Business process


A business process, business method, or business function is a collection of related, structured activities or tasks performed by people or equipment in which a specific sequence produces a service or product for a particular customer or customers. Business processes occur at all organizational levels and may or may not be visible to the customers. A business process may often be visualized as a flowchart of a sequence of activities with interleaving decision points or as a process matrix of a sequence of activities with relevance rules based on data in the process. The benefits of using business processes include improved customer satisfaction and improved agility for reacting to rapid market change. Process-oriented organizations break down the barriers of structural departments and try to avoid functional silos.

Overview

A business process begins with a mission objective and ends with achievement of the business objective of providing a result that provides customer value. Additionally, a process may be divided into subprocesses, the particular inner functions of the process. Business processes may also have a process owner, a responsible party for ensuring the process runs smoothly from start to finish.
Broadly speaking, business processes can be organized into three types, according to von Rosing et al.:
  1. Operational processes, which constitute the core business and create the primary value stream, e.g., taking orders from customers, opening an account, and manufacturing a component
  2. Management processes, the processes that oversee operational processes, including corporate governance, budgetary oversight, and employee oversight
  3. Supporting processes, which support the core operational processes, e.g., accounting, recruitment, call center, technical support, and safety training
There are other definitions of the classification of processes proposed by
  1. Strategic processes, which are managerial, directive or steering processes. Management has an important role in each of these. This type of process is related to strategic planning, partnerships, etc.
  2. Operational processes, which are business processes, are of a productive or "missional" nature. These processes generate a product or service to be delivered to customers. These are considered to be unique or specific to each organisation.
  3. Support processes, which are auxiliary in nature, support for operational and strategic processes. These are responsible for providing resources and are presented in most organizations.
A business made up of many process may be decomposed into various subprocesses, each of which have their own peculiar aspects but also contribute to achieving the objectives of the business. The business review analyzes processes, that usually include the mapping or modeling of processes and sub-processes down to a group of activities at different levels. Processes can be modeled using a large number of methods and techniques. For instance, the Business Process Modeling Notation is a business process modeling technique that can be used for drawing business processes in a visualized workflow. While decomposing processes into process classifications, categories can be helpful, but care must be taken in doing so as there may be crossover. At last, all processes are part of a largely unified customer-focused result, one of "customer value creation." This goal is expedited with business process management, which aims to analyze, improve, and enact business processes.

History

Adam Smith

An important early description of processes was that of economist Adam Smith in his famous example of a pin factory. Inspired by an article in Diderot's Encyclopédie, Smith described the production of a pin in the following way:

One man draws out the wire; another straights it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another... and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them.

Smith also first recognized how output could be increased through the use of labor division. Previously, in a society where production was dominated by handcrafted goods, one man would perform all the activities required during the production process, while Smith described how the work was divided into a set of simple tasks which would be performed by specialized workers. The result of labor division in Smith's example resulted in productivity increasing by 24,000 percent, i.e. that the same number of workers made 240 times as many pins as they had been producing before the introduction of labor division.
Smith did not advocate labor division at any price or per se. The appropriate level of task division was defined through experimental design of the production process. In contrast to Smith's view which was limited to the same functional domain and comprised activities that are in direct sequence in the manufacturing process, today's process concept includes cross-functionality as an important characteristic. Following his ideas, the division of labor was adopted widely, while the integration of tasks into a functional, or cross-functional, process was not considered as an alternative option until much later.

Frederick Winslow Taylor

American engineer Frederick Winslow Taylor greatly influenced and improved the quality of industrial processes in the early twentieth century. His Principles of Scientific Management focused on standardization of processes, systematic training and clearly defining the roles of management and employees. His methods were widely adopted in the United States, Russia and parts of Europe and led to further developments such as "time and motion study" and visual task optimization techniques, such as Gantt charts.

Peter Drucker

In the latter part of the twentieth century, management guru Peter Drucker focused much of his work on the simplification and decentralization of processes, which led to the concept of outsourcing. He also coined the concept of the "knowledge worker," as differentiated from manual workers – and how knowledge management would become part of an entity's processes.

Other definitions

Davenport defines a process as:

a structured, measured set of activities designed to produce a specific output for a particular customer or market. It implies a strong emphasis on how work is done within an organization, in contrast to a product focus's emphasis on what. A process is thus a specific ordering of work activities across time and space, with a beginning and an end, and clearly defined inputs and outputs: a structure for action.... Taking a process approach implies adopting the customer's point of view. Processes are the structure by which an organization does what is necessary to produce value for its customers.

This definition contains certain characteristics that a process must possess. These characteristics are achieved by focusing on the business logic of the process instead of taking a product perspective. Following Davenport's definition of a process, we can conclude that a process must have clearly defined boundaries, input and output, consist of smaller parts and activities which are ordered in time and space, that there must be a receiver of the process outcome—a customer – and that the transformation taking place within the process must add customer value.
Hammer & Champy's definition can be considered as a subset of Davenport's. They define a process as:

a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.

As we can note, Hammer & Champy have a more transformation-oriented perception and put less emphasis on the structural component – process boundaries and the order of activities in time and space.
Rummler & Brache use a definition that clearly encompasses a focus on the organization's external customers, when stating that

a business process is a series of steps designed to produce a product or service. Most processes are cross-functional, spanning the 'white space' between the boxes on the organization chart. Some processes result in a product or service that is received by an organization's external customer. We call these primary processes. Other processes produce products that are invisible to the external customer but essential to the effective management of the business. We call these support processes.

The above definition distinguishes two types of processes, primary and support processes, depending on whether a process is directly involved in the creation of customer value or concerned with the organization's internal activities. In this sense, Rummler and Brache's definition follows Porter's value chain model, which also builds on a division of primary and secondary activities. According to Rummler and Brache, a typical characteristic of a successful process-based organization is the absence of secondary activities in the primary value flow that is created in the customer oriented primary processes. The characteristic of processes as spanning the white space on the organization chart indicates that processes are embedded in some form of organizational structure. Also, a process can be cross-functional, i.e. it ranges over several business functions.
Johansson et al.. define a process as:

a set of linked activities that take an input and transform it to create an output. Ideally, the transformation that occurs in the process should add value to the input and create an output that is more useful and effective to the recipient either upstream or downstream.

This definition also emphasizes the constitution of links between activities and the transformation that takes place within the process. Johansson et al. also include the upstream part of the value chain as a possible recipient of the process output. Summarizing the four definitions above, we can compile the following list of characteristics for a business process:
  1. Definability: It must have clearly defined boundaries, input and output.
  2. Order: It must consist of activities that are ordered according to their position in time and space.
  3. Customer: There must be a recipient of the process' outcome, a customer.
  4. Value-adding: The transformation taking place within the process must add value to the recipient, either upstream or downstream.
  5. Embeddedness: A process cannot exist in itself, it must be embedded in an organizational structure.
  6. Cross-functionality: A process regularly can, but not necessarily must, span several functions.
Frequently, identifying a process owner is considered as a prerequisite. Sometimes the process owner is the same person who is performing the process.