Business Process Improvement 101- Definition, Methods, and More
An increasing number of companies are turning to business process management (BPM) to gain a better understanding of their operations and find ways to leverage data to improve their processes. In fact, the global Business Process Management (BPM) market is predicted to grow by a compound annual growth rate (CAGR) of 13.52% from 2016 to 2021, reaching $14.89 billion by 2021.
The overarching goal of almost any business is profitability and business process management delves into this topic specifically through the lens of efficiency and cost-effectiveness.
However, BPM itself is an umbrella term that covers a wide range of functions and activities. One such function is business process improvement (BPI), which looks specifically at how to improve existing operations within a business. In order to apply this analysis to their organizations, it's important for business owners to understand the different models and steps of BPI.
Understanding Business Processes
A business process is a sequence of repeatable steps within an organization that leads to an ideal outcome or business goal. For example, whenever the company wants to hire a new employee, it goes through an administrative process (i.e. recruitment) to reach that business goal.
Other examples of business processes include-
- Employee Onboarding
- Product Development
- Customer Service/Support
- Inventory Management
There are many schools of thought concerning the types of business processes. Generally speaking, however, most processes will fall under three main categories-
1. Core or Operational Processes - These are processes that generate value and income, such as manufacturing and order processing.
2. Supporting Processes - As the name suggests, these processes support other operations. Examples include recruitment, accounting, and technical support.
3. Management Processes - Operation and support processes require planning, coordination, and control - this is where management processes such as budgeting and employee oversight come in.
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What is Business Process Improvement?
Business process improvement is a management exercise that seeks to analyze, review, and improve existing business processes. To put it simply, it's about making things in the company work more efficiently. By doing so, business owners and managers can optimize the company's performance, follow industry standards and best practices, and provide better product and service quality to customers.
The key to getting business process improvement right is to make sure the establishment can map out all of its processes - hence why it's imperative that business owners and managers know every procedure within their organization. This is the only way to accurately identify inefficiencies and find ways to redesign processes.
3 Primary Goals of BPI
Because BPI can have a broad scope, it helps to focus your process improvement activities on a goal (or goals) that is most relevant to the organization. Typically, this can be one or more of the following-
1. Improving Product Quality - This process improvement goal focuses on improving product quality using the same input of resources. This usually means identifying inefficiencies in the manufacturing process that negatively affect the product or finding new manufacturing methods through the use of new technologies and practices.
2. Speeding Up Process Times - This process improvement goal looks at making processes faster by removing redundant steps or using new technology (e.g., process automation).
3. Waste Reduction - This goal is centered on revealing wasteful activities and removing them from the company's workflow, either to support the two other goals or to simply improve business productivity. For example, reducing product wastage through inventory management can lead to lower inventory carrying costs.
5 General Steps of Process Improvement
Like any business management discipline, business process improvement has multiple methodologies. The general principles, however, are usually the same and cover the following steps.
1. Looking For the Problem
A business problem or challenge is the impetus of any process improvement project. This step is about asking the question, What things in the business can we improve or fix?
As mentioned earlier, management can use business process mapping to get an overview of the company's current processes. The good news is that this is no longer done with a pen and paper.
Businesses can utilize visuals such as digital flowcharts to display each step of their processes. Workflow or task management applications can also map and track processes in real-time, giving users an overview of operations and a list of employees responsible for the activities and tasks that comprise each process.
2. Analysis of the Problem
After process mapping comes analysis. This step involves understanding the causes behind inefficiencies, redundancies, and errors. More often than not, this requires involving entire teams or departments to provide their feedback and suggestions on how to improve processes.
For example, if one department discovers an unusual pattern of employees resigning within one year after getting hired, there may be a flaw within the HR department's recruitment process. This, in turn, could be indicative of poor communication between that department and the company's hiring manager.
3. Redesign the Process
Once a problem and its causes have been identified, the business can proceed to redesign the offending process. Because every organization is different, there is no one size fits all approach to this strategy. Still, there are certain best practices that work in almost any situation.
- Choose the Right Metrics for Measuring Progress - This makes it possible to quantify the impact of improving the process.
- Get as Much Feedback as Possible - Be sure to get suggestions from field-level team members, who are often in the best position to comment on how processes should work to make their jobs more efficient.
- Define the Scope of the Redesign - This makes it easier to identify the risks and predict the impact of any changes made to a process.
