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Special Report: 4 Process redesign strategies for operational excellence

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By: Frederic Ponsignon, PhD, Research Fellow,

Centre for Innovation & Service Research (ISR), University of Exeter Business School

April 2013

Special Report4 Process redesign strategies for

operational excellence


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Executive Summary

Despite the continued popularity of process redesign, little is known about the particular

strategies that organisations can follow to achieve operational excellence. A redesign strategy

specifies the best practices that are to be used in priority and the ones that are to be avoided

in order to realise the objectives of the redesign effort.

Our research team at the University of Exeter Business School set out to identify the

configurations of redesign practices that work best in particular operational contexts. Using

the Q-sorts method, we found four distinctive strategies; employee-focused, cost-focused,

hybrid and workstream-focused. Each strategy consists of a coherent set of best practices

and represents a unique way of going about process redesign.

In addition, any strategy includes two foundational best practices that are used at the outset

of the process redesign journey in all situations, regardless of business context and

organisational characteristics. Articulating redesign strategies will help managers select the

most appropriate set of best practices to deliver the required operational improvements. The

choice of the strategy to adopt is ultimately dependent on the current requirements and

priorities of a particular organisation.


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Process redesign strategies for

operational excellence

The pursuit of operational excellence

can be approached through a variety

improvement methodologies, systems,

and tools. In particular, many process-

focused thematic initiatives such as re-

engineering, lean, 6-sigma, EFQM and

TQM have been used by organisations

to improve their operational processes

and achieve superior levels of

performance. Recent surveys ofbusiness and operations managers show

that process improvement and redesign

remain a key priority for most

organisations1. However, it is estimated

that up to 70% of redesign projects fail

to deliver the expected improvements

in operational performance2.

There are many stories and anecdotes

of world-class organisations thatsuccessfully conducted process redesign

programs in the early 1990s. Based on

those success stories, popular books by

Hammer, Champy and the likes identified and documented an extensive set of best practices

of process redesign such as removing non-value added activity and business process

outsourcing. A short-list of well-established redesign best practices can be found in Box 1.

These still remain highly popular today as they have been successfully applied across a wide

range of organisations and industries3. Consequently, best practices are often said to be

effective in redesigning virtually all operational contexts.

Despite the continued popularity of process redesign, little is known about the particular

strategies that organisations can follow to achieve operational excellence. Documenting a list

of individual best practices is useful but does not provide sufficient guidance to managers

ready to embark on a major redesign journey. Also, there is little value in focusing on an

undifferentiated set of best practices. Process redesign typically involves using specific

configurations of best practices. There is therefore the need to identify the combinations of

1Rigby and Bilodeau (2005) The Bain 2005 management tool surveyin Strategy and Leadership; Auringer (2009)

Meeting the Challenge: The 2009 Higher Education CIO Agenda2

http://bit.ly/xHwtkG3Liman Mansar and Reijers (2007) Best practices in business process redesign: use and impactin Business Process

Management Journal

Do certain approaches to operational

excellence work better than other?


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redesign practices that work best in particular organisational contexts. A redesign strategy

specifies the best practices that are to be used in priority and the ones that are to be avoided

in order to realise the objectives of the redesign effort. Articulating redesign strategies will

help managers select the most appropriate set of best practices to deliver the required

operational improvements.

In order to identify suitable process redesign strategies, our research team at the University of

Exeter Business School looked for a wide range of experts who had embraced best practices in

the redesign of their operations. A type of sorting method - the Q-sorts method4 - was used to

explore the viewpoints of 62 process experts about the relative success of redesign best

practices in improving operational performance in their organisations (see the Appendix for

details about the respondent sample). The study included 16 popular best practices such as

outsource, automate, manage exceptions, empower, and reduce customer contact for

instance. Firstly, our analysis determined individual best practices that were perceived as

highly successful by most respondents. Secondly, we identified specific configurations of best

practices that were common across a number of respondents and markedly-different from

others. Respondents who reported a statistically-similar set of successful and unsuccessful

best practices were grouped together. The data analysis enabled the identification of four

distinct groups of process experts embodying four specific approaches to process redesign.

Box 1: A short-list of best practices of process redesign

1. Reassign control tasks to the customer: moving control activities (e.g. checks and reconciliation)to the customer. For example, an organisation has redistributed its billing controls to its

customers, eliminating the bulk of its billing errors.

