|Management of a business|
A business process or business method is a collection of related, structured activities or tasks by people or equipment which in a specific sequence produce a service or product (serves a particular business goal) for a particular customer or customers. Business processes occur at all organizational levels and may or may not be visible to the customers.A business process may often be visualized (modeled) as a flowchart of a sequence of activities with interleaving decision points or as a process matrix of a sequence of activities with relevance rules based on data in the process. The benefits of using business processes include improved customer satisfaction and improved agility for reacting to rapid market change. Process-oriented organizations break down the barriers of structural departments and try to avoid functional silos.
A business process begins with a mission objective (an external event) and ends with achievement of the business objective of providing a result that provides customer value. Additionally, a process may be divided into subprocesses (process decomposition), the particular inner functions of the process. Business processes may also have a process owner, a responsible party for ensuring the process runs smoothly from start to finish.
Broadly speaking, business processes can be organized into three types, according to von Rosing et al.:
A slightly different approach to these three types is offered by Kirchmer:
A complex business process may be decomposed into several subprocesses, which have their own attributes but also contribute to achieving the overall goal of the business. The analysis of business processes typically includes the mapping or modeling of processes and sub-processes down to activity/task level. Processes can be modeled through a large number of methods and techniques. For instance, the Business Process Modeling Notation is a business process modeling technique that can be used for drawing business processes in a visualized workflow.While decomposing processes into process types and categories can be useful, care must be taken in doing so as there may be crossover. In the end, all processes are part of a largely unified outcome, one of "customer value creation." This goal is expedited with business process management, which aims to analyze, improve, and enact business processes.
An important early (1776) description of processes was that of economist Adam Smith in his famous example of a pin factory. Inspired by an article in Diderot's Encyclopédie, Smith described the production of a pin in the following way:
”One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another ... and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them.”
Smith also first recognized how the output could be increased through the use of labor division. Previously, in a society where production was dominated by handcrafted goods, one man would perform all the activities required during the production process, while Smith described how the work was divided into a set of simple tasks, which would be performed by specialized workers.The result of labor division in Smith’s example resulted in productivity increasing by 24,000 percent (sic), i.e. that the same number of workers made 240 times as many pins as they had been producing before the introduction of labor division.
It is worth noting that Smith did not advocate labor division at any price and per se . The appropriate level of task division was defined through experimental design of the production process. In contrast to Smith's view which was limited to the same functional domain and comprised activities that are in direct sequence in the manufacturing process,today's process concept includes cross-functionality as an important characteristic. Following his ideas, the division of labor was adopted widely, while the integration of tasks into a functional, or cross-functional, process was not considered as an alternative option until much later.
American engineer, Frederick Winslow Taylor greatly influenced and improved the quality of industrial processes in the early twentieth century. His Principles of Scientific Management focused on standardization of processes, systematic training and clearly defining the roles of management and employees.His methods were widely adopted in the United States, Russia and parts of Europe and led to further developments such as “time and motion study” and visual task optimization techniques, such as Gantt charts.
In the latter part of the twentieth century, management guru Peter Drucker focused much of his work on simplification and decentralization of processes, which led to the concept of outsourcing. He also coined the concept of the "knowledge worker — as differentiated from manual workers — and how knowledge management would become part of an entity's processes.
Davenport (1993)defines a (business) process as:
”a structured, measured set of activities designed to produce a specific output for a particular customer or market. It implies a strong emphasis on how work is done within an organization, in contrast to a product focus’s emphasis on what. A process is thus a specific ordering of work activities across time and space, with a beginning and an end, and clearly defined inputs and outputs: a structure for action. ... Taking a process approach implies adopting the customer’s point of view. Processes are the structure by which an organization does what is necessary to produce value for its customers.”
This definition contains certain characteristics a process must possess. These characteristics are achieved by a focus on the business logic of the process (how work is done), instead of taking a product perspective (what is done). Following Davenport's definition of a process we can conclude that a process must have clearly defined boundaries, input and output, that it consists of smaller parts, activities, which are ordered in time and space, that there must be a receiver of the process outcome- a customer - and that the transformation taking place within the process must add customer value.
Hammer & Champy’s (1993)definition can be considered as a subset of Davenport’s. They define a process as:
”a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”
As we can note, Hammer & Champy have a more transformation oriented perception, and put less emphasis on the structural component – process boundaries and the order of activities in time and space.
Rummler & Brache (1995)use a definition that clearly encompasses a focus on the organization’s external customers, when stating that
”a business process is a series of steps designed to produce a product or service. Most processes (...) are cross-functional, spanning the ‘white space’ between the boxes on the organization chart. Some processes result in a product or service that is received by an organization's external customer. We call these primary processes. Other processes produce products that are invisible to the external customer but essential to the effective management of the business. We call these support processes.”
