?The 7-Steps of Process Management
Arthur M. Schneiderman
In 1992, while serving on the Conference Board’s Quality Council II, I became aware of the need for a model that would integrate the many process related initiatives that were competing with one another in the contemporary management arena. I presented my first attempt at one of our meetings that year. It met with a very favorable response from my colleagues, who were the Chief Quality Officers of several Fortune 500 companies. Over the succeeding years, I continued to refine and simplify the model. By 1996, I developed the following graphic, which has since served as the basis for my model for process management:
Process DefinitionCharacterizationSimplification(language ofand(Reengineering I)flowchart)Idealization
Re-designImprove ExistingCHECKControl (SDCA)No(Reengineering II)Process?
?Incremental2000, Arthur M. Schneiderman. All Rights Reserved. Improvement
Arthur M. Schneiderman: The 7-Steps of Process Management Step 1: Process Definition
Whenever two or more people try to discuss a process, they need to first develop a common language for that discussion. Fortunately, we have such a language in the form of flowcharts and their associated standard operating procedures (SOP's). Once an organization chooses its own particular dialect for this "language of the process" it is prepared to explicitly define the current state of how the process is executed. Who does this process definition best? Experience shows that useful documentation can only be generated by the people who actually execute the process. It is through their particular use of language that the procedures take on real meaning. For example, I visited one west coast manufacturing facility where the vast majority of line workers were Vietnamese immigrants who did not speak English; but, guess what language was used in the SOP's! By contrast, I've visited several Japanese facilities where the process documentation was hand written by the operators and placed in loose-leaf binders. I didn't understand a single word, but I could tell by the dog-eared, well-worn pages, as well as the marginal notes that these were living, useful documents. Documentation written in the language of the operator becomes an invaluable training tool for new operators, in contrast to the notorious military training and instruction manuals of old.
Note that whether changes occur through incremental improvement or process redesign, we continually return to Step 1 to assure that the documentation always reflects the current state of the process. This is the key step in converting intangible (stored in volatile human memory) into tangible (documented) process knowledge.
This foundation step is formalized in the requirements of ISO9000 certification, which requires that the processes be documented and that they be executed in accordance with that documentation. This is an essential starting point for process management. However, ISO9000 does ?2 2000, Arthur M. Schneiderman. All Rights Reserved. Page
Arthur M. Schneiderman: The 7-Steps of Process Management not currently go beyond this step. It does not require that the current process meet or exceed the requirements of all of the stakeholders. That is the purpose of the remaining six steps.
Step 2: Simplification (Reengineering I)
The rapid rise (and some would say equally rapid fall) of process reengineering has tended to merge two very different process management activities. The first is process simplification: the relentless
effort to identify and eliminate non-value adding activities in a process. What constitutes a non-value adding step? I like Rath & Strong's definition of a value adding process step:
; The "thing" flowing through the process undergoes a physical
change. Here a "thing" can be either a physical product such as a
TV set or an automobile, or a service product such as a phone call
to a customer service call center or a mortgage application,
; The customer is willing to pay for that change, and
; The activity is not to correct an upstream error.
This distinction is more easily made in theory than in practice. I find it useful to differentiate between two levels of non-value adding activities:
; currently non-value adding, and
; potentially non-value adding.
For example, most inspection steps are potentially non-value adding. But don't try eliminating them when your process is out-of-control (see Step 4)
or produces an unacceptable number of outcomes outside of the customer's requirement.
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Arthur M. Schneiderman: The 7-Steps of Process Management But not all non-value adding activities started life more
productively. Many are the result of poor "improvement processes" that encourage changes that in fact have no positive effect on the very problem they were supposed to mitigate. This process clutter is symptomatic of improvement processes that leap from problem to solution without root cause identification or fail to have a verification step to assure that the solution has the desired effect. Many suggestion systems that I've observed suffer from this weakness.
process redesign as The second, very different reengineering activity is
described in Step 7.
Step 3: Characterization and Idealization
Once we have a trim, well-documented process, we are prepared to continue with its management. Many well-worn quotes can be used to introduce the next step:
; “You can't manage what you don't measure.”
; “You get what you measure.”
; “If you're not keeping score, you're only practicing.”
; “If you don't measure it, it will not improve; if you don't monitor
it, it will get worse.”
