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A T H O U G H T PA P E R

Defrag or DIE!
How Fragmented Business Processes Destroy Value
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Fragmentation is a killer.
When your computer’s hard drive gets fragmented, more work must be done to retrieve data. Performance
deteriorates. In an extreme case, loss of data can occur.

When a habitat is fragmented in ecological systems, genetic recombination is hindered because the area of
any usable patch of habitat is severely reduced. Imagine planting a field of corn in hundreds of individual clay
pots, each separated by miles from its neighbors and you get the idea. As a result of this fragmentation, genetic
diversity decreases, and a population’s ability to adapt to environmental changes suffers. Species go extinct.

When organizations are fragmented, the effect is a catastrophic combination of the problems described
above. More work is required to deliver value to the customer, and the ability of the organization to adapt to
environmental changes suffers. In extreme cases, the loss of value is lethal. Businesses go extinct.

What causes businesses to become fragmented?

Business fragmentation occurs when critical processes aren’t managed as an integrated whole. Transactions
travel helter-skelter through a complex series of handoffs between functions, jobs, and information systems.
Each handoff is an opportunity for error, delay, and unnecessary cost. Without an integrated process man-
agement framework, transaction value deteriorates. What’s more, with no unifying focus, local process
variations grow so far apart that standardizing to best practices becomes a daunting change management
task. The potential for resistance increases and the speed of implementing improvements decreases.

Processes in a highly fragmented organization resemble a labyrinthine system of poorly joined plumbing,
with pipes that leak time, money, and customer value. Core business transactions are pushed, pulled, disin-
tegrated and re-integrated numerous times on their way to the customer. This alone would be cause for great
suffering and gnashing of teeth. Unfortunately, most businesses today are subject to a number of
variables that are making the problem still worse…

Silo-vision
In their article “How Process Enterprises Really Work” (Harvard Business Review, Nov-Dec
1999), authors Mike Hammer and Steven Stanton state:

The power in most companies still resides in vertical units—sometimes


focused on regions, sometimes on products, sometimes on functions—and those
fiefdoms still jealously guard their turf, their people, and their resources.