- Plan for Long-Term Changes - Any changes to a process have to be worth it in the long run. A redesign with short-term results may only end up costing the company more money.
- Conduct Risk Analysis - It's impossible to predict outcomes with 100% accuracy, so it is important to leave room for error. Have a backup plan should things go wrong and be ready to go back to the drawing board if necessary.
4. Implement the Changes
Implementing process changes is a challenge of establishing buy-in with your employees and other stakeholder groups. It's imperative that the company's leadership get commitment and support by outlining the reasoning for improving the process and how these alterations can help the organization.
Of course, business leaders should also expect to meet some resistance. After all, people can be wary of change. One way to obtain support is to make small, incremental changes to a process to demonstrate their results. This approach also has the benefit of reducing risk.
5. Measure and Refine
Business process improvement is a continuing effort, not a one and done deal. As mentioned earlier, it's important to choose the appropriate metrics to measure the impact of improving a process. Regardless of the result, however, the organization must not shy away from going back to the drawing board and finding a better approach to process improvement.
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Examples of Business Process Improvement Techniques
Different organizations, academics, and institutions have contributed to the growing number of business process management and improvement methodologies. While the underlying objective of these methodologies is largely the same, the difference lies in how each methodology usually addresses a specific need.
- Kaizen - Kaizen, which means improvement or change for the better in Japanese, is a business philosophy that focuses on continual improvement by making small and gradual changes to processes. Companies like Toyota, Lockheed Martin, and the Mayo Clinic use Kaizen principles to improve employee engagement, quality control, and processing times among others.
- Six Sigma - Developed by Motorola in 1986, Six Sigma is a popular framework that breaks down process improvement using the DMAIC approach- define, measure, analyze, improve, and control. The methodology focuses on making statistical improvements to business processes under the lens of efficiency and error reduction.
- Kanban - Kanban is another Japanese methodology (meaning billboard' or signboard') designed for process workflow visualization. The idea is that by visualizing the company's work, it becomes easier for leadership and stakeholder groups to get on the same page and improve process efficiency.
- Total Quality Management (TQM) - TQM focuses on achieving long-term success through customer satisfaction. This customer-centric methodology seeks to empower employees with the ability to improve their processes to provide customers with a better product and/or experience.
- 5S - 5S is a workplace methodology based on the Kaizen and lean system that aims to create a workplace that is clean, safe, and orderly, thereby reducing waste and improving productivity. The framework is based on five pillars (hence the name 5S)- sort or seiri, set in order or seiton, shine or seiso, standardize or seiketsu, and sustain or shitsuke.
- PDCA - PDCA, which stands for plan-do-check-act, is a four-step management methodology designed to help organizations be more efficient when identifying processes requiring improvement. The PDCA framework, based on Kaizen, offers a cyclical approach to making processes better.
- SIPOC - SIPOC is a tool under the Six Sigma methodology that summarizes the inputs and outputs of a process in a table. It's a diagram tool that illustrates the relevant elements of a process improvement effort, breaking them down into supplies, inputs, process, outputs, and customers.
Automation vs. System Integration for Process Improvement
When it comes to software tools for business process improvement, organizations typically gravitate towards two solutions - system integration and automation.
System integration tools have been around for quite some time. The idea is to use the software to identify scattered systems and integrate them into a single, more efficient process or integrated application system. This allows the organization to-
- Improve Customer Satisfaction
- Improve Relationships with Partners
- Reduce Operational Costs
- Increase Workflow Efficiency
- Promote increased accuracy in data sharing
RPA is typically used to automate financial processes, such as payroll processing, inventory tracking, and demand forecasting, as well as customer relationship processes like order processing and chatbots. According to Deloitte's 2016 Global Outsourcing Survey (GOS), 75% of organizations are already achieving their cost-saving targets by automating routine processes, freeing up time for employees to work on value-creating tasks.
Business process improvement can be a challenging endeavor requiring the entire organization to get on board. However, by automating repetitive business processes, organizations can lighten the load and reduce risks and expenses in the long run. By eliminating the need to perform certain tasks manually, management can save time and money spent on labor, while also drastically reducing the risk of human error.
Simultaneously, by integrating all software tools through system integration, businesses can ensure all systems and applications become interconnected, allowing for a free flow of consistent and accurate data to utilize in their next business process improvement venture.
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