Process-Centered Management - Essay Example

Process-Centered Management Through a process of manufacturing and supply to the end user, a product or service follows a sequential chain of events otherwise known as processes, in order to plan, design and implement a fool proof method of directing the flow of information and materials throughout this structure of process centered management. Process Centered Management is that branch of the reengineering process in the corporate world that is in direct context of the work culture and formulation of a structure that follows an independent process driven pattern to reach a set of goals. This kind of management is one where all activities leading towards the achievement of organizational goals, are process driven with a deep rooted influence on the channelization of material and information along the way. This has been regarded as an emerging trend where work in progress is concerned owing to the fact that it provides observations of a revolution that's only just begun. The natural leaders are among the first to have taken to and moving already from a procedure-based culture towards a process-based culture; from micro to macro; from a microscopic view to a telescopic view. Procedure-based task analysis has now been very systematically replaced by process-related performance technology where it is now believed that the kinds of work that people do, the jobs they hold, the skills they need, the careers they follow, the roles managers play, the principles of strategy that enterprises follow will shift towards handling processes that they are most suited to. The shift has been carried forth from the revolution of ideals, in which the key word is radical, to the organized reworking of a society in need, in which the key word is process. Apart from banking, process centered management has been extremely effective in the IT industry as well. It is in this context that the as an invisible economic asset, there are important opportunities that are inherent in the concept of process centered management. This has been triggered by the paradigm shift discussed above, where the time spent in inventory cycle is more important than the size of inventory held. We will now regard the company we are studying in order to reach more understanding of core processes as well as the marcoms outcome and other projections. Marcoms may be defined as the tryst between communication and marketing, a proportionate combination of which is required to give sales that vital push. It would be imperative here to establish that the company we are dealing with is from the field of banking. Purpose of Promotional Activity: As a preliminary note, we will find that banks are now confronted with a situation where the competitive pressure has increased while banks have to become more customer-focussed. Simultaneously, an extensive network of branches as it exists today is not longer affordable. As an example, one will find that expenses for the location of the 49.000 bank branches in Germany are estimated at Euro 7.5 to 10 billion (Salmony and Denck 1999). The only way out of this dilemma is for the banks to shift focus towards new distribution channels that are offered by technological innovations like the internet and smartcard technology. Also, it has been proven that E-commerce and electronic financial services will be the motor of banking business in the future. In this regard, Forrester Research claims that the world-wide turnover of ecommerce to be $ 100 billion in 2000 and $ 330 billion in 2002 (Salmony and Denck 1999). With emerging innovations and effective process design, it has become imperative to reach out to new distribution channels, apart from making use of the new technologies at the fullest and supporting customer oriented business strategies. Therefore borrowing the techniques of process centered engineering will lend greater credibility to the improvement for banks. Fortis Banque Luxembourg, long known as Banque Générale du Luxembourg, covers both general and specific banking needs for customers in Luxembourg and beyond. As a vital part of the Fortis’ Fortis Banque operations, this bank has a wide variety of financial services to individuals, businesses, and government institutions on offer. Further, it operates about 35 retail branches in the country of Luxembourg and also offers Internet-based banking for private consumers. Apart from this it offers such services as foreign exchange-transactions, international trade financing for businesses besides offering private banking for wealthy clients. As of now, the Banque General Luxembourg (BGL) is taking giant strides in the arena of process centered management in collaboration with Andersen Consulting. (Fortis Banque – Online Banking) BGL developed a structured model of the company’s ‘Business Process Architecture’ (BPA) which provides a comprehensive description of all business processes in the bank. This model consists of important information regarding the structure, functioning, and key parameters of BGL’s business processes. This enables the company to establish process centered management. This model describes business processes at different levels of detail. It begins with a generic macrolevel representation of a bank’s global business processes, and goes ahead to classify the global picture to more detailed descriptions of processes. Four Macro Level Processes are used in the model to define the fundamental business mission of the bank: ‘Fulfill demand’, ‘Generate demand’, ‘Develop products and services’ and ‘Plan and manage the enterprise’. This classification has been derived from a standard model of Andersen Consulting. By extending and refining this model BGL created a generic reference for companies in the financial service industry. This bank is one that has a more or less upper class or business based clientele which requires some amount of exclusivity apart from security and reliability with the parties they deal with – especially banks. Therefore, it was imperative for the bank to come up with a design that would reflect heavy research and take projections one step further by upping sales and managing the bills and receivables department in a better way. For this the two areas that needed work were the credit department