The above definition distinguishes two types of processes, primary and support processes, depending on whether a process is directly involved in the creation of customer value, or concerned with the organization’s internal activities. In this sense, Rummler and Brache's definition follows Porter's value chain model, which also builds on a division of primary and secondary activities. According to Rummler and Brache, a typical characteristic of a successful process-based organization is the absence of secondary activities in the primary value flow that is created in the customer oriented primary processes. The characteristic of processes as spanning the white space on the organization chart indicates that processes are embedded in some form of organizational structure. Also, a process can be cross-functional, i.e. it ranges over several business functions.
Johansson et al. (1993).define a process as:
”a set of linked activities that take an input and transform it to create an output. Ideally, the transformation that occurs in the process should add value to the input and create an output that is more useful and effective to the recipient either upstream or downstream.”
This definition also emphasizes the constitution of links between activities and the transformation that takes place within the process. Johansson et al. also include the upstream part of the value chain as a possible recipient of the process output. Summarizing the four definitions above, we can compile the following list of characteristics for a business process:
Frequently, identifying a process owner, (i.e., the person responsible for the continuous improvement of the process) is considered as a prerequisite. Sometimes the process owner is the same person who is performing the process.
Workflow is the procedural movement of information, material, and tasks from one participant to another.Workflow includes the procedures, people and tools involved in each step of a business process. A single workflow may either be sequential, with each step contingent upon completion of the previous one, or parallel, with multiple steps occurring simultaneously. Multiple combinations of single workflows may be connected to achieve a resulting overall process.
Business process re-engineering (BPR) was originally conceptualized by Hammer and Davenport as a means to improve organizational effectiveness and productivity. It consisted of starting from a blank slate and completely recreating major business processes as well as the use of information technology for significant performance improvement. The term unfortunately became associated with corporate "downsizing" in the mid-1990s.
Though the term has been used contextually to mixed effect, "business process management" (BPM) can generally be defined as a discipline involving a combination of a wide variety of business activity flows (e.g., business process automation, modeling, and optimization) that strives to support the goals of an enterprise within and beyond multiple boundaries, involving many people, from employees to customers and external partners.A major part of BPM's enterprise support involves the continuous evaluation of existing processes and the identification of ways to improve upon it, resulting in a cycle of overall organizational improvement.
Knowledge management is the definition of the knowledge that employees and systems use to perform their functions and maintaining it in a format that can be accessed by others. The Duhon and the Gartner Group have defined it as "a discipline that promotes an integrated approach to identifying, capturing, evaluating, retrieving, and sharing all of an enterprise's information assets. These assets may include databases, documents, policies, procedures, and previously un-captured expertise and experience in individual workers."
Total quality management (TQM) emerged in the early 1980s as organizations sought to improve the quality of their products and services. It was followed by the Six Sigma methodology in the mid-1980s, first introduced by Motorola. Six Sigma consists of statistical methods to improve business processes and thus reduce defects in outputs. The "lean approach" to quality management was introduced by the Toyota Motor Company in the 1990s and focused on customer needs and reduction of wastage.
Advances in information technology over the years, have changed business processes within and between business enterprises. In the 1960s, operating systems had limited functionality, and any workflow management systems that were in use were tailor-made for the specific organization. The 1970s-1980s saw the development of data-driven approaches, as data storage and retrieval technologies improved. Data modeling rather than process modeling was the starting point for building an information system. Business processes had to adapt to information technology because process modeling was neglected. The shift towards process-oriented management occurred in the 1990s. Enterprise resource planning software with workflow management components such as SAP, Baan, PeopleSoft, Oracle and JD Edwards emerged, as did business process management systems (BPMS) later.
The world of e-business created a need to automate business processes across organizations, which in turn raised the need for standardized protocols and web services composition languages that can be understood across the industry. The Business Process Modeling Notation (BPMN) and Business Motivation Model (BMM) are widely used standards for business modeling.The Business Modeling and Integration Domain Task Force (BMI DTF) is a consortium of vendors and user companies that continues to work together to develop standards and specifications to promote collaboration and integration of people, systems, processes and information within and across enterprises.
The most recent trends in BPM are influenced by the emergence of cloud technology, the prevalence of social media, mobile technology, and the development of analytical techniques. Cloud-based technologies allow companies to purchase resources quickly and as required independent of their location. Social media, websites and smart phones are the newest channels through which organizations reach and support their customers. The abundance of customer data collected through these channels as well as through call center interactions, emails, voice calls, and customer surveys has led to a huge growth in data analytics which in turn is utilized for performance management and improving the ways in which the company services its customers.
