Processes are everywhere. They are the building blocks of all operations, and their design will affect the performance of the whole operation and, eventually, the contribution it makes to the organisational results. People drive processes. Processes ensure performance. Thus, pondering on processes will offer us insights as to how to achieve better results in a consistent manner. Today’s column attempts to do so.
Processes are the fundamental building blocks of all organisations. Both process understanding and process improvement form the lifeblood of organisations.
Processes transform inputs, which can include actions, methods and operations, into outputs. They are the steps by which we add value, and it should be the aim of customer focused organisations, for these outputs to satisfy or exceed the needs and expectations of their customers.
Central to understanding the processes perspective is the idea that all processes transform inputs into outputs. Put simply, processes take in a set of input resources, some of which are transformed into outputs of products and/or services and some of which do the transforming.
According to businessdictionary.com, a process is a sequence of interdependent and linked procedures which, at every stage, consume one or more resources (employee time, energy, machines, money etc.) to convert inputs (data, material, parts, etc.) into outputs. These outputs then serve as inputs for the next stage until a known goal or end-result is reached.
Processes can vary to cover simple to complex operations. Converting clay into a brick can be one example. Processing paperwork to grant a loan can be a more a complex example. Converting crude oil petrol with the involvement of a refinery can be even a more complex example. Knowingly or unknowingly we engage in processes all the time.
Figure 1 contains a basic three stage process, comprising input, throughput and output.
No one, in any function or part of the business, can fully contribute to its competitiveness if the processes in which they work are poorly designed. It is not surprising then that process design has become such a popular topic in the management press and among consultants. It is worthwhile examining the design of processes. This is primarily concerned with how processes and the resources they contain must reflect the volume and variety requirements placed on them.
Four V’s for Processes
All processes differ in some way, and to some extent, all processes need to be managed differently. Some of the differences between processes are ‘technical’ in the sense that different products and services require different skills and technologies to produce them. However processes also differ in terms of the nature of demand for their products or services.
Four characteristics of demand in particular have a significant effect on how processes need to be managed:
- The volume of the products and services produced
- The variety of the different products and services produced
- The variation in the demand for products and services
- The degree of visibility that customers have of the production of products and services.
Let’s discuss the above four Vs of processes in detail.
Processes with a high volume of output will have a high degree of repeatability. That means the same thing is happening over and over again. Producing biscuits, batteries or even books can be such examples.
As tasks are repeated frequently it often makes sense for employees to specialise in the tasks they perform. This allows the activities to be streamlined. It involves formulating standard procedures and set down in a manual with instructions on how each part of the job should be performed. Also, because tasks are systemised and repeated, it is often worth developing specialised technology that gives higher processing efficiencies.
In contrast, low-volume processes with less repetition cannot specialise to the same degree. Employees are likely to perform a wide range of tasks, and while this may be more rewarding, it is less open to systemisation. Nor is it likely that efficient, high-throughput technology could be used.
The implications of this are that high-volume processes have more opportunities to produce products or services at low-unit cost. So, for an example, the volume and standardisation of large fast-food restaurant chains such as MacDonald’s or KFC enables them to produce with greater efficiency than a small, local cafeteria or a restaurant. The implications can be even at country levels with regard to their competitiveness. Apparel industry in China, thriving on volumes is one such example.
This V is all about diversity. Processes that produce a high variety of products and services must engage in a wide range of different activities, changing frequently between each activity. They must also contain a wide range of skills and technology sufficiently ‘general purpose’ to cope with the range of activities and sufficiently flexible to change between them. A high level of variety may also imply a relatively wide range of inputs to the process and the additional complexity of matching customer requirements to appropriate products or services. So, high-variety processes are invariably more complex and costly than low-variety ones.
For an example, a taxi company is usually prepared to pick up and drive customers almost anywhere (at a price); they may even take you by the route of your choice. There are an infinite number of potential routes (products) that it offers. But its cost per kilometre travelled will be higher than for a less customised form of transport such as a bus service.
Sri Lankan apparel industry thrives on variety. As opposed to high volume processes, it has developed processes to accommodate variety, in catering for “niche” markets.
This is a challenging aspect of a process. Processes are generally easier to manage when they only have to cope with predictably constant demand. Resources can he geared to a level that is just capable of meeting demand. All activities can be planned in advance. By contrast, when demand is variable and/or unpredictable, resources will have to be adjusted over time. Worse still, when demand is unpredictable, extra resources will have to he designed into the process to provide a ‘capacity cushion’ that can absorb unexpected demand.
Let’s take a simple example. Demand for certain products go up during festive seasons. Processes involved with supplying them to markets should gear to face this variation. Another example can be processes that manufacture high-fashion garments. They will have to cope with the general seasonality of the garment market together with the uncertainty of whether particular styles may or may not prove popular.
Operations that make conventional business suits are likely to have less fluctuation in demand over time, and be less prone to unexpected fluctuations. Because processes with lower variation do not need any extra safety capacity and can be planned in advance, they generally have lower costs than those with higher variation. We see both scenarios in Sri Lanka giving headaches to many managers.
Process visibility is a slightly more difficult concept to grasp. It indicates how much of the processes are ‘experienced’ directly by customers, or how much the process is ‘exposed’ to its customers. Generally processes that act directly on customers (such as retail or healthcare processes) will have more of their activities visible to their customers than those that act on materials and information. However, even material and information transforming processes may provide a degree of visibility to the customers.
For example, parcel distribution operations provide Internet-based ‘track and trace’ facilities to enable their customers to have visibility of where their packages are at any time. Low-visibility processes, if they communicate with their customers at all, do so using less immediate channels such as the telephone or the Internet.
Many operations have both high- and low-visibility processes. This serves to emphasise the difference that the degree of visibility makes. Let’s take the case of an airport. Some of its processes are relatively visible to its customers (check-in desks, information desks, restaurants, passport control, security staff, etc). Such employees operate in a high-visibility ‘front-office’ environment. Other processes in the airport have relatively little, if any, customer visibility (baggage handling, overnight freight operations, loading meals on to the aircraft, cleaning, etc.). We rarely see these processes but they perform the vital but low-visibility tasks in the ‘back-office’ part of the operation.
As we know, back office is as important as the front office, in order to offer an integrated service to the customer. Is it really the case in Sri Lanka? We have heard many cases with regard to poor hygienic conditions of hotels and restaurants with an attractive entrance. High-visibility process has an indirect control where the shortcomings can be spotted easily.
From Four Vs to one Big V
We looked at volume, variety, variation and visibility. All these four aspects should be carefully dealt with in ensuring process excellence. It includes higher efficiency, faster cycle time and higher overall productivity. In essence, adding value to organisation. As the competitive business world increasingly demands, value creation is the only survival path. Four Vs of processes, once aligned and appropriately tuned, should ensure value creation.
The above four Vs have a particular relevance to Sri Lanka. We are in the threshold of business expansions, especially in the areas such as tourism. Right people handling the right processes in producing right results will be increasingly important. Process excellence will be one critical success factors in ensuring economic growth.
Hence, the time is ripe to reflect on processes that we manage. Four Vs will offer us insights for improvements. Choosing the V that needs more focus and attention could be the way forward in order to strengthen the processes.
(Dr. Ajantha Dharmasiri is a learner, teacher, trainer, researcher, writer and a thinker in the areas of human resource management and organisational behaviour. He can be reached on [email protected].)