Learning Objectives
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Learning Objectives
At the end of this Business Process Management topic, all learners will be able to: • understand process components and boundaries.
• identify process owners, internal and external customers and other stakeholders. • understand the difference between managing projects and maximizing their
benefits to the business.
• establish key performance metrics and appropriate project documentation.
Portions of this topic were taken from the ASQ Six Sigma Green Belt web-based Certification Preparation Course.
Introduction
Six Sigma Black Belt | Business Process Management | Process versus Functional View Introduction: Introduction
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An important concept in Six Sigma is business process management (BPM). BPM is the ability to define and improve business processes to create added value for all stakeholders. It requires the organization to focus on systemic approaches to improving quality in processes rather than taking a disjointed approach with competing methods, competing stakeholders and competing outcomes.
As seen below, traditional management structures create vertical silos. For example, most manufacturing organizations have an operations group, a research and
development group, a human resources group, a marketing group, an information technology group, a customer service group, a sales group, a finance group, and so on. If a product process flows in and through several of these groups, then each group may have very different ideas on defining the process, measuring it and improving it.
Similarly, W. Edwards Deming described the supplier – process – customer framework by emphasizing the importance of the interdependence of these system components. That, coupled with statistical methods and process feedback, can be used to improve business processes.
The goal of BPM is to implement a systemic approach that overcomes the natural silo mentality that builds in an organization.
Business Systems and Processes
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Business Systems and Processes
A Six Sigma project revolves around analyzing and improving a company's processes. This is why it is crucial to determine what a company's processes are, including where those processes start and stop and what they contain. According to Benbow and Kubiak in The Certified Six Sigma Black Belt Handbook:
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A business system is designed to implement a process or, more commonly, a set of processes. Business systems make certain that process inputs are in the right place at the right time so that each step of the process has the resources it needs. Perhaps most importantly, a business system must have as its goal the continual improvement of its processes, products, and services.
The diagram below illustrates the relationship between systems, processes, subprocesses, and steps. Each part of the system can be broken into a series of processes, each of which may have subprocesses. The subprocesses may be further broken into steps.
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Process Components
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Process Components
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Processes can be defined as a series of events that produce an output. They contain different elements, actions and steps. The objective of most business processes is to add value to the product or service being created, which, in turn, will be sold to a customer. Not every process adds value directly, but may be necessary for the business to support other value-adding processes. In assessing the organizations existing processes, those that are identified as not adding value or are not functioning efficiently may be selected for process improvement efforts or for elimination. Process components include everything it takes to get from "step A" to "step B," including inputs, process steps and outputs. It is important to identify specific process steps in order to determine those that add value to the process. The measurements captured for the inputs, process steps and outputs can be used to optimize (or eliminate) the particular process measured. The items to be measured can be controlled and changed.
At a minimum, a process contains the following elements:
• Inputs: The people or organizations that provide the raw material or resources to use in the process
• Task or process steps: How raw materials and resources are transformed into a product or service
• Outputs: The people or organizations that receive the product or service produced The diagram below illustrates an example of these elements.
Process Boundaries
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Process Boundaries
As a variety of processes flow through an organization, there are points where one process ends and another begins. Process boundaries are the beginning and end points of a process. These boundaries are identified using flowcharts and process maps. Given the complex nature of most modern business processes, defining process boundaries is clearly important to the Six Sigma process.
The transition points between boundaries are especially important. They can often represent a transition between people, departments or divisions. Any process is susceptible to inefficiencies at these points. This transition issue makes it all the more important to set clear boundaries for a process to be evaluated. The focus should be on a project with clear boundaries and endpoints as you will learn in the Define lesson of this course.
When setting boundaries for a process under evaluation, be cautious where the boundary exists to avoid issues of transition (hand-offs) between departments or organizational levels. Mitigating potential issues at the "hand-off" points is key, and the following tools can help in the transition:
• Control or action plans
• Pilot or phased approach of implementing solutions • Training
Process Hand-Offs
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A critical challenge to setting clear project boundaries is that many business processes cut across multiple departments. An example of such a process is quote-to-cash, shown below. The diagram depicts the process from one department to the next, showing how each transition is a potential "leaking point.” At any of these points, data are lost, waste increases, delays occur, information disappears and the process
becomes less efficient.
