The old economy is trying to keep up with all the fancy topics of the new digital age. Everybody wants to be agile, lean, high performant, responsive, digitized and of course fully based on Process Management. As a consequence, the old economy claims to have arrived in the new age.
In fact, it is not true at all – mere lip service.
The understanding of the underlying principles in Process Management in the new economy is completely different.
In this article I will focus on describing the need for a 180 degree change in the understanding of Process Management to adapt to the new challenges. I will start with the definition of Business Process Management and Process Optimisation. I will show how Process Management is understood in the old and new economy, and finally I will conclude with the key differences in the principles.
You can find some more preconditions for the new age and how to reach a high-performance organisation in The Mother of Principles in Next Level Organisations
Or on how to become more responsive, lean, agile and digitized in the article Prerequisite for Digital Transformation
The targets of Process Management
The target of Process Management can be found in its definition:
Business Process Management (BPM) is defined as the identification, modelling, documentation, execution, control, monitoring, measurement and optimization, automation – or in short, management – of business activity flows – rather than tasks.
The targets of BPM are to:
- improve business performance—increasing efficiency at reduced costs and enabling new business models—aligned with an organization’s strategic direction
- align the firm’s resources—people, information flows and systems—across the enterprise, leading to transparency
- increase discipline and consistency—or in short, quality—as well as operational agility and flexibility in daily operations
- create and deliver value to customers—enhancing customer satisfaction by meeting customer requirements
(Wikipedia: based on Gartner, extended by definition BPMInstitute and Association of BPM Professionals)
These targets of BPM are the common starting point in the old and new economy.
The target of Process Optimisation
We could define the processes as the horizontal component of an organisation whereas line management remains the vertical component. The typical structure of the vertical organisation is by function, product, region or project or a combination of them. An end-to-end process will cross several organisational vertical borders, creating interfaces. It will become more or less complex depending on the organisation structure and the entanglement of the process.
It is the target of the Process Optimisation to increase the efficiency and the added value of a process. A reasonable way to achieve this is therefore to simplify the process—reducing the number of interfaces. As a logical consequence, this idea gave rise to a new structure-element for organisations, the processes itself, which became popular around 2000 (based on M. Gaitanides, 1983). In the so called Process Organisations, process owners lead all functions and skills within their process. The clear benefit is that there are no interfaces, as no separate vertical organisation exists because each interface means:
- a potential berthing place for delay, as it needs coordination for the hand over,
- a source of error, as context information may get lost in the transfer
- an empty space of responsibility, as two parties are in charge with ambiguous assignments
This said, the advantages of reduced complexity seem obvious. However, why didn’t this kind of organisations breakthrough in the old economy?
The understanding of Process Management in the old economy
The old economy is based on hierarchical organisations and a separate process layer. Management in the old economy is focused on increased efficiency and quality at reduced costs. For that very reason, Process Management is used to command and control the performance of the employees. Additionally, management is in charge of both the automation and the standardisation of the processes and the strategic direction. Whenever an error occurs or the performance drops, processes have to be adapted. The processes are detailed until the task levels which makes them inflexible and intransparent – the opposite of the target of BPM. For these optimised processes control mechanisms have to be enforced, leading to an increase in management and process overhead.
All in all, as a result of the implementation and redefinition of processes, bureaucracy and administration have continuously grown in the organisations in the last years, becoming a hidden encumbrance in the performance. Due to more management and more processes overhead, employees act as soulless robots. Actually, 70% are not engaged in their work anymore.
The understanding of Process Management in the new economy
In order to achieve a substantial and sustainable quantum leap in performance, the so far used paths have to be broken. The new economy has to deal with much higher complexity and cannot afford sluggish structures and disengaged employees. They need access to all the knowledge in the company and cannot rely on only 20% of managers’ understanding of the problems in the business.
The new economy found the following levers of Process Organisations to have the desired effect on performance:
- Reduction of management, leading to lean and efficient structure
- Reduction of process overhead, leading to integrated processes with less interfaces
- Increased, real empowerment of employees
Knowing this, it is not surprising that the new organisation models are all based on cross-functional teams, flat organisations, self-management and end-to-end process. This answers as well the question, why Process Organisations were not in favour and did not find a breakthrough in the old economy. The resistance of the management in changing the grown structures is too big, as it would mean distribution of power to employees and reduction of the existing management.
But what is the difference of understanding in Process Management in the new economy—besides that they are organised based on processes?
Different understanding of Process Management in the old and new economy
I would like to compare it with the difference of the programming language C and C++, for those savvy in informatics. The languages themselves have more or less the same syntax and semantics. The principles behind however, are completely different. Whereas C—comparable to old economy Process Management—focuses on hard coded behaviour—rigid hierarchy and processes—C++—and new economy processes—concentrates on the reuse and flexibility of code—processes. Like in C++ the allowed actions of an object—an employee—are defined, rather than the exact tasks and execution order, which can be adapted to the needs. In a self-managed organisation there is no need of a central governance that maintains the logic and issues commands and controls the execution. The governance is decentralised and delegated to the individuals in the process group – the process owners. The benefit is that the decisions are taken where all the knowledge is.
Base principles of Process Management in the new economy
But can a completely autonomous process organisation function and deliver the desired results, being based on a complete chaotic system? Not at all. The base-principles—also designated constitution or operating system—have to be defined. This is nothing else than the base processes in a Process Organisation. Out of these generic processes the concrete processes are composed dynamically:
- Management functions, management overhead (distributed and democratic):
- Decision making process, self-management
- Project Management
- Change Management
- Crisis Management
- Methods of resolving conflicts
- Support functions, process overhead (almost none):
- Recruitment, onboarding and dismissal
- Compensation and incentives
- Performance Management and targets
- Strategic planning, budgeting and controlling, investments
- Supplier Management
- Staff functions
- Responsibilities, job titles, job descriptions and status
- Meeting practices
- Coordination mechanisms
- Information sharing (transparency)
- Save and reflecting space, story telling
So, if the new economy talks about processes it refers to the generic base-processes of the organisation. Or compared with C++ the methods (allowed actions) of the objects. Whereas in the old economy the full workflow is defined and therefore like in spaghetti code—difficult to change, inflexible and intransparent.
Different target focus in Process Management
Finally, if we compare the targets of Process Management of the old versus new economy we find completely antagonistic precedence of the underlying principles:
- Increased efficiency and reduced costs vs. enabling new business models that create and deliver value to customers
- Discipline and consistency vs. agility/flexibility
- Alignment and control of resources by management vs. transparency, trust, decentralized empowerment and self-management
- Steep hierarchies and loads of overheas vs. flat organisations with very reduced amount of management roles and process overhead
The process-based organisations of the new economy have not only a different understanding of processes but they produce superior results—both in efficiency and effectiveness—which means a quantum leap in performance. Additionally, they foster a positive atmosphere, ensuring engagement and motivation by fun and patience; simply a great place to work and be.
That is our understanding of organisations of the next level of performance—high-performance organisations—or a quantum leap in performance.
Hierarchical organisations are limited in increasing the performance dramatically as they are on the wrong track in Process Management. The basic understanding of the principles has to be corrected first.
Read more about the basic principles of high-performance organisations in The Mother of Principles in Next Level Organisations
Read more about organisations of the next level – coming soon. Go and subscribe to the blog and get informed when it is published