5 steps can make business operations more efficient

You’re on the phone with your biggest client, who is upset because the order was one week late, or the invoice contained errors, or the IT consultant never showed up. You apologize profusely, promise to rectify the problem and offer a full refund. The client seems mollified and the situation is somewhat under control. At least for now. 

Unfortunately, incidents like this have occurred three times in the last month. You know that something is wrong, but you are not sure exactly what. So what do you do? 

Before rushing to blame inadequate employees or faulty technology, you may want to take a closer look at the business processes behind your operations. When the same problems occur over and over, it is likely that your processes need improvement.  Unless they are addressed, inefficiencies can sabotage a company’s ability to remain profitable over the long term.

Step by step

A business process is a set of sequenced steps performed within a company in order to produce a specific product or service. Processes exist in a firm’s daily activities, whether they are formalized and documented, or simply expressed as “the way we do things around here.”  Core business activities such as accounting, technology, marketing/sales, product development and customer service typically consist of business processes.

How do you know if your business needs process improvement? Below are some common signs:

• Long cycle times
• Frequent errors in key systems/documents
• Increased levels of customer complaints
• Employee frustration around confusing or complicated procedures
• Bottlenecks in the process slow things down
• It takes a lot of people to get one thing done
• There is a lot of re-work (having to do something more than once in order to get it right)
• Decreased productivity 

Business Process Improvement

Or BPI is a methodology used to optimize a company’s operations and position it for sustained success. It consists of five basic steps that can be applied to almost any business activity. The steps are: Define. Analyze. Redesign. Implement. Monitor.

Introducing BPI in your business does not have to be complicated or time consuming. The five steps above can be applied at any level or area of your operations in order to diagnose and improve faulty processes. Establishing a process mindset—constantly looking for ways to do things better or faster—will result in higher customer satisfaction, lower costs, fewer errors and increased profitability.

So let’s get started with a real life example. Bill is the CEO of Green Leaf Bank, a small regional lender that experienced initial rapid growth. Over the past year, however, Bill noticed that cycle times for mortgage loans had essentially doubled and the number of loans approved had dropped.  As a result, the bank was experiencing decreased revenue. Bill and his team decided to conduct a BPI initiative to determine the root cause of the problem and explore possible solutions.

Step 1: Define. Clearly defining the problem is crucial to successful process improvement.  Keep it as specific and simple as possible. For example, Bill’s problem statement was, “We are losing revenue because our loan cycle times are too long.”

Step 2: Analyze. Break down the existing process into its components, starting at the beginning. For example, the loan process for Green Leaf begins when the customer submits the application and ends when the check is issued. Draw a map of the existing process using a “boxes and arrows” approach. Each step in the process is shown as a box, and all the boxes are connected by arrows that indicate the direction of the flow.        

As you analyze each component, ask the following questions:

• At what point in the process do we experience delays?
• Where do errors happen most frequently?
• Which components drive the most customer complaints?
• Which elements incur the highest cost?

When Bill and his team reviewed the existing process map, they discovered the most time consuming and frustrating step consisted of customers submitting incomplete or incorrect information multiple times. The loan processors had to reach out to customers on average 3.5 times in order to collect all the information needed. In terms of duration, this step accounted for almost 45 percent of the entire process. 

Step 3: Redesign. Once it’s clear which step(s) needs to be redesigned, start with the end in mind. Draw the map of the new process, eliminating or revising the problem areas. In our example, Bill’s goal was to create an application process that was streamlined and simple so that customers could complete it correctly the first time.

In order to do this, the team decided to combine several forms into one and eliminate the redundant information. They considered providing customers with the option of applying online in order to speed up the process. In addition, they realized that customer service representatives needed additional training on how to assist customers with the application forms. 

Step 4: Implement. The key to a successful implementation hinges on a structured and organized approach. Bill and his team revamped the customer application portion of the process by planning, documenting, training and communicating the new procedures to all employees. 

Step 5: Monitor. Once the new process is rolled out, it is important to measure its success. Bill’s team did this by tracking the following metrics: total applications received, applications that were filled out correctly the first time, and the loan cycle time. This allowed Bill to assess the success of the initiative as well as the need for any revisions.  Within three months, the turnaround time of the average loan was one-third of what it had been, and the total number of loans issued increased by 25 percent. Bill’s commitment to a BPI initiative paid off in terms of happier clients and higher revenue.

As you can see, embracing BPI takes discipline and patience, but the benefits are well worth the effort. Mastering and consistently applying business improvement principles across all areas of your operations will help position your company for sustained growth and success.

Contact: Ileana Tudor is managing director of Tudor Business Consulting Inc. in Eden Prairie, offering strategic planning and process improvement services: 952.479.1174; igt@tudorbusinessconsulting.com; www.tudorbusinessconsulting.com