Many organizations begin ERP selection without a solid foundation of business process management. When they look at the mass of ERP systems to choose from, they have no idea where to start because they don’t know what technology will enable their business processes or competitive advantage.
Clearly, business process management is important. At the most basic level, business process management helps you define business requirements that you can submit to your long-list or short-list ERP vendors. However, the value of business process management goes beyond business requirements:
Misalignment between processes and strategy makes it difficult to deliver customer value. Business process management gives you the opportunity to design your processes to support your digital strategy and competitive advantage. Business design sessions bring together stakeholders from across the organization to promote strategic alignment and find opportunities to improve your competitive advantage.
You can protect your competitive advantage and minimize software customization by viewing processes through three lenses. Backoffice processes, like invoicing or procurement, can usually leverage out-of-the-box software functionality. Other processes are industry differentiators. These will guide your choice of ERP software since some ERP systems may not support niche functionality. Finally, there are processes that provide competitive advantage, such as product development or ecommerce. These may require software customization. While expensive, customization for the sake of competitive advantage is always worthwhile.
Defining your business processes allows you to identify organizational changes and communicate them to employees. Imagine telling employees, “there will be change,” without being able to outline specific process changes. This would not elicit buy-in.
Business process management also helps you understand roles and responsibilities as well as changes to organizational structure. This understanding facilitates change management activities as it enables you to develop a targeted communication plan.
Another way to elicit buy-in from employees is to involve them in business design sessions. When employees are allowed input on the changes made to their own processes, they will naturally support these changes and encourage others to support them, as well.
When we say that business process management can lead to organizational alignment, we are talking about a certain approach to business process management. One approach relies on functional thinking, which is a way of thinking about processes in terms of specialization. The other approach relies on end-to-end process thinking, which looks at the entire value chain, including the intended purpose of each process and hand-offs between functions. The latter approach leads to organizational alignment.
Another name for this approach is value chain mapping. What does it look like? It’s all about breaking down functional silos and gaining end-to-end process understanding, visibility and control. You bring together various stakeholders to look for ways to increase efficiency across functional areas and not just within functional areas. By integrating processes across silos, you ensure everyone is working toward the same goals.
While many ERP consultants take a functional approach to business process mapping, Panorama uses value chain mapping. Make sure your ERP consultant takes this integrated approach.
Ideally, business process management will remove 90% or more of the workarounds your employees use to complete tasks. Employees use workarounds when processes are poorly defined. Sometimes, the current technology cannot support efficient processes anyway.
When mapping your business processes, be sure to differentiate between workarounds and actual processes. You don’t want to include workarounds in the business requirements you submit to ERP vendors as each requirement may add additional implementation costs. You can remove workarounds by designing new processes that negate the need for extra steps.
Another cause of workarounds is a lack of effective employee training. Fortunately, an ERP implementation is a great opportunity to train employees. You can use process documentation to design customized training materials. Training should be recurrent enough to support long-term retention and customized enough to address each employee’s unique processes.
Business process management provides a foundation for building a center of excellence, which allows you to continuously improve. During business design sessions, you can develop key performance indicators (KPIs) to regularly measure performance improvements and project cost savings, such as decreased turnover.
While most organizations only measure improvements immediately after go-live, many benefits are achieved overtime, so you should continue to measure improvements years after go-live. This is especially true if you have a center of excellence since you will always be improving processes.
While continuous improvement is essential, it can be mismanaged. It’s important to involve the IT department in process changes as your ERP system should continually be configured to support new processes. If your technology cannot support these processes, employees will use workarounds and create new inefficiencies.