2. Reduce customer contact points: reducing the number of points of contact with customers. Forexample, fords accounts payable department decreased the number of customer touchpoints

from three to two (resulting in reducing the number of clerks from 500 to 125).

3. Eliminate non-value-adding tasks: eliminating tasks from a business process (e.g. checks andverification tasks through which orders, requests or customers pass).

4. Re-sequence tasks (process flow optimisation): changing the sequence or order of tasks toimprove process flow. For instance, a retail bank has decided to perform its credit scoring tasks

very early in the loan application process.

5. Manage exceptions: designing business processes for typical, standard customer requests ororders and isolating the exceptional ones from the normal flow. For instance, Xerox established a

specific procurement process to handle rush orders.

6. Make resources more specialised: turning generalist employees into specialists. A specialist buildsup routine more quickly and may have more in-depth and comprehensive knowledge than a

generalist.

7. Make resources more generalised: transforming specialised employees into more generalistemployees. For instance, at IBM credit, specialist jobs such as credit checker and pricer were

combined into a single position, deal structurer.

8. Empower employees: giving employees more decision-making authority. Empowered employeesare given the freedom to make decisions without referring to supervisors. For instance, a large

telecommunications company has decided to allow its top sales managers to change offering

4

More information about q-sorts, data collection and analysis can be found in the academic paper from which thisspecial report was developed:

http://business-school.exeter.ac.uk/research/areas/topics/management/outputs/publication/?id=723
http://business-school.exeter.ac.uk/research/areas/topics/management/outputs/publication/?id=723http://business-school.exeter.ac.uk/research/areas/topics/management/outputs/publication/?id=723http://business-school.exeter.ac.uk/research/areas/topics/management/outputs/publication/?id=723


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specifications to accommodate the needs of high-profile customers.

9. Add control tasks: adding verification tasks to check the completeness and correctness ofincoming materials and/or check the output before it is sent to customers. For instance, a utility

company requires high-value bills to be double checked manually before they can be sent to

customers.

10. Automate tasks: replacing employees with automated systems to execute the process. Forinstance, an application can be seen in the processing power of enterprise systems such as the

deployment of optical character recognition in inputting mass claims.


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Articulating distinctive process

redesign strategies

The research found that four major strategies are available to managers for going about

process redesign. In other words, there are at least four different ways to achieve operational

excellence through process redesign. A redesign strategy consists of a certain configuration of

best practices that are to be applied or avoided, as illustrated in Figure 1. Each of the four

strategies can potentially be implemented with equal success in any organisation. The choice

of the strategy to adopt is ultimately dependent on the current requirements and priorities of

a particular organisation. In addition, a redesign strategy includes two foundational best

practices that are used at the outset of the process redesign journey in all situations,

regardless of business context and organisational characteristics.

Figure 1: Four process redesign strategies

PROCESS REDESIGN STRATEGIES

Employee-focused

Empower employees

Use generalists

Maintain customer

contact

Minimise automation

Hybrid

Maintain customer

contact

Empower employees

Automate tasks

Keep control tasks

in-house

Workstream-focused

Manage exceptions

Use specialists

Avoid adding control

tasks

Cost-focused

Do not empower

employees

Minimise the use of

generalists

Automate tasks

Add control tasks

FOUNDATIONS

1. Remove non-value adding tasks

2. Re-sequence tasks (optimise flow)


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Two foundational best practices

The best practices of removing non-value adding (NVA) tasks and re-sequencing tasks were

seen as universally applicable - both have been successfully applied by the vast majority oforganisations. The data also indicate that these practices are effective in a wide variety of

industries; manufacturing, service, private and public companies.

Respondents describe removing NVA tasks as a way of streamlining the process through waste

removal, improving cycle times and of achieving efficiency gains through cost reduction and

increased throughput. It is associated with both a strong customer focus and internal process

efficiency. This allows the process to provide customers with better value for money. The

importance of defining value from both the customer and the business perspectives was also

stressed. Moreover, the data suggests that improving process flow though task re-sequencing

lead to increased productivity. Inappropriate tasks must be relocated to optimise processdesign and eliminate bottlenecks. Finally, the data suggest that these two best practices are

used sequentially as the foundation of process redesign efforts. An organisation embarking on

a process redesign journey tends to identify and eliminate NVA tasks from the process first,

and then proceed to optimise flow through the re-ordering of the remaining tasks.

