Business process orientation

Last updated August 14, 2024

The concept of business process orientation (BPO) is based upon the work of Deming (Walton, 1996), Porter (1985), Davenport and Short (1990), Hammer (1993, 1996 and 1999), Grover et al. (1995), and Coombs and Hull (1996). This body of work suggests that firms could enhance their overall performance by adopting a “process view” of the organization. Although many firms have adopted the BPO concept, little to no empirical data existed substantiating its effectiveness in facilitating improved business performance. McCormack (2000) conducted an empirical study to explore the relationship between BPO and enhanced business performance. The research results showed that BPO is critical in reducing conflict and encouraging greater connectedness within an organization, while improving business performance. Moreover, companies with strong measures of BPO showed better overall business performance. The research also showed that high BPO levels within organizations led to a more positive corporate climate, illustrated through better organizational connectedness and less internal conflict. Another empirical study by Kohlbacher (2009) reveals that BPO is positively associated with customer satisfaction, product quality, delivery speed and time-to-market speed.^[1]

For a central concept, one that has become something of a Holy Grail for 1990s managers, BPO has remained remarkably hard to pin down. Its champions argue that it is a new approach to management that replaces the rigid hierarchies of the past ("I report to my boss") with structures that are much flatter, more cooperative, more process-oriented ("I report to my customer."). Many of us have had experience with both types of organization and we know intuitively what BPO feels like. Yet, if you're like me, you want a more solid foundation on which to make decisions and recommendations^{[ citation needed ]}.

Most of the literature on business process orientation has been in the popular press and lacks a research or empirical focus. Although empirical evidence is lacking, several models have emerged during the last few years that have been presented as the high performance, process oriented organization needed in today and tomorrow’s world.^[2] Deming, Porter, Davenport, Short, Hammer, Byrne, Imai, Drucker, Rummler-Brache and Melan have all defined what they view as the new model of the organization. According to each model’s proponent, the “building” of this model requires a new approach and a new way of thinking about the organization which will result in dramatic business performance improvements. This “new way of thinking” or “viewing” your organization has been generally described as business process orientation.

Process centering or building an organization with a business process orientation has led to many reported successes. Texas Instruments, Progressive Insurance and American Standard Companies have all been reported, albeit anecdotally, as receiving improved business performance from building a process orientation within an organization (Hammer 1996). Business process orientation has also led to successes when applied to medium and small scale business that is properly setup.

Process orientation, and its relationship to improved cross-functional interaction, was introduced almost fifteen years ago by Michael Porter. He introduced the concept of interoperability across the value chain as a major issue within firms (Porter 1985). W. Edwards Deming also contributed with the “Deming Flow Diagram” depicting the connections across the firm from the customer to the supplier as a process that could be measured and improved like any other process (Walton 1986). Thomas Davenport and James Short (1990) described a process orientation within an organization as a key component in the “New Industrial Engineering: Information Technology and Business Process Redesign.”

Michael Hammer also presented the business process orientation concept as an essential ingredient of a successful “reengineering” effort. Hammer coined this term to describe the development of a customer focused, strategic business process based organization enabled by rethinking the assumptions in a process oriented way and utilizing information technology as a key enabler (Hammer, 1993). Hammer offers reengineering as a strategy to overcome the problematic cross-functional activities that are presenting major performance issues to firms and cites many examples of successes and failures in his series of books and articles. Hallmark and Wal-Mart are often put forward as success stories and IBM and GM as the failures.

Culture is a major theme in the examples cited. A “business process culture” is a culture that is cross-functional, customer oriented along with process and system thinking. This can be expanded by Davenport’s definition of process orientation as consisting of elements of structure, focus, measurement, ownership and customers (Davenport 1993). Davenport also stressed commitment to process improvement that directly benefits the customer and business process information oriented systems as a major component of this culture

Finally, Hammer (Hammer 1993, 1995, 1996, 1999) described “process thinking” as cross-functional and outcome oriented. He also used four categories to describe the components of an organization. These are:

Business Processes
Jobs and Structures
Management and Measurement Systems
Values and Beliefs

The Definition of BPO

To establish a more solid foundation, I would like to propose a definition and an approach to measuring BPO. The BPO concept has sufficient practitioners and researchers and has been implemented in enough companies that we now have the information we need to develop a testable statistical model. The trick, of course, is getting at that broad range of experience and boiling it down in scientifically acceptable ways to a point where practitioners can use it easily in the field.

