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ISSN 1822-6515 ISSN 1822-6515 EKONOMIKA IR VADYBA: 2008. 13 ECONOMICS AND MANAGEMENT: 2008. 13

PECULIARITIES OF BUSINESS PROCESS MANAGEMENT WHEN DEVELOPING QUALITY MANAGEMENT SYSTEM IN ORGANIZATIONS

Asta Daunorienė, Diana Bagdonienė Kaunas University of Technology, Lithuania, [email protected], [email protected]

Abstract This paper discusses importance of quality management system and of process approach in

organization management, and analyzes peculiarities of classification, assessment and management of business processes. The paper discusses experience of the implementation of business process management system gained by Lithuania and foreign countries and analyzes difficulties faced by the organization before making a decision to acquire a process management system. Authors of the paper state that functional and beneficial quality management system can be developed faster and in a more qualitative manner when using software.

Keywords: quality management system (QMS), process approach, business processes, business process management system (BPMS).

Introduction Today we live in a modern rapidly ever-changing world that requires every organization to promptly

respond to changes of pace. This process emerges from actual combinations such as more open and competitive global economy, improved personnel training, better technologies and increasing focus on quality and customer satisfaction. Hierarchical organizations that have been focused on functional management for many years today shift to the process-focused organizations emphasizing the whole value chain beginning with the input and ending with the supply of the output (ultimate result) to the customer.

Thus, in order to adapt to the conditions of modern business a unified management of all the processes existent in organization is necessary including product designing, development, manufacturing, marketing, supply to the customer and customer service. To create competitive products and services of high quality every organization and its business partners inevitably have to share information and pursue common goals. To outrun its competitors every organization has to improve its business processes and manage them effectively, as well as to use resources and intellectual values properly. Business Process Management Systems allow for effective management of wide range of processes.

Business process management in context of development of quality management system represents a particularly relevant and often discussed issue for many years already. Currently many organizations face a need to reorganize their business processes in order to shorten period of works execution, reduce prices and improve satisfaction of customer needs. To this end an excellent means is implementation of information technologies in the organization to manage its processes. Currently systems of computerized IT system designing are widely developed, organizations look for better ways of describing problem field and representation of their business processes. There are many techniques for business process designing however each of them has its advantages and disadvantages. Companies from all over the world proactively engage in implementation and application of Business Process Management Systems that help them achieve real performance benefits. Market research companies have noticed that Business Process Management (BPM) is equally active in USA and in Europe.

It’s worth noting that in Lithuania many organizations have implemented a quality management system for the reason of a prestige or expansion to new markets. The very operation of quality management system and management of the organization often stays in a background, although it constitutes the core purpose of this system for the organizations that are willing to effectively manage all their processes. According to the Lithuanian Department of Standardization (01 08 2007) currently there are 756 organizations that have implemented certified quality management systems. Quite a large share of organizations that have implemented quality management systems faces a problem of the efficiency of their system. The developed system remains formally valid however in reality it either does not function at all or it works not in the way it has been designed to. The problems that determine lack of effectiveness of QMS usually emerge in different stages of or after the implementation of ISO standards. Therefore the first critical step when implementing QMS is perception of the importance of this system and desire to have a properly functioning quality management system that ensures achievement of goals and

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strategies of the organization. A quality management system is based on value-creating processes that when are managed effectively assist in achieving goals of the organization. Therefore purpose of this paper is formulated as a question: what are the basic principles for selection of the most appropriate method of business process management when creating a quality management system in the organization?

Object of the research – business processes in the organization with the aim to suggest recommendations useful for the organizations developing a quality management system.

Methodology of the research – the paper integrates logical and systematic analysis of scientific papers, draws on in-depth interview conducted in Lithuanian organization, also included case analysis.

Findings of the research – implications of quality management and process approach for the organization are discussed; classification of business processes suggested by different authors is presented; concept of process management is formulated; features of implementation of the process management system in the organization when implementing a quality management system is established.

