Chapter 4

Put Processes First
Make High Performance Possible

At a manufacturer of industrial equipment I know, customers often submit orders with a request that the product being ordered be modified to meet some special need. What happens to such requests could charitably be described as a comedy of errors. The customer service rep (CSR) who receives the request takes it to an engineer, who often rejects it, citing the impossibility of meeting the customer’s need. What the engineer really means is that he sees no percentage in spending his time modifying an existing design, since his job description and rewards are focused on developing new designs. Moreover, why should he listen to this CSR? After a great deal of arguing and arm twisting, the CSR is sometimes able to bring the engineer around. But then the scene is repeated with the industrial engineer (who doesn’t want to modify his production system), with the scheduler (who doesn’t want to disrupt her neat and tidy plan), and with just about everyone else involved in filling the order. Each customer request creates such a crisis; each one is handled in a different way, each has an unpredictable outcome, and each leads to a great deal of energy being expended on internal squabbling. The company has calculated that it takes upward of a month to fill such special orders, but that the actual productive work time involved in doing so is less than three days. The rest of the time is spent arguing.

This company has a process problem. And if this story sounds at all familiar, so do you.

For most of the last decade, I thought I had found a word that summed up the work I did, my outlook on the world, my point of view. The word was radical. I used this word not in its political sense but in its dictionary meaning: "fundamental, far reaching, going to the root." The reengineering movement that I started in the late 1980s was all about making fundamental change in how companies conducted business, about rethinking everything from the ground up, about starting with the proverbial clean sheet of paper. I felt, and most other members of the movement would have agreed with me, that radical was the key word in the definition of reengineering: radical change in business processes for dramatic improvement in business performance. Reengineering was a take-no-prisoners, burn-it-down-and-start-over approach to making businesses better. Down with tired ideas, irrelevant methods, and obsolete systems. Up with new customer realities, new corporate structures, and new information technologies.

I was wrong.

Don’t misunderstand me. I have not cooled off, nor have I recanted my commitment to radical ideas. I am not like a onetime political activist who has settled down into comfortable bourgeois life. I still believe that major changes in the business environment require radical responses. But I no longer view radical as the core of my definition, or as the first word of the reengineering lexicon. Now that pride of place belongs to the mild and unassuming word process. I no longer see myself as a radical person; instead, I have become a process person.

Process is the Clark Kent of business ideas: seemingly mild and unassuming but actually amazingly powerful. Process is the way in which the abstract goal of putting customers first gets turned into its practical consequences. Without process, companies decay into a spiral of chaos and internal conflict.

Since we are living in a customer-driven world, it would seem natural for companies to orient themselves around what customers care most about. But a moment’s reflection reveals that customers aren’t at all interested in the activities toward which companies devote most of their managerial energies: the annual budget, the organization chart, the executive succession plan, the compensation program. At most these are only means to an end. Customers care about one thing only: results.

From the customers’ point of view, a company exists only to create value for them, to provide them with results. Yet in far too many companies, the actual creation and delivery of customer value is not the responsibility of any particular individual. One searches in vain for people who are focused on and responsible for the end-to-end work of filling customer orders; on seeing new products through from conception to realization; or on resolving customer problems. Instead, the work that creates results for customers is broken into pieces and scattered across numerous departments and units. In these companies, workers, managers, and departments focus on each of the steps that lead to creating results for customers, but no one focuses on all the steps together as a unit. One person takes the customer call, another gathers needed information, a third decides what is to be done, a fourth takes action, and no one oversees the whole thing. These companies, like our manufacturer of industrial equipment, suffer from a crisis of process.

Process is a word now widely used in the business world but often incorrectly. Put most simply, processes are what create the results that a company delivers to its customers. Process is a technical term with a precise definition: an organized group of related activities that together create a result of value to customers. Each word here is important. A process is a group of activities, not just one. For example, filling an order is a process comprised of many activities—receiving and recording the order, checking the customer’s credit, allocating inventory, picking and packing goods, planning the shipment, and making the delivery. No single task creates the desired result. Value is created by the entire process in which all these tasks merge in a systematic way for a clear purpose.

Second, the activities in a process aren’t random or ad hoc; they are related and organized. They include no extraneous irrelevant activities, and the included ones cannot be performed in an arbitrary sequence. The process of order fulfillment (as it is often called) is a stream of relevant, interconnected activities that must be performed in sequence to produce the desired outcome. We don’t pack before we pick. We don’t check credit after we have shipped. We also don’t forget to do either one; nor do we decide to check the sports pages for yesterday’s scores. We do the right things in the right way every time.

Third, all the activities in a process must work together toward a common goal. People performing different steps of a process must all be aligned around a single purpose, instead of focusing on their individual tasks in isolation.

Finally, processes are not ends in themselves. They have a purpose that transcends and shapes all their constituent activities. We don’t perform order fulfillment to keep ourselves busy; we do it to create the result—goods delivered as requested—that customers care about.

Over the last few years, I have reviewed the concept of process with many thousands of people. After presenting the definition, I usually ask the audience whether their own companies have order fulfillment processes. Typically, only 25 percent raise their hands, at which point I express my surprise. Clearly, all these companies have customers whose orders they somehow manage to fill. I ask them why those methods do not qualify as processes—that is, what’s missing? Without fail, the audience cites two words from my definition—together and organized.

