Acorporation must change in order to survive and thrive. Change will include process re-engineering, or the analysis of business processes with the goal of improving communication, methods and procedures to align with the organization’s needs.
“You need to have the mindset to revamp something you may have initially designed because now you can make it better with new information, new knowledge and new systems,” says David Davis, Risk Management Services partner, Armanino McKenna LLP. “Process re-engineering can suggest scrapping an entire process or uncovering simple solutions, like improved system and software training.”
Smart Business spoke with Davis about how process re-engineering can reveal improvements to core processes that ultimately produce tangible and intangible benefits for growing companies.
What size companies can benefit from process re-engineering?
What I’ve seen in my career is that companies with more than $25 million in revenue, and specifically those that have been growing, can benefit from engaging in process re-engineering. Growth companies need to reanalyze their processes on an ongoing basis instead of just adding more resources.
What core business processes should be analyzed?
Some areas that present problems for companies are inventory management and logistics and any department responsible for moving goods from one place to another or coordinating the receipt of products and services. There is always a ton of paperwork associated with these functions, which seems to bog down a lot of companies.
There are also other areas around manufacturing. For example, the management of raw materials that go into the process, the proper inventory of the finished goods and how that information is properly communicated internally so companies can more accurately record information that will better service customers in a timely manner.
Some additional processes to consider are how financial reporting integrates with other departments as well as budgeting and forecasting processes and performance analysis. How do you know you should be implementing changes, adding staff or considering a different vendor unless you are doing some type of analysis and forecasting about what’s going to happen to your business?
What gains should be expected from a re-engineering effort?
One area includes tangibles like hard cost savings from reduced shipping, reduced replacement costs, savings from head count improvements and cost reductions in manufacturing. There also are intangibles like improved communication within the company and the benefits from people better understanding what other workers do and how they do it. Communication is the biggest problem I see in companies today.
How are target processes identified?
Mapping is an important place to start. If a company doesn’t have their existing processes mapped so they understand what they can do, then they really need to do that. You can’t just come in and say, ‘Change this and change that,’ unless you understand the processes. If the company tells me they already have their processes mapped, then I strongly suggest that we walk through them to make sure they are accurate. Otherwise, wrong decisions can be made, or perhaps the process only needs a tweak here and there instead of throwing it out and starting from scratch.
Often, it’s just a training issue because people aren’t doing things the way the company first designed it. Chances are a large percentage of the people you trained when the process was first put in now have different jobs or are gone completely. One recommendation I always seem to end up making is for companies to get their people better training on the systems. Workers like to create spreadsheets and programs on the side, and they’re the only ones who know the information contained there. This slows down other people.
Can employees view re-engineering as invasive or threatening?
Sometimes there will be head count reductions, but that’s not always the goal of process re-engineering. Upon my initial engagement with a company, I tell the staff that my goal isn’t to eliminate jobs, but to make their jobs more efficient so that, as the company grows, they can do more but not have to work more. You’d be surprised how enthusiastic people get if they think it’s going to make their life better. It’s also important to get a company’s senior management behind the effort early on.
Should companies tap outside resources?
Many times it makes sense to bring in outside help. Consultants bring a different and more critical view than the insiders who may have originally designed a process. They’re not biased they come in, and if they see a problem, they tell management what they’ve uncovered.
DAVID DAVIS is a Risk Management Services partner with Armanino McKenna LLP in San Ramon. Contact David at (925) 790-2726 or David.Davis@amllp.com.