Importance of quality management and process approach in management of the organization Total Quality Management (hereinafter – TQM) rapidly proliferating all over the world represents a

quality-focused way of managing the organization based on total participation (involvement) of its members and targeted at the long-term success for the organization, its employees and society. It’s worth noting that TQM is not a successful implementation of quality assurance standards of ISO 9000 series. It is much more than that. Total Quality Management is a concentrate of human experience in improvement of methods for organization of scientific work. Currently scientific concepts of TQM are widely applied all over the world, thus it is essential for Lithuanian organizations that are on the way to global integration and management experts that are getting ready to work in these organizations to achieve that principles of TQM become an established norm of daily performance.

Today total quality is based on the quality of management, on the quality of human behaviour, on the quality of working process and working environment, and on the quality of outcome deriving from all this – on the quality of products and services. It means ability to supply products and services of high quality desired by customers.

Implementation of QMS depends on variety of organizational needs, specific goals and processes, as well as on the structure and size of the organization. First, when implementing QMS the quality policy must be defined and quality objectives must be set. The next step is preparation of compulsory procedures (according to the ISO 9001) identifying business processes and their interconnections. Traditionally, when implementing QMS new documentation emerges that must be continuously handled by the organization. However there’s another problem often faced by the organizations: interconnections among different descriptions of processes that do not reflect actual relations among processes in the organization. Therefore organizations can be proud of only “paper” QMS that does not bring real benefit for the organization (Kazokienė, 2005). Thus, when organizations often face one of the QMS disadvantages such as process approach towards organizational management, it is very difficult for managers of internal activities to identify real value-creating processes constituting basis for quality management systems, and to focus on their implementation and improvement.

Establishment of process approach can be deservedly considered one of the major achievements in the field of management during the recent decade. Deming, Juran, et al., emphasize importance of the process- focus (Juran, 1999). Every organization has some functional departments, hierarchical levels, manufacturing and service lines, and in pursuit of organizational goals different barriers and contradictions normally happen among them. According to Juran (1999) these can be fully overcome only under perception of process approach – a universal way of thinking and pursuit of goals that fits every function, every level, and every manufacturing or service delivery line.

The process approach represents an attitude towards organization management that requires substantial reconsideration of organizational structure, indicators of management effectiveness, control mechanisms and basis for personnel incentives.

Pall (1987) being a proponent of the process approach describes a process as a consistent consolidation of people, resources, energy and equipment of the organization through activities while creating a specified ultimate outcome, i.e., a product. According to other proponents of this approach namely Davenport and Short (1990), business process is a consistent sequence of interrelated tasks performed to establish an output of the activity i.e., the end product.

Proponents of the process-organizational approach describe a business process as follows:

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• Johansson (1993): process is a sequence of interconnected activities that turn input and its transformations into output. All of this must give value to the input and create an output which must be useful and productive for the recipient.

• Scherr (1993): business process is a series of suppliers’ interrelationships in course of which the specific output at the specific time is obtained.

• Davenport (1993): business process is a structured valued sequence of intended activities that produce a specified output for individual customer or market.

• Hammer (1993): process represents such activities that involve one or several types of inputs and produce an output valued by customer.

In summary of these definitions, the process can be considered to be a sequence of interrelated and interactive actions, or put it another way, actions that turn input into output.

The process approach can be applied in every organization regardless of its type, size or offered product. When focussing on the process approach and in pursuit of continuous improvement of its performance, an organization has to:

• identify and define processes necessary for achievement of organizational goals; • define sequence and interaction of those processes; • define criteria and techniques ensuring productive operation and management of processes; • ensure procurement of resources and information necessary for the operation and monitoring of

processes; • monitor, measure and analyze these processes; • implement actions appropriate for achievement of planned results and to continuously improve

these processes. ISO 9001 standard provides the following criteria for process approach that also define benefit for

