose” the time made available through the improvement. In other words we are substituting high value activities for non-value added or obsolete activities. This should be done deliberately using a planning tool with a very short timeline.

Planning for Parkinson’s Law should be integrated into an organizations Continuous Improvement methodology. Let’s examine an organizational Business Process Improvement Model and see how Parkinson’s Law can be blended in to make the model produce tangible savings every time.

Here is a typical 7-Step model:

  • Preparation – A process is selected and defined with a project charge statement.
  • Documentation – The “Present State” process is captured in detail to include baseline metrics.
  • Analysis – A wide range of improvement possibilities is considered.
  • Synthesis – Options are evaluated against deliverables described in the project charge statement and one or more improvement scenario(s) is adopted as the “Future State” process.
  • Acceptance – The improved process proposal is presented to management. Management decides which elements will be implemented.
  • Implementation – The improvements are put in place and the improved workflow is standardized.
  • Continuous Improvement – Key metrics are identified and continuously measured to ensure the ongoing health of the new process. The workflow is reviewed on a regular basis to identify additional opportunities from efficiency and effectiveness perspectives. This time tested approach will usually produce substantial and measurable results when harnessed to effective BPI tools. However, one key element is missing, an antidote for “Parkinson’s Law”. Without this additional step the waters will close shortly after Implementation and all savings will be lost. Consider adding an eighth step to the model that is described above. Insert it between steps IV (Synthesis) and V (Acceptance). Let’s call this step “Reallocation of Resources”.

During the “Reallocation” step resources that have been “Freed-Up” through the elimination of waste are “Repurposed”. The trick is to immediately substitute high value added activities for non value added activities. This can be accomplished in two ways both of which may benefit the organization. Selecting the best option or combinations of options should be driven from a situational perspective.

The two options are:

  • The “Wish List” Option – Every organization has a list of things that they could do to move the company towards “World Class Status” or to improve competitiveness or customer satisfaction,” IF ONLY WE HAD THE RESOURCES”. The “Wish List” will not contain waste or non value added activities but rather high value the things the organization should be doing. Develop a “Wish List” for your organization with an activity involving top management. Get the customer’s perspective by repeating the session with them or inviting the customers to management’s “Wish List” meeting. Develop the list by brainstorming “Things we could do to improve the organization if we had unlimited human resources”. Next, sort the list by the functional departments of the organization and prioritize each functional list. When you have freed resources visit the “Wish list” for high value added “Repurposing”.
  • Increased Capacity Option – If there is a great demand for your products or services that the organization has been unable to meet or if you wish to increase your market share, this option may be for you. After the non value added activities have been removed from the process don’t stop there. Reconfigure and /or redeploy existing resources to maximize production capacity. It must be studied and planned for. It will not happen under its own steam.

After the “Reallocation of Resources” decisions have been made they should be incorporated into the Improvement Project Proposal and delivered to management. Subsequent implementation of improvements should be done using project planning tools. The implementation plans should include the action items that describe reallocation of resources.

Sarasota County Case Study

Sarasota County government has been a longstanding proponent of customer service and continuous improvement. Every building county building proudly proclaims Dedicated to Quality Service.” These are not just plaques on the entryways of public buildings. These words are backed up by actions and a solid commitment from management at all levels.

In 1996 Jim Ley, County Administrator, trained staff in Continuous Improvements and launched several highly successful process improvement projects. Subsequently, the county adopted a “Work Simplification” based methodology. Sarasota County deployed Continuous Improvement through a formalized structure and trained internal trainers to grow the program in a cost effective manner. The County has wisely integrated Continuous Improvement with Strategic Planning initiatives. This gave rise to an interesting and proactive project launched by Karen Rushing, Clerk of the Circuit Court and Sarasota County Comptroller and Pete Ramsden, The Director of Finance. Mr. Ramsden had been involved with the County’s Continuous Improvement program from the outset. He was a member of one of the first teams trained and chartered by the County. Pete had effectively used process improvement techniques with his Finance work team to harvest much of the low hanging fruit.

Southwest Florida has experienced very strong growth for over 40 years. Projections through 2030 continue to show growth, which translates to an increased workload for Sarasota County. Rather than take the traditional passive approach and hire new workers as volume increased, Karen Rushing and Pete Ramsden had taken an aggressive and proactive tact that will delight county customers without adding additional staff. If successful this experiment would have transferability to processes County-wide.

The work flow targeted for improvement was Accounts Payable. The “Present State” process worked well with a very short cycle time, happy customers and a talented Accounts Payable staff. The goal of the project was to optimize the Accounts Payable work flows to generate sufficient capacity to accommodate the predicted increase in workload with the existing staffing level.

Sondra Knapp, Accounts Payable Manager was the project coordinator for the process improvement study which documented all departmental processes. Analysis and synthesis yielded a projected 25% increase in capacity. These improvements are very modest by BPI standards. The relatively small improvement percentage was due to the fact the workflows had been optimized several times in recent years. None the less a 25% capacity increase is substantial and well worth pursuing.

Improvements fell into three categories. The categories include:

  • Process Mechanics: The existing process was changed by steps being eliminated, combined, re-sequenced, done in a different place, done by a different person, automated or improved. Many of these changes would be done on a pilot basis to avoid the sting of another Law, “Murphy’s”.
  • Compliance Improvement: The study revealed a high number of requests for payment were submitted incorrectly or incompletely by internal and/or external suppliers of process inputs. This caused an inordinate number of delays and time dedicated to avoidable rework. All agreed that a multifaceted outreach and education program would greatly improve compliance with existing process requirements.
  • Workplace Redesign: Moving office furniture and equipment would compliment the optimized work flows by improving visibility, reducing distances traveled and improving accessibility to equipment and materials needed to do the job.

This is the point in the project where decisions must be made that will affect the bottom line outcome of the project, reallocating existing resources. Sarasota County evaluated their options and chose well. Reducing the existing workforce was never a viable consideration. The idea of releasing hardworking, well trained and motivated workers only to rehire inexperienced people a few months later made no sense at any level. The County leadership was well aware of Parkinson’s Law. Management was determined not to lose hard earned capacity increases to Parkinson. Accordingly, a plan was initiated that would keep the Accounts Payable staff meaningfully engaged with project implementation tasks.

Sondra Knapp was responsible for implementing the myriad of improvements. She has broken the improvements into a series of projects. Each project is formatted as a Gantt chart. Sondra engaged the Accounts Payable staff in the interesting work associated with project implementation.

Project tasks include:

  • Designing, scheduling and delivering training programs to suppliers of process inputs.
  • Writing a Users’ Manual for Purchasing Card holders.
  • Developing, publishing and distributing informational materials to internal and external process suppliers.
  • Working with County Audio/Visual staff to script, produce and deploy a series of video based compliance aids.
  • Redesign the existing office space.
  • Assessing and installing Contract Management Software.
  • Designing, implementing and assessing the results of a number of process redesign pilot projects.
  • Working with existing Systems suppliers to optimize and integrate electronic operations.
  • Developing “New Vendor and Contract Bid” kits.

There was plenty of work involved with project implementation. The AP Staff would experience full days even though much non value added activity had been removed from their jobs. As projects wind down the workload will increase as projected. Parkinson’ Law will be thwarted.

Sarasota County provides an excellent example of a “Process Mature” organization using BPI in a proactive and effective manner. Actively planning for Parkinson’s Law gave the organization the much needed human resources to implement the extensive projects initiated during the process optimization effort. Events were timed so that the new workload would gradually materialize as project implementation tasks gradually subsided.