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May 10, 2011

Process Excellence

At any given time most companies have numerous activities underway to improve their operations. For example, the company might be pursuing one or more of the following:

1- TQM
2- Lean manufacturing
3- Kaizen
4- Business process reengineering
5- Theory of constraints
6- Variation reduction
The list can be extended indefinitely. Six Sigma can't simply be thrown into the mix without causing tremendous confusion. People will find themselves in conflict with one another over jurisdiction, resources, and authority. Leadership must give careful thought as to how the various overlapping activities can best be organized to optimize their impact on performance. An "umbrella concept" often provides the needed guidance to successfully integrate the different but related efforts. One concept that I've found to be particularly useful is that of "Process Excellence," or PE.

What is Process Excellence?
Organizations are typically designed along functional lines. Functions, such as engineering, marketing, accounting, manufacturing, and so on are assigned responsibility for certain tasks. The functions tend to correspond closely to university degree programs. Persons with higher education in a functional area specialize in the work assigned to the function. General management allocates resources to each function based on the needs of the enterprise.

If the enterprise is to be successful the "needs of the enterprise" must be based on the needs of its customers. However, customers typically obtain value not from organizational functions but from products or services that are created by the cooperative efforts and resources of many different functional areas. Most customers could care less about how the enterprise creates the values they are purchasing. A similar discussion applies to owners and shareholders. In fact, there is a substantial body of opinion among management experts that focusing internally on functional concerns can be detrimental to the enterprise as a whole. An alternative is to focus on the process or value stream that creates and delivers value.

A process focus means that stakeholder values are defined and activities are classified as either relating to the creation of the final value (value-added activity) or not (non-value added activity.) Processes are evaluated on how effectively and efficiently they create value. Effectiveness is defined as delivering what the customer requires, or exceeding the requirements; it encompasses quality, price, delivery, timeliness and everything else that goes into perceived value. Efficiency is defined as being effective using a minimum of resources; more of an owner's perspective. Excellent processes are those that are both effective and efficient.

PE is the set of activities specifically designed to create excellent processes. PE is change-oriented and cross-functional. It includes Six Sigma, all of the initiatives listed earlier, and many more as well. By creating a top-level position for PE, leadership assigns clear responsibility for this important work. The PE Leader, usually a Vice-President, leads a Process Excellence Leadership Team (PELT) which includes functional leaders as well as full-time PE personnel such as the Director of Six Sigma. The VP of PE isn't responsible for a particular processes, but she has the authority to identify key processes and nominate owners for approval by the CEO or the PELT. Examples of processes include:


Order fulfillment
Coordinating improvement activities of Six Sigma, Lean, etc.
Customer contact with the company
Handling public relations emergencies
Getting ideas for improvement projects
Matching improvement projects with customer needs
Innovating
Communicating with the outside world
Communicating internally
Identifying talent
Handling customer problems
Avoiding legal disputes
In other words, the VP of Process Excellence has a "meta-process" responsibility. He is responsible for the process of identifying and improving processes. PE activities such as Six Sigma, Lean, etc. provide PE with resources to direct toward the organization's goal of developing internal processes that give them a competitive advantage in securing the best employees, delivering superior customer value, and earning a premium return for its investors.