Our approach to building this foundation began with an extensive literature review, interviews with experts both in the U.S. and Europe and testing with experienced practitioners and experts to determine the key definition and variables within BPO. Using various statistical techniques (domain sampling, coefficient alpha testing, and factor analysis), we both determined the validity of various BPO variables and condensed those variables into a simpler composite list (survey instrument) that offered easy use in measuring BPO within an organization (McCormack 1999).

It is important to consider originality or value as well. An observation of studies conducted into process management revealed the use proxy variables as an important indicator for PO. A good example is the ISO 9000 certification.^[3]

Our research found that the practitioners and experts said a Business Process Oriented Organization comes down to this:

"An organization that emphasizes process as opposed to hierarchies, a process oriented way of thinking, outcomes and customers."

We also found that BPO also breaks into three elements:

Process Management and Measurement – measures that include aspects of the process like output quality, cycle time, process cost and variability compared to the traditional accounting measures.
Process Jobs – "product development process owner" rather than "research manager".
Process View – thorough documentation from top to bottom and beginning to end of a process.

Recent research extends the elements of McCormack (1999) and concludes that the concept of BPO consists of the following components:^[4]

Design and documentation of business processes
Management commitment towards process orientation
Process ownership (see process owner)
Process performance measurement
Corporate culture in line with the process approach ^[5]
Application of continuous process improvement methodologies (see continuous improvement process or business process improvement), and
Process-oriented organizational structure.

Related Research Articles

William Edwards Deming was an American business theorist, composer, economist, industrial engineer, management consultant, statistician, and writer. Educated initially as an electrical engineer and later specializing in mathematical physics, he helped develop the sampling techniques still used by the United States Census Bureau and the Bureau of Labor Statistics. He is also known as the father of the quality movement and was hugely influential in post-WWII Japan, credited with revolutionizing Japan's industry and making it one of the most dominant economies in the world. He is best known for his theories of management.

Workflow is a generic term for orchestrated and repeatable patterns 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.

Six Sigma (6σ) is a set of techniques and tools for process improvement. It was introduced by American engineer Bill Smith while working at Motorola in 1986.

In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Strategic management provides overall direction to an enterprise and involves specifying the organization's objectives, developing policies and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex environments and competitive dynamics. Strategic management is not static in nature; the models can include a feedback loop to monitor execution and to inform the next round of planning.

A business process, business method, or business function is a collection of related, structured activities or tasks performed by people or equipment in which a specific sequence produces a service or product 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.

<span class="mw-page-title-main">Business process modeling</span> Activity of representing processes of an enterprise

Business process modeling (BPM), mainly used in business process management; software development, or systems engineering, is the action of capturing and representing processes of an enterprise, so that the current business processes may be analyzed, applied securely and consistently, improved, and automated. BPM is typically orchestrated by business analysts, leveraging their expertise in modeling practices. Subject matter experts, equipped with specialized knowledge of the processes being modeled, often collaborate within these teams. Alternatively, process models can be directly derived from digital traces within IT systems, such as event logs, utilizing process mining tools.

Quality management ensures that an organization, product or service consistently functions well. It has four main components: quality planning, quality assurance, quality control and quality improvement. Quality management is focused not only on product and service quality, but also on the means to achieve it. Quality management, therefore, uses quality assurance and control of processes as well as products to achieve more consistent quality. Quality control is also part of quality management. What a customer wants and is willing to pay for it, determines quality. It is a written or unwritten commitment to a known or unknown consumer in the market. Quality can be defined as how well the product performs its intended function.

<span class="mw-page-title-main">Business process re-engineering</span> Business management strategy

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 aims to help organizations fundamentally rethink how they do their work in order to improve customer service, cut operational costs, and become world-class competitors.

<span class="mw-page-title-main">Michael Martin Hammer</span> American engineer and author

Michael Martin Hammer was born in Annapolis, Maryland. Hammer was a Jewish-American engineer, management author, and a former professor of computer science at the Massachusetts Institute of Technology (MIT). Hammer and James A. Champy founded the management theory of Business process reengineering (BPR). In which, they wrote "Re-engineering the Corporation: Manifesto for Business Revolution" in 1993.

Genba is a Japanese term meaning "the actual place". Japanese detectives call the crime scene genba, and Japanese TV reporters may refer to themselves as reporting from genba. In business, genba refers to the place where value is created; in manufacturing, the genba is the factory floor. It can be any "site" such as a construction site, sales floor or where the service provider interacts directly with the customer.