Step 3 deals with process performance measurement or metrics and is among the most difficult and least developed of the steps. A process can be characterized by an appropriate set of results and process metrics. Results metrics measure the output of the process in terms related to its customer's explicit requirements. They are measures of process effectiveness. Process metrics represent the key independent variables that are the internal drivers of change in the results metrics. They often are the critical factors in determining process efficiency. In general, ?4 2000, Arthur M. Schneiderman. All Rights Reserved. Page
Arthur M. Schneiderman: The 7-Steps of Process Management each type of metric can characterize either the average value of a measure or its variability. So we in general have results and process metrics that measure the average and variation of critical process measures. For any given process, there is a theoretical limit that can be achieved for each metric without redesigning the process to embody new technology or significant organizational change. This process limit, or entitlement, or ideal represents the best that can be done with the process absent major resource investments of financial or human capital. Without an estimate of the process capability associated with each metric, we cannot set rational goals nor decide on the priorities for redesign (Step 7).
Once we have identified the gap between current and potential performance, we can set appropriate goals based on known root causes and their associated corrective actions or on a normative model for
1. process learning such as my half-life method
Step 4: Control (SDCA)
The control step assures that the metrics associated with the process remain stable. In this way, the fraction of output that fails to meet customer requirements can be predicted with a specified level of statistical confidence. With this assurance, the customer can effectively manage their inevitable non-conforming inputs through either 100% inspection (done by them or their supplier) or defect correction. Walter Shewhart laid the foundations of Control in the 1920's. Shewhart's basic premise was that through approximations of rigorous statistical formulas, he could make these techniques accessible to the first level operators thus eliminating the need for a cadre of costly statisticians.
Unfortunately, the resulting techniques often look like witchcraft to the average manager. Coupled with Shewhart’s (and his follower's) evasion of economic considerations (cost of a false alarm vs. cost of producing ?5 2000, Arthur M. Schneiderman. All Rights Reserved. Page
Arthur M. Schneiderman: The 7-Steps of Process Management non-conforming output) these have undermined management support for process control. As a result, although there is much talk about SQC (watching the results metrics) and SPC (locking the process's critical nodes (process metrics)), I have seen little evidence of its widespread use outside of Japan.
Fortunately, today we have the ubiquitous PC. I have gone back and redone most of SQC using a math software package (MathCad), which eliminates the need for complex tables and formula while increasing the statistical rigor. I am in the process of adding economic considerations into the design of out-of-control action plans. It is my hope that the combination of real simplification (with increased rigor) and real cost/benefit analysis will be the keys to achieving the essential management support for this critical step.
Control is a prerequisite for process improvement. Without it, it is difficult or impossible to do experiments to identify root causes. Root cause analysis is central to both incremental improvement (Step 6) and process
redesign (Step 7).
Step 5: Decision: Improve Existing Process?
My biggest criticism of proponents of what I call "rampant reengineering" is their lack of sound criteria for making the redesign vs. incrementally improve decision. Hammer's admonition to "obliterate" the current process is more marketing than sound business practice. It must be obvious to everyone that a newly redesigned process, with its unfamiliar technology and/or organizational structure will not instantly achieve its ultimate capability. Much process learning is required to significantly narrow the initial performance gap (typically 30% to 40%). Continuous improvement tools and techniques currently produce the fastest rates of improvement for newly re-designed processes.
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Arthur M. Schneiderman: The 7-Steps of Process Management Over time, a point of diminishing returns (implicit in the half-life method) is reached for processes that are core competencies, and the process needs to be re-designed in order to achieve or maintain competitive leadership. Process redesign is very expensive in both fiscal and human capital terms. Hence, process management must ebb and flow between redesign and incremental improvement. In nearly all cases, this improvement "tide" has a cycle of many years. Successful process management requires continuous evaluation of these two alternatives. It should also be kept in mind that defects are highly contagious. A newly redesigned process often generates the same defects as the old one. The carrier of this disease is ignorance of their root causes. And, to make things worse, process redesign is usually a "bet your career" activity. A prudent process owner will want to know as much as possible about the root causes of defects in the old process in order to minimize the risk before making the very costly decisions associated with process redesign.
Step 6: Incremental Improvement (PDCA)
Much has been written by both myself and others, about incremental
2improvement. I recommend the books by Kume (for methodology) and
3Shiba, Graham and Walden (for organization-wide deployment).
To put this step in perspective though, keep in mind that incremental improvement is the essence of evolution and an ever-present human activity, ongoing since the very dawn of humankind three million years ago. What has changed most in the last half-century are the principal players in this activity.
thFrom the start of the industrial revolution to the middle of the 20 century,
the responsibility for process improvement increasingly lay with management or their designees, the industrial engineers. Charlie Chaplin eloquently captured the result in his 1936 epic movie Modern Times. The
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Arthur M. Schneiderman: The 7-Steps of Process Management process worker was told “don't think, just follow the standard operating procedures.“ The worker became nothing more than a pre-
robot. Although Frederick W. Taylor is usually credited with the creation of this trend, Peter Drucker has shown that this in fact is incorrect. It was his followers that drove this trend toward improvement specialists. Taylor's writings themselves are completely consistent with modern incremental improvement practices.
