A business process is a system that a company uses to achieve its goals. This process can also be interpreted as the steps taken to generate value for customers. Managers analyze business processes to assess how well processes are running. The manager first analyzes the currently running processes. After that, management can determine changes to improve existing processes. Process improvements can help companies save time, lower costs, or create products that are more suitable for customers.
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Part 1 of 2: Determining How Business Processes Are Created
Step 1. Define business processes
Business processes refer to the activities that employees perform on a daily basis to achieve organizational goals. This process reflects the company's actions to achieve certain goals. The business process must include all variations or exceptions to the process. To understand how to analyze a business process, you must consider how a business process is created.
- Consider the scope of the task. For example, you update the process used to send invoices to clients. The scope of the task refers to how broad the scope of the task to be carried out. In this case, assume the scope is all invoices sent to a client. You determine that in a month, an average of 200 invoices are sent to clients..
- Specify the desired result. Think about what this process is trying to accomplish. In this case, you want invoices to be sent accurately to each customer as soon as the product is shipped. You will send a physical copy of the invoice when submitting the order. You will also email each client an electronic invoice.
- List the subprocesses that are in the process. The more specific a process is, the easier it is to analyze and improve.
- Document business processes. You can document the process as a list of steps and consider depicting them in a flowchart. Processes often cross multiple departments in large organizations. The invoice creation process, for example, would involve the billing and accounting departments.
- Define the various departments or entity functions in the process along with all inputs and outputs. For example, making a payslip requires input from the production department to find out the number and hours of workers worked, the HR department to find out rates and salary reductions, etc.
- List all exceptions to the process. Almost all business procedures will have exceptions and variations. For example, you may be able to have certain clients receive large discounts. This customer orders products in large quantities. Giving large discounts makes the billing staff cut the discount amount calculated in the invoicing software. Large discounts must be entered manually to create an accurate invoice.
Step 2. Document the business process and think about what type of business process to create
Separating several business processes by type will help business process analysis and process improvement. If two processes are of the same type, the process upgrades may be similar. A particular process may be an operational, support or management process.
- Operational processes refer to the daily tasks of delivering products to customers. The process of creating invoices for clients can be included in the operational process. It is very important to send accurate invoices to clients so that payments can be collected as quickly as possible.
- Support processes refer to your company's operational support activities. The Human Resources Department is an example of a company support area. This department supports department managers in interviewing and recruiting new employees. Although Human Resources are not directly involved with clients, they do support the operations department.
- Every organization needs management to run the overall business direction of the company. The process of planning and implementing the budget is a management process. All companies should have a formal budgeting process. This process should involve management discussing the company's budget with the financial manager.
Step 3. Analyze business processes to find symptoms of process inefficiency
Business processes consist of inputs (inputs) and outputs (outputs). Labor, energy, materials, and capital equipment are considered as inputs. Inputs are assets that are used to generate revenue and profit. On the other hand, the output is a physical product or service. Inputs enter the process and produce outputs. You will need to conduct an analysis to look for the inefficiencies of this process.
- Your process must use inputs efficiently to produce outputs. For example, you manage a branch of a repair shop. Your input is labor, equipment and parts. Your output is customer vehicle repair services.
- A long repair time or work backlog is an indication of process inefficiency. The problem may be due to some customers' repair schedules being too close.
- Indications of process inefficiency can also be seen if the cost of replacing parts far exceeds the budget. In this case, the problem may be specific to the purchasing department, or the parts from the supplier.
- Determine which processes need improvement based on the problems identified. You must prioritize several business processes. Choose the process that has the most impact on your business. For example, you might want to fix the runtime first. The long processing time will result in the company losing customers. Prioritize improving the process.
Part 2 of 2: Analyzing Business Process
Step 1. Talk to key people about processes within the company
Once you have determined the process to be improved, discuss the process with the people responsible for its implementation. Take time to interview key participants, and ask for improvements that could be made.
- Ask about staff actions and why.
- Determine the input needed to perform each task and where you get each input. If the company produces denim jeans, you need to know who the denim supplier is and the frequency with which the raw materials are sent to the company.
- Identify the outputs of each task and who will receive them. If you manage a workshop, the workshop staff should document their work. The repair staff must pass the information on to the billing department, which then generates an invoice for the customer.
- Ask for suggestions on how to address process inefficiencies your staff finds.
Step 2. Create a business flowchart for each process
Process flowcharts can help you describe business processes. You can use the documentation from your process discussion to create a flowchart. This flowchart should have all the steps needed to complete a particular business process.
- It is important to note that a business process flowchart should only contain defined procedures that employees must follow.
- Flowcharts can be drawn manually or with software. Word and spreadsheet programs with mapping facilities can be used to create flowcharts. You can also find specialized software for creating flowcharts.
- Flowcharts are very useful tools to clearly see the business processes in front of you. This tool will make identifying and correcting inefficiencies much easier.
- Once the changes to the process are made, review the results again and see if the process has improved to your expectations. If not, repeat the analysis process and try to identify areas that need improvement. Business process analysis is an ongoing activity in your business.
Step 3. Conduct a brainstorming session to find process improvements
Many processes involve more than one department within your business. Group sessions will identify process inefficiencies that impact more than one department. These sessions may also validate information provided during personal interviews with participants.
- Summarize the information received and share it with process participants. This will include participants who have and have not been interviewed before. Ask for feedback from everyone. This feedback will provide additional guidance for your analysis.
- Information received from participants in the process should give you a clear idea of how the process works, and what the problem is.
- Interpersonal discussion becomes the basis for making changes to a process. Changes can be cost reductions, process cycle time reductions, process simplifications, or service improvements to customers.
