Process management may be difficult and time-consuming, but it’s increasingly becoming a standard by which customers and investors evaluate companies. And while its methodology is fairly straightforward, it can turn the business playing field into a battleground.

When a football team executes a handoff, everyone has to work together. The quarterback must know which way to turn and how to hold the ball so that the running back can take it without hesitating. The offensive line must know where to create an opening for the running back. And the running back has to hang on to the ball, or all of his teammates’ efforts are wasted.

On the business field, process management helps companies perfect the handoff by improving the coordination of activities between departments or business units so that they work as a team toward the same goal. In many of a business’s activities, if one function drops the ball, other departments suffer. For instance, product development may create a wonderful product, only to discover that the marketing department’s research shows that the product will be too expensive for the company’s target customers. Traditionally, companies haven’t thought much about the handoffs that are integral to their business. They’ve carefully managed their functions, such as accounting, engineering, operations and sales, but not the interactions that take place between those functions.

Process management runs under a new game plan. It emerged as a concept out of the reengineering and process-improvement initiatives of the 1970s and 1980s. But only within the past four or five years has it gained steam. Sweeping in scope, it requires a major shift in the corporate culture that affects people’s mind-sets, measures and methods.

Companies that have begun to shift from a functional, silo structure to process management have done so out of necessity. In an effort to fend off major threats such as declining market share or an eroding customer base, they made the major, long-term commitment that this management technique requires. The methodology for achieving process management is fairly straightforward, but gaining people’s buy-in and ingraining this initiative into your organization can be challenging. To make sure your process-management initiative is successful, you need to change your corporate culture.

Customer-Driven Beginnings

A process can be defined as a set of activities required to accomplish a business task. While activity-based costing/management (ABC/M) focuses on individuals’ activities within a company, process management operates at a higher level, looking at how different processes interact.

To begin a process-management project, you must evaluate how well your company performs for its customers. "Essentially, process management is about transforming customer needs and requirements into processes that are designed to meet those needs," says Sam Johnson, partner in the national office of Ernst & Young LLP in Cleveland. "It also requires looking at the downstream impact of what you’re doing."

A process-based company depends on cross-functional teams that identify which of the business’s current processes are most and least aligned with the company’s strategies and mission. This exercise promotes communication across the organization. It also demands that people think differently about their jobs.

Process management requires functional managers to oversee teams that include people who don’t report to them. "That’s a huge challenge," says Pat Dowdle, manager of ABM at GATX Corp., a Chicago-based company that provides services to the transportation industry. "That’s one reason why becoming a process-oriented organization can be anywhere from a seven- to 10-year journey, and that’s asking a lot of an organization."

Dowdle is responsible for implementing both ABM and process-management initiatives at his company. "We’re making good headway with process management in our new business areas, but within our traditional business areas, we’re still on ABM," he says. "With ABM, you can have quick wins, but with process management it takes longer to show its impact, especially when it comes to changing an existing business. We’re trying to prove to management that this is more than just theory, and we realize we must show results in two or three years or we’ll lose people’s interest."

Jerry Stevens, president of the Stevens Group Inc. in Durham, N.C., a consultancy specializing in process management, believes that process management can show early successes that keep management’s enthusiasm for the initiative alive. "You can get some quick wins with process management by identifying a process that is performing poorly and making some quick improvements," Stevens says. "For instance, you may find results come faster with a process such as cycle time, as opposed to focusing on cost improvements. But you employ the same kind of approach as you would with ABM — that is, piloting a part of the company that will show visible improvement within six months or so."

Does having ABM in place speed up process-management implementation? Dowdle believes it greatly helps, since ABM is process-oriented and, as a result, can cushion the cultural transition. But he doesn’t consider it an essential prerequisite. In fact, focusing on process management before diving into ABM initiatives often makes sense.

"It’s logical that first you should know which processes are critical to achieving your company’s objectives and which are not before you delve into the ABM aspects of each one, because you may find that you simply don’t need ABM information on some of the processes you’ve identified," says Stevens.

Pushing Process Management Through the Value Chain

Few U.S. companies have more than four or five years of process-management experience. One company that is as far along as any is the Pella Corp. in Pella, Iowa, a privately held manufacturer of windows and doors which has approximately 6,000 employees. The company has been engaged in process management since 1992. "It’s become a perfect fit for us, but it’s taken time," says Jackie Johansen, compliance improvement specialist at Pella. "When we started out, an executive team went abroad to study how companies could succeed with process management. Then we began using it in our manufacturing, and it’s expanded into our distribution network, sales network and with our suppliers. Today, it works throughout our value chain."

Pella’s journey to becoming a process-based company centered on picking the brains of its customers. The result has been what Johansen calls seamless sales — a one-stop shopping service for customers.

