Example ofBusiness Process

ImprovementBy Martin Smith

Contact Martin Smith at mesmithjr@aol.com.

Abstract: This project is an example of business processimprovement, or re-engineering as it is sometimes called. Thecorporation was not radically re-structured; instead, onedepartment achieved significant gains in efficiency andquality of service by re-designing several processes. A smallteam of front-line supervisors and managers did the designwork and then carried out the implementation of the newprocess design. Two internal consultants supported the team.The project was characterized by a disciplined approach,strong executive support and quantified results.

Situation: The setting was the Accounting Department of a local telephone company.The department had about 500 employees. Most were assigned to two work centers. 3.5million bills were issued each month to business and residence customers.

Critical Business Issue: Reduce expenses by 8-10% in each of the next five years.

Intervention: Re-design the CASH PROCESS. This process involves receipt of thecustomer’s payment, crediting the customer’s account and depositing the amount in thecompany’s account.

Exhibit 1. Relationship Map Specific to Cash Process

RevenueAccounting

Office

Customers

PaymentAgents

Bank

CorporateData

Center

InformationSystemsSupportGroup

PublicCommuni-

cations

CustomerServiceCenters

CentralCash Unit

Corporatebooks

Treasury

Regional Telephone Company

Local Telephone Company

Accounting Department

Refunds

Refund DataBalanceSheet Data

Coin Collections

Dishonored Checks

UnidentifiedPayments

InvestigationRequestsInvestigation

Requests

Investigation Requests

Inquiries

Payments

Payments

Dishonored Checks

UnidentifiedPayments

DishonoredChecks

Inquiries

DataCorrections

CashSummary

ErrorReports

Notify of Outof Balance

Proof forCashSummary

Exhibit 2. Schedule for Design Phase

Project Activity

1. Train the Team

2. Plan the Project

3. Prepare Relationship Map

4. Build IS Map

5. Identify Disconnects

6. Patch or Re-design?

7. Define Attributes

8. Build SHOULD Map

9. Specify Measures

10. Stakeholder Review

12. Revise

13. Formulate Recommendations

14. Decide What to Implement

���������������������������

���������������������������

������������������������

������������������������������������������������������

������������������������������

������������������������������������

��������������������������������������������������������������������

���������������������������������

������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������

������������������������������������������������

���������������������������������������������������������������������������������������������������������������

Week

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Start: Sept 17

End: Dec 15

17

NOTE: The Project Team worked full time for 4 weeks and part time for 10 weeks.

Exhibit 3. Flowchart for Sub-Process, Dishonored Checks, BEFORE the Re-design

NOTE. Do not try to read the content of the process steps but rather understand the diagramming conventions.Rows represent work groups or computer systems. Boxes indicate steps where work is performed. Diamonds aredecision points. Lines crossing the boundaries between rows represent hand-offs from one function to another.Compare Exhibit 7 to Exhibit 3. The old design had 50 steps compared to the 24 steps in the new design.

Bank

CentralCash Unit

Ca shO pe ration

Da ta EntryGroup

Com pute rRoo m

Custome rser viceCente r

Systems

Di shonored CheckRec eived from

Customer's Bank

1

End3 Bank Fi les

Updated

24

Correct 32 Process

Payment

47

OurCus tomer

?

2

Residentof XYZState?

4PrepareForm toRe-bil l

Cus tomer

6 PrepareForm toAdjust

Customer'sAccount

7Enter

Adjus tmenti nto Busi nessOffice Support

System

12

SystemCorrectlyUpdated?

14

CorrectError

16 AlertService

Rep

17Dai ly Cash

Sheets (Form508) Prepared

to ReflectDi shonored

Checks

19

Mai l Copy20 Fi le

di shonoredChecks

21 Bal anceDai lyBank

Statement

30

Bal ance?

31

End33

Pul lCheck andCal l Bank

41Funds

Available?

43Enter Note in

Busi nessOffice Support

System

44Enter Notein BOSS

andPrepareMemoCard

45

Mai lCheck toCus tomer

46

PrepareTransactionForm 770

5

Re-bal anceForm 508's

26Batch508's

27 Veri fyPrintout

29PrintoutCorrect?

34CorrectErrors

35

Key Data8

DataKeyed

28Transmit

BatchLi st ing

36

Execute9

ExecuteRun 1

37

ContactCus tomer

18Re-

deposit?

38 CheckReturned

?