Box 1: Quotes from respondents

Remove Non-Value Adding Tasks

This is the most important thing and the firststep in any improvement initiative, I would

always start with that, it always works

(Telecommunications)

Its a foundation of the business(Manufacturing)

Eliminating any unnecessary action or use ofresources is the basis for effectiveness and

efficiency (Professional Services)

You have to get rid of the junk in a process.Things that are a waste of time should not be

done. Only then can you clearly see the realwork of a process (Manufacturing)

Re-sequence Tasks (flow optimisation)

This was next because after removing thenon-value-added tasks, then it is possible to

re-sequence the tasks (Telecommunications)

Just a simple matter of optimising a processdesign - as with running tasks in parallel, when

appropriate (Construction)

There is an optimum flow for any process toeliminate bottlenecks (Professional Services)

This process is optimised to improveproductivity on the production line

(Manufacturing)


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Four major strategies

In addition to the two foundational best practices, we identified four distinct redesign

strategies. Each strategy consists of a coherent set of best practices and represents a uniqueway of going about process redesign to achieve operational excellence. The four strategies

are:

Employee-focused Cost-focused Hybrid Workstream-focused

Strategy #1: Employee-focused

This approach focuses on

empowering employees and

maintaining frequent

touchpoints with the customer.

The strategic aim of the

redesign effort is to improve

flexibility through empowered

generalist employees. Another

important feature includesresisting automation. Instead,

an employee-focused strategy

consists of putting in place a

multi-skilled workforce to

maintain sufficient flexibility in

the process of delivering

products and services. This

strategy also emphasises that

the more customer contact, the better. Customer interactions are opportunities to

understand the customer perspective and to be in a position to meet highly-variable and

often-changing customer requirements. Non value-adding activities are identified from the

customer standpoint, and not solely based on internal considerations. Consulting and law

firms as well as custom manufacturers and R&D labs are good examples of contexts that suit

the employee-focused strategy. Organisations considering moving to a low-volume, high-end

business model could apply the best practices that characterise this strategy.

Employee focused approaches empower employees to

make decisions. They resist automation.


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Box 2: Employee-focused - Quotes from respondents

Use Generalists Specialisation restricts agility and flexibility (Professional Services) and hasresulted in less efficient processes and longer end-to-end times and therefore

greater costs (Public Services)

Multi-skilled generalists can be moved to where the work is needed(Manufacturing)

Empower staff To build ownership and accountability (Professional Services), to facilitate goodmorale in the workplace (Manufacturing) and to get the job done with a sense of

pride and commitment (Healthcare)

Minimise

Automation

Automated systems and equipment cripple flexibility and sometimes reduce thechances to satisfy a client (Construction)

Automation takes away the human factor (Healthcare), is expensive to set up andmaintain, and not flexible. Automation has been useful in limited areas but not as a

general approach (Manufacturing)

MaintainCustomer

Contact

The variety of customer needs is too great, we have to maintain a variety ofcontact channels to meet needs (Public Services)

The more customer contact the organisation can manage, the better. Each is atouchpoint opportunity to gain feedback from the customer (Professional

Services)

Remove NVA

tasks

Reviewing tasks at hand and seeing the value of process streamlining helped tomeet the SLA from the client (Healthcare)


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Strategy #2: Cost-focused

The organisations that adopt

this strategy aim to achieve

operational excellence through

cost reduction and the

establishment of rigid, inflexible

business processes. Task

automation and the use of

specialists help to maximise

efficiency gains. In addition,

employees are given limited

decision-making authority to

ensure that they comply withwork procedures and oper-

ational guidelines. Another

related theme is the role of

automation and process control

in making the operational

system error proof, which is closely associated with Poka Yoke methods. This facilitates a clear

focus on productivity optimisation, efficiency gains and cost savings. This strategy can be used

for designing high-volume service and manufacturing operations such as mass claims

processes or mass manufacturing. For instance, a restaurant considering implementing a type

of fast-food operation should apply the redesign best practices associated with this strategy.

