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By Martin Smith
Contact Martin Smith at firstname.lastname@example.org.
Abstract: This project is an example of business process
improvement, or re-engineering as it is sometimes called. The
corporation was not radically re-structured; instead, one
department achieved significant gains in efficiency and
quality of service by re-designing several processes. A small
team of front-line supervisors and managers did the design
work and then carried out the implementation of the new
process design. Two internal consultants supported the team.
The project was characterized by a disciplined approach,
strong executive support and quantified results.
Exhibit 1. Intervention: Re-design the CASH PROCESS. The department had about 500 employees. crediting the customer’s account and depositing the amount in the company’s account. Relationship Map Specific to Cash Process Re giona l Te le phone Com pa ny Corporate Data Center Loca l Te le phone Compa ny Accounting De pa rtme nt Coin Collections Cash Sum m ary Public Communications Dishonored Check s Dishonored Check s Error Reports Data Corrections Revenue Accounting Office Bank Central Cash Unit Investigation Investigation Requests Requests Notify of Out of Balance Customer Service Centers Investigation Requests Balance Sheet Data Unidentified Paym ents Paym ents Dishonored Check s Proof for Cash Sum m ary Information Systems Support Group Unidentified Paym ents Refund Data Payment Agents Paym ents Inquiries Treasury Corporate books Inquiries Refunds Customers . This process involves receipt of the customer’s payment. Critical Business Issue: Reduce expenses by 8-10% in each of the next five years. 3.5 million bills were issued each month to business and residence customers. Most were assigned to two work centers.Situation: The setting was the Accounting Department of a local telephone company.
Prepare Relationship Map 4. Patch or Redesign? 7. Plan the Project 3. Stakeholder Review 12. Specify Measures 10. End: Dec 15 . Build IS Map 5. Schedule for Design Phase Week Project Activity 1. Define Attributes 8. Identify Disconnects 6. Decide What to Implement NOTE: The Project Team worked full time for 4 weeks and part time for 10 weeks. Revise 13.Exhibit 2. Train the Team 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Start: Sept 17 2. Formulate Recommendations 14. Build SHOULD Map 9.
Compare Exhibit 7 to Exhibit 3. Rows represent work groups or computer systems. Lines crossing the boundaries between rows represent hand-offs from one function to another. Dishonored Checks. Do not try to read the content of the process steps but rather understand the diagramming conventions. BEFORE the Re-design Bank 1 Di shonored Check Rec eived from Customer's Bank 24 Bank Fi les Updated 3 End 2 Central Cash Unit Yes 47 Process Payment 32 Correct Mem o Card Upda ted Custom er Account Data Check Our Cus tomer ? Daily Bank Stat ement 4 No Resident of XYZ State? Yes 6 Prepare Form to Re-bill Cus tomer 7 Prepare Form to Adjust Customer's Account 12 Enter Adjus tment i nto Busi ness Office Support System No 14 System Correctly Updated? No Form 19 Yes 16 Corr ect Err or 17 Alert Service Rep Correction Dai ly Cash Sheets (Form 508) Prepared to Reflect Di shonored Checks 21 Fi le di shonored Checks 20 Mai l Copy 30 Bal ance Dai ly Bank Statement No 31 Bal ance ? Yes 34 Printout Corr ect? No 33 41 Pul l Check and Cal l Bank End Yes 43 Funds Availa ble ? No 44 45 Enter Note in Busi ness Office Support System Enter Note in BOSS and Prepare Memo Card Acco unt Debi t Form 508 5 Ca sh O pe ration 26 Prepare Tra nsaction Form 770 29 Veri fy Printout 27 Batch 508's Re-bal ance Form 508's 35 Corr ect Err ors Yes Transact ion Ticket B atched Forms 8 Da ta Entry Group 28 Data Keyed Key Data 36 Transmit Batch Li sting Printout Electroni c Tran smission Com pute r Roo m Corrections 37 Execute Run 1 9 Execute Custome r ser vice Cente r 18 Contact Cus tomer Electroni c Tran smission Yes 38 Redeposit? Yes 39 No Check Returned ? Notificatio n to Return Custom er Check No 50 Contact Cus tomer to Resol ve 40 End Electronic Me ssage 10 Systems Service Order System 15 Busi ness Office Support System 51 Cash System 48 Busi ness Office Support System 49 Busi ness Office Support System NOTE. Diamonds are decision points. Boxes indicate steps where work is performed. 46 Mai l Check to Cus tomer .Exhibit 3. The old design had 50 steps compared to the 24 steps in the new design. Flowchart for Sub-Process.
