Fragmented Business Processes Destroy Value

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When organizations become fragmented, it requires more work to deliver value to the customer and the ability of the organization to adapt to environmental changes is diminished.  In extreme cases, the loss of value is deadly and businesses go extinct.

What causes businesses to become fragmented?

Business fragmentation occurs when critical processes aren’t managed as an integrated system.  Workflows become a complex series of handoffs between functions, jobs and information systems.  Each handoff represents an opportunity to introduce error, delay and added cost.

When organizations become fragmented, it requires more work to deliver value to the customer and the ability of the organization to adapt to environmental changes is diminished.  In extreme cases, the loss of value is deadly and businesses go extinct.

What causes businesses to become fragmented?

Business fragmentation occurs when critical processes aren’t managed as an integrated system.  Workflows become a complex series of handoffs between functions, jobs and information systems.  Each handoff represents an opportunity to introduce error, delay and added cost.  Devoid of an integrated process management framework, workflow value deteriorates.  The potential for resistance increases and the speed of implementing improvements declines.

Processes in a fragmented organization are like a convoluted system of poorly-joined plumbing, with pipes that leak time, money and customer value.  Core business transactions are disintegrated and re-integrated numerous times on their way to the customer.  There are a number of variables that contribute to this problem of fragmentation.

Silo Mentality

Today, most organizations still concentrate their power in vertical units.  These silos are reinforced by functionally-oriented metrics that have no discernable connection to the performance of the organization’s processes.  While there are valid reasons to structure reporting relationships on principles other than workflows, process should definitely be the underlying organizing principle for the operations for any business.

Processes are your direct connection to customers.  Customers, in turn, are your direct connection to revenue. In the long run, all other considerations are subordinate.  Without process metrics and management systems, your silos will obscure this essential connection and fragmentation will increase.

Physical Fragmentation

This is the unavoidable result of actual separation of functions.  One consequence of separation is the time it takes a transaction to move from one group to the next.  Potentially more serious, however, is the degradation of information associated with transactions as they travel between functions.  Such delays result in time in which no value is being added.  Finally, in addition to being delayed or misunderstood, there is also the possibility that the transaction will simply be lost.

Cultural Fragmentation

This type of fragmentation is less obvious than physical fragmentation but is often far more damaging.  It breeds from a lack of alignment on priorities and is aggravated by functionally-focused metrics.  Items that are high priority in one workgroup’s queue are shuffled to the bottom of the pile as organizational barriers are crossed.  As the degree of misalignment increases, so too does the “leakage” of value.  A business transaction traveling such a route loses momentum and impact before it finally reaches its destination: a paying customer.

Fortunately, there are steps you can take to prevent the fragmentation of your business.  First, focus on your critical processes.  Critical processes are those that will make or break your business in the foreseeable future.  They are essential to achieving your organization’s strategic objectives.  When performing this exercise, it is important to look forward as the processes that defined success in the past may not be the same processes that will ensure your business’s future.  Once these processes are identified, the next step is to quickly build a process management system that will redirect organizational attention to the areas where it’s most needed.

Empower Your Process Managers

Before you improve your critical processes, it’s essential to ensure they are being properly managed.  Fortunately, this doesn’t require a significant investment of time or money to design and deploy bona fide process metrics.  However, it may indeed require a fundamental change in your organization’s mindset.  Process management is completely dependent on process ownership.  Ownership dictates that each process has an individual who is accountable for process performance and has the authority to make any necessary changes.  This person’s voice must be louder than the surrounding voices representing the silos. As indicated earlier, functional priorities must be subordinate to process priorities. Assigning process owners in name only will only serve to further empower the functional fiefdoms.

First Manage, Then Fix

Your first step is to adopt a simple, disciplined approach to defining and managing your organization’s processes.  Once achieved, you can then concentrate on enabling employees to analyze and improve critical processes.  Improvements made in the absence of a process context can accelerate fragmentation and will only result in deterioration of performance.  Hence, it’s important to have a clear grasp of the big picture in addition to a robust system for managing performance.

In the face of so many variables conspiring to increase fragmentation, reversing the trend may appear overwhelming. However, if you follow the steps outlined herein along with sustained management support and commitment, measurable results will follow.  The important thing is to start—today.

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