Tuesday, July 14, 2009

Humor Spotlight of the Month

Business Process Transformation, n. (1) "Erector Set" for Business; (2) Extreme Makeover, Corporate Edition; (3) instant transformation, as in prestidigitation and legerdemain, (4) a spell taught at Hogwarts School of Magic and Wizardry.

Business Process Management for the Service-Driven Organization: Role of Policies and Procedures Manuals for Governance in Sourcing and Outsourcing

In any business process, the governance and management of operations depends on following policies and procedures. This chapter addresses the use of policies and procedures manuals for service management and business process transformation (“BPT”).

Service Management. For repetitive processes, having a script and flow chart of operations serves to train personnel, enable supervisors to determine conformity of actual services to the intended procedures and ensure delivery of any committed service levels (“service level agreements”, or “ SLA’s”).

Service Catalog. Most organizations today are an amalgamation of multiple services in support of a common business goal under a common brand. To customers, the organization offers different services. Business process management (“BPM”) defines the service suite into a catalog of services. Effective BPM can enable more effective quality management and compliance with standards.

Business Processes as Trade Secrets. Development and updating of policies and procedures manuals involves the enterprise’s core, its trade secrets. By definition, a trade secret is information or a process used in a business that gives it competitive advantage since it is not widely known. Policy manuals need to be protected from security breaches. Individual having access to trade secrets need to be contractually restricted, and appropriate physical and logical security measures are appropriate.

Intellectual Property and Ownership of the Process. Processes are subject to intellectual property rights. The process itself may be subject to patent or trade secret. The manual will be subject to copyright. The labeling of the process, the goods or the services to customers may be subject to trademarks and trade names. Publicity, human resource “poaching” and competitive activities that relate to business processes may be subject to unfair competition. Covenants not to compete, not to solicit employees and not to use or disclose confidential information may apply too.

Shareholder Value from Portability and Fungibility. Defined business processes are portable and can be performed interchangeably by any trained person. For the enterprise, this creates an opportunity to use service level management for achieving cost management and price transparency. Depending on the costs of training, real estate costs and the value added (such as ROI and ROE), shareholder value can be maximized by retaining the high-value processes and outsourcing the rest. “Value” needs to be adjusted to risk, since some key processes (such as marketing vision, business strategy, the design and structuring of new goods and services, prototyping and similar “right-brain” thinking) cannot be effectively outsourced.

Budgeting. Such written procedures help run operations for budgeting because it implicitly defines the time and other resources required to perform a task. Budgeting can also be used for chargebacks to the client organization’s affected departments to more accurately reflect fully distributed costs and net profits. Net profit calculations for a department may be used for incentive compensation to managers and affected personnel.

The “Change Control” Process. Designing and maintaining manuals for policies and procedures imposes a bureaucratic overhead. If procedures change often, there will be additional training, management intervention and administrative updating of the manuals.

Contracting for External Services. Outsourcing contracts should address the legal issues relating to development, maintenance, use, ownership and changes in business processes and related procedures manuals. Vendors should be selected based on their ability to work within applicable business processes, to assist in improving those processes and in ensuring compliance with applicable legal, security, risk management, governance, corporate social responsibility and codes of conduct, import/export and other operational policies.

Risk Management. Process management has a critical impact on the continuity of one’s business processes. External service providers should have their own internal processes and procedures for business continuity that integrate and support the enterprise customer’s operations. Special attention should be given to procedures in case of a security breach, a force majeure event, and a breach of any statutory or regulatory compliance obligation or other business interruption.

Getting Started. There are several good software tools in the marketplace that allow an organization to design and manage its business processes. Some tools combine process design with governance, compliance and risk management. Business process management is an essential tool for the growing service organization. Supply chain management starts with good policies and procedures.

NOTE: For more information generally on business process transformation, please click here.