Box 3: Cost-focused - Quotes from respondents

Dont empower Give sales people discretion, theyd use it to get more sales to get largercommissions (Telecommunications)

Staff do not adhere to the defined limits of authority (BPMconsultancy);anything to do with employees is risky, human nature has a

tendency not to follow the process (Telecommunications)

Use specialists Specialised resources ensure complete focus on what they do (BPMConsultancy)

The process is strictly followed to make sure customer receives the productswithout any snags (Manufacturing)

Efficiency expected through specialised work environment, multi-tasking only atsupervisory/managerial level (Banking and Insurance)

Automate This step ensures all the routine tasks are automated and made error proof(BPM Consultancy)

Add control

tasks

Used to instigate checking at key points in an attempt to eliminate errors (BPMConsultancy)

Cost focused approaches look to standardize processes and

automate tasks.


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Approach #3: Hybrid

This strategy represents a mixed

form of process redesign

characterised simultaneously by

customer centricity and a focus

on efficiency. It combines best

practices from the employee-

and cost-focused strategies. The

Hybrid label highlights the dual

goal of managing customer

contact activities and non-

contact activities to allow

different parts of the end-to-end

process to focus on differentobjectives.

On the one hand, high levels of customer service are provided through maintaining customer

contact points and empowering employees. On the other hand, efficiency is maximised by

establishing process rigidity through process automation, the retaining of control and the

elimination of unnecessary tasks. An application of this strategy can be found in the financial

services industry (see Box 4). Retail banks often split up the end-to-end service process into

distinct front-office and back-office parts, staffing them with different employees and

controlling them separately.

Box 4: Hybrid - Quotes from respondents

Front-office

Orientation

Employees are interested in customers, in sorting things out, and in handling thevariation that occurs in the process (Banking and Insurance)

Giving shop-floor employees the ability to take control and manage their activitieshas been very successful (Banking and Insurance)

On the customer-facing side you actually want more customer touchpointsbecause it becomes a differentiator (Banking and Insurance)

Back-office

orientation

We centralised the reporting tasks, and also automated the input data gathering(), the only task that remains was the reconciliation of input data (Banking andInsurance)

Youve got to keep some level of control as to what youre doing, you dont wantto lose control over the decision making process (Banking and Insurance)

When information tends to be at the centre of all processes, automation of thecollection, dissemination, analysis and processing of information is a typical part of

a process improvement (Banking and Insurance)

Dual front-

office back-

office

orientation

Sales people are the point of contact while other people will be doing thetechnicalities (Banking and Insurance)

Its very difficult to have a whole case worker; you can have somebody responsiblefor taking that cradle to grave, but you still require people underneath them to

review the claim and handle specific actions and tasks (Banking and Insurance)

A hybrid approach will employ different approaches in

different parts of the business such as dividing a bank

into front office and back office


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Approach #4: Workstream-focused

A workstream-focused

redesign strategy enables

the operational system to

adapt to the situation at

hand through managing

exceptions and establishing

separate processes for

normal and exceptional

customer orders or

requests. The importance of

exception management in

particular suggests that

processes can operate in

both standard and

exception modes according

to specific situations en-

countered. Performance

depends on the ability to define the types of processes more specifically to deal with both

modes through organising work, for example, using a triage approach.

A reluctance to implement a variety of process control activities means that the initial processdesign should ensure that quality is built into the process. This requires an ability to anticipate,

plan and organise work from the outset of the process design journey. The workstream-

focused strategy was adopted by A&E units. In a nutshell, A&E now separates out patients into

minors (i.e. patients who are not seriously ill or injured) and majors, and directs them to the

appropriate pathways; i.e. see and treat by a suitable clinician for minors or large rooms to

assess and treat seriously ill or injured patients.

Box 5: Workstream-focused - Quotes from respondents

Manage

exceptions

A recognition that we dont want to hold up normal work with rarities. Starting to beapplied more to e.g. claims handling where we try to make early decision on potential

timescale, liability etc (Banking and Insurance)

We divided customer orders between made-to-order and standard to make sureproduction and delivery times are adhered to (Manufacturing)

By only managing exceptions the degree of management oversight can be reduced,this lets workers feel more valued and empowered, and they only get help or are

managed when it is needed, this also reduces the time that management spend, so

both parties win (BPM Consultancy)

Use

specialists

Applies to some areas but not necessarily widespread. Successful in managing areaswhere it is deemed that more specific knowledge is appropriate as part of the

relationship (Banking and Insurance) Complex but repetitive tasks have been simplified and broken down into easier steps

A workstream-focused approach allows the organization

to handle exception and respond to different types of


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(Banking and Insurance)

Separating the work into streams allows for better measures of performance and playsto the two types of employees: those that like the out of the ordinary tasks and

those that view the out of ordinary tasks as getting in the way (BPM Consultancy)


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Implications for Managers

This paper has identified and articulated four distinct process redesign strategies. Figure 1

shows the specific configurations of best practices that characterise each strategy. Theseunique combinations of best practices can be applied for achieving operational excellence,

with the ultimate choice of a strategy depending on organisational requirements and priorities.

