Piecing Together The Importance Of Processes
Last week we started talking about the four types of pain points you may face in business – financial, process, productivity, and support pain points.
We specifically looked at process pain points and why documenting your processes in detail can benefit your business, turning your pain points into gain points. Some of the benefits we highlighted were:
- Gaining clarity on what is supposed to happen, who is supposed to make it happen and when this must happen – and relaying this to each role-player in the process
- Having an independent point of view to help highlight potential areas of improvement, possible risks and where controls need to be implemented to protect the business from such risks
- Identifying dependencies on other processes which could result in delays or inefficiencies down the line
- Highlighting steps that require manual inputs and present opportunities for automation of routine, repetitive tasks, reducing the risk of human error and freeing up resources for other more valuable tasks.
Let’s delve a bit deeper into what business processes are about.
Types of business processes
In any organization there are various types of business processes. Usually, we can distinguish three specific types:
Core processes – these are the processes which your business uses to create value and generate revenue. The core, or primary processes, are focussed on what your business does across the value-chain. This is often the heart of the business and can include:
- Developing / creating a product or service
- Marketing the product or service
- Delivering the product / rendering the service to the customer
- After-sales service / support to the customer to continue to add value after the initial purchase.
Support processes – these are the processes that serve the “internal clients” in your business. Examples include your Human Resources and IT processes – while they may not directly generate revenue, your business will not be able to survive without their support. Your support processes make the core processes possible.
Management processes – these do not directly generate income but optimize the ability to generate revenue and ensure ongoing success and survival of the business. Management processes involve measurement of performance and results, in addition to managing risks and opportunities. It also requires regulatory compliance and ensuring that financial budgets and targets are met.
Why you need to understand your business processes
Depending on the nature of your business and the type of product / service you deliver, your core processes may differ from that of another business. Something which you view as a support service (for example, IT) may in fact be the core process of another type of business. Understanding which processes are core vs which are support and / or management processes, can help identify where you should be spending most of your resources.
Once you start understanding your business processes, it becomes easier to see how the processes fit together to and where you need to re-adjust your approach to make sure you reach peak performance.
At one point in history, you may have poured a lot of time and effort into a particular process to meet a specific need. That need may no longer exist, yet you still spend a vast quantity of resources on that process. For example, you may have come up with a detailed reporting process, to provide you with specific insights that you needed at one point in time. However, your business has since developed further and you do not nearly need as much of this information, yet your staff still spend several hours each month collating this information and drafting lengthy reports. Think about whether this process is really adding value:
- How long is it taking to get the data, analyse it and draft the reports? What if you were able to automate this data collation and reporting process? Think of how many hours you could free up and allocate elsewhere in your business?
- How many people and hours are involved in getting this information in the appropriate format? The time spent on collecting the data and drafting the reports may be costing you more than the insights it is currently contributing. Is this a function that you could rather outsource at a fraction of what it is currently costing you?
- Are different departments in the business looking for the same information at different times or perhaps simply in a different format? Does this result in duplication of effort and further waste of resources?
If you find yourself asking “Why are we doing this?” it may be time to reconsider your processes. Given that business, risks, and opportunities change over time, your processes may require some revisiting. Regardless of the type of process, each one will require careful planning, coordination, monitoring and control.
Re-assessing your current state of business processes is useful for:
- Confirming your core processes – those where you should be focussing all your efforts
- Identifying routine processes that could be automated to better support your core functions
- Highlighting where you can improve efficiencies and cost savings, for example through possible outsourcing or co-sourcing
- Identifying where you are vs where you ideally want to be, and then start mapping how to get to that ideal.
Continuous business process improvement also helps you achieve and maintain a competitive edge in the market. Letting this lag, can increase costs, reduce revenues, de-motivate your staff and ultimately leave your customers feeling less satisfied (and more likely to turn to your competitor).
Depending on where you are in your business journey, the need for understanding your processes may resonate more strongly with you. For instance, if you are in start-up mode, you may only have a few people involved in the business, who have close contact and know what they are supposed do. In this case it is easy to communicate the processes and adapt to the business needs as you go along. Once your business starts growing, communicating process changes may become more challenging. Without having standardized documented processes, having different teams in different locations may complicate working together towards a common goal.
A cornerstone for a growing business
Formally documented and thoroughly communicated processes can provide a cornerstone on which to build your growing business. Having proper processes in place can provide the framework within which all your resources, assets, people, technology, and suppliers can function cohesively. Business processes may vary greatly across organisations, but the following four essential features should be common to all:
- Predetermined – each process has a clear start and end, with several finite steps to be followed
- Repetition – a clearly thought-out process and its relevant steps can be followed repeatedly
- Value-driven – the aim of the process is to take the various capitals in the business and transform them into something with value; there is no point in having a specific step in the process if it does not add value to what you are producing
- Flexibility – when circumstances change, the process can be adapted; it lends itself to ongoing scope for improvement.
How our GrowthAssurance model helps you improve your business processes
While you know your business, your GrowthAssurance consultant can help you by providing you with a fresh perspective over your business processes.
We engage you and your team in getting to understand each of your business processes, whether core, support or management related, and document the details:
- Who is involved – who is responsible and who is accountable
- What must be done and when it must be done
- How / whether these steps have been documented
- What laws, regulations, policies and procedures are applicable to the process
- What software systems are used (if any).
For each process, we then facilitate a process risk assessment with management, including process owners. This includes:
- Finding risks and threats to opportunities in the process
- The impact and likelihood of these risks occurring
- The resulting inherent risk rating
- The internal controls that have been implemented within the process to mitigate these risks
- Management’s assessment of the perceived effectiveness of these controls and
- The residual risk remaining after implementation of controls.
The timing and method of process review, documentation and analysis, and the related risk and control assessment is customized to your needs. Our GrowthAssurance model allows you the ultimate flexibility:
- Start with a general overview or delve into a specific process while also drawing on expert knowledge from our various service lines, relevant to your processes
- Get help in documenting your business processes and analyzing how they work (or should ideally work)
- Assess your risks per process and check how well you are controlling them
- If you have already documented your processes, you may just need a fresh pair of eyes to help highlight where you could improve further – get our experienced consultants to review what you have done and fine-tune it further for the most growth.
This article was written by Tania Knoetze, Service Line Leader for Internal Audit.
Find Tania’s service here: https://thegrowthsmiths.com/collections/internal-audit-services