Thursday, February 25, 2016

Auditing Business Processes and the Business hosting these processes

There is often a lot of uncertainty while trying to improve business processes. Often many things need to be changed but it is difficult to know what exactly needs to be changed, when to change, how much to change, etc. It is also often difficult to asses the overall progress of the business and process transformations.

Auditing Business Processes and the Business hosting these processesMichael Hammer [1] has developed an auditing framework based on the observation of hundreds of companies. This framework which he called ‘The Process and Enterprise Maturity Model’ (PEMM) identifies two distinct groups of characteristics (Process Enablers and Business Capabilities) that are needed for business processes to perform well and to sustain that performance. These Process Enablers and Business Capabilities provide an effective way for businesses to evaluate process-based transformations and they also give important directions about how to improve.
Some experts argue in the literature about whether it is sometimes needed to extend the PEMM framework with some extra elements depending on the business in question (e.g. elements which link the process improvements to financial results or to the strategy of the organization, etc.). If you feel that there is anything which is still important to your organization then include this in your personalized audit also.

The Process Audit - The Process Enablers (PEMM)

There are a set of process enablers which are evaluated by strength (process design, people/performers, manager/owner, infrastructure, process metrics). There are four strength levels: P-1, P-2, P-3 and P-4. Each level builds on the proceeding level. The strength level of the enabler defines how mature a process is or how capable it is to deliver higher performance over time. The lowest strength is always the strength of the whole process, or with other words the strength of the weakest link is the strength of the whole process. If e.g. most of the enablers has a strength level of P-3 but there is one with P-1 then the strength of the whole process is P-1! This also means that it does not have any sense to improve one enabler (one aspect of the process) to the maximum strength level but instead to proceed step by step and incrementally improve all of them.
Each strength level is scored not by ‘yes’ or ‘no’ but by largely true (means that the strength level statement is at least 80% correct), somewhat true (between 20% and 80%) or largely untrue (means that the strength level statement is less than 20% correct).
In case you use more than one task group (2-3) to audit a process separately then do not average the results but bring the groups together and agree on the final score!
The 5 Process Enablers of Michael Hammer [1] with their subcategories and 4 strength levels are the following:
  • Design
    • Purpose
    • Context
    • Documentation
  • Performers
    • Knowledge
    • Skills
    • Behavior
  • Owner
    • Identity
    • Activities
    • Authority
  • Infrastructure
    • Information Systems
    • Human Resource Systems
  • Metrics
    • Definition
    • Uses

The Business Audit - The Business Capabilities (PEMM)

According to Michael Hammer [1] in order to be able to develop high-performance processes organizations need first to develop Business Capabilities or supportive environments in the following four areas: Leadership, Culture, Expertise, Governance.
In the Business Audit these Business Capabilities are evaluated by strength. There are four strength levels: E-1, E-2, E-3 and E-4. Each level builds on the proceeding level. The strength level of the Business Capability defines how mature an organization is or how capable/ready it is to support/host process-based transformations. The lowest strength is always the strength of the whole organization, or with other words the strength of the weakest link is the strength of the whole organization. If e.g. most of the Business Capabilities have a strength level of E-3 but there is one with E-1 then the strength of the whole organization is E-1! This also means that it does not have any sense to improve one Business Capability to the maximum strength level but instead to proceed step by step and incrementally improve all of them.
In order to be able to advance with a process enabler or with the whole process to P-1 level, the organization needs to have all Business Capabilities on E-1 level! When all Business Capabilities reach the E-2 level then the organization is ready to advance the process enablers to P-2 level. Etc.
Each strength level is scored not by yes or no but by largely true (means that the strength level statement is at least 80% correct), somewhat true (between 20% and 80%) or largely untrue (means that the strength level statement is less than 20% correct).
In case you use more than one task group (2-3) to audit the business capabilities separately then do not average the results but bring the groups together and agree on the final score!
In case your organization is not yet ready for an organization wide transformation program then you may also apply the Business Audit to one division or business unit only.
The 4 Business Capabilities of Michael Hammer [1] with their subcategories and 4 strength levels are the following:
  • Leadership
    • Awareness
    • Alignment
    • Behavior
    • Style
  • Culture
    • Teamwork
    • Customer Focus
    • Responsibility
    • Attitude Toward Change
  • Expertise
    • People
    • Methodology
  • Governance
    • Process Model
    • Accountability
    • Integration

ISO 9001 Business Audit versus PEMM Business Audit

One of the ways many companies are improving and restructuring their organizations is by introducing management operating systems based on the ISO9001 quality system standard.
Very simply put ISO 9001 is about implementing and documenting efficient processes; monitoring them for quality and continually improving the effectiveness of the system.
However, the ISO 9001 standard does not tell you what an efficient process is and how to transform your processes in order to become efficient! And this ‘gap’ in the standard can be filled in with the PEMM framework and with business process improvement methodologies as e.g. the so called Lean process improvement tools and techniques.
There are several similarities between PEMM and ISO 9001 as for example the process documentation aspect, management responsibility, governance, etc.
The auditing of a business according to the ISO 9001 standard contains a checklist of the standard requirements as e.g.:
  • All of the key processes have been identified (process approach)?
  • All interrelations between these processes have been identified (systems approach)?
  • All key process have been documented well in order to assure their effective operation and control?
  • Are the structural and documentation requirements met?
  • The control of documents and data records has been defined well?
  • All customer and regulatory requirements have been defined well and are met?
  • Etc.
Read more about these and other subjects in my books and in my blog!






BUSINESS PROCESS IMPROVEMENT HANDBOOK FOR OFFICE & SERVICES
FOR EXPERTS & MANAGERS AN ADVANCED GUIDE
BUSINESS PROCESS IMPROVEMENT HANDBOOK FOR OFFICE & SERVICES
Read More



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