Business processes comprise a set of sequential sub-processes or tasks with alternative paths, depending on certain conditions as applicable, performed to achieve a given objective or produce given outputs. Each process has one or more needed inputs. The inputs and outputs may be received from, or sent to other business processes, other organizational units, or internal or external stakeholders.
Business processes are designed to be operated by one or more business functional units, and emphasize the importance of the “process chain” rather than the individual units.
In general, the various tasks of a business process can be performed in one of two ways:
Typically, some process tasks will be manual, while some will be computer-based, and these tasks may be sequenced in many ways. In other words, the data and information that are being handled through the process may pass through manual or computer tasks in any given order.
The above improvement areas are equally applicable to policies, processes, detailed procedures (sub-processes/tasks) and work instructions. There is a cascading effect of improvements made at a higher level on those made at a lower level.
For example, if a recommendation to replace a given policy with a better one is made with proper justification and accepted in principle by business process owners, then corresponding changes in the consequent processes and procedures will follow naturally in order to enable implementation of the policies.
Business processes must include up-to-date and accurate reports to ensure effective action.An example of this is the availability of purchase order status reports for supplier delivery follow-up as described in the section on effectiveness above. There are numerous examples of this in every possible business process.
Another example from production is the process of analysis of line rejections occurring on the shop floor. This process should include systematic periodical analysis of rejections by reason, and present the results in a suitable information report that pinpoints the major reasons, and trends in these reasons, for management to take corrective actions to control rejections and keep them within acceptable limits. Such a process of analysis and summarisation of line rejection events is clearly superior to a process which merely inquires into each individual rejection as it occurs.
Business process owners and operatives should realise that process improvement often occurs with introduction of appropriate transaction, operational, highlight, exception or M.I.S. reports, provided these are consciously used for day-to-day or periodical decision-making. With this understanding would hopefully come the willingness to invest time and other resources in business process improvement by introduction of useful and relevant reporting systems.
The span of control is the number of subordinates a supervisor manages within a structural organization. Introducing a business process concept has a considerable impact on the structural elements of the organization and thus also on the span of control.
Large organizations that are not organized as markets need to be organized in smaller units – departments – which can be defined according to different principles.
Information management, and the organization infrastructure strategies related to it, are a theoretical cornerstone of the business process concept, requiring "a framework for measuring the level of IT support for business processes."
A workflow consists of an orchestrated and repeatable pattern of activity, enabled by the systematic organization of resources into processes that transform materials, provide services, or process information. It can be depicted as a sequence of operations, the work of a person or group, the work of an organization of staff, or one or more simple or complex mechanisms.
Total quality management (TQM) consists of organization-wide efforts to "install and make permanent climate where employees continuously improve their ability to provide on demand products and services that customers will find of particular value." "Total" emphasizes that departments in addition to production are obligated to improve their operations; "management" emphasizes that executives are obligated to actively manage quality through funding, training, staffing, and goal setting. While there is no widely agreed-upon approach, TQM efforts typically draw heavily on the previously developed tools and techniques of quality control. TQM enjoyed widespread attention during the late 1980s and early 1990s before being overshadowed by ISO 9000, Lean manufacturing, and Six Sigma.
A business rule defines or constrains some aspect of business and always resolves to either true or false. It specifically involves terms, facts and rules. Business rules are intended to assert business structure or to control or influence the behavior of the business. Business rules describe the operations, definitions and constraints that apply to an organization. Business rules can apply to people, processes, corporate behavior and computing systems in an organization, and are put in place to help the organization achieve its goals. Even though a system of strategic processes govern business rules, business rules are not strategic themselves; they are directive.
Product management is an organizational function within a company dealing with new product development, business justification, planning, verification, forecasting, pricing, product launch, and marketing of a product or products at all stages of the product lifecycle. Similarly, product lifecycle management (PLM) integrates people, data, processes and business systems. It provides product information for companies and their extended supply chain enterprise.
Business performance management and "enterprise performance management") is a set of performance management and analytic processes that enables the management of an organization's performance to achieve one or more pre-selected goals. Gartner has officially retired the concept of "CPM" and reclassified it as "financial planning and analysis (FP&A)," and "financial close" to reflect two concepts: increased focus on planning, and the emergence of a new category of solutions supporting the management of the financial close.
