Example of

Business Process
Improvement
By Martin Smith
Contact Martin Smith at mesmithjr@aol.com.

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.

Situation: The setting was the Accounting Department of a local telephone company.
The department had about 500 employees. Most were assigned to two work centers. 3.5
million bills were issued each month to business and residence customers.
Critical Business Issue: Reduce expenses by 8-10% in each of the next five years.
Intervention: Re-design the CASH PROCESS. This process involves receipt of the
customers payment, crediting the customers account and depositing the amount in the
companys account.

Exhibit 1. 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

Exhibit 2. Schedule for Design Phase

Week

Project Activity

1. Train the Team

1 2

5 6

9 10 11 12 13 14 15 16 17

Start: Sept 17

2. Plan the Project

3. Prepare
Relationship Map
4. Build IS Map
5. Identify
Disconnects
6. Patch or Redesign?
7. Define Attributes
8. Build SHOULD
Map
9. Specify
Measures
10. Stakeholder
Review
12. Revise

13. Formulate
Recommendations
14. Decide What to
Implement
NOTE: The Project Team worked full time for 4 weeks and part time for 10 weeks.

End: Dec 15

Exhibit 3. Flowchart for Sub-Process, Dishonored Checks, BEFORE the Re-design

Bank

1
Di shonored Check
Rec eived from
Customer's Bank

24
Bank Fi les
Updated

3
End

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. Do not try to read the content of the process steps but rather understand the diagramming conventions.
Rows represent work groups or computer systems. Boxes indicate steps where work is performed. Diamonds are
decision points. Lines crossing the boundaries between rows represent hand-offs from one function to another.
Compare Exhibit 7 to Exhibit 3. The old design had 50 steps compared to the 24 steps in the new design.

46
Mai l
Check to
Cus tomer

Exhibit 7. Flowchart for Sub-Process, Dishonored Checks, AFTER the Re-design

Cycle Ti me

(7 Days)

(1 Day)

(1 Day)

4
Ba nk,
Payment
Proce ssing
Agent, 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 4. 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. 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

Implementation: 29 of the 32 recommendations were implemented within 12

months of the executive decision to proceed. A year-to-year comparison yielded
the following results.

Exhibit 8. Results
Measure

Result

Process Steps

44% Reduction from 422 to

237 steps

Manually Processed Payments

90% reduction from 42,000 to

4,000 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

$930,000 reduction in annual

expense

Postscript: the General Manager commissioned another project at the time this
project entered the implementation phase. Over the next two years, two additional
projects were undertaken. Together, these projects encompassed about 75% of the
departments work activity.

Exhibit 9. Lessons According to the Project Team

Start with a small process, something that can be done in a short timeframe.
Set clear time lines. Keep them firm. Keep short intervals between target dates.
This policy reinforces accountabilities and maintains momentum of the project.
Dont dissipate resources over too many projects. Limit the organization to
two projects at one time, one in design and the other in implementation.
Include key stakeholders on the project team. Work units responsible for the
process must be represented on the team. The staff who maintain the supporting
computer systems should also be represented.
Focus on short term pay-offs. Pay-offs should be quantified in terms of
financial, cycle time and customer service results.
Use a PC for all flowcharting and documentation. Capture entries on the PC
while the team is working out the design on the easel. Edit the draft off-line.
Manage the on-going process immediately. Dont wait for all the changes to
be implemented. Collect measurement data as soon as practical. Schedule
process reviews as part of the GMs staff meeting at least once a month.
Exhibit 10. Lessons According to the Author
The support of the General Manager and the senior management team was
essential. They enforced strict adherence to the project schedule. They attended
the same training as the team. They met at decision points with the project
team. The GM initiated quarterly sessions with all management and
representative non-management personnel to review the status of each of
several processes. Measurement trends and improvement plans were reviewed
for each process.
Any given change effort requires coordination with other change efforts to
ensure adequate resources.
Another alignment issue was the coordination of the process change with
departmental strategy on one hand, and job-level design on the other hand.
Further Information:
Bisson, B., Folk, V. and Smith, M.E. (2000). Case study: How to do a business
process improvement. Quality and Participation, 23 (1), pp. 58-63.
www.stractics.com