4 Process Redesign Strategies for Operational Excellence

Despite the continued popularity of process redesign, little is known about the particular strategies that organisations can follow to achieve operational excellence. A redesign strategy specifies the best practices that are to be used in priority and the ones that are to be avoided in order to realise the objectives of the redesign effort.

The research team at the University of Exeter Business School set out to identify the configurations of redesign practices that work best in particular operational contexts. Using the Q-sorts method, we found four distinctive strategies; “employee-focused”, “cost-focused”, “hybrid” and “workstream-focused”. Each strategy consists of a coherent set of best practices and represents a unique way of going about process redesign.

In addition, any strategy includes two foundational best practices that are used at the outset of the process redesign journey in all situations, regardless of business context and organisational characteristics. Articulating redesign strategies will help managers select the most appropriate set of best practices to deliver the required operational improvements. The choice of the strategy to adopt is ultimately dependent on the current requirements and priorities of a particular organisation.

Process redesign strategies for operational excellence

The pursuit of operational excellence can be approached through a variety improvement methodologies, systems, and tools. In particular, many process-focused thematic initiatives such as reengineering, lean, 6-sigma, EFQM and TQM have been used by organisations to improve their operational processes and achieve superior levels of performance. Recent surveys of business and operations managers show that process improvement and redesign remain a key priority for most organisations. However, it is estimated that up to 70% of redesign projects fail to deliver the expected improvements in operational performance.

There are many stories and anecdotes of world-class organisations that successfully conducted process redesign programs in the early 1990s. Based on those success stories, popular books by Hammer, Champy and the likes identified and documented an extensive set of best practices of process redesign such as “removing non-value added activity” and “business process outsourcing”. A short-list of well-established redesign best practices can be found in Box 1. These still remain highly popular today as they have been successfully applied across a wide range of organisations and industries. Consequently, best practices are often said to be effective in redesigning virtually all operational contexts.

Despite the continued popularity of process redesign, little is known about the particular strategies that organisations can follow to achieve operational excellence. Documenting a list of individual best practices is useful but does not provide sufficient guidance to managers ready to embark on a major redesign journey. Also, there is little value in focusing on an undifferentiated set of best practices. Process redesign typically involves using specific configurations of best practices. There is therefore the need to identify the combinations of redesign practices that work best in particular organisational contexts. A redesign strategy specifies the best practices that are to be used in priority and the ones that are to be avoided in order to realise the objectives of the redesign effort. Articulating redesign strategies will help managers select the most appropriate set of best practices to deliver the required operational improvements.

In order to identify suitable process redesign strategies, the research team at the University of Exeter Business School looked for a wide range of experts who had embraced best practices in the redesign of their operations. A type of sorting method — the Q-sorts method4 — was used to explore the viewpoints of 62 process experts about the relative success of redesign best practices in improving operational performance in their organisations (see the Appendix for details about the respondent sample). The study included 16 popular best practices such as ‘outsource’, ‘automate’, ‘manage exceptions’, ‘empower’, and ‘reduce customer contact’ for instance. Firstly, our analysis determined individual best practices that were perceived as highly successful by most respondents. Secondly, we identified specific configurations of best practices that were common across a number of respondents and markedly-different from others. Respondents who reported a statistically-similar set of successful and unsuccessful best practices were grouped together. The data analysis enabled the identification of four distinct groups of process experts embodying four specific approaches to process redesign.

A short-list of best practices of process redesign

1. Reassign control tasks to the customer: moving control activities (e.g. checks and reconciliation) to the customer. For example, an organisation has redistributed its billing controls to its customers, eliminating the bulk of its billing errors.

2. Reduce customer contact points: reducing the number of points of contact with customers. For example, ford’s accounts payable department decreased the number of customer touchpoints from three to two (resulting in reducing the number of clerks from 500 to 125).

3. Eliminate non-value-adding tasks: eliminating tasks from a business process (e.g. checks and verification tasks through which orders, requests or customers pass).

4. Re-sequence tasks (process flow optimisation): changing the sequence or order of tasks to improve process flow. For instance, a retail bank has decided to perform its credit scoring tasks very early in the loan application process.

5. Manage exceptions: designing business processes for typical, standard customer requests or orders and isolating the exceptional ones from the normal flow. For instance, Xerox established a specific procurement process to handle rush orders.

6. Make resources more specialised: turning generalist employees into specialists. A specialist builds up routine more quickly and may have more in-depth and comprehensive knowledge than a generalist.

