Process Improvement

Process Improvement Tips

Before you try to improve a process you need to understand it. This means you have to analyse it to identify areas for improvement. Below are some tips for analysing and improving a process.

Analysing a process
This means you have to ask questions, lots of questions. Remember, you can not have too much information.

What are the current processes
What manual activities are performed?
What are the volumes, error rates, turnaround times?
What is the resource commitment?
How efficient / effective is it?
What are the current issues?
What are the people in the process doing?
Are they helping, or do they contribute to the issues?
How do current systems impact the process?
Can current systems be enhanced to improve the process
Can new technology improve the process?
What would the benefits of improvements be?
What would be the cost?
What is the potential impact / downside of improvements to the process?
What is the potential for backlogs of work?

There are eight main steps in analyzing a process:

Ask questions and collate data
Analyse the data and develop process maps
Identify issues and areas for improvement
Agree process maps, issues and areas for improvement
Identify possible solutions for issues and improvements
Complete a high-level cost/benefit analysis for solutions
Agree a shortlist of solutions
Complete a detailed cost / benefit analysis for short-listed solutions

Process maps
As part of the analysis a process map should be developed. This will become your process documentation (if you have not fully documented it already) and should cover the following topics:

Description of process
Key performance indicators
Who performs the process, including an organisation chart
List of specific policies or guidelines related to process
Key controls associated with the process
List of scenarios within the process
Diagram(s) of process flows
Identified issues with the process

It can be expanded by including:

Current metrics for the process
Summary of recommended changes to current process
Future state process flows if recommended changes made
Detailed description of process steps
Expansion of process steps to a full training guide.

Justifying improvements
Process improvements come in two types:

Non-technology improvements focus on process and people, they are independent of scale but gains may be minor.
Technology improvements try to streamline and automate the process. Gains can be high but require scale to justify the investment (scale could be the volume of transactions, eg: invoices / credit notes per annum; or the number of FTE’s involved in the process). Scale improves the economies of investing in technology and increases the available options.

At what point does the investment in technology and process improvement justify itself? The answer to this question is dependent on two factors:

Do you know what you have and what problems you are trying to solve?

Some people invest in a solution believing it will solve their problems. Often they find it fails to live up to their expectations and only highlights more problems. Eg: imaging invoices will solve paper storage problems, but unless it is linked to your financial system it may not relieve retrieval issues and will certainly not reduce processing backlogs. Unless it is integrated into your overall process it is simply a storage mechanism. So, you need to be clear on what your current process is to determine the problem you are trying to solve, identify possible solutions and to value the benefits to compare with the costs.

Do you intend to invest your own money (ie: buy the solution) or use someone else’s money (outsource to gain access to the solution).

Buy - If an up-front investment is required this needs to generate benefits that usually rely on scale (the higher the volume, the better the benefits as the cost is spread over a wider base). If the technology is unlikely to change and you have scale, then buying the solution may be a good option.

Outsource - Paying a transaction rate and passing the maintenance and updating of the solution to an outsourcer can improve the economies of technology. The lower the volume the more appropriate outsourcing becomes as the only means available to gain access to the technology, and the higher the volume then the more appropriate outsourcing becomes as scale can be exchanged for economic benefits through price reductions. In the modern business environment outsourcing should always be considered, but this is especially applicable if the technology is changing. What you buy now may be obsolete in a year. Better to let someone else keep up-to-date.

It would be nice to have a standard template to enable the justification of improvements to be obtained easily and quickly. Unfortunately every business is different, but there are questions you should answer whenever you try to improve a process.

What is the process?

Make sure you fully understand the process and know what is actually being done, rather than what you think is being done.

What is the problem(s)?

Be clear about the problem. Is the process to slow, to time consuming, to expensive, to inaccurate – what is wrong?

Why is this a problem?

How do you know this is a problem? Through customer or staff feedback, through benchmarking or performance metrics – what is it that tells you this is a problem? This is important because you need to identify a solution that satisfies whoever is being impacted by the problem. Check that no one benefits from the problem, does the benefit outweigh the problem?

What is the monetary cost of the problem(s)?

Everything can be attributed a monetary value. It could be time, which can be valued, or a direct monetary loss. If the monetary value is not obvious then determine what is it is worth to the parties affected to fix the problem, this will result in a value range (seldom will everyone agree) which can be used as a proxy for cost.

What would solve the problem(s)?

Everyone affected by the problem or involved in the process will have opinions on how to solve the problem, and you can always ask other businesses.

Where would you get the solution(s)?

Can you provide the solution yourself, can you buy, rent or share it. Determine all the options for gaining access to the solution. One of them will be more economic and provide more non-monetary benefits than the others. Benefits can also be traded off against each other.

What is the monetary cost of the solution(s)?

The cost may be obvious – X amount for a packaged solution – but there are invariably other costs. Include external and internal costs, such as time for implementing and training, attribute a value to non-monetary costs and any relevant opportunity costs (everything can be attributed a value).

What are the benefits of the solution(s) and their monetary value?

What are you expectations for the solution? Be realistic and expect the benefits to build up – you will seldom gain maximum benefits from day one. Attribute a monetary value to all benefits. Do any of the solutions solve multiple problems?

Do the benefits justify the cost(s)?
This should be a simple matter of A minus B but seldom is. There will be debate over the valuation of the costs and benefits, whether the solution will actually fix the problem and will the benefits materialise.

There are always numerous solutions to a problem. You need to identify and value these solutions. There will be one that justifies the investment.

Tips for analysing a process

Agree the process - what it is, where it starts and ends; agree the current status of the process; where possible cross check data
Ask lots of questions and listen (to anyone) - you want to know what is really done, not what someone thinks is done; look at the system - is it used as designed; look beyond the system - you want to find the manual work-a-round's
Look beyond the obvious - both when analysing the process and looking for solutions
Be realistic - about the potential for improvement; about the costs and benefits of possible solutions
Gain ownership and buy-in - of both problems and solutions.

Tips for improving a process

When implementing change do it initiative by initiative

Rolling out multiple initiatives which impact the same function / process will prevent the early / easy identification of problems and their causes. It may not be easy to distinguish what has created the problem.

Ensure you understand your cost structure - what costs are fixed, step or variable - what benefit will actually be achieved

Many initiatives fail to meet their financial expectations due to unrealistic expectations. Understanding the cost types enables realistic targets to be set and allows true cash savings to be distinguished from non-cash, quality or efficiency savings.

Ensure you understand the process you are trying to improve and the impact / benefit desired

You must understand what you are trying to improve and the result you want to achieve. Eg: moving paper invoices to electronic will improve data entry quality and reduce data entry costs, but it will not improve line item matching to PO’s (beyond the data entry quality improvement).

Resource up for go-lives of process improvements - assume it will not go smoothly

It is easier to resource high for go-lives then downsize, than to recover by training new resource when the process is under stress. Delay reductions in personnel until it is certain the initiative is under control and is successful.

Identify the steps in the process – should you automate, eliminate or redesign

Attempting to remove steps in a process can sometimes be more disruptive and harder than automating that same step. And technology is not always the best solution, sometimes the process just needs to be redesigned or staff need more training.

Conclusion
When improving a process try to look beyond the short-term. Short-term gains can result in long-term pain. Do not solve a current problem to replace it with a future issue. And though it may be a painful and even long journey, finish what you start. A half improved process will be worse than a non-improved one