For instance, the employee-focused strategy and the cost-focused strategy rely on highly

contrasting best practices of redesign. The former requires redesigning fluid processes for

flexibility and the execution of a high variety of tasks. Decision-making authority is transferred

to service employees and automation decisions are to be carefully considered. Conversely, the

cost-focused strategy concentrates on a narrower range of activities that can be more easily

automated. It designs rigid processes for efficiency and where workers make few judgmental

decisions. In addition to these diametrically opposed approaches, the hybrid strategy

simultaneously focuses on maximising efficiency gains and maintaining high levels of customerservice. This advocates separating the front office, which is to focus on customers, from the

back office, which is to be managed for cost reduction. The ultimate objective is to achieve

both efficiency and customer service. Finally, the workstream-focused strategy has the ability

to respond to changes in the environment by focusing the process design on handling external,

customer-induced variability. Frequent changes in customer requirements (e.g. normal and

special orders) requires operating separate, focused processes staffed with specialists.

Processes redesigned based on this strategy will accommodate and be robust to customer-

induced variation.

Furthermore, the study shows that removing NVA tasks and re-sequencing tasks (i.e. for

process flow optimisation) are widely applicable across organisations and independent from

the choice of a particular redesign strategy. Removing NVA is used to improve both efficiency

gains and customer service which goes a long way toward explaining why this best practice is

effective in virtually all contexts. Similarly, re-sequencing tasks ensures a seamless process

flow, a tried-and-tested tenet of the lean philosophy. Out-of-sequence tasks are likely to

disrupt process execution regardless of the operational context and require improvement

through re-sequencing. These best practices represent the foundations of any process

improvement strategy.


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Conclusions

Organisations that embark on a process redesign journey face an important strategic choice in

determining how they achieve operational excellence. Given the plethora of improvementtools and techniques available to practitioners, the ability to identify the right combination of

best practices to direct process redesign efforts is important. Because of a lack of evidence-

based guidance, practitioners find it difficult to choose among numerous popular best

practices of redesign. This paper has made a strong case for the view that it is possible to

articulate distinct process redesign strategies that can all lead to operational excellence. There

is not one single right way for organisations to redesign the operational system. A process

redesign strategy is best approached through the application of one of four configurations

along with two foundational best practices. This white paper contributes to the ongoing

debate around process improvement for operational excellence by identifying four distinctive

redesign strategies that managers can consult to select the most appropriate configuration ofbest practices for their specific situation. It is clear that the choice of the redesign strategy will

ultimately be dependent on a multiplicity of factors relevant to a particular organisation at a

particular time (e.g. intent, history, competition, capability etc).


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Appendix

Characteristics of the respondent sample

Categories No. of participants (%)

Revenues Less than $10 million 8 (17%)

$10-$99 million 7 (15%)

$100-$499 million 3 (6%)

$500-$999 million 5 (10%)

More than $1 billion 25 (52%)

Number of employees Less than 100 7 (15%)

100-199 6 (13%)

1,000-4,999 7 (15%)

5,000-19,999 8 (17%)

More than 20,000 20 (42%)

Industry Banking and Insurance 14 (29%)

Telecommunications 5 (10%)

Postal, Courier, Logistics 2 (4%)

Manufacturing 9 (19%)

BPM Consultancy 9 (19%)

Public Services 2 (4%)

Healthcare 2 (4%)

Professional Services 4 (8%)

Construction 1 (2%)


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About the author

Frederic Ponsignon, PhD, is a Research Fellow in service and process

management at the Centre for Innovation and Service Research (ISR),University of Exeter Business School. He can be reached on

[email protected]

http://business-school.exeter.ac.uk/research/areas/centres/isr/
mailto:[email protected]:[email protected]://business-school.exeter.ac.uk/research/areas/centres/isr/http://business-school.exeter.ac.uk/research/areas/centres/isr/http://business-school.exeter.ac.uk/research/areas/centres/isr/mailto:[email protected]

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