It can be difficult from a people management perspective to work toward improving efficiencies across departments. Department leaders bring their own agendas and reward-based behavior to such meetings. In addition, this may be the first time two particular leaders have been in a room together working toward the same goal. Furthermore, by nature of the current processes, a naturally antagonistic relationship may exist between the two departments.
Making this processes more efficient takes a great deal of cooperation and often major change.
Cross functional area challenges include:
• Stakeholders in various functional areas (they need to get "buy in" from different people in the organization)
• Team members in various functional areas (the project is not their main job function)
• Time commitment (team members may not have much time to spend on the project due to other expectations)
• Departments with different opinions on “which process is most important to be fixed” may fight for their project and be unwilling to work on other projects • Departments unwilling to share information (processes) that would help a project
Introducing Owners and Stakeholders
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Introducing Owners and Stakeholders
Effective Six Sigma projects cannot happen without the appropriate decision makers taking ownership of the project. In addition to key resources "buying in" to the change, these and other resources must be available to give an appropriate level of input and make decisions. Often, the individuals who are needed are the busiest and cannot find time to participate in the project unless the level of importance is appropriately elevated. These individuals should be identified early on and informed of their role in the project as soon as practical.
Who is a stakeholder?
A stakeholder is anyone who has an interest in the business. This broad group might include:
Each stakeholder has a different interest based on their relationship to the business. Similar to stakeholders in the business, there are project stakeholders – those who have an interest in the process at issue. Examples of this group are usually employees, managers, department heads, customers, suppliers or vendors and process owners. What is an owner?
Six Sigma narrows the definition of owner to a process owner, such as a member of the management team within the organization responsible for a specific process. The process owner leads the improvement effort for their area of responsibility by: • identifying all stakeholders within the process.
Defining Owners and Stakeholders
Six Sigma Black Belt | Business Process Management | Process versus Functional View Task: Defining Owners and Stakeholders
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To further illustrate the differences among the various types of stakeholders, click the title of the stakeholder in the list below:
Primary Business Stakeholders • Investors
• Owners or shareholders • Board of directors
• Employee ownership groups Process Owners
• Principal stakeholder of the selected process • Typically a member of the management team • Project sponsor with vested interest in its success Internal Customer Stakeholders
• People or groups who are downstream from the selected process who receive value from its outputs
• Other people or groups within the organization who are affected by the process outcomes
• Those who serve external customers in some capacity External Customer Stakeholders
• Those who purchase the product or service produced by the process Internal Supplier Stakeholders
• People or groups who provide input to the selected process
• Other people or groups affected in some way by the process and what supports the process
External Supplier Stakeholder
• Those who supply raw materials or resources used in the process Other Project Stakeholders
• Project team members who have a vested interest in the success of the project • Other employees or groups who are affected by the process, but not directly
involved in it
• Senior management sponsors other than the process owner • Government agencies (in some circumstances)
Introduction to Project Management
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Introduction to Project Management
Understanding project management basics is essential to successfully communicating the many facets of this complex process. This subtopic will illustrate how project management supports the objectives of BPM. Further details on Six Sigma project management may be viewed in the lesson entitled "Project Management."
The foundation document that begins this process is the project charter. The definition and scope of the project is established differently in a Six Sigma project versus a traditional project. For example, a traditional project for IT solutions may be to develop, design and implement an automated system access form. On the other hand, a Six Sigma project may focus on very specific metrics such as reducing down-time for new hires by 20%. Six Sigma project goals line up directly with company strategic goals and objectives.
Sometimes, the Black Belt or Master Black Belt defines the scope of the project. In other organizations, a process owner may define it. In still others, a strategic plan may define the scope. The scope can always be expanded or clarified by the project team. Regardless of how the scope is determined, the project charter documents the project scope.
Project Manager Roles
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Black Belts play multiple roles when managing a Six Sigma project. They: • develop the project plan and other tools to manage the project.
• manage the project team by assigning tasks and ensuring their execution. • communicate progress and results to project stakeholders.
• facilitate the project through difficult periods and transitions.
• manage the project focus in addition to managing the project execution.
The next lesson in this course, Project Management, outlines detailed information on project management for Six Sigma projects. For the purposes of this introduction, we will concentrate on the the difference between managing project execution and managing project focus.
All projects require good management skills, but Six Sigma projects differ in that the focus of the project is paramount. The results of the process improvement effort must be connected to key and well-defined business results. While BPM is concerned with focusing on the "right projects" and the "right processes" with the greatest
opportunities, project management is concerned with "doing things right." The
foremost role for the Six Sigma project manager is to ensure that the focus on business results drives all decisions about the project.
