Saturday, April 5, 2014

How to Evaluate Processes

 The criteria to evaluate processes need to clearly identify the core competencies, and focus more on process optimization opportunities

Business processes underpin organizational capability; and business capabilities underpin the strategy execution. While mapping and evaluating processes, which criteria do you normally use?
Cost, Performance, Value Added, Complexity? Or shall you use a combination? In either case, how do you make that decision?

One way to evaluate processes would be to bracket them with capabilities. It would be probably best to bracket them with a capability and then analyze it for redundancy and complexity later. The processes and capabilities as opposite sides of the same coin - processes are the actions that provide desired capabilities as outcomes. Start with a mapping of processes to capabilities, do the process assessments, and infer from that with the resulting capability perspective. There are four conditions to evaluate a capability. Any capability which fulfills all these conditions (and very few would) lies pretty close to the core competency of that enterprise and thus is valuable. 
- Is this capability valuable? 
- Is this capability rare? 
- Is this capability costly to imitate? 
- Is this capability non substitutable? 

It's critical to have some objective measures that define business value of processes. From value perspective, separate 'actual' business processes from 'implemented' processes, many of which are only in place to support the environment. This approach yields the core business processes which can then, be evaluated based on their value to the mission, how you determine the value of a process/capability is at the crux of the issue. -Business value and criticality (revenue impact, direct customer impact, reputation impact)
-Competitive differentiator vs. commodity (product development vs. HR)
- Effectiveness -- does the process reliably result in the desired outcome?
- Efficiency -- cost, cycle time, degree of automation
- Organizational scope (enterprise-wide, departmental, workgroup)

Weighting factors may be applied depending on the scenario and the objectives of the assessment. A process has the following targets: 
- work product or set of work products 
- capacity/unit of time 
- level of quality for the delivered work products 
- supply of resources, including man-hours, expendable supplies, other inputs (perhaps from predecessor processes) 
- cost/unit of output 
- expected learning-curve improvement rate

The criteria to evaluate processes also need to clearly identify the core competencies, and focus more on process optimization opportunities. Taken together, they can provide a good heat map to highlight where the organization should focus its energies. One may also look at processes in terms of their flexibility (how easily they can be reconfigured or changed) and risks (measured in terms of the variability of the outputs, such as the delivery rate or quality level.). Many of the identified evaluations belong in finance and other disciplines, to evaluate how the process fits with business strategy, it's robustness against risks and scale ability. And thresholds for automation or even re-engineering.

There are also attributes such as Value Contribution, Reproducibility, Transportability, and Propriety, that can be applied to both but are more useful when working with capabilities that are made up of multiple processes. Capabilities are made up of People, Process, and Technology with Technology used in a very broad sense - not just Information Technology. They do share some attributes including: Effectiveness, Efficiency, Scalability, Measurability, Required Performance, Current Performance, Performance/Capacity Curve, Complexity, Divisibility... Here are a set of evaluation questions:
1      1)  What is the required output, and is the process adequate to deliver it? 
2      2)  How many human (internal or customer/partner) touch points are there? (fewer the better) 
3      3)  Who are these human actors, and do they need/want to be involved?
        4)    Is it well and commonly understood? 
        5) Can it be streamlined or changed to better deliver the output for any of the criteria
        6)There are many other considerations - granularity being one which is almost so and procedural composition or de-composition. 

Take the combination of approaches to evaluate process independently and bracket them with business capabilities as well, process is an important part of capability, but not the only consideration, focusing on pursuing business value because it is the very reason to develop capabilities, as they apply to and enhance the business model, set objective criteria and leverage multiple factors listed above in order to evaluate business processes effectively.  



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