Five Common Pitfalls in Process Optimization And how to avoid them

Process optimization — summarized!

1. Management Summary

Process optimization is “the discipline of adjusting a process so as to optimize some specified set of parameters without violating some constraint” and should always links back to the heart of the business strategy. The optimization efforts should strengthen the reason of existence of a company, and lead to cost minimization, output maximization, or both.

There are 5 common pitfalls to avoid when engaging in process optimization:

1. Unclear start and finish of the process optimization project

2. Using the wrong key performance indicators

3. Lack of ownership and support throughout the organization

4. Not embedding process changes

5. Lack of execution

To avoid these and have successful process optimization projects, there are 5 pre‐requisites to consider, which can be called “the 5 C’s:”

Customer first: Start with the customer and understand their way‐of‐working and processes. Work outside‐in with process improvements, and be sure to keep the corporate goals in mind.

Conscientiousness: Define the right KPIs which are needed to measure, analyze and simulate any optimizations. These process KPIs should link back to KPIs defined at the strategic /corporate level. Also, run simulations of your processes, to discover potential bottlenecks upfront.

Collaboration: Involve process owners, process participants and your C‐level sponsor in all phases of the optimization project. Build feedback explicitly into your processes, e.g. using feedback forms and questionnaires.

Communication: Transparency in communication helps to keep the optimization project afloat and avoids inefficiencies and inconsistencies. Management dashboards with all relevant KPIs as well as (internal) notification and discussion systems to foster collaboration among the people involved in the process optimization project are real assets.

Continuous execution: Process optimization is an on‐going activity, as new process bottlenecks will emerge once the previous has been solved. It is therefore recommended to use so‐called “hot deployments” of new processes to avoid system downtime, in order to improve processes on a continuous basis.

2. What is process optimization?

From our earliest days, we have been trying to optimize our processes. As prehistoric hunter‐ gatherers, we developed spears, sharpened rocks and other tools to kill animals and grow crops for our daily food supply. The chances for successful results (having something to eat) were greatly improved by using tools. The food supply process was gradually optimized with more advanced tools and techniques, like hunting in small groups instead of hunting alone, or by pouring water over the crops every now and then. These optimizations served two goals: better results and reduced costs (i.e. effort needed, time spent away from the cave, or the risk of getting wounded or killed yourself)

Process optimization can be defined as “the discipline of adjusting a process so as to optimize some specified set of parameters without violating some constraint”. Process optimization always links back to the heart of the business. The optimization efforts should strengthen the core business of a company, by delivering better products and services, in a shorter period of time, at lower cost and with less environmental impact.

Closely related to process optimization is process analytics, the set of methods and tools that can be applied to analyze (intermediate) results of business processes in order to support decision ‐ making in organizations. The analysis of process events can be divided into 3 categories.

Usually, companies apply process analytics to provide management, stakeholders and the people executing the process with insights into the efficiency and effectiveness of these business processes. Process analytics are typically used as input to optimize business operations, or for compliancy and audit purposes to be able to demonstrate that a company is operating in accordance with specific regulations or service level agreements (SLAs).

2.1. Why process optimization matters

Management guru Simon Sinek says to always start with the “Why” in order for business managers to inspire action. So then, why process optimization?

Process optimization is important, as it helps businesses reach their goals and fulfill their mission more effectively and more efficiently. In turn, this helps their customers as they get better products, delivered faster and usually at lower cost.

And these customers, in turn, enable a company to survive or grow. The optimization efforts should therefore be focused on the end‐to‐end business process, starting with the customer and eventually also ending with the customer.

Especially in today’s current economic situation, where we see a lot of companies (and even entire countries) struggle to survive harsh market conditions, process optimization is important. A lot of companies are striving to reduce their operational costs and /or to improve the way they cooperate with existing clients in order to reduce churn. And although the saying goes that “the time to repair the roof is when the sun is shining” many companies unfortunately did not look after their roofs until it started to pour down on their carpets and office furniture…

The two most common goals of process improvement are maximizing output and minimizing costs. Either way, it should contribute to the bottom line results of the business.

2.2. Maximizing output

To guarantee its long‐term “raison d’être,” a company must at least ensure enough funds to pay its stakeholders. Employees want their salaries, investors and banks want to be compensated for the risk of lending money to a company, and governments want to impose taxes. But keeping your status quo typically won’t be enough in the long run. Innovations are needed for the survival of a company, simply because the world is changing, too.

The increase in revenues can (thus) be used for innovations: e.g. to fund new product developments. Inventing a new medicine to reduce heart failure, developing a new software tool for mobile computing, or creating new services based on 3D printing, whatever is your business or expertise: new developments cost money.