the organization, its productivity and effectiveness in pursuit of set goals: • integration and arrangement of processes enabling achievement of planned results; • confidence by customers and other stakeholders due to consistent activity of the organization; • ability to focus attempts to make processes effective and productive; • clarity of all processes in the organization; • reduced costs and shorter cycle due to effective use of resources; • improved, consistent and predictable outcomes; • opportunities for targeted and priority initiatives of improvement; • encouragement of personnel involvement and clearer responsibility. Several additional principles can be added to these criteria that define benefits available from the

process approach for any organization: • clarity of organizational activities. Clear scheme of organizational activity is an effective tool for

management of the organization. • perceiving organization as a system. Identification of interrelated processes shows how individual

employees and departments take part in operation of the organization. • optimization of the sequence of processes. Processes are analyzed based on their delivered values

while eliminating stages that do not add value and searching for the possibilities to improve efficiency.

• coordination of personnel actions. Requirements of the client of every process and possibilities of the supplier are revealed, cooperation among individual departments and functions is optimized.

• assessment and continual improvements of effectiveness of processes. Effectiveness of processes is continuously measured against set indicators and improved accordingly.

Success of many organizations proves that desired outcome is achieved more efficiently when activity and related resources are managed as a process since such management eliminates different barriers and contradictions among functional departments, hierarchical levels, manufacture and service lines.

Peculiarities of classification, assessment and management of business processes in the organization

Organizations define their operation as a set of particular activities they perform. Every activity constitutes a business process. Business process requires organizational resources and personnel to produce specific end product or to obtain an outcome for both internal and external user (Armistead, 1996).

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Many organizations have five to ten key business processes (sales, designing, preparation for manufacture, procurement, manufacture, logistics, installation, guarantee service, etc.), however it is obvious that number of business processes is dependant on the size and complexity of the activity of every particular organization.

Performance of key business processes requires supporting processes. Supporting business processes usually lie among departments or fields of activity of the organization (personnel selection and employment; equipment maintenance and calibration of devices; training; development of new products and business; and etc.)

Based on ISO 9001 standard during implementation of QMS, processes in the organization are classified as follows:

• processes of organization management: include processes concerning strategic planning, setting goals and formulation of policy, generation of information sharing and ensuring availability of necessary resources and managerial analysis.

• processes of resource management: include all the processes providing necessary resources for processes of management, realization and measuring;

• realization processes: include all the processes that create an intended production of the organization; • processes of the measurement, analysis and improvement: these are the processes necessary for

measurement, gathering data for business analysis and improvement of effectiveness and productivity. They include processes of measurement, monitoring and audit, preventive and corrective actions. They comprise an inseparable part of management, resource management and realisation processes of the organization.

Other scientists (Chang, 2006; Smith, Fingar, 2003; Benner, Tushman, 2003; Burlton, 2002; Crowston, Short, 1998) classify organizational processes as follows:

• main processes. It is common to refer to processes that create an added value of a product or service for external users as the main processes. The main purpose of such processes is satisfaction of needs and expectations of external users.

• auxiliary processes. It is common to refer to processes that support the main processes and in the first place seek to satisfy needs of internal users as the auxiliary processes.

• managerial processes. The purpose of managerial processes is establishment of organizational goals and strategies or effective management of other processes in the organization.

To manage business processes optimally organizations must not only classify but also asses all the processes existent in the organization.

Criteria for assessment of the process can vary greatly, i.e., satisfaction of internal and external users, period of execution, absence of errors, accuracy of detection of customer needs, arrangement in acceptable range of process variation; percentage of contracts and orders fulfilled in time and etc. However not always assessment criteria can be easily defined therefore according to Kaziliūnas (2004) the following several features that must be characteristic to criteria of process assessment can be distinguished:

• readily measurable; • convenient for communication; • showing ratio between desirable and achieved outcome; • independent of other environment factors; • useful and used sufficiently common. According to Smith and Fingar (2003) management, classification and assessment of business

processes constitute one of the major functions in every organization which is inseparably related to other business functions and is of particular relevance for organizations of all sectors in modern business environment. Thus management of business processes represents a part of management of the organization intended for achievement of set its performance goals.