Business process modeling (BPM) in business process management and systems engineering is the activity of representing processes of an enterprise, so that the current process may be analyzed, improved, and automated. BPM is typically performed by business analysts, who provide expertise in the modeling discipline; by subject matter experts, who have specialized knowledge of the processes being modeled; or more commonly by a team comprising both. Alternatively, the process model can be derived directly from events' logs using process mining tools.
A performance indicator or key performance indicator (KPI) is a type of performance measurement. KPIs evaluate the success of an organization or of a particular activity in which it engages.
Business process re-engineering (BPR) is a business management strategy, originally pioneered in the early 1990s, focusing on the analysis and design of workflows and business processes within an organization. BPR aimed to help organizations fundamentally rethink how they do their work in order to improve customer service, cut operational costs, and become world-class competitors.
Enterprise content management (ECM) extends the concept of content management by adding a time line for each content item and possibly enforcing processes for the creation, approval and distribution of them. Systems that implement ECM generally provide a secure repository for managed items, be they analog or digital, that indexes them. They also include one or more methods for importing content to bring new items under management and several presentation methods to make items available for use.
The XML Process Definition Language (XPDL) is a format standardized by the Workflow Management Coalition (WfMC) to interchange business process definitions between different workflow products, i.e. between different modeling tools and management suites. XPDL defines an XML schema for specifying the declarative part of workflow / business process.
Process mining is a family of techniques in the field of process management that support the analysis of business processes based on event logs. During process mining, specialized data mining algorithms are applied to event log data in order to identify trends, patterns and details contained in event logs recorded by an information system. Process mining aims to improve process efficiency and understanding of processes. Process mining is also known as Automated Business Process Discovery (ABPD). However, in academic literature the term Automated Business Process Discovery is used in a narrower sense to refer specifically to techniques that take as input an event log and produce as output a business process model. The term Process Mining is used in a broader setting to refer not only to techniques for discovering process models, but also techniques for business process conformance and performance analysis based on event logs.
Enterprise modelling is the abstract representation, description and definition of the structure, processes, information and resources of an identifiable business, government body, or other large organization.
Workflow Management Coalition (WfMC) is a consortium formed to define standards for the interoperability of workflow management systems.
A workflow management system provides an infrastructure for the set-up, performance and monitoring of a defined sequence of tasks, arranged as a workflow application.
In systems engineering, software engineering, and computer science, a function model or functional model is a structured representation of the functions within the modeled system or subject area.
In process improvement, a SIPOC is a tool that summarizes the inputs and outputs of one or more processes in table form. It is used to define a business process from beginning to end before work begins. The acronym SIPOC stands for suppliers, inputs, process, outputs, and customers which form the columns of the table. It was in use at least as early as the total quality management programs of the late 1980s and continues to be used today in Six Sigma, lean manufacturing, and business process management.
Business process management (BPM) is a discipline in operations management in which people use various methods to discover, model, analyze, measure, improve, optimize, and automate business processes. Any combination of methods used to manage a company's business processes is BPM. Processes can be structured and repeatable or unstructured and variable. Though not required, enabling technologies are often used with BPM.
In philosophy, a process ontology refers to a universal model of the structure of the world as an ordered wholeness. Such ontologies are fundamental ontologies, in contrast to the so-called applied ontologies. Fundamental ontologies do not claim to be accessible to any empirical proof in itself, but to be a structural design pattern, out of which empirical phenomena can be explained and put together consistently. Throughout Western history, the dominating fundamental ontology is the so-called substance theory. However, fundamental process ontologies are becoming more important in recent times, because the progress in the discovery of the foundations of physics spurred the development of a basic concept able to integrate such boundary notions as "energy," "object", and those of the physical dimensions of space and time.
Collaborative workflow is the convergence of social software with service management (workflow) software. As the definition implies, collaborative workflow is derived from both workflow software and social software such as chat, instant messaging, and document collaboration.
Decision Model and Notation (DMN) is a standard published by the Object Management Group. It is a standard approach for describing and modeling repeatable decisions within organizations to ensure that decision models are interchangeable across organizations.
Ask ten people what TQM is and you will hear ten different answers. There is no specification or standard for it, or certification programme to proclaim that you have it. What we understand by TQM probably depends on which of the thought leaders, (often referred to as 'gurus') we have come across.
In fact, the term TQM has become so widely used that it has become the number one buzzphrase to describe a new type of quality-oriented management. Thus, the name TQM now covers a very broad tent encompassing all sorts of management practices. In my management advisory activities I run into scores of these different programs all parading under the same name. Few are alike, and those varied programs have a wide variety of features—a mixture of the old and the new—with, in more cases than not, very little of the new. ... However, I have forewarned you there are almost as many different TQM programs as there are companies that have started them because that creates confusion about what to do in your own case.
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