Back in December 2013, I started a series of posts that describe processes and how to manage them.  You can read them here, here, here, here, and here.  Go ahead, we’ll wait.

OK, you’re back!

I have had some time to ruminate and use this processing model.  It seems to breed some confusion in my business partners when I discuss it with them.  The problem is my use of “Factory” to describe a core process.  It is so much simpler to just call it a “Core” process.  The definition, the right thing to be doing, still holds but the association is much easier to grasp.

However, we still need the Factory.  The new definition of the Factory is the process flow that emerges as a transaction moves through the core processes.  This is what we in systems analysis call “the happy path”.  Transactions that stay in the Factory make us happy because they process in an efficient and effective manner where variability and risk are controlled.

Experience is a great teacher.  I hope I never grow too old or set in my ways to change.

Exception Processes happen whenever an enterprise has to process a transaction that can’t be handled by its Factory Process. The usual culprit is that the submitter of the transaction (e.g. customer, taxpayer, etc) does so in a fashion that is not handled in the Factory Process.

In this previous post, I described several situations where this could occur and why. The next decision for the enterprise is what they’re going to do.

Acquiescing to unruly customer behavior may be the path of least resistance but that’s not helping your enterprise maximize its profits. The Factory Process is in place because it’s the least expensive way to process the transaction. Anything else you do will only drive costs upward.

In the prior post, I described real reasons why customer could not conform. In those cases and due to the high volume of transactions, a permanent exception process needs to be implemented. The alternative is to forego the revenue.

However, the enterprise has a worthy goal to eliminate these exception processes. This is done using a customer education campaign and fees for continued unruly behavior.

The education campaign should be applied first. Tell your customers how their unruly behavior drives up costs and therefore prices. Describe the systems you have put in place that allows them to access the Factory Process and help them convert to using them.

Next, consider eliminating stimuli that encourage unruly behavior. Get rid of the return coupons from your statements, including those on the statements you email to them. Place the URL for your payment website prominently of your billing correspondence. This will discourage paper check payments and encourage electronic check payments.

The next step in changing customer behavior might be to introduce fees for unruly behavior or discounts for desired behavior.

The problem with writing and publishing from a stream of consciousness is that sometimes you say things you might want to reconsider.  I have been thinking about my statement in the last post that exceptions to exceptions are illogical.  Consider the following…

An enterprise decides that its factory process is that it will conduct its business with its customers electronically.  Say the enterprise is a utility company.  It emails the monthly bills to every customer and includes a link to its electronic payment website.  This makes it simple for the customers to comply with the utility’s wishes.  Or does it?

Assume that every customer can receive the bill.  That doesn’t mean that every customer has the ability to pay electronically because not every customer may have a bank account or payment card.  Then there is that group of unruly customers who just refuse to make electronic payments.  Assume that these groups comprise a number large enough that failure to accommodate their needs will severely hamper collections of revenue necessary to keep the enterprise going.

The enterprise now has an exception process that must process old-fashioned payments where the customer returns a coupon or remittance advice with a paper check.  Since the volume is significant, the utility must have a reasonably efficient process to minimize costs.  So a factory process is set up to efficiently process paper coupons and checks.  It starts with the utility including a remittance coupon that the customer can print and return with his check.

The rest of the process can be built either by investing in the process or outsourcing to a lockbox operation.  The factory-compliant transaction is where the coupon and check arrive together and the check amount matches the amount that was billed.  These transactions flow right through the new factory process for the exception process.  The output from this process should resemble an electronic payment so that it can be submitted to the enterprise factory process immediately upon completion.

What can go wrong now?  We now have the following three exceptions to the exception:

• Only the check arrives
• Only the coupon arrives
• The amount on the check doesn’t match the amount on the billing coupon

So what’s the lesson here?  It is that there should exist factory processes within exception processes where the incidence of exception is going to be very high and the enterprise has little way to control customer behavior.  These factory processes should be managed just like the enterprise factory process in order to maximize efficiency and minimize costs.  The output from this exception process should reenter the enterprise factory process as quickly as possible.  But there are also exceptions to be encountered that the exception factory process can’t handle.  These should be managed at the department level just like exceptions to the enterprise factory process are managed at the enterprise level.