James (Jim) Champy is an Italian American business consultant, and organizational theorist, known for his work in the field of business process reengineering, business process improvement and organizational change. He co-authored the book "Reengineering the Corporation: A Manifesto for Business Revolution" in 1993 with Michael Martin Hammer, which was considered one of the 25 most influential business management books by Time (magazine).

Thomas Hayes "Tom" Davenport, Jr. is an American academic and author specializing in analytics, business process innovation, knowledge management, and artificial intelligence. He is currently the President’s Distinguished Professor in Information Technology and Management at Babson College, a Fellow of the MIT Initiative on the Digital Economy, Co-founder of the International Institute for Analytics, and a Senior Advisor to Deloitte Analytics.

A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.

In business, engineering, and manufacturing, quality – or high quality – has a pragmatic interpretation as the non-inferiority or superiority of something ; it is also defined as being suitable for the intended purpose while satisfying customer expectations. Quality is a perceptual, conditional, and somewhat subjective attribute and may be understood differently by different people. Consumers may focus on the specification quality of a product/service, or how it compares to competitors in the marketplace. Producers might measure the conformance quality, or degree to which the product/service was produced correctly. Support personnel may measure quality in the degree that a product is reliable, maintainable, or sustainable. In such ways, the subjectivity of quality is rendered objective via operational definitions and measured with metrics such as proxy measures.

A continual improvement process, also often called a continuous improvement process, is an ongoing effort to improve products, services, or processes. These efforts can seek "incremental" improvement over time or "breakthrough" improvement all at once. Delivery processes are constantly evaluated and improved in the light of their efficiency, effectiveness and flexibility.

Business process management (BPM) is the discipline 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.

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Management accounting in supply chains is part of the supply chain management concept. This necessitates planning, monitoring, management and information about logistics and manufacturing processes throughout the value chain. The goal of management accounting in supply chains is to optimise these processes. This strategy focuses on supporting management.

This article outlines the evolution of management systems. A management system is the framework of processes and procedures used to ensure that an organization can fulfill all tasks required to achieve its objectives.

References

↑ Kohlbacher, M. (2009): The Effects of Process Orientation on Customer Satisfaction, Product Quality and Time-Based Performance. Paper presented at the 29th International Conference of the Strategic Management Society, Washington DC, October 11–14, Conference Website.
↑ Cleven A, Mettler T, Rohner P, Winter R (2016). "Healthcare quality innovation and performance through process orientation: Evidence from general hospitals in Switzerland" (PDF). Technological Forecasting and Social Change. 113 (Part B): 386–395. doi:10.1016/j.techfore.2016.07.007.
↑ Kohlbacher, Markus; Gruenwald, Stefan (2011). "Process orientation: Conceptualization and measurement". Business Process Management Journal. 17 (2): 267–283. doi:10.1108/14637151111122347.
↑ Kohlbacher, M. and Gruenwald S. (2011): Process orientation: conceptualization and measurement. Business Process Management Journal 17(2), pp. 267-283.
↑ Kohlbacher, M., Gruenwald, S. and Kreuzer, E. (2011): Corporate culture in line with business process orientation and its impact on organizational performance. In: zur Muehlen M. and Jianwen S. (Eds): Business Process Management Workshops, Springer, Berlin Heidelberg, pp. 16-24.

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[SMS-1] Kohlbacher, M. (2009): The Effects of Process Orientation on Customer Satisfaction, Product Quality and Time-Based Performance. Paper presented at the 29th International Conference of the Strategic Management Society, Washington DC, October 11–14, Conference Website.

[2] Cleven A, Mettler T, Rohner P, Winter R (2016). "Healthcare quality innovation and performance through process orientation: Evidence from general hospitals in Switzerland" (PDF). Technological Forecasting and Social Change. 113 (Part B): 386–395. doi:10.1016/j.techfore.2016.07.007.

[3] Kohlbacher, Markus; Gruenwald, Stefan (2011). "Process orientation: Conceptualization and measurement". Business Process Management Journal. 17 (2): 267–283. doi:10.1108/14637151111122347.

[BPMJ2011-4] Kohlbacher, M. and Gruenwald S. (2011): Process orientation: conceptualization and measurement. Business Process Management Journal 17(2), pp. 267-283.

[BPD2011-5] Kohlbacher, M., Gruenwald, S. and Kreuzer, E. (2011): Corporate culture in line with business process orientation and its impact on organizational performance. In: zur Muehlen M. and Jianwen S. (Eds): Business Process Management Workshops, Springer, Berlin Heidelberg, pp. 16-24.

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