The extra revenues generated can also be used to expedite a company’s go‐to‐market plans. Opening up new regional offices, increasing marketing & advertising spend, or hiring a new sales rep all will contribute to grow your business quicker.

2.3. Minimizing costs

Cost reductions play a significant role here too. For example, one could optimize the order‐to‐cash process in a large manufactory by adopting a just‐in‐time production methodology, leading to minimized inventory levels between various production steps. This will reduce the production costs.

Costs can be lowered by looking carefully at all cost centers in a company, eliminating the ones that do not contribute to the core business operations. In addition, expensive production factors may be utilized better or be replaced by less expensive ones — often, this means that administrative (human) processes get partially replaced by computer‐automated processes, so that the people freed up now can do other activities that were previously outsourced or neglected. So: do more with less.

Cost reductions in general lead to higher profit margins (or more precisely — to a higher return on investment). This also increases the attractiveness of a business to external investors and shareholders.

If we plot the goals of process optimization against internal and external benefits, we get the following process improvement matrix:

As we can see from the above examples, process optimization is important — not only as an exercise to carry out when things are not working, but (also) when things are going well. Still, optimizing processes is something that is easier said than done, as there are several pitfalls to be avoided.

3. Common pitfalls around process optimization

If you are serious about optimizing your processes, there are 5 pitfalls to avoid:

  1. Unclear Start and finish
  2. Using the wrong key performance indicators (KPIs)
  3. Lack of ownership and support throughout the organization
  4. Not embedding process changes
  5. Lack of execution

In the remainder of this chapter, these 5 pitfalls will be explained in more detail.

3.1. Pitfall #1: Unclear start and finish

If you want to optimize a process, it is essential to understand the current status quo of this process, the so‐called zero measurement. Who is involved in the process? What input and output parameters are being used? What is the average time‐to‐completion for a single instance of this process? How often are exceptions raised, and how are these handled, and by whom? These and other questions need to be addressed before any optimization efforts are being implemented. It (also) implies that a company has kept track of and analyzed its business processes for some time to be able to provide this kind of information.

It is just as important to know where you want to be heading with your processes. Where is the finish line? What is the desired outcome of the improvements and changes in your business processes? If you don’t know what you want to accomplish, you don’t know if you have reached your goals.

Of course, we all know this, and we also know about the examples of optimization projects that failed. On average it is estimated that 60‐70% of all process optimizations projects fail. You will be surprised to see how many optimization projects were started without clearly defined objectives or without a proper baseline analysis being carried out first. Knowing apparently is not equal to doing.

3.2. Pitfall #2: Using the wrong KPIs

This pitfall may sometimes be confused with the previous one, as “unclear finish line,” but in fact is something different. KPIs serve as “signposts” to guide you in the right direction, up to the finish line (which will have its own set of KPIs, too). Ill‐defined performance indicators can take you off course, as they point your optimization efforts in the wrong direction.

It may be that the KPI is unrelated or only modestly impacted by the process you are trying to optimize. Or that the KPI is not SMART‐ly defined, i.e. not Specific, Measurable, Acceptable, Realistic or Time‐bound enough. That way, KPIs may become multi‐interpretable.

It also may happen that the KPI is not only impacted by your business process, but also by external factors, as the following example demonstrates:

One telecom provider in Europe, trying to improve its customer satisfaction level defined several KPIs to see if they were still on track. One KPI was “number of complaints uttered via social media” to see if service levels indeed had improved. However, at that same time — with the rise of so‐called web care teams — the use of social media for this type of (negative) brand communication was booming industry‐wide. This meant that the KPI in itself was not useful to steer on. What the telecom provider should have done was to control for the number of complaints for the increase in using social media for this purpose.

Another way how wrong KPIs may manifest themselves is using KPIs that are not linked to the overall business goals of the company in any way. So indeed, your process optimization efforts may positively influence your KPI, but in the long run, this is not a guarantee that the improved process in itself now better contributes to the bottom line results of the company. For example, the mere fact that you have reduced the “number of steps for handling a customer request” by itself does not guarantee that you will be making more profits. Instead, what would have helped is to define a KPI on “total operational costs for handling a customer request”.

3.3. Pitfall #3: Lack ownership and support throughout the organization

In the end, it is the people who make a process successful. Even though processes may describe (or prescribe) what tasks need to be done, when and by whom, it is the human participant in the process that makes the difference. He or she can do his task poorly, resulting in a poor process outcome or extra avoidable costs as it needs to be corrected at a later stage.

