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