Experience of Lithuania and foreign countries gained when implementing systems of business process management

Today business process management is often associated with up-to-date information technologies. Gartner Group, the company of information technologies research has declared: “process management is more about business transformation than about technology”. This attitude is reflected in different up-to-date business process management software such as suggested by Fuego, Proforma, Lombardi, Intalio, IDS Sheer.

Business Process Management System is recognized as a new category of computer software that starts a new age for business infrastructure under the effect of information technologies. It enables

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organizations to model, develop and manage business processes that include complex management of organization and consolidates different departments and business partners.

Business process management systems (BPMS) of the new generation have got started developing only several years ago and now rapidly gain popularity all over the world. The main innovation is that real business processes are modelled but not programmed as in conventional activity management systems. It enables employees of the organization to change models of process during work and ensures creation of optimal model with respect to the nature of activity of the specific organization.

Newly implemented BPMS’s are especially useful for automation of external and internal processes in different organizations. They contribute to assuring timely customer service and consolidation of personnel working in geographically distant departments (especially when there are more than several tens of employees participating in the same process). Lithuanian experience shows that new systems allow for speed-up of accomplishment of individual tasks by up to several tens of times as customer service time after implementation of new systems is shortened from several tens of days to several hours.

Business process and documentation management systems are especially rapidly proliferating in foreign companies that work with large numbers of customers and handle tremendous flows of different information and documentation. This is proved by different studies performed globally. In 2006 Business Process Research was performed that involved interviewing of almost 150 employees about quality of process management, key issues and goals who worked in German companies and public sector and were responsible for IT decision-making. The research was performed by IDS Scheer and involved questioning of the respondents using phone and internet. IT market analysis and consulting company Pierre Audoin Consultants (PAC) that analyzed findings of the research and made conclusions showed that there were no alternatives for business process management in medium and large organizations. 80 per cent of interviewed organizations were deeply or very deeply convinced that business process management was important. When compared to 2005, percentage of organizations confident of importance of business process management exceeded a record limit of 55 per cent (Kriškūnas, 2006).

Almost 75 per cent of interviewed organizations believe that management of business processes is very important and valuable. Fields of top priority remain as follows: improvement, cost reduction and enhancement of process efficiency and updating as well as business process standardization and coordination. It obvious that primary goals of strategic business process management are optimally coordinated performance of the organization and cost reduction.

Managers of organizations involved in the research see opportunities and feel need for improvement of total organization of business processes in the company. Similarly as in previous year it was scored as good or sufficient by almost 70 per cent of respondents. However structure of individual departments scored higher than general organization of business processes in the company.

According to majority of respondents, investment in business process management pays-off. In consideration of profit rate, investment in business process management brings the maximal benefit of all. In almost 80 per cent of cases, profits increased after investing in business process management. Growth of benefit from implemented innovations far exceeded that of previous years.

Based on the above-mentioned facts and in accordance with findings of the research, companies will continue to invest in optimization of business processes.

Research performed by IDS Scheer explicitly showed need for a manager of a new type, for professional manager of processes and of process management. Process manager should be empowered to make decisions concerning business process management. Findings clearly show that concept of business process management is perceived by people as a managerial task and organizations lack not understanding of it but practical implementation.

Based on the findings of this research we argue that when functional structure for work organization and organization management mechanism is developed, an effective process management can be assured.

Foreign experience perfectly applies for Lithuanian organizations since many of them have a pretty wide range of customers. New process management systems are expected to contribute to effective management of resources and better satisfaction of customer expectations.

Difficulties faced by Lithuanian companies when acquiring a business process management system

To reveal difficulties faced by Lithuanian companies when implementing BPMS, case analysis was performed, i.e., one Lithuanian organization was selected engaged in fields of engineering solutions,

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maintenance and service of industrial and energetic equipment and constructions management for biofuel energy, thermo technology, industrial and energetic objects for more than 15 years already.

With reference to data of the VI quarter, 2007 there were more than 130 certified professionals working for the company what constituted the largest number of such employees in one single company on Lithuanian scale. In 2006 turnover of the organization amounted for 150 mln. Lt, and the company was expecting its revenue to amount for 240 mln. Lt at the end of 2007.