"Before process management at our company, when a customer walked into one of our retail outlets, we’d identify their needs and then recommend that they call a contractor, who would actually sell them the window or door they wanted," says Johansen. "So we were actually selling our products directly to contractors rather than to customers. The customer would have to call the contractor and arrange for the installation, which was extra work for them. ... Now, we handle the entire process ourselves, from purchase to installation. It’s reduced the amount of work our customers have to do, and it’s helped tie them more closely to our company."

Most companies that have had success with process management have implemented the technique in incremental steps. They’ve adopted process management for some parts of their business, without abandoning their functional-management roots. Sometimes that strategy can pull employees in several directions.

"Most companies try to do both functional management and process management, which leads to an inherent conflict," says David E. Keys, Household International Professor of Accountancy at Northern Illinois University in DeKalb and one of 12 people who contributed to the book "The Road to Excellence: Becoming a Process-Based Company," published by the Consortium for Advanced Manufacturing-International (CAM-I). "For example, an employee may end up reporting to two bosses — one functional manager and one process manager." He adds, however, that many companies are willing to put up with the clash of management styles in order to reap process management’s cost and time savings.

At Pella, mixing functional management and process management hasn’t been much of a problem, according to Johansen. She says, "The functional management within our company actually supports the process management. Functional managers evaluate employees based on how well they integrate themselves into our process management." Stevens adds that companies trying out this concept need to maintain their hierarchical structure but overlay a process-management mind-set onto their existing organization. He says, "The idea is to change the culture and the mind-set, but not your organizational structure, and certainly there are some challenges there."

Among the problems businesses face when implementing this type of initiative is trying to do too much. Champions of process management tend to dive into the deep end of the pool and then hope they don’t go under. "So many companies fail with process management because they bite off more than they can chew," says Johnson. "You need to understand the rate of change your company can handle. Trying to do it enterprisewide all at once is ill-advised."

As you plan and implement a process-management project, you need to take several steps to boost the initiative’s chance for survival. Determine which processes have the greatest direct impact on customers, based on input from a team of managers from different divisions of your company. Of the processes your team identifies, focus early process-management efforts on the ones most likely to produce improvement quickly and easily. Get senior management behind your efforts at the outset. Tie performance metrics to process efforts. Encourage employees to think about how to remove barriers that make handoffs between departments difficult, and reward those who succeed. (See 10 Steps to Process Management, below.)

Process management can be difficult and time consuming, but it’s increasingly becoming a standard by which companies are evaluated. One indicator of the concept’s growing popularity is its incorporation into the ISO 9000 standard. ISO 9000, an international standard with which a large number of manufacturers comply, certifies a certain level of quality at a company, which appeals to shareholders and potential investors. "These days, the standards for ISO 9000 are being rewritten to include a stronger emphasis on process management," says Stevens.

Process management may be one of the most valuable assets a company can possess. But before your business can profit from a project-management system, employees must be willing to take ownership of it, a buy-in that requires nothing less than changing your corporate culture.

10 Steps to Process Management

Use this framework to guide your process-management implementation:

  1. Form a cross-functional team. Choose team members who have authority to mobilize resources, credibility within the organization and detailed knowledge of the management procedures in place at your company.
  2. Train the team. Develop expertise in team-building techniques and the use of related software tools. "Process management requires a number of iterations and levels of maturity, so the software tool set you select should reflect how far along you are with your efforts," says Tom Freeman, manager with Arthur Andersen’s advanced cost management team in Dallas and co-editor of "The Road to Excellence: Becoming a Process-Based Company," published by the Consortium for Advanced Manufacturing-International (CAM-I).
  3. Identify a critical process challenge. Choose a process that is likely to show quick and easy results, such as a reduction in cycle time or faster delivery to customers.
  4. Analyze how work is performed within this process. Ask how well this process is currently connected to the overall objectives of the business. The exchange of knowledge among team members often reveals disconnects in the process, such as incorrect customer addresses that affect delivery promptness and billing accuracy. Rank these disconnects in terms of how much they disrupt performance, and work first on the ones with the highest priority.
  5. Identify best-practices processes both inside and outside the company. "Select truly global best practices; don’t limit yourself to your own industry or your own country," Freeman says.
  6. Specify how to improve the process. Use what you learn from best-practices studies and the team’s knowledge of the process to develop two or more recommendations for improvements. Determine whether you have the resources to complete the improvements.
  7. Develop a cost/benefit analysis. Analyze the financial risks and potential returns of the proposed changes.
  8. Assign process improvements to a project manager for implementation. The project manager should spell out resource requirements and work activities.
  9. Test the new process initiative. Find out how well it achieves its objectives in a controlled test environment, such as a small subset of your customer base.
  10. Deploy the recommended process improvements. By now you should have in place all the activities required to make the proposed improvements. Keep in mind that the new business model you’ve developed should be a continuous loop of evaluation and improvement.