Contents
What’s it: A business process refers to a series of interrelated actions, activities, or work to achieve a business goal. They shape the business operation and, therefore, must be done.
Companies usually group internal processes into several functional areas or departments. They include:
- Procurement
- Product development
- Production
- Logistics
- Accounting and finance
- Human Resources
- Information and technology
- Marketing
- Customer service
In each functional area, managers actively examine processes to identify and eliminate potential inefficiencies and bottlenecks. It aims to make business processes more effective and efficient. It can involve:
- Fix production system flaws to avoid system failure
- Reduce time to do work and tasks
- Reduce cost and resource consumption
- Improve output quality
- Increase customer and employee satisfaction
Why are business processes important?
Business processes reflect how efficient and effective operations are within a business, which ultimately explains the company’s superiority.
Superior business processes can be a valuable capability to support competitive advantage. For example, a well-defined and effective process enables a company to deliver products on time. It can also eliminate unnecessary costs or activities. And, finally, it makes business processes effective and efficient along the value chain, enabling companies to create superior value.
Difference between business processes, procedures, and functions
As defined above, a business process is a series of actions or work to achieve the desired result. A business procedure is a defined way to execute a process, usually documented. Procedures detail who does what in each part of the process.
Meanwhile, a business function is an organizational unit within a business that carries out business operations. It can involve several business processes and procedures.
Take customer complaint service in the marketing function as an example. It can involve several processes, such as establishing and verifying complaints, identifying solutions, and providing solutions to resolving complaints. Who does and what to do when dealing with customer complaints is documented in business procedures.
Types of business processes
Business processes can vary between companies. It depends on the nature of their business. Some may be categorized into the following three groups:
- Operational process. It relates to the company’s core activities. For example, it could include logistics, production, marketing, and customer service for a manufacturer.
- Support process. It includes processes in core business support activities. It could include functional areas such as human resources, accounting, legal, and information technology.
- Management process. It relates to management functions, including measuring, monitoring, and controlling activities. Examples are the processes involved in strategic planning, governance, and budgeting.
The above categories can then cover many activities in functional areas. For example, production could involve processes such as handling raw materials, converting inputs into outputs in a manufacturing system, checking output quality, and maintaining production machinery.
Examples of business processes in functional areas
Every business function relies on a network of interconnected processes to achieve its goals. Let’s delve into some real-world examples to illustrate these processes in action:
Finance: Imagine the finance department as the guardian of a company’s financial health. Here, some key processes keep the money flowing smoothly:
- Risk management: This process identifies and mitigates potential financial risks, safeguarding the company from unexpected losses.
- Financial control: Managing expenses and ensuring proper allocation of funds is crucial. Financial control processes ensure responsible spending and adherence to budgets.
- Billing & invoice handling: Accurate billing ensures customers are charged correctly, and efficient invoice handling guarantees timely payments.
- Budget monitoring: Tracking actual spending against the budget allows for adjustments and ensures financial goals are met.
- Financial bookkeeping: Recording financial transactions meticulously is essential for accurate financial reporting and analysis.
Marketing: The marketing department is all about attracting customers and promoting a company’s offerings. Here are some processes that drive successful marketing campaigns:
- Advertising development: Crafting compelling advertising messages and selecting the right channels to reach the target audience is a key process.
- Product delivery: Ensuring products or services reach customers efficiently and in good condition is vital.
- Product development: Understanding customer needs and developing new products or improving existing ones is an ongoing process.
- Market research: Constantly gathering customer insights and market trends helps businesses stay ahead of the curve.
Human resources: The HR department focuses on attracting, developing, and retaining talent. Here are some processes that ensure a skilled and motivated workforce:
- Recruitment: Finding qualified candidates to fill open positions is an essential HR process.
- Training & development: Equipping employees with the necessary skills and knowledge to perform their jobs effectively is a continuous process.
- Performance monitoring: Evaluating employee performance and providing feedback helps ensure employees are on track and meeting expectations.
Logistics: Getting products from point A to point B requires a well-oiled logistics system. Here are some processes that ensure efficient delivery:
- Planning & organizing: This process involves coordinating transportation, warehousing, and inventory management to meet customer demands.
- Goods handling: Efficiently receiving, storing, and shipping goods is crucial for maintaining a smooth supply chain.
- Information management: Accurate tracking of inventory levels and order fulfillment throughout the supply chain is essential.
Business Process Management (BPM)
Business process management (BPM) is a systematic approach to managing business processes within a company. It aims to ensure the processes run smoothly. Thus, it ultimately supports the established strategy and helps the business achieve its goals.
BPM involves discovering, modeling, analyzing, measuring, improving, and optimizing the processes in which a business operates. Typically, companies utilize software to monitor and control automated and non-automated business processes. It involves steps such as:
- Design and modeling
- Execution
- Monitoring
- Optimization
- Reengineering
Design and modeling
This step maps the workflows and processes within the business. It describes the tasks or jobs, including standard operating procedures, service level agreements, and task handover mechanisms.
Modeling requires real analysis and representation to understand and describe processes, including clear beginnings and endings, desired outcomes in each process, and sequences of actions and work performed. In addition, models are important for determining how processes might operate under different circumstances.
Execution
This stage is about executing the defined or modeled process. It can involve both manual and automated tasks. Manual processes are carried out by staff, while automated processes are driven by software.
For example, when handling a customer’s order at an online retailer, the software automatically requests payment and a shipping address before the order is processed. When the money has come in, the system notifies the staff. Then, the staff packs and ships the item to the customer’s address.
Monitoring
Monitoring includes tracking every part of the process. So, its actual condition can be monitored. Usually, it is aided by predefined performance statistics.
Take the customer order handling process as an example. Monitoring allows the business to see when an order is received, how long it should take, who is handling it, when it should be shipped, and when it should have reached the customer.
Such monitoring allows the business to identify and fix possible problems in each process. It is also important to identify opportunities to save costs or improve process effectiveness.
Optimization
Optimization involves identifying potential or actual problems in the process and then fixing them. For example, in the above case, the customer may not have received the goods on time due to a problem in the internal procedures for handling the order.
Optimization checks for such issues or bottlenecks. Then, the team defines the improvements and implements them in the process design. So, the same problem does not arise in the future.
Optimization isn’t just about bottlenecks in the process. But, it can also involve finding ways or solutions to make the process more efficient and effective than before.
Reengineering
This usually involves redesigning the entire process cycle instead of small improvements in some parts. Business processes may become too complex and cumbersome because, for example, customer orders have increased dramatically. It makes the existing process ineffective and inefficient in managing orders.
For example, previously, companies might divide teams or functions based on customer groups. Each team carries out the entire process, from handling orders to monitoring orders until they reach the customer. Management may find it ineffective and inefficient.
Later, the company’s steering committee proposed reengineering. Instead of each team handling the entire job, the new process design divides each process into multiple work areas. Each team in each area handles the same tasks and jobs, making them more specialized and skilled.