39

End40

ContactCus tomerto Resol ve

50

ServiceOrder

System

10Busi ness

Office SupportSystem

15Busi ness

Off iceSupportSystem

48Busi ness

Off iceSupportSystem

49Cash

System

51

No

Check

Yes No

Yes

Form

Transact ion Ticket

Electroni c Tran smission

Electroni c Tran smission

Acco untDebi t

No

Yes

Correct ion

Upda ted Custom erAccount Data

Form 508

B atchedForms

Daily Bank Stat ement

No

Yes

No

Yes

Printout

Corrections

No

Yes

No

Mem o Card

No

Yes

Yes

ElectronicMe ssage

Noti ficatio n to Return Custom er Check

Exhibit 7. Flowchart for Sub-Process, Dishonored Checks, AFTER the Re-design

Cycle Time

Ba nk,Payment

Proce ssingAgent, orEle ctronic

FundsTransfe r

CashOperation

Data EntryGroup

Compute rRoom

Treasury

Systems

DishonoredCheck

Received

1 CheckPresented

Second Timefor Payment

2

ReturnedAgain?

3Can

Check BeAuto-

debited?

4

DebitsListed

5 Checks &Listing

Forwarded

6

End7

CustomerAccountDebited

9Total

Entered onDai ly

Worksheet

12Data Enteredinto BusinessOffice Support

System

13Dai lyBank

StatementBalanced

17

StatementsFiled

18 Res identof XYZState?

19$5 ChargeDebited toCustomer's

Account

20

End21

Run 1Executed

10 Batch ListingTransmitted

22

Run AB01Executed

23

BalancePosted toTreasury

Dai lyReport

14

End15

CashSystem

11 BusinessOffice

SupportSystem

16CustomerRecord

InfoSystem

24

No

Yes

No

Yes

Check

ElectronicTransaction

Data

ListList andCheck s

Work sheetData

No

Yes

List

Batch

(7 Days) (1 Day) (1 Day)

Exhibit 4. Categories of Disconnects (total of 62)

• Duplication of effort• Steps that should be performed by other departments• Discrepancies between the two processing centers• Unnecessary steps• Cycle time delays• Opportunities for automation.

Exhibit 5. Categories of Recommendations (total of 32)

• Automation of manual activities• Work elimination• Transfer of responsibilities and personnel from one department to another• Job redesign• Measurement plan for tracking process performance• Documentation of work procedures• Training to cover the new procedures• Re-arrangement of the work force

Exhibit 6. Design Attributes for “Dishonored Checks” Sub-process

Element Attributes

Inputs • Automatic check debiting• All checks processed twice by the bank• Non-company check volume reduced

Processing • No re-depositing of checks• Fewer hand-offs• Manual forms eliminated

Outputs • Debit reflected ASAP• “Uncollectables” reduced

Implementation: 29 of the 32 recommendations were implemented within 12months of the executive decision to proceed. A year-to-year comparison yieldedthe following results.

Exhibit 8. Results

Measure Result

Process Steps • 44% Reduction from 422 to237 steps

Manually Processed Payments • 90% reduction from 42,000 to4,000 per month

Unplaced cash (payment cannotbe credited to an account)

• 43% reduction

Customer Queries aboutprocessing of payment

• 44% reduction

Force • 45% fewer employees assignedto Cash process

Operating Expense • $930,000 reduction in annualexpense

Postscript: the General Manager commissioned another project at the time thisproject entered the implementation phase. Over the next two years, two additionalprojects were undertaken. Together, these projects encompassed about 75% of thedepartment’s work activity.

Exhibit 9. Lessons According to the Project Team

• Start with a small process, something that can be done in a short timeframe.• Set clear time lines. Keep them firm. Keep short intervals between target dates.

This policy reinforces accountabilities and maintains momentum of the project.• Don’t dissipate resources over too many projects. Limit the organization to

two projects at one time, one in design and the other in implementation.• Include key stakeholders on the project team. Work units responsible for the

process must be represented on the team. The staff who maintain the supportingcomputer systems should also be represented.

• Focus on short term pay-offs. Pay-offs should be quantified in terms offinancial, cycle time and customer service results.

• Use a PC for all flowcharting and documentation. Capture entries on the PCwhile the team is working out the design on the easel. Edit the draft off-line.

• Manage the on-going process immediately. Don’t wait for all the changes tobe implemented. Collect measurement data as soon as practical. Scheduleprocess reviews as part of the GM’s staff meeting at least once a month.

Exhibit 10. Lessons According to the Author

• The support of the General Manager and the senior management team wasessential. They enforced strict adherence to the project schedule. They attendedthe same training as the team. They met at decision points with the projectteam. The GM initiated quarterly sessions with all management andrepresentative non-management personnel to review the status of each ofseveral processes. Measurement trends and improvement plans were reviewedfor each process.

• Any given change effort requires coordination with other change efforts toensure adequate resources.

• Another alignment issue was the coordination of the process change withdepartmental strategy on one hand, and job-level design on the other hand.

Further Information:

Bisson, B., Folk, V. and Smith, M.E. (2000). Case study: How to do a businessprocess improvement. Quality and Participation, 23 (1), pp. 58-63.

www.stractics.com