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Quality Management Review: PROCESS-ORIENTED ORGANIZATIONAL DESIGN

April 26, 2008

The bmc Credit example is an excellent illustration of the complexities that large-scale process redesign can impose on an organization. The solution sounds simple: just train everyone in six different departments to execute the entire process from beginning to end. Great idea, but what are the job descriptions for the new roles, who do the people report to, should a new department be created?—the list of organizational issues is long. This type of problem was the genesis for the third wave of process management, known as process-oriented organizational design. The purpose of the third wave is to set up an organizational structure that enhances the focus on process. This enables the key business processes within the organization to operate at maximum efficiency, delivering value both internally and to customers.

The trick when designing an organizational structure around processes is not to lose the functional benefits completely; there needs to be a balance between the two. Just like a heavily functional organization can suffer from process inefficiency, a totally process-oriented organization can suffer from lack of functional expertise. An interesting example of a process-oriented design comes from the State of Michigan Office of Retirement Services (ORS).

ORS was faced with significant challenges in the late 1990s and early 2000s. Impending retirement of the baby boomers threatened to overload processes that were already being stressed to their breaking point. Because the organization didn’t expect to have the opportunity to increase staff to handle the additional workload, its only real option was to improve process efficiency. Several reengineering projects got things off to a good start, and then they redesigned the organization to fit the model

The top of the diagram lists the Executive Director and his direct reports, just like any other traditional organizational structure. In this case the reporting functions were HR and Finance, Operations, Customer Service, and IT/Reengineering. Each of these functional areas had a director, middle management, front-line management, and employees. Reporting relationships were vertical/traditional, so ORS retained its emphasis on functional expertise.

What makes this example nontraditional is the process component illustrated on the left-hand side of the diagram. There were several groups of cross-functional processes, shown in the diagram as flowing from left to right. The organization created the titles of Business Process Executive (BPE) and Business Process Owner (BPO) to ensure that the core processes got the attention they needed as well. A BPO was someone with broad subject matter expertise who was responsible for delivering process results. A BPE was a member of the executive team who did not have a direct link to the process. In other words, their function was not part of process execution. The BPE’s responsibilities were to ensure that necessary cooperation and collaboration between functions happened so the overall process performance would not suffer.

For example, processes 1.1 Employee Reporting and 1.2 Employer Payments were closely related. Each is a core process rooted in operations. Therefore, the BPO title is listed under the Operations functional area, to note that the role is seated here. On the far left-hand side of the structure are the letters CS. This is to illustrate that the Director of Customer Service is the BPE for this group of processes. Because employee reporting and employer payments do not touch customer service, this manager will not be tempted to play favorites when overseeing process performance; the BPE can look out for the good of the process as opposed to worry about the impact on his or her own function. This setup also forces the management team to learn about processes from other parts of the organization, contributing to their ability to make better management decisions for the organization overall.

The end result of the ORS redesign was properly aligned leadership and employees, clear accountability for meeting customer needs, and dramatic process improvements such as those shown in table.

Measure

1997

May 2005

1st pension payment on effective date

Up to 6 months

98.3% in 60 days

Health insurance initiated on effective date

Up to 3 months

96.39% of the time

Telephone response rate—resolution on first contact

Inconsistent

93.2% of the time

Customer Satisfaction

  • Active

  • Retired

No records available 4 of 4 100%

77.5%

Written response rate (Up to a year)

Inconsistent in 10 days

Correspondence 99.5%

Employee Satisfaction

No records available

92.6%

The challenge of the third wave was documenting the benefits of the redefined organizational structure. In the ORS example, processes were being reengineered as the structure was redesigned and implemented. Skeptics could claim that the impressive results were generated by process redesign and would have occurred regardless of organizational structure changes. Because the challenges of changing a structure were so formidable, many management teams determined that it wasn’t worth the risk. While this reluctance to modify the structure to fit new processes surely caused some reengineering efforts to fail, the precise number of efforts failing because of ill-matched structure and process is unknown and unknowable.

The significance of the third qm , however, was that more and more companies started to realize that process performance was a key factor in their high-level decision making. Gone were the days when an executive team could simply look at financial reports to determine how the organization was performing. Process thinking had to be integrated into all management decisions, up to and including the structure of the organization. The final frontier was planning for the future of the organization by proactively leveraging process performance.

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4 Comments leave one →
  1. April 26, 2008 3:12 pm

    Good Layout and design. I like your blog. I just added your RSS feed to my Google News Reader. .

    Jason Rakowski

  2. April 28, 2008 6:45 am

    Interesting perspective.

  3. April 28, 2008 6:50 am

    Interesting perspective: I’m particularly intrigued by the BPE and BPO roles. Intuition would tell me that a responsible executive related to process should also be the person responsible for the process themselves, although this doesn’t appear to be the case here. I wonder, politically, how this would work in other, commercial organisations.

    I would also question the metrics shown. Not necessarily from an accuracy viewpoint, but from the point of view of ‘how much of that improvement is related to better process design, better process management, better process implementation, and how much is a result of better organisational design?’

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