AMN Perspectives by Thomas Group: Experience at Work

Posted: March 9, 2004, 9 a.m., EST

by John Steidl, Thomas Group consultant and Mike Manor, president, Automotive Aftermarket, Thomas Group

IRVING, TX — In this week’s article we’ll deal with a fundamental question: What is a “process enterprise” and how does it differ from the kind of enterprise most of us are living in today?

All of our companies have at least one thing in common: We have functional organization charts. The details may vary widely, but one way or another we’ve divided our businesses into functional departments. This basic approach to the structure of work has dominated business through most of the 20th century for a good reason. It provides a fairly effective means for senior management to exercise measurement and control over what is going on in the business. It does have a significant weakness however. Functions only perform specific tasks. To create value that a customer is willing to pay for, a whole series of tasks, performed by different functions, have to fit together seamlessly in a value stream or process.

In the typical functional organization, we manage functions, not processes. We measure functions, not processes. And we try to solve problems within functions-not across processes. This can make it difficult to identify and resolve the real causes of performance problems. One example from our experience is a manufacturing company that appeared to have a tremendous bottleneck in its final assembly area. This is the problem we were called in to solve. Here’s what we observed:

Most orders had a small component of custom engineering associated with them. This was usually less than 10 percent of the total value of the product, but still a critical piece of the “value add” to the customer. The design group was always weeks late in providing the necessary drawings to manufacturing, because the customer was always late in providing the specification in a form the design group could use. The customer was late because the sales force wasn’t especially concerned with the custom specifications. (The custom work was a very small component of the total price, so the sales people considered it “trivial.”) There was no standard for a clean order and no process to get one. The activity to get complete specifications from the customer simply fell through the cracks. Resolution of this problem required looking at the complete value stream from early in the sales process all the way through to final assembly, while recognizing that a very small piece of value added activity could nevertheless play havoc with schedules, capacity, on time delivery and customer satisfaction if it wasn’t understood in the context of the broader process.

Because functional organization structures focus on optimizing functional performance, many of our biggest performance gaps lie in the interfaces between the different functions (white spaces), precisely where no one has clear accountability. The problem experienced by this client was caused by exactly this situation. We can all identify with this. The solution to closing these gaps and ensuring accountability for these “white spaces” is to create a “process enterprise.”

But what does that really mean? From a practical perspective, it’s useful to define something in terms of its key attributes. The attributes of a process enterprise include:

1. The business has a defined process model. Or to put it another way, the business has identified a small number of critical processes that make up its value stream. These will include things like new business acquisition, new product development and order fulfillment. Order fulfillment might be further broken down into internal fulfillment and supply chain management.

2. Each of the key processes has a senior-level process owner assigned to it.

3. There are performance measures and targets associated with each of the processes.

4. Functional performance goals are aligned to these process goals in a hierarchical way.

5. A cross-functional management framework is established to drive performance improvement in the key processes. Note that functions don’t go away in this new environment, but there are some differences in the way they’re managed, and a key topic is the role of the functional manager vs. the role of the process owner. 6. Decisions are made differently in the process enterprise.

7. The performance improvement plan is driven on a process level through the cross-functional management framework rather than through individual departments. Although individual departments may have their own improvement plans, these must be in alignment with the overall process performance improvement plan.

Each of these attributes is an entire topic in itself, and we’ll spend several future articles covering some of the more important points of practical application. Our goal will be to give you a high-level roadmap to create the process enterprise within your own organization.

For additional information, visit www.thomasgroup.com or call Mike Manor at 972-401-4444.

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“AMN Perspectives by Thomas Group: Experience at Work” is written and sponsored by Thomas Group. The opinions expressed in “AMN Perspectives by Thomas Group: Experience at Work” articles appearing on aftermarketNews.com do not necessarily reflect the opinions of AMN or Babcox Publications.