Payment Proce ssing Agent. Dishonored Checks. o r Ele ctronic Funds Transfe r 1 Dis honored Check Received 2 Check Presented Second Time for Payment 3 Yes Returned Again? No 7 End Can Check Be Autodebited? No Yes 6 Checks & Listing Forwarded 5 Debits Listed List List and Che ck s No Check Cash Operation 9 Cus tomer Account Debited 12 Total Entered on Daily Worksheet Electronic Tra nsaction 13 Data Entered into Business Office Support System 18 Statements Filed 19 Res ident of XYZ State? Yes 20 $5 Charge Debited to Customer's Account List Work sh eet Data En try Group 17 Daily Bank St at ement Balanced Data 22 Batch Listing Transmitted 10 Run 1 Executed Batch 23 Run AB01 Executed Compute r Room Data 14 Balance Pos ted to Treasury Daily Report Treasury Systems 11 Cash System 15 End 16 Business Office Support System 24 Cus tomer Record Info System 21 End .Exhibit 7. Flowchart for Sub-Process. AFTER the Re-design Cycle Ti me (7 Days) (1 Day) (1 Day) 4 Ba nk.
Categories of Recommendations (total of 32) • • • • • • • • Automation of manual activities Work elimination Transfer of responsibilities and personnel from one department to another Job redesign Measurement plan for tracking process performance Documentation of work procedures Training to cover the new procedures Re-arrangement of the work force Exhibit 6. Design Attributes for “Dishonored Checks” Sub-process Element Attributes Inputs • Automatic check debiting • All checks processed twice by the bank • Non-company check volume reduced Processing • No re-depositing of checks • Fewer hand-offs • Manual forms eliminated Outputs • Debit reflected ASAP • “Uncollectables” reduced . Categories of Disconnects (total of 62) • • • • • • Duplication of effort Steps that should be performed by other departments Discrepancies between the two processing centers Unnecessary steps Cycle time delays Opportunities for automation. Exhibit 5.Exhibit 4.
Results Measure Result Process Steps • 44% Reduction from 422 to 237 steps Manually Processed Payments • 90% reduction from 42.Implementation: 29 of the 32 recommendations were implemented within 12 months of the executive decision to proceed. Exhibit 8.000 per month Unplaced cash (payment cannot be credited to an account) • 43% reduction Customer Queries about processing of payment • 44% reduction Force • 45% fewer employees assigned to Cash process Operating Expense • $930. two additional projects were undertaken. Over the next two years.000 to 4. A year-to-year comparison yielded the following results.000 reduction in annual expense Postscript: the General Manager commissioned another project at the time this project entered the implementation phase. these projects encompassed about 75% of the department’s work activity. . Together.
Keep them firm. and job-level design on the other hand. The staff who maintain the supporting computer systems should also be represented. • Another alignment issue was the coordination of the process change with departmental strategy on one hand. Edit the draft off-line. • Focus on short term pay-offs. They met at decision points with the project team. 58-63. Folk. Lessons According to the Author • The support of the General Manager and the senior management team was essential. Collect measurement data as soon as practical. Exhibit 10. • Use a PC for all flowcharting and documentation. The GM initiated quarterly sessions with all management and representative non-management personnel to review the status of each of several processes. • Don’t dissipate resources over too many projects. They enforced strict adherence to the project schedule. B. Schedule process reviews as part of the GM’s staff meeting at least once a month. cycle time and customer service results. • Include key stakeholders on the project team. • Set clear time lines. Don’t wait for all the changes to be implemented. Limit the organization to two projects at one time. V. and Smith. 23 (1). Keep short intervals between target dates. They attended the same training as the team.com . This policy reinforces accountabilities and maintains momentum of the project. (2000). M. Case study: How to do a business process improvement.Exhibit 9. one in design and the other in implementation.. Work units responsible for the process must be represented on the team. Further Information: Bisson. • Manage the on-going process immediately. • Any given change effort requires coordination with other change efforts to ensure adequate resources. something that can be done in a short timeframe. www. Quality and Participation. Pay-offs should be quantified in terms of financial. Capture entries on the PC while the team is working out the design on the easel.stractics. pp. Lessons According to the Project Team • Start with a small process. Measurement trends and improvement plans were reviewed for each process.E.
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