This makes the role of the process owner very important — someone has to feel and take responsibility for a specific business process. This process owner is the one who can work with other process participants about their jobs.

The process owner usually also is the driving force behind process optimization projects, as he cares about his process and strives to do a better job each and every day. Clearly, lack of (sufficient time by) a process owner also means that in the end — no one really sees to a successful outcome of the optimization project.

Also the lack of C‐level support for process optimization efforts can be quite harmful to the end results of the optimization program. Business processes typically span multiple people and systems belonging to multiple departments. More often than not, the hand‐over between departments (and/or data synchronization between IT systems) are the first place to look when you want to optimize processes. The “departmental handshake” often leaves room for improvement, but this is usually only realized if supported or imposed by top level management.

3.4. Pitfall #4: Process changes are not embedded

There is a natural human resistance to change. This makes it very important to take the time to communicate all changes needed to realize process improvements with all stakeholders in your processes. First, people need to understand why change is needed. In classical change management literature by Kurt Lewin this is called the “unfreeze situation” in which the organization will be prepared to become more “fluid” and receptive to upcoming changes. This first part of the change process is typically the most hard and stressful. When you start cutting down the “way things are done”, you put everyone and everything off balance.

Once the organization has been “unfrozen,” the necessary process changes can be implemented step by step. People start to believe and act in ways that support the new direction. In order to accept the change and contribute to making the change successful, people need to understand how the changes will benefit them. Employee trainings and time for internal discussions may help execute the needed change successfully.

As a last step, the organization needs to internalize and embed the process improvements. People have embraced the new processes and act upon those. When an organization is refreezing again, you will notice that a stable organization chart is in place, with proper job descriptions, enough time for employee trainings and last but not least — a consistent set of process descriptions.

But also in “agile” situations where frequent — or even on‐going — change is desired and needed to adapt to ever‐changing market conditions, it is essential to make sure that each change is properly embedded within the organization’s way of working and business processes. Clear communication about goals, documenting all changes — including the ones that did not lead to significant improvements — and celebrating intermediate achievements contribute to embedding your continuous optimization efforts.

3.5. Pitfall #5: Lack of execution

Before you can improve your business, first understand the current situation (see Pitfall #1) and what you want to see improved (Pitfall #2). However, there is a risk that companies drive this to the extreme, focusing on collecting and analyzing as many data as possible on all kind of processes — even the ones that are not in scope of being changed right now. Complicated statistics ready‐made‐ for‐consumption through nice dashboards and reports by itself do not improve your bottom line results. What is needed is a means to execute upon business insights effectively, something that makes these insights actionable: a Business Process Management (BPM) system.

4. The 5 C’s for doing process optimization right

As we have seen in the previous chapter, the path to optimized processes is full of holes that one can fall into if unprepared. In the remainder, we will describe the 5 C’s — which may serve as 5 pre‐ requisites for doing process optimization right, right from the start.

If each of these 5 C’s is taken into consideration and thoughtfully implemented in your process optimization program(s), your chances for success will become much greater!

4.1. Customer first

The basic reason for any company to exist is its customers. Customers pay the bills, and they help shape the future, giving input on new requirements. It is therefore important to understand the customer’s processes and way‐of‐working first before implementing any process improvement.

First identify who your real customer is, as in bigger organizations this may be blurred through the various intermediate (internal) customers. Then, establish what the customer would experience as a “successful result”. Some thought leaders have labeled this as Successful Customer Outcomes.

Work outside‐in; to discover the steps a customer would take in his customer journey. This customer journey is one of the most critical processes you want to optimize.

Process improvements should always lead to an even better adaptation to the way customers expect us to work, not vice versa. We simply cannot force customers into our way of working if we want to keep them coming back. A customer‐driven approach is needed, where the customer is our point of departure and our guiding North Star. Nonetheless, as an organization you also have your own strategic business goals — e.g. operational excellence, profit optimization or market share maximization — which shouldn’t be lost from sight and which can be better achieved if you strive for better results for our customers.

Start with the end in mind — a happy customer — and then work backwards.

4.2. Conscientiousness (awareness)

Be clearly aware of what you want to improve, otherwise you may end up optimizing the wrong process, as the following example demonstrates:

A large internet service provider (ISP) received many customer complaints about the time needed to handle service requests, sometimes resulting in customers not having access to the internet for more than 72 hours. In turn, the ISP implemented an automatic e‐mail response system acknowledging customers that their complaint has been received and was being processed.

Besides the fact that a lot of customers could not even receive this message as they were cut off from their internet connection […], the automatic e‐mail totally ignored the real problem customers were facing: the huge amount of time needed to solve the complaints. In these types of situations, you do not want to hear that the ISP is working on the problem; you simply want it to be fixed quickly.