Project Benefits
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Project Benefits
The benefits realized from the project are often the starting point for selecting the project itself. Projects may be selected for a variety of reasons, including:
• Customer complaints • Product defects
• Waste and cost reduction • Cycle time improvement • Work flow improvement • Supplier quality improvement • Customer service improvement • Error reduction
• Sales improvement
The selection of the project should have anticipated benefits related to company strategies and customer needs. The project goal states the benefits in clear and specific language.The Project Management lesson provides further details about developing problem statements and goal statements.
Example: Reduce production line defects to less than 1.5% for all products started on the line by October 1, 2007.
Example: Reduce the exception processing steps contributing to inspection, rework and overtime resulting in a 20% reduction in the cost per unit by 4th quarter 2006.
Introduction to Performance Metrics
Six Sigma Black Belt | Business Process Management | Process versus Functional View Task: Introduction to Performance Metrics
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Performance metrics fall into three categories: quality, time, and cost. These three metrics work within a delicate balance. Improving quality might require an increase in the time needed for production, which would also increase costs. Reducing the cycle time might reduce costs, but it also might reduce quality. Reducing costs might also reduce quality if source materials are less expensive because they are inferior in quality. Click the terms below to learn more about performance metrics.
Quality
• Fewer defects
• Higher quality of material resources • Fewer warranty items or returns
• Higher demand by customers for product or service • Customer survey scores increasing
Time
• Cycle-time reductions
• Response time in a call center • Time-to-market
• Response time to customer inquiries • Time to complete special orders Cost
• Revenue realized due to increased sales of a product or service that, in turn, is due to lowered price, reduced costs of production, volume improvement, improved product quality, enhanced product features, better availability to the customer, fewer defects and so on.
• Cost reductions realized through fewer defects, less scrap, fewer returns, fewer warranty items and so on.
Performance versus Project Metrics
Six Sigma Black Belt | Business Process Management | Process versus Functional View Concept: Performance versus Project Metrics
Performance metrics are used to determine how effective or efficient a process is, and to establish goals for the project’s anticipated outcome. Performance metrics are determined as the Six Sigma process is applied to a specific process, and they are recorded in project documentation.
Examples of performance metrics include defects per unit (DPU), cost of poor quality (COPQ) and cost of quality (COQ). Performance metrics describe the success of the selected process.
Project metrics describe the success of the project’s execution. Project metrics might include:
• Percent of tasks completed • Resource utilization
• Timeliness of task completion or milestones reached • On budget
• Project variances on budget, timeliness, or resource use
Primary project metrics will respond clearly and specifically to management questions such as:
• Are we on schedule using expected resources of people, equipment, facilities, and other resources?
• Are we on budget using expected resources of people, equipment, facilities, and other resources?
• Are we still expecting to yield the projected value/returns as described in the charter?
Project Documentation
Six Sigma Black Belt | Business Process Management | Process versus Functional View Task: Project Documentation
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Different organizations will elect to use different types of project documentation as demanded by the project. Click each term below to learn more about what project documentation might include.
Project Charter
As mentioned previously, the project charter is the central piece of documentation in the project management process. While project charters vary by organization, they often include common elements such as team members, business need and project description. More in-depth information on project charters may be viewed in the Project Management lesson.
Status Reports
• Written with a standardized format and formal tone, delivered periodically. Status reports are specific to each organization.
• Provide high-level information on projects ° Where project stands in relation to plan
° Report any risks or issues affecting the time, scope or cost of the project and what is being done to address these issues
° Request management intervention as needed ° Tools used:
• Milestone charts • Performance reports • Budget reports Management Reviews
• Meetings between the project leader and management providing updates to the status of the project using a Gantt chart, status reports or performance reports. Budget Reviews
• Written with a standardized format and formal tone, delivered periodically. Budget reviews are specific to each organization.
• Evaluate actual resource and budget utilization • May involve budget revision
Customer Audits
• Are formal reviews conducted by a certified quality auditor (quality audits have their own Body of Knowledge, which is outside the scope of this course) • Play an active role in keeping the project on track to the stated goals • Should be updated as often as feasible for the project and the needs of the
customer
Note: In this context, “customer” is defined as the principal stakeholder or "owner of the process" in a project.
Additional examples of data and fact-driven documentation are discussed in the Project Management lesson.