In the early 1950's, following the seminal visits by Deming and Juran, the Japanese tried a different process improvement paradigm: empower all
way process workers to not only do their daily job, but also to improve the they did that job. But, empowerment is different from
delegation. Japanese managers went on to train the workers in the basic scientific methodology, set aside a portion of their workday (about 5-10%) for improvement activities, and reward and recognize their success to catalyze the required cultural changes.
4The 7-step method (described in my Strategy & Business article) is a
simplified scientific methodology for identifying and eliminating root causes of the gap between current and potential process performance. It represents a special case of the Deming or Shewhart PDCA Cycle: Plan-Do-Check-Act. The 7-QC tools: the graph, check sheet, Pareto diagram, cause-and-effect diagram (a.k.a. the Ishikawa or fishbone diagram), scatter diagram, histogram, and control chart represent the principle tools. For more complex processes, data often takes on the form of verbal statements of fact rather than a series of numbers. Here, the 7-Management and Planning Tools: the KJ (or it's simplified form, the affinity), relations, matrix, tree, PDPC, and arrow diagrams and matrix data analysis, prove most valuable. For the most complex processes, where interconnections between activities can be highly non-linear, simulation
5tools such as System Dynamics modeling become essential.
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Arthur M. Schneiderman: The 7-Steps of Process Management Taken together, the loop formed by steps 4 and 6, constitute the essence of Total Quality Management. Intuitive recognition by executives that TQM by itself is insufficient has let to its recent declining popularity. However, the answer is not to flit from step-to-step, but to recognize that an integrated approach, though very difficult, is essential. No single step can serve as a silver bullet for very long.
Step 7: Re-design (Reengineering II)
Over time, incremental improvement yields diminishing absolute returns. This results from both the technological and organizational constraints imposed upon the process. Here are two examples:
; a process that cuts circles of fixed diameter d, out of sheet
stock. At first blush, it looks as if the minimum possible waste
(called offal in that business) is (1-
geometry. However, that assumes that the centers of the circles
are at the corners of a square of side d. It is quickly recognized
though, that by offsetting the rows by d/2, the offal can be
reduced further to an absolute minimum of 15.2%, but that's
it. Only with a new technology, for example shearing the circles
from bar stock, can yield be further improved.
; A step in processing all insurance application called for it to be
reviewed by an outside underwriter. This added on average 3.3
days to the processing cycle time, a critical results metric for
winning more market share. That level of performance had been
achieved through successive technology changes: regular mail to
FedEx to fax to Email, but it could not be reduced further because
of regulatory steps in the independent underwriters review
process. However, the vast majority of applications were
eventually approved. By establishing criteria for which ?9 2000, Arthur M. Schneiderman. All Rights Reserved. Page
Arthur M. Schneiderman: The 7-Steps of Process Management
applications need to be reviewed by an underwriter and by
forward integrating to create an internal underwriting function the
barrier was broken.
In both of these examples, incremental improvement can exponentially gnaw away at the gap between current performance and these process limits. If organizational success requires breaching these barriers, only process redesign holds the answer: new technology or new organization (in- or out-sourcing, functional to process re-organization, risk taking or shedding, etc.).
There is much mystique associated with process re-design. Yes, there may be some cases where "thinking outside the box" is required, but in the vast majority of cases, the next wave is well known to both the process owners and their suppliers. Whether it's through vendors, the trade press or benchmarking activities, we usually know what's coming next. The issue really is a resource allocation question: where should we invest our scarce human and capital resources?
Sometimes process redesign is justifiable on the basis of cost savings alone. Redesigns involving automation (replacing labor with capital) usually fall into this category. The more challenging redesign decisions, however, flow from strategic imperatives. Here, it's the revenue side of the equation, maintaining or gaining market share, that swings the cost benefit analysis. Unfortunately, most organizations rely on executive instinct rather than thoughtful analysis to make these redesign decisions. We are fast approaching the time when increasing business complexity will outstrip even the best intuitive decision makers. The half-life method provides another important link between incremental improvement and process redesign. The half-life, which depends on process complexity, tells us the rate at which the gap between current and potential performance can be closed. It allows us to easily predict where we will be at any future point in time if we improve incrementally. What if ?10 2000, Arthur M. Schneiderman. All Rights Reserved. Page