DEFRAG OR DIE! | A THOUGHT PAPER


The “silo-vision” described by Hammer and Stanton is reinforced The Turnover Trap
by functionally oriented metrics that have no discernable connection In the absence of integrated process management, high employee
to process performance. Managers are rewarded for such things as turnover accelerates fragmentation. Tribal knowledge about best
completing key projects, hitting local financial targets, or reducing practices and the variables that affect process performance walks out
headcount within their silo. While these may be desirable goals, the door with each exiting employee. Without a clear understanding
failing to understand how these objectives will affect process of how their work fits into the process as a whole and no process
performance puts the organization at risk. metrics to focus their attention, new employees will gravitate toward
practices that make their lives easier. Who can blame them? In the
Of course, there are valid reasons to structure reporting relation-
absence of meaningful feedback, where would you focus? Without a
ships on principles other than process. However, process should be
process context, jobs lose their meaning, employee moral drops and
the underlying organizing principle for operations for any business.
turnover accelerates. This vicious cycle can be difficult to break.
In other words, regardless of what the org chart says, the attention
and efforts of employees should be focused on getting products and
services out the door as effectively and efficiently as possible.
The Systems Snowball
Businesses are utterly reliant on the systems that facilitate the flow
Processes are your direct connection to customers. Customers are of information to where it is needed. This web of interactions can
your direct connection to revenue. In the long run, all other con- be quite complex. A single system can support multiple business
siderations are subordinate. Without process metrics or manage- processes, while a single process can be supported by multiple
ment systems, the silos will obscure this essential connection and systems.
fragmentation will increase. Silo-vision leads to two forms of frag-
In some organizations, the sheer number of systems and interrela-
mentation:
tionships seem to grow exponentially with little rhyme or reason.
Physical Fragmentation: This is the inevitable result of spatial New systems are added without an overall strategy, legacy systems are
separation of functions. One consequence of separation is the time left running even as the people who understand them are leaving, and
it takes a transaction to travel from one group to the next, time in homegrown applications with duplicate functionality pop up like
which no value is being added. Potentially more serious, however, weeds. When this growth occurs without a process framework, busi-
is the degradation of information associated with transactions as ness fragmentation increases.
they travel. It’s like the game “telephone,” where one person within
a small circle starts a message that each person whispers into his or “Ouch”-sourcing
her neighbor’s ear until it returns to the originator, hopelessly gar- Outsourcing an intact process that is not a core competency can
bled. In addition to being delayed or misinterpreted, there is always offer significant advantages to a business. On the other hand, out-
the possibility that the transaction will simply fall through the sourcing a “chunk” of a critical process to an outside vendor can lead
cracks. How many times have you placed an order with a company to disaster if little thought is given to how its linkage to the rest of
that simply vanished? Never, right? the process will be managed. Such piecemeal outsourcing can lead
to serious performance problems.
Cultural Fragmentation: This type of fragmentation is less obvi-
ous than physical fragmentation but is often far more damaging. It Consider the example of a cable company hiring a third party to
stems from a lack of alignment on priorities, which is exacerbated by manage repair calls from consumers. How can customer satisfaction
functionally focused metrics. Items that are top priority in one be ensured when the entity making commitments and qualifying
group’s work queue move to the back burner as organizational bar- calls is completely disconnected from accurate, timely information
riers are crossed. As the degree of misalignment increases, so too about the rest of the process? Unless process requirements are clear,
does the “leakage” of value. The effect is analogous to driving down information exchange is flawless, and service level agreements are
a highway where speed limits, traffic laws, signage conventions, and aggressively managed, the outsourced call center will focus on
investment in road maintenance change dramatically each time you minimizing their cost for handling each call at the expense of the
cross a county line. A business transaction traveling such a highway ultimate customer.
loses momentum and takes a real beating before it finally reaches its
destination—a paying customer. In this scenario, pressure will increase to reduce the time spent
understanding each customer’s problem. The information captured
will lose important detail. Customer irritation will grow when they performance gap, then the process owner needs the power to mobi-
sense they are being rushed. lize them. As mentioned earlier, functional priorities must be subor-
dinate. Too many organizations assign process owners in name only,
With less useful information, the effectiveness of repairs decreases.
while the real power remains with the functional fiefdoms.
This causes customer satisfaction to plummet and there will be no
remedy until the contract is up for review. In the long run, the unfor-
tunate cable company ends up with a process that is more costly, less
Manage First, Then Tweak
Your first step is to adopt a simple, disciplined approach to defining,
effective, and risks driving customers into the arms of its competitors.
integrating, and managing processes. After this is accomplished, you
Perhaps the most damaging thing about fragmented organizations can concentrate on enabling employees to analyze and refine critical
is the way they respond to performance issues. Without a coherent processes.
picture of how the business operates, efforts to improve amount to
What? No radical redesign? No cutting edge software? No cadre of
little more than flailing in the dark. Sometimes the “fixes” create
black belts flexing their statistical muscles?
more problems than they solve. Fortunately, there are steps you can
take to stop or even reverse the fragmentation of your business All in good time…
without sacrificing flexibility.
A systematic approach for evaluating and changing the design of
Focus on Critical Processes processes to improve performance is an important component of
Critical processes are those processes that will make or break your process management. However, basic process management systems
business in the foreseeable future. They are essential to achieving should be in place before adopting a rigorous improvement method-
your strategic goals. Looking forward is important, because the ology such as Six Sigma. Incremental improvements work best in an
processes that defined success in the past may not be the ones that integrated system. Individual pieces of a process can be optimized,
will ensure your business survives and thrives in the future. Once and these improvements often add up to big improvements to the
these processes are identified, the next step is to quickly build process process as a whole. On the other hand, improvements made in the
management systems that redirect organizational attention to where absence of a process context can accelerate fragmentation and the
it’s needed. resulting deterioration of performance. The only way to know when a
piece of a process can be isolated and improved independently is to
have a clear grasp of the big picture and a robust system for managing
Empower Process Managers
performance.
Before you redesign or improve your critical processes, it’s essential
to make sure that they are managed. The good news is that it won’t In the face of so many variables conspiring to increase fragmentation,
require a huge investment of time or money to design and deploy the job of reversing the trend may seem overwhelming. Don’t fall prey
metrics. The bad news is that it may require a fundamental change to this illusion. If you follow the steps outlined above with sustained
in mindset. Process management relies on process ownership. management support and commitment, measurable results will follow
Ownership means that each process has an individual who is in fairly short order. There are well-established tools and methodolo-
accountable for process performance and has the authority to make gies to help your organization begin this journey.
any necessary changes. This individual’s voice must be louder than
the voices representing the silos. If resources are needed to address a The important thing is to start defragging—today.

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