BUS300: Operations Management

The work process approach, which has roots in industrial engineering and work measurement, focuses on accomplishing tasks. It starts with a simple but powerful idea: organizations accomplish their work through linked chains of activities cutting across departments and functional groups. These chains are called processes and can be conveniently grouped into two categories: (1) processes that create, produce, and deliver products and services that customers want, and (2) processes that do not produce outputs that customers want, but that are still necessary for running the business. I call the first group ‘operational processes’ and the second group ‘administrative processes’. New product development, manufacturing, and logistics and distribution are examples of operational processes, while strategic planning, budgeting, and performance measurement are examples of administrative processes.

Operational and administrative processes share several characteristics. Both involve sequences of linked, interdependent activities that together transform inputs into outputs. Both have beginnings and ends, with boundaries that can be denned with reasonable precision and minimal overlap. And both have customers, who may be internal or external to the organization. The primary differences between the two lie in the nature of their outputs. Typically, operational processes produce goods and services that external customers consume, while administrative processes generate information and plans that internal groups use. For this reason, the two are frequently considered independent, unrelated activities, even though they must usually be aligned and mutually supportive if the organization is to function effectively. Skilled supply chain management, for example, demands a seamless link between a company's forecasting and logistics processes, just as successful new product development rests on well-designed strategy formation and planning processes.

The work processes approach is probably most familiar to managers. It draws heavily on the principles of the quality movement and re-engineering. Both focus on the need to redesign processes to improve quality, cut costs, reduce cycle times, or otherwise enhance operating performance. Despite these shared goals, the two movements are strikingly similar on some points, but diverge on others.

The similarities begin with the belief that most existing work processes have grown unchecked, with little rationale or planning, and are therefore terribly inefficient. Hammer, for example, has observed: ‘Why did we design inefficient processes? In a way, we didn't. Many of our procedures were not designed at all; they just happened …. The hodgepodge of special cases and quick fixes was passed from one generation of workers to the next.’ The result, according to one empirical study of white-collar processes, is that value-added time (the time in which a product or service has value added to it, as opposed to waiting in a queue or being reworked to fix problems caused earlier) is typically less than 5 per cent of total processing time.

To eliminate inefficiencies, both movements suggest that work processes be redesigned. In fact, both implicitly equate process improvement with process management. They also suggest the use of similar tools, such as process mapping and data modelling, as well as common rules of thumb for identifying improvement opportunities. First, flow charts are developed to show all the steps in a process; the process is then made more efficient by eliminating multiple approvals and checkpoints, finding opportunities to reduce waiting time, smoothing the handoffs between departments, and grouping related tasks and responsibilities. At some point, ‘process owners’ with primary responsibility for leading the improvement effort are also deemed necessary. Their role is to ensure integration and overcome traditional functional loyalties; for this reason, relatively senior managers are usually assigned the task. The differences between the two movements lie in their views about the underlying nature and sources of process change. The quality movement, for the most part, argues for incremental improvement. Existing work processes are assumed to have many desirable properties; the goal is to eliminate unnecessary steps and errors while preserving the basic structure of the process. Improvements are continuous and relatively small-scale. Re-engineering, by contrast, calls for radical change. Existing work processes are regarded as hopelessly outdated; they rely on work practices and a division of labor that take no account of modern information technology.

For example, the case management approach, in which ‘individuals or small teams … perform a series of tasks, such as the fulfillment of a customer order from beginning to end, often with the help of information systems that reach throughout the organization,’ was not economically viable until the arrival of powerful, inexpensive computers and innovative software. For this reason, re-engineering focuses less on understanding the details of current work processes and more on ‘inventing a future’ based on fundamentally new processes.

Perhaps the most dramatic difference between the two approaches lies in the importance they attach to control and measurement. Quality experts, drawing on their experience with statistical process control in manufacturing, argue that well-managed work processes must be fully documented, with clearly defined control points. Managers can improve a process, they believe, only if they first measure it with accuracy and assure its stability. After improvement, continuous monitoring is required to maintain the gains and ensure that the process performs as planned. Re-engineering experts, on the other hand, are virtually silent about measurement and control. They draw on a different tradition, information technology, that emphasizes redesign rather than control.

Insights for Managers

The work processes perspective has led to a number of important insights for managers. It provides an especially useful framework for addressing a common organizational problem: fragmentation, or the lack of cross-functional integration. Many aspects of modern organizations make integration difficult, including complexity, highly differentiated sub-units and roles, poor informal relationships, size, and physical distance. Integration is often improved by the mere acknowledgment of work processes as viable units of analysis and targets of managerial action. Charting horizontal work flows, for example, or following an order through the fulfillment system, are convenient ways to remind employees that the activities of disparate departments and geographical units are interdependent, even if organization charts, with their vertical lines of authority, suggest otherwise.

In addition, the work processes perspective provides new targets for improvement. Rather than focusing on structures and roles, managers address the underlying processes. An obvious advantage is that they closely examine the real work of the organization. The results, however, have been mixed, and experts estimate that a high proportion of these programmes have failed to deliver the expected gains.

My analysis suggests several reasons for failure. Most improvement programmes have focused exclusively on process redesign; the ongoing operation and management of the reconfigured processes have usually been neglected. Yet even the best processes will not perform effectively without suitable oversight, co-ordination, and control, as well as occasional intervention. In addition, operational processes have usually been targeted for improvement, while their supporting administrative processes have been overlooked. Incompatibilities and inconsistencies have arisen when the information and plans needed for effective operation were not forthcoming. A few companies have used the work processes approach to redefine their strategy and organization. The most progressive have blended a horizontal process orientation with conventional vertical structures.