Their companies do perform all the steps that constitute order fulfillment, but the individuals who do these jobs do not work together. Each is focused narrowly and exclusively on his or her task; they are disconnected and not aligned toward any common purpose. The credit checker wants to maintain credit standards. The warehouse manager tries to minimize inventory. The shipping department aims to reduce costs. There is no sense that everyone works together toward achieving the goal that serves the collective interest of all—getting product to the customer.

If the participants in this work lack a common purpose, each one will inevitably work at cross-purposes with the others. Everyone has a narrow goal related to his or her department’s objectives, which, in fact, have little or nothing to do with the overall needs of the process. While each manager makes sure that his or her department excels at its narrow task, no one ensures the excellence of the whole operation; nor does anyone view fulfillment as a whole through the prism of process.

In addition, the collection of activities that constitute order fulfillment are not organized. That is to say, they are undesigned. They lack any coherent structure, any overarching framework that carefully specifies exactly which tasks are to be performed, by whom, when, and where. Rather, work meanders from department to department, sometimes one way, sometimes another. There is no organizing design that integrates all the pieces into a whole process.

A process design prescribes how all the individual units of work must come together to achieve the overall goal. It specifies exactly what work is to be done, in what order, in what location, and by whom. Process design is a prerequisite for repeatability; without it the would-be process is likely to be performed differently each time. No matter how hard individuals work, they cannot overcome a flawed process design, much less the burden of no design at all.

Traditional organizations are not friendly to processes. They are structured around departments, each focused on one task and that task alone. In such organizations, no one knows or cares that others are doing related work. Credit checkers have absolutely no idea of what salespeople or warehouse workers are up to, and vice versa. Each unit speaks its own language and remains aloof from the others. As a result, customers’ orders are like travelers passing through a series of rival kingdoms, where border guards give them a hard time before stamping their visas so they can proceed.

With processes broken into disconnected pieces, each hidden in a separate department, no one is in a position to see the end-to-end process, much less make it work smoothly. Departmental managers are narrowly focused on their own turf, while top managers are too far away from the action to comprehend the work being done on the front lines.

In this balkanized environment, bad habits and pointless work flourish. Each department is burdened with assorted checkers, expediters, supervisors, and so on—people whose work is an artifact of the disconnected process and adds not a whit of direct value to the customer, who, presumably, is the target of the effort. Unfortunately, even work that adds no value for customers does add cost.

Errors proliferate in a processless environment. Sharing neither a common vision nor a common terminology, departments miscommunicate, leading to mistakes that require rework or that alienate customers or both. The absence of process also makes companies clumsy and sluggish. Handoffs between departments generate enormous delays. And since no one has authority or perspective on the overall process, no one is in the position to adapt it to special or changing customer needs.

How then have traditional organizations that submerge their processes under functional departmental structures managed to survive for hundreds of years and create the great prosperity of the industrialized world? The short answer: That was then, and this is now. What was once satisfactory no longer is. In a world of pliant customers, genteel competition, and moderate change, companies could generally escape the consequences of high costs, low quality, rigidity, and unresponsiveness to customers. After all, what could customers do? They had nowhere else to go. But in today’s customer economy, customers no longer tolerate the poor levels of performance with which they once had no choice but to be satisfied. Low cost, high quality, and rapid response are now taken for granted; they are essential simply for getting the customer’s attention, let alone his or her business.

Without rigorous attention to processes, achieving even such minimally acceptable performance—much less anything better—is impossible. In the absence of a process focus, a company cannot consistently deliver the performance levels that customers always wanted and now demand. Instead, it will be overwhelmed with overhead, beset by delays, and plagued by errors; it will operate unpredictably and inconsistently. Specifically, the twin goals of ETDBW and MVA are unachievable without a process focus. A quick scan of the preceding two chapters will reveal that processes were at the core of what companies have done to realize these two goals. Without precise process designs and common integrating goals, employees have little chance of consistently operating in ways that customers find convenient. They will have even less chance of successfully performing and coordinating the broader range of activities needed to deliver higher levels of value-added. As work gets more demanding and more complex, process becomes absolutely essential.

Customers, results, and processes are bound together in an iron triangle. You can’t be serious about one without focusing on the other two. The capacity to deliver the results customers expect is largely a matter of how well you design and manage your processes. Processes are the route to results and so to success in the customer economy.

Given its steady, sturdy style—more like the tortoise—the process approach is not much reported by business magazines in search of the sexy hare. Process is the province of quiet companies that speak softly but generate big profits. Glamorous start-up companies seldom focus on process because they don’t yet need to. In their entrepreneurial stage, they can live off booming demand for their unique products.

For established companies in mature industries, however, process is vital. IBM, Ford, Duke Power, 3M, Cadbury Schweppes, GE Capital, Mead Paper, Progressive Insurance, Air Products and Chemicals, Detroit Edison, UPS, Motorola, and John Deere are just a few of the dozens and dozens that are now intensively focused on their processes. Virtually all companies in some industries, such as chemicals and electric power, are becoming process oriented. In these and other highly competitive industries, secular market growth isn’t sufficient to carry a company to success. Only superior execution can, and that depends on having superior processes.

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