7. Make resources more generalised: transforming specialised employees into more generalist employees. For instance, at IBM credit, specialist jobs such as credit checker and pricer were combined into a single position, “deal structurer”.

8. Empower employees: giving employees more decision-making authority. Empowered employees are given the freedom to make decisions without referring to supervisors. For instance, a large telecommunications company has decided to allow its top sales managers to change offering specifications to accommodate the needs of high-profile customers.

9. Add control tasks: adding verification tasks to check the completeness and correctness of incoming materials and/or check the output before it is sent to customers. For instance, a utility company requires high-value bills to be double checked manually before they can be sent to customers.

10. Automate tasks: replacing employees with automated systems to execute the process. For instance, an application can be seen in the processing power of enterprise systems such as the deployment of optical character recognition in inputting mass claims.

Articulating distinctive process redesign strategies

The research found that four major strategies are available to managers for going about process redesign. In other words, there are at least four different ways to achieve operational excellence through process redesign. A redesign strategy consists of a certain configuration of best practices that are to be applied or avoided, as illustrated in Figure 1. Each of the four strategies can potentially be implemented with equal success in any organisation. The choice of the strategy to adopt is ultimately dependent on the current requirements and priorities of a particular organisation. In addition, a redesign strategy includes two foundational best practices that are used at the outset of the process redesign journey in all situations, regardless of business context and organisational characteristics.

Two foundational best practices

The best practices of removing non-value adding (NVA) tasks and re-sequencing tasks were seen as universally applicable — both have been successfully applied by the vast majority of organisations. The data also indicate that these practices are effective in a wide variety of industries; manufacturing, service, private and public companies.

Respondents describe removing NVA tasks as a way of streamlining the process through waste removal, improving cycle times and of achieving efficiency gains through cost reduction and increased throughput. It is associated with both a strong customer focus and internal process efficiency. This allows the process to provide customers with better value for money. The importance of defining value from both the customer and the business perspectives was also stressed. Moreover, the data suggests that improving process flow though task re-sequencing lead to increased productivity. Inappropriate tasks must be relocated to optimise process design and eliminate bottlenecks. Finally, the data suggest that these two best practices are used sequentially as the foundation of process redesign efforts. An organisation embarking on a process redesign journey tends to identify and eliminate NVA tasks from the process first, and then proceed to optimise flow through the re-ordering of the remaining tasks.

Box 1: Quotes from respondents

Four major strategies

In addition to the two foundational best practices, we identified four distinct redesign strategies. Each strategy consists of a coherent set of best practices and represents a unique way of going about process redesign to achieve operational excellence. The four strategies are:

 Employee-focused

 Cost-focused

 Hybrid

 Workstream-focused

Strategy #1: “Employee-focused”

This approach focuses on empowering employees and maintaining frequent touchpoints with the customer. The strategic aim of the redesign effort is to improve flexibility through empowered generalist employees. Another important feature includes resisting automation. Instead, an employee-focused strategy consists of putting in place a multi-skilled workforce to maintain sufficient flexibility in the process of delivering products and services. This strategy also emphasises that the more customer contact, the better. Customer interactions are opportunities to understand the customer perspective and to be in a position to meet highly-variable and often-changing customer requirements. Non value-adding activities are identified from the customer standpoint, and not solely based on internal considerations. Consulting and law firms as well as custom manufacturers and R&D labs are good examples of contexts that suit the employee-focused strategy. Organisations considering moving to a low-volume, high-end business model could apply the best practices that characterise this strategy.

Box 2: “Employee-focused” — Quotes from respondents

Strategy #2: “Cost-focused”

The organisations that adopt this strategy aim to achieve operational excellence through cost reduction and the establishment of rigid, inflexible business processes. Task automation and the use of specialists help to maximise efficiency gains. In addition, employees are given limited decision-making authority to ensure that they comply with work procedures and operational guidelines. Another related theme is the role of automation and process control in making the operational system error proof, which is closely associated with Poka Yoke methods. This facilitates a clear focus on productivity optimisation, efficiency gains and cost savings. This strategy can be used for designing high-volume service and manufacturing operations such as mass claims processes or mass manufacturing. For instance, a restaurant considering implementing a type of fast-food operation should apply the redesign best practices associated with this strategy.