as well as the human resource department. Effectiveness of Promotional Activity: Expectations Management With the use of simulation methodology, careful management of expectations was found to be an important issue for projects. In this regard, it was found that it is difficult to handle expectations that are unrealistic. Therefore, the creation of realistic expectations was based on the requirement for proportionate marcom, or marketing communication which has deep emphasis on HR branding as well an effect on the quality of information provided to consumers as regards work in progress as well as credit handling practices. This led to the building of a good deal of insight into simulation methodology and tools, which is not easily obtained. In this regard, the bank came to the conclusion that simulation is the key to providing absolutely accurate, true and reliable information. It was also seen that exaggerated expectations can be dangerous for the organizational health of the bank if they are not satisfied by the simulation results. In order to solve the problem, it became imperative to explain objectives, constraints and assumptions used for simulation on a continuous basis. In this context it is important to emphasise that simulation is a decision support and not a decision-taking tool. While most people may argue that this is an expensive means of process management techniques, it has been demonstrated time and again that simulation adds value by providing new and unique results. To put emphasis on the additional effects of simulation in early project phase and explain the complexity of the model, the tool and the statistical analysis also increases the acceptance of cynics. Yet, the risk of confirming people in their negative expectations still persists. Even as animation boasts of effects on the positive and negative side in the context of expectation management, one has to conclude that it is a very appealing tool. In an environment where everything depends on the quality of events, animation might be even more powerful than the actual results of simulation. In this regard, all presentations of the animation in BGL’s simulation projects have been extremely successful. Still, one must ensure that animation is not confused with the actual results of simulation in terms of decision support, where it merely illustrates these results. On the other side of this fence are people who are used to fact based decision making. For them animation might be a useless tool meant for children. In the case of this bank it was found that in keeping with its mission, the promotion was taking place which was leading to this banking making a wide choice of print media in it promotional practices. Further with a heavy emphasis on new services like enhanced credit facilities for businessmen and wealthy clients operating even outside Europe, the bank has been targeting mainly at wealthy clients. The Marcom outcome was this was a concerted effort towards bringing banking services to the doorstep of such clients depending on their bank balances and deposits in a given quarter. (Fortis Banque – Online Banking). Also, the bank has now begun to provide a wide variety of online services. The research undertaken for this was in terms of studying the bank as well as client profile apart from various plans and schemes like the Business Structure leading to process centered management. The impact on the Organisations Operations as a result of the promotional activity: In this regard, the sales services as well as the design of the processes for “Deliver Credits” and “Recruit New Employees”, played special significance by revealing what the clients expect of the customer service and support practices in terms of better trained professionals and an integrated E-commerce program to deal with the bulk of correspondence taking place. With the entire documentation of BPA having taken place between October ’98 and February ’99 by a team from BGL’s Organisational Department, information about processes was collected from existing business documentation before being structured and built into a conceptual model for the process architecture. From here, the bank has worked closely with the business experts. Thereafter, the model was completed, refined, confirmed and validated. Future process sponsors and owners have been identified at this stage of the project already. This goes ahead to constitute the first step towards the implementation of a process centered management structure. (Fortis Banque, Online Banking) The second phase of this project took place between December ’98 and April ’99. This phase saw a careful analysis of two core processes by means of stimulation - ‘Deliver Credits’ and ‘Recruit new Employee’. Owing to a variety of existing problems in both processes as regards dynamic parameters, such as time, volumes, capacities and quality, simulation methodology was made use of. Apart from this, simulation enabled the migration from a static towards a dynamic process model and it was used to provide insight into dynamic features of current and future process design. These could not have been obtained with traditional, static modelling tools. Therefore, BGL used the software package Arenaof Systems Modelling Corporation for computer simulation. Process ‘Deliver Credits’: The process ‘Deliver Credits’ deals with the throughput time, i.e. the time between client interview and decision respectively disbursement of the credit. Used determine the quality of BGL’s service in ‘delivering a credit’, from the client’s point of view, this exchange of information between the branch offices and the credit department was identified as a critical area of the process. In keeping with this trend, the target parameter was the rate of missing information on credit request files. These files are sent from the branch offices to the credit department and the process of recovering such missing information is said to be the cause of delays and additional communications apart from leading to an increase in the total throughput time. Therefore, the bank decided to implement a taskforce in the credit department in order to come up with missing information besides assisting the branch offices in improving the information quality in the future. Having recovered