4.2.1. Use process monitoring

KPIs help us to stay on the right track. They are like the gauges in the cockpit of an airplane: is the altitude good, is the direction still okay, is the cabin pressure high enough, how much fuel do I have and how many miles can I still fly before I need to fill up the tank again?

In business, we use similar indicators that provide us with feedback on our business process execution. These process indicators need to be accurate, cost‐effective to obtain, easy to understand, timely and actionable. Any KPI should ultimately link back to the corporate business goals — e.g. a KPI that shows the average response time towards customers can be meaningful as one of the indicators for “customer satisfaction”.

Process analysis tools help you to pro‐actively monitor your process KPIs. These tools — often an integral part of a BPM suite ‐ provide ways to analyze and visualize KPIs via a management dashboard. This dashboard can be used for optimally “tuning” the process optimization efforts, as well as serve as a communication means to process stakeholders and C‐level management. Moreover, these tools often support escalation management; i.e. they automatically escalate process notifications to the right person so that these will be handled quickly and adequately.

4.2.2. Use process simulation

Part of being conscientious or aware is also to test, test and test. The earlier you can test your process improvements, the easier it will be to prevent costly and avoidable mistakes. A common way to verify upfront if your process improvements will yield the right effect is to simulate your business processes. Simulation can be done manually, although most BPM tools also offer a simulation module for this purpose. Using simulation, you can discover process bottlenecks upfront, or see how your process does under heavy loads. Simulation is a great way to streamline process designs, and to get deeper insights into what will be optimal routes or “paths” to take. Based on the outcomes of the first round of simulations, you can redesign your original process or assign extra resources to specific tasks, and then run the second simulation round et cetera until you have optimized the end‐to‐end process in such a way that it meets your customer SLA requirements or internal requirements (in other words: it crosses the finish line, see also Pitfall #1).

4.3. Collaboration

Process optimization is almost never a stand‐alone effort. It will require various people, disciplines, teams, systems, technologies and activities to all get in line. It is therefore essential that a good collaboration process is established. In particular, the process owners and key users of the process should be involved, right from the start. Most BPM tools offer collaborative features for this purpose.

4.3.1. Collaborate during all phases of the optimization project

During the process discovery and process design phase, key users and process owners can suggest possible optimizations in the process flow. As they “live” their process day and night, they know where to focus on and where inefficiencies could be eliminated.

Process owners and key users of the process should regularly meet to discuss possible optimizations and to agree if and how these can be incorporated into the process design. They will need to collaborate with legal, financial, HR and marketing experts to ensure the right process optimizations are carried out. As a side effect, “the process” itself gets more credibility too, as it is now shared and co‐created by a larger community of experts within the company.

Shared input leads to shared responsibility, and people will start to feel more involved and responsible for the way things are done within the company. In fact, it has become a process owned by the Legal department, Finance, HR or Marketing, too!

Also during process evaluation, e.g. when the simulation results are being reviewed and discussed, collaboration between the people directly involved in the process execution and the business experts is important. In the end, these business experts can suggest alternatives for process bottlenecks discovered during simulation. Most of the time, the alternatives involve business decisions: Can we accept longer process times (thus: increased time‐to‐market) in order to add an extra quality check in the production process? Is it acceptable in terms of risk and compliancy to outsource specific process tasks to a 3rd party?

Most BPM tools nowadays foster collaborative processes. They not only offer shared repositories where process experts can work together, with versioning capabilities, facet search, the ability to comment on each other’s work and so on. They also offer tools to foster communication amongst team members with functionality to send notifications to each other or to the whole team involved (see also the next C about Communication).

4.3.2. Explicitly solicit feedback

It is important to start with end in mind: the way your customer will use the process outcome. So why then not invite the customer explicitly to collaborate with you to improve the process and the process results; the product or service he’s buying from you?

Whether you are using product feedback forms that are included with the product itself, conducting customer interviews via the phone, setting up online polls and questionnaires, or simply asking the ultimate question [9]: how likely is it for you to recommend this product to someone else?; the customer can give you valuable feedback. You can also choose to set up face‐to‐face customer interaction programs to involve customers at an early stage to improve the product or service to‐be as well as the process itself. This is especially useful if you are delivering complex products or services, or if the costs involved to change something in the product (or process) are relatively high or time‐consuming.