Box 3: “Cost-focused” — Quotes from respondents

Approach #3: “Hybrid”

This strategy represents a mixed form of process redesign characterised simultaneously by customer centricity and a focus on efficiency. It combines best practices from the employeeand cost-focused strategies. The Hybrid label highlights the dual goal of managing customer contact activities and noncontact activities to allow different parts of the end-to-end process to focus on different objectives.

On the one hand, high levels of customer service are provided through maintaining customer contact points and empowering employees. On the other hand, efficiency is maximised by establishing process rigidity through process automation, the retaining of control and the elimination of unnecessary tasks. An application of this strategy can be found in the financial services industry (see Box 4). Retail banks often split up the end-to-end service process into distinct front-office and back-office parts, staffing them with different employees and controlling them separately.

Box 4: “Hybrid” — Quotes from respondents

Approach #4: “Workstream-focused”

A workstream-focused redesign strategy enables the operational system to adapt to the situation at hand through managing exceptions and establishing separate processes for normal and exceptional customer orders or requests. The importance of exception management in particular suggests that processes can operate in both standard and exception modes according to specific situations encountered. Performance depends on the ability to define the types of processes more specifically to deal with both modes through organising work, for example, using a triage approach.

A reluctance to implement a variety of process control activities means that the initial process design should ensure that quality is built into the process. This requires an ability to anticipate, plan and organise work from the outset of the process design journey. The workstreamfocused strategy was adopted by A&E units. In a nutshell, A&E now separates out patients into ‘minors’ (i.e. patients who are not seriously ill or injured) and ‘majors’, and directs them to the appropriate pathways; i.e. ‘see and treat’ by a suitable clinician for minors or large rooms to assess and treat seriously ill or injured patients.

Box 5: “Workstream-focused” — Quotes from respondents

Implications for Managers

This paper has identified and articulated four distinct process redesign strategies. Figure 1 shows the specific configurations of best practices that characterise each strategy. These unique combinations of best practices can be applied for achieving operational excellence, with the ultimate choice of a strategy depending on organisational requirements and priorities. For instance, the employee-focused strategy and the cost-focused strategy rely on highly contrasting best practices of redesign. The former requires redesigning fluid processes for flexibility and the execution of a high variety of tasks. Decision-making authority is transferred to service employees and automation decisions are to be carefully considered. Conversely, the cost-focused strategy concentrates on a narrower range of activities that can be more easily automated. It designs rigid processes for efficiency and where workers make few judgmental decisions. In addition to these diametrically opposed approaches, the hybrid strategy simultaneously focuses on maximising efficiency gains and maintaining high levels of customer service. This advocates separating the front office, which is to focus on customers, from the back office, which is to be managed for cost reduction. The ultimate objective is to achieve both efficiency and customer service. Finally, the workstream-focused strategy has the ability to respond to changes in the environment by focusing the process design on handling external, customer-induced variability. Frequent changes in customer requirements (e.g. “normal” and “special” orders) requires operating separate, focused processes staffed with specialists. Processes redesigned based on this strategy will accommodate and be robust to customerinduced variation.

Furthermore, the study shows that removing NVA tasks and re-sequencing tasks (i.e. for process flow optimisation) are widely applicable across organisations and independent from the choice of a particular redesign strategy. Removing NVA is used to improve both efficiency gains and customer service which goes a long way toward explaining why this best practice is effective in virtually all contexts. Similarly, re-sequencing tasks ensures a seamless process flow, a tried-and-tested tenet of the lean philosophy. Out-of-sequence tasks are likely to disrupt process execution regardless of the operational context and require improvement through re-sequencing. These best practices represent the foundations of any process improvement strategy.

Conclusions

Organisations that embark on a process redesign journey face an important strategic choice in determining how they achieve operational excellence. Given the plethora of improvement tools and techniques available to practitioners, the ability to identify the right combination of best practices to direct process redesign efforts is important. Because of a lack of evidencebased guidance, practitioners find it difficult to choose among numerous popular best practices of redesign. This paper has made a strong case for the view that it is possible to articulate distinct process redesign strategies that can all lead to operational excellence. There is not one single right way for organisations to redesign the operational system. A process redesign strategy is best approached through the application of one of four configurations along with two foundational best practices. This white paper contributes to the ongoing debate around process improvement for operational excellence by identifying four distinctive redesign strategies that managers can consult to select the most appropriate configuration of best practices for their specific situation. It is clear that the choice of the redesign strategy will ultimately be dependent on a multiplicity of factors relevant to a particular organisation at a particular time (e.g. intent, history, competition, capability etc).

Appendix

Characteristics of the respondent sample