Processes are sets of activities that have some level of definition and standardization about them.  The Enterprise runs using three types of processes.  These are Factory, Safeguard, and Exception.

The Factory Process is that process that implements the essence of the business. These activities are the “right” things to be doing.  We have previously referred to them as the “things we’re supposed to do”.  It is the core competency and operates at the highest efficiency and velocity.  Every step of the Factory Process is standard and should be automated to the highest extent possible. The Enterprise wants to push all transaction activity through it. This is the path for transactions from Customers who “play by the rules” of the game as the Enterprise wants it played.  This should encompass the majority of the transactions processed by the Enterprise.

The Factory Process must be protected by Safeguard processes to ensure it is not being abused.  These activities ensure that you are doing the “right” things right.  The high velocity of the transactions flowing through the Factory Process means that problem transactions can be completed before it is known that they are problems.  (e.g. Processing fraudulent transactions can cause money to leave the Enterprise with no hope of recovering it.)  Business-driven Enterprise Architecture and Internal Audit are examples of Safeguard processes.

Transactions that don’t conform to the Factory Process are Exceptions and run through Exception Processes.  In many cases, these are the activities that we have labeled the “things we really do”. Exceptions should only spawn from unruly Customer behavior.  If behavior within the Enterprise dictates a change, adjust the Factory Process or change the behavior back to that which conforms to the existing Factory Process.   The degree of automation for Exception Processes is thus dictated by the Enterprise’s ability to control or influence this unruly Customer behavior.  (e.g. Most Customers will need Customer Service at some point in your relationship to them and unless you are in the Customer Servicing business, it is an Exception Process.  There is always some level of Customer Service that can be automated and some level that shouldn’t be.  Perhaps the former set of activities should be considered Safeguard processes because they help the Customer play the game correctly.  The latter set is for those Customers who just demand more attention.  Understand the difference.)

The goal should always be to correct the exceptional nature of the transaction and then get it back into the Factory Process.  The idea of running a parallel process that handles the exception differently all the way through its lifecycle is both inefficient and ineffective.

The idea of an Exception to an Exception is illogical.  It is just another more obscure exception that has many of the same traits as some other exception.

The scariest thing workers face in a business process re-engineering project is the prospect that their jobs will be eliminated. The current economic climate makes this particularly scary because the prospects for them to find another job are not good.  However, the BPR analyst needs to have complete understanding of the current process and the expert sources of the required information may think they are the least incentivized people to provide it.  They do not want to help you eliminate or change their jobs when they know their next stop could be unemployment.

The incumbents in any job are the recognized experts in the current process.  They know why things are done and they often know ways to eliminate work.  They don’t speak up for two reasons: no one asked them and they are uncertain of the repercussions.

So ask them!  Find out what they do and why.  Once you ask them, they’ll probably tell you everything you want to know.  The important thing is to focus solely on the work they do and not on redesigning the process in front of them.  It is fair to ask them how they would improve things.  Make sure the current process and any suggestions for improvement are well documented.  Make sure you know who contributed what information.

Let’s fast forward to the end of the project when a new process that eliminates unnecessary steps is implemented.  If there are job eliminations, it is imperative that you not lose the people who were instrumental in helping you design and implement the new process.  I have two reasons for this position:

1. Eliminating people who helped the enterprise improve itself sends a bad message to the remaining employees both inside and outside the affected area that helping is a bad idea.
2. The enterprise loses a valuable resource who is willing to place the future of the enterprise above their own needs.  Enterprises need more loyalty these days, not less.

A better approach would be to find another job for the most helpful workers and to include a bonus or a raise in the transition.  You should also tell them that should they figure out how to better do their new job, that you’d do the same thing all over again.  In other words, show them they will be rewarded every time they help the enterprise improve.

So, we’re keeping the people whose jobs we eliminated because they helped us.  But in order to realize the savings of the process improvement, we need to eliminate some people.  I would start that process by looking up the chain of command for the manager who knew or should have known how to do it and never did.  This is a person who is costing the enterprise more than the value provided.