Internally, asking for feedback from process actors and other employees may be worthwhile too. They often have valuable suggestions where improvements could be realized, or — e.g. as customer support employee — have first‐hand feedback from customers right at their disposal. To collect this kind of feedback efficiently, you may choose to add a feedback step to your main business processes. Some BPM tools offer feedback gathering capabilities out‐of‐the‐box, e.g. by providing an electronic feedback form that can be sent out to a select group of recipients as soon as a specific process step has been completed. This enables organizations to systematically collect feedback in a standardized fashion, at multiple stages in the process execution flow.

Of course, it is still up to the process owner and company management to also act upon this feedback, but at least the first necessary step has been made then.

4.4. Communication

The previous point of collaboration won’t work if you do not communicate. Nonetheless, communication goes broader than just fostering collaboration; it is the oil needed to keep the engine of process optimization going. It is essential to communicate goals, objectives, intermediate results, proposed changes and final process implementations to all stakeholders involved.

First of all, your customers need to be aware that you are working on improving processes, products and/or services. This is not only an excellent marketing opportunity to show customers you are taking their feedback seriously and are investing time and money to create an even better “successful customer outcome” for them. It may also help to manage expectations that at some point in time, the product or service may change; and as with ordinary people, also customers don’t like change so it never hurts to inform them upfront about the process you are following and when they may expect the outcomes.

Involving the C‐level team is also crucial. As with any change project, commitment from the top is needed to enforce certain changes and optimizations. If there is no buy‐in from your C‐level management team, you may ask yourself the question whether to continue your optimization efforts at all. Most likely, your C‐level ambassador will ask you for regular updates on targets, project progress, results achieved and costs made so far. In other words: the KPIs we discussed earlier will — if chosen correctly — also be of interest to your top management. This information should be presented in an intuitive and easy‐to‐consume way, without too much detail at first but with the possibility to dive into specifics when needed. A management dashboard with drill‐down capabilities on each KPI is ideal for this, and should be provided / updated at least once a month, if not once a week.

This dashboard may also (in a revised form) be shared with other people involved in the project, as they, too, are eager to see if objectives are being met. At the same time, with this kind of information in their pockets they can help to maintain the necessary support for the optimization initiative throughout the rest of the organization.

Most BPM suites offer integration with business intelligence (BI) systems for reporting and dashboarding purposes. Moreover, they offer internal communication and notification features such as provided by Chatter or Yammer (or similar tools) to let stakeholders effectively communicate with each other. Sometimes, these are completed by other forum‐like functionality such as internal wikis, discussion boards and a shared file repository to document agreements, new insights, major choices made and so on, with all team members involved. This transparency in communication helps to keep the optimization project afloat and avoids inefficiencies and inconsistencies as much as possible.

4.5. Continuous execution

You are never done. Process optimization is an on‐going activity, as new process bottlenecks will emerge once the previous has been solved. This makes process optimization a continuous effort. That is why it is so important to upfront define the “finish line” when you consider your optimization project to be ready, to avoid the pitfall of just going on and on and on forever. Process optimization is a “living process” which will evolve, change, grow and shrink over time.

As long as you are able to keep the changes and modifications within the original boundaries of your project, you will be in good shape.

In the ideal situation, you will have the ability to implement process changes and process optimizations without any process downtime. “Improving the plane while flying it” is not easy to achieve. Most of the times, implementing a new process requires a system halt at some time, resulting perhaps in your web shop not being available for a couple of hours, your production systems being stopped for a nightly overhaul, or your invoicing system being “out‐of‐order” for some time. And although these outages can usually be planned for and corrected in the weekend or overnight, they still are not met with a lot of enthusiasm by your management team.

Every system outage brings along a risk, e.g. that it is not solved in time or creates other irrecoverable problems with it. To some extent, process simulation can help you reduce these risks, but “keeping the lights on” is usually the preferred option.

Some advanced BPM suites therefore provide the ability to do hot process deployments, that is, to introduce a new version of your business process next to the current version. That typically means you are running both processes simultaneously until all older process instances have been finished or redirected to the new way of working. This can be rather complicated (e.g. the new process may require different input data than the old process) and can take some time especially for long‐ running business processes. Nonetheless, if carefully implemented in your BPM system, it can significantly reduce the risk to optimize processes. A pre‐requisite to doing hot deployments — in fact to doing any new process deployment — is the ability to do a full roll‐back to your previous situation.

If for some reason, even after extensive testing and simulation, the new process does not work out right, you need to be able to roll‐back to the previous situation, ideally also incorporating the running instances of the new (faulty) process.

No pain, no gain. However, if the pitfalls are taken into account before starting your optimization projects, and if the 5C’s are implemented correctly, your chances for running smooth process optimization projects with maximum gain and only minimal pain will significantly increase!