Business processes: bridge between strategy and operations

Like mentioned in the blog of 22 January 2015, implementing your business strategy is one of the 9 reasons to describe your business processes. Even more: clearly defined business processes are mandatory for everyone to understand how their respective tasks contribute to the achievement of the business strategy. Obviously, this will improve the motivation of all the employees. Poorly communicated strategies are seldom successful.

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A relatively simple, yet very useful and effective way to apply this, is by considering an enterprise as a system consisting of 3 performance levels (Rummler & Brache):

1. The organisation level

This is actually the strategic level, where we consider the organisation and its relationship with its environment - in particular, the market in which it operates. The performance of an organisation will never be optimal if its business processes are not!

2. The process level

This is the level at which the work flows, through the different parts of the organisation, in order to deliver ‘output’ (products or services) to customers. Process objectives have to be aligned with the organisational objectives – and therefore  with the demands and expectations of customers – , so the business processes can optimally contribute to the realization of the business strategy.

3. The job level

In their turn, business processes are streamlined and highly performing when the respective activities, or ‘jobs’, are well implemented and harmonized, so the work optimally flows.

To each of these 3 ‘performance levels’ we can assign performance requirements:

  • objectives, which determine what must be achieved
  • design, describing how the objectives are to be achieved the best
  • management, that oversees whether the predefined objectives are respected and will be achieved

This results in following 9 performance variables ; you can clearly see that the process level is the “bridge” between the strategy (organisation level) and the activity – or individual job – level:

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Next – fictitious – example illustrates how to use this matrix in practice, considering your enterprise existing of 3 systemic levels. And how the process level is making the bridge between strategy and operational level.

Imagine a producer of – standardized – concrete sewer pipes and collectors, with a quality determined by official standards. Such a market is characterized by  procurement through public tenders by official authorities or public enterprises. The choice of the supplier is especially based on the best offering supplier. The producer has no other choice than to conquer market share through high efficiency; by being cheaper than the competitors, and still comply with the official standard. The focus is clearly on efficiency, whereby the 9 performance variables could seem as follows:

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tabel 2, 2 Engels

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Explanation of the table:

  • Organisation level: the objective of the company is to increase its market share with 10% within 5 years. This will be achieved by continuous improvement of the operational activities (the primary processes); e.g. thanks to the implementation of BPM or Lean/Six Sigma. To follow up the effect of this continuous process improvement, the management could measure, among others the market share (end result); but also the (evolution of the) production – and the product – costs will help to measure the increase in efficiency.
  • Process level: the above is ‘translated’ by a reduction of the production costs with 5% and the logistic costs with 3%. These process objectives will be realized through a stricter control of raw material, by using dispatching software, by implementing ‘flow’ and ‘pull’ (Lean) principles, etc. These improvements will be monitored by regularly measuring the costs of scraps (caused by inferior raw materials) and through monitoring of costs for transport and storage.
  • Job / Activity level: the process level is on its turn translated to the respective individual – or team – objectives. For example by a quality control of 100% of deliveries of raw materials (=objective); by reviewing the QM-procedure (=design), by registering and monitoring the analysis results for each delivery (=management).

Below figure represents how the above performance variables are related. The organisation objectives (market share, increase of efficiency) will be realized by more efficient business processes : Receipt & control of raw materials; Production; Drying and curing the product; Storage of the finished product; Transport to the yard.

Going a step further down, we can see – in the process diagram “Receipt & inspection of raw materials” – which activities within this process may contribute to the realization of the business strategy. So, you  can see that e.g. the activities “Take a sample of raw material” and “Refuse the load” in this process need to be adjusted (according to new measures written in red).

Notice that also the process “purchase”, whereby negotiations and contracts with suppliers are discussed, will be impacted by this renewed strategy; for simplicity reasons, we  restrict ourselves to only one example.

By illustrating the relationships between the objectives on 3 levels, people of the quality inspection will understand more easily their personal contribution to the organisational objectives – and thus to the business strategy. This will motivate them even more intrinsically: they know now why they are asked to apply a stricter control, and how important this is for the company.

People knowing the concept of the Balanced Scorecard (and corresponding  strategy maps), will recognize the “cascade principle”. Indeed, a strategy map is also a mean to visualize and to articulate the business strategy for everyone of the organisation. The perspective “internal business processes” – being one of the 4 perspectives of a Balanced Scorecard – is also the “bridge” between the “financial” and “client” perspectives on one hand and the “learn & growth” perspective on the other hand. I will come back on the relation between Balanced Scorecards and business processes in later blogs.

Would you like to know more about how these principles may help your enterprise or organisation in its growth; or for the design or implementation of its strategy? Feel free to contact us.

Or ask here for a FREE checklist which may help you to examine in which way your organisation is effective for the 9 performance variables.

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