In 2006 organization concerned has expanded its activity by merging with 3 subsidiaries that already had ISO 9001 certificates. Thus, new organization faced a need to reorganize its business process system. Top managers of the organization with the aim to design a functional quality management system have decided to purchase software of business process management system. To find out managers’ attitude towards quality management system under implementation, implications of emerging changes and difficulties faced by the organization before making decision to purchase a business process management system, an in-depth interview was performed with all top owners of processes of the organization concerned.

Research revealed that managers involved were committing significant attempts to implementation of quality management system, and changes that emerged due to process management in the organization were treated as a reason for pursuit of desired performance.

Findings of our research confirmed attitude of top managers towards process-based management of the organization. According to top managers of the organization, process approach improves productivity of quality management system when seeking for better satisfaction of customers. The trend emerged that major advantages of implementation of process approach are considered to be continuously improving management and main benefits deriving from it, reduced operation costs due to more efficient use of resources, improved and predictable performance.

Findings showed that the main reasons that determined resistance to acquisition of software for business process management system were as follows:

• a well-established management philosophy of top managers and resistance to replace it with management based on process approach;

• lack of understanding by managers that precondition for process-based organization is that processes of organization represent the essential aspect of its consistency;

• managers unable to understand that a process-based way of doing business could enhance opportunities for achievement of set goals;

• existence of managers’ attitude that implemented software which contributes to management of processes available in the organization will bear no fruits to general management of the company;

• disagreement among managers on sharing responsibility for performed activities and on levels of subordination.

However in summary of attitudes of top owners of processes it‘s true to say that functional and beneficial quality management system can be developed faster and in a more qualitative manner when using software in the organization. After acquisition of business process software all the preconditions are likely to occur for development and attractive formalization of quality management system to serve for both the customer and the company; for the customer – as a reliable guarantee of quality and consistency; and for the company – as a uniform understanding of daily routines and business processes by every member of the organization, recognition of personal contribution to company’s performance, knowledge of outcome targeted at by the whole company and by individual processes.

Conclusions 1. As advanced organizations understand that quality management is one of the essential preconditions for

business improvement and success, and implementation of modern quality management techniques in business process management as well as improvement of quality management system allow them to achieve satisfaction of fastidious customers what provides them with a competitive advantage over their rivals. Implementation of quality management systems enables organizations to define and manage processes that ensure development and manufacture of products perfectly satisfying expectations and needs of customers.

2. Understanding of process approach towards operation of organization and transition from functional management is one of the promising trends for improvement of organization management since it eliminates cooperation barriers among departments and hierarchical levels and enables employees of the company to achieve better outcomes. When assessing process approach used in the organization it is

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necessary to identify what processes are performed in the organization, to define their sequence and interaction, to select productive proceeding of these processes as well as criteria and techniques ensuring their management when targeting at the achievement of organizational goals.

3. Effective process management improves capabilities of the organization to participate in, manage and respond to market changes and to enhance business opportunities. This way company reduces inefficiencies and errors that derive from accomplishment of unnecessary work. Moreover successful process management allows for documentation, analysis and designing of critical processes, simplification of information flows upon which these processes are dependant and enhancement of satisfaction of customers and partners.

4. One of the ways available for implementation of efficient quality management system in practice is integration of computer software into process management of the organization. Integration of specialized software encourages implementation of organizational changes by striving for continuous improvement and exceeding set working tasks. It also enables to adjust and adapt existing systems and to create uniform, all-embracing process management system in the organization.

5. Findings of the research explicitly show clear initiative on the side of managers and their proactive participation in development of quality management system. The crucial thing is that positive attitude can be felt, that quality management systems are being implemented using business process designing means, understanding of importance and desire to have a well functioning quality management system to ensure achievement of organizational strategy and goals.

6. To suggest specific solutions for implementation of business process designing system in the organization it is necessary to reveal benefits of information technologies and specific features of their application in business process management.

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