comprehensive measurements regarding throughput times and rates of missing information for different types of credits (small personal loans, mortgages and corporate credits) and different delegation levels (decision in branch or in credit department), the bank came to the conclusion that simulation provided the following results and recommendations regarding the objectives: Improving the quality of transmitted information on credit request files reduces average throughput times. A differentiated result per type of credit and type of information has been elaborated that leads to a prioritisation depending on the possible gains in time. Increasing volumes of up to 3% can be handled by the process as it is now, without penalising throughput times. Increases of more than 3% need to be compensated by adapting capacities. This reflects on the sales as well as bills and receivables department who are accountable for the volumes and management of these throughput times. The minimum capacity needed for the task force - a specific number of files that has to be processed per day in average was derived. - Implementation of the task force generally increases throughput times due to an additional hand-over in the process. In certain situations (depending on credit type and transmitted information) throughput times are penalised by the new way of processing the collection of missing information, in other situations throughput times are reduced. In view of these results focussing on specific types of credit requests and types of errors was recommended for the implementation of the task force. (Pater et al, 1999) Process ‘Recruit new Employee’: With BGL achieving a fast rate of growth, recruiting is a strategic issue for the company. While the Human Resources (HR) department is the central piece in the recruiting process, there are other departments also actively contribute to this process. In this regard, since the time to recruit a new employee was perceived as ‘too long’ by many department managers in the company, the objective of the project was to provide measurements that allow a precise evaluation of the current process performance, elaborate improvement suggestions to reduce the recruiting time without changing the quality of new employees. (Pater et al, 1999) Following measurements performed during the simulation project, it was proven that the major part of the recruiting time was composed of elapsed times caused by internal and external communication. Leaving aside certain scheduling issues, resource capacities were only a minor issue in this process, in which case simulation of various improvement ideas led to the following major recommendations: Introduce an end-to-end planning to formalize and pre-schedule all major process steps especially if interactions between HR and other departments are involved. This helps to reduce recruiting time considerably (at least 30% on average). Shift the entire pre-selection of candidates to the HR department. A second pre-selection by department managers, that currently confirms the HR choice anyway in 90% of the cases can be avoided. This helps to reduce recruiting time on average by 2.8 weeks. Measure and control process performance based on vacancies. Integrating the two IT systems currently used in the recruiting process is therefore strongly recommended. Adopt an increasingly pro-active behaviour to the labour market. Delays can be avoided by searching qualified personnel even before vacancies arise. (Pater et al, 1999) Process Characteristics Where simulation is concerned, BGL’s experiment with the same has been met with success as is demonstrated by the simulation project. This success has four dimensions: The process characteristics, the objectives of simulation, the quality of input data and the management of expectations. While simulation of the process ‘Deliver Credits’ in BGL demonstrated the fact that the process is quite industrialized in nature, it was found that a sizable chunk of time and effort to reach an appropriate description of rules and patterns from the process specialists who were not at all familiar with such a perspective. While on this, it may be interesting to note that the recruiting process of BGL proved to be less industrailised. Identification of rules and patters did not always throw up accurate results. Therefore, it was decided to stimulate a part of the process as a ‘black box’. However, the effort led to valuable suggestions for process improvement. While complexity to a certain tune in the process logic and in the statistical distribution of parameters justified the use of simulation, it was also found true that in cases where the process appeared simple enough to be analyzed by a calculator or spread sheet, using simulation threw up disproportionate figures and conclusions. Yet, issues that appeared simple to start with often turned out to be complex after a detailed analysis, especially owing to the involvement of statistical data. Quality of Input Data With a requirement for reliability of input data, there also came a need for the same to be exact and statistically relevant. Therefore, it was deemed fit by the bank that the data requirements should always be watched very carefully when choosing target processes as well as while defining objectives in a simulation project. Both these simulation projects of BGL were filled with heavy data requirements. In this context, the effort for collection, verification and continuous improvement of data represented an important part of the project’s budget. As a post research preview, we may conclude by affirming that with flexibility and ability to change as its most advantageous features, process centered management helps use the customer as most of the most important elements in process orientation, so as to ensure that the organization captures a sizable share of the market in qualitative as well as quantitative terms. References: Dupuy, F., 1998. Le client et le bureaucrate. Paris: Dunod. Garvin, D.A., 1998. The process of organization and management. Sloan Management Review, Summer: 33-50. Fortis Banque Luxembourge. Online Banking. URL: http://www.fortisbanque.lu/SitePublic/ServiceServlet (Accessed on: 2nd February, 2007) Hammer, M., 1996. 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