Process approach to project management: Theory and practice

The process approach to management is the basis of all modern management systems (both regular activities and development). The lack of a clear and structured description of the system "process approach to management" leads to the presence of a large number of misconceptions among American managers, consultants and, as a result, disappointment in the process approach after unsuccessful attempts to implement it. In this article, you will find a systematic description of the process approach to management and comments on the practical aspects of its use.

Let's first define what we mean by the term "management approach". The management approach is a way (method) of delegating authority and responsibility. In management, there are three approaches to management: functional, project, process. Realistically, in the practical work of a manager, a superposition of these three management approaches is almost always used. For example, a widely used tool for implementing a functional approach to management is the budgeting system (delegation of authority and responsibility through the system of financial responsibility centers (CFO)). In turn, budgeting management requires a process approach to management, and to implement budgeting, it is necessary to apply a project approach to management. Let's briefly describe all three approaches to management.

A functional approach to management is the delegation of authority and responsibility through functions. Function - a subsystem of the organization, allocated on the principle of similarity of work performed by employees. There are four main functions in an organization: marketing, production, personnel, finance. In addition, you can distinguish a number of auxiliary functions, for example, security, legal support. Accordingly, within the framework of the functional approach to management, the system (organization) is divided into functions, which are headed by functional managers, endowed with authority and responsibility for their management. Then the functions are divided into subsystems – sub functions (units), which are headed by managers endowed with powers and responsibilities for the management of the units entrusted to them, and so on. Thus, a system of delegation of authority and responsibility is created, permeating the entire organization as a whole. The functional manager is responsible for the most effective and efficient activities of the unit entrusted to him. This management approach is used to manage regular (repeated) activities.

Project approach to management is the delegation of authority and responsibility through projects, where the project is a "one-time" activity, for the implementation of which a cross-functional team is created, one of the participants of which is appointed as the project manager, the other as the chief engineer of the project (if necessary). The authority and responsibility associated with the achievement of the project objectives (efficiency and effectiveness) is delegated to the project manager. In this case, the project team members fall under dual control: the project manager (project, "one-time" activities) and the functional manager (regular activities), a matrix organizational structure is created associated with the implementation of two management approaches at the same time.

For design organizations, everything is a little more complicated, they have a "stable" functionality of project managers and chief project engineers, although the general approach does not change.
The process approach to management is the delegation of authority and responsibility through business processes, where the business process is a stable (repeatedly repeated) activity that converts resources (inputs) into results (outputs). Within the framework of the process approach, it is supposed to identify the problematic business process and its participants, appoint one of the participants in the business process as the owner, delegate authority and responsibility for managing this business process to him. A matrix structure emerges in the management of regular activities. 

 

The participant of the business process is subordinate to the functional manager and the owner of the business process, which is associated with the simultaneous use of two approaches to managing regular activities: functional and process. Which, by the way, does not exclude triple subordination, if he (the employee) is also a member of the project team (irregular activities). Creating optimal conditions for the interaction of the three approaches to management is a separate topic that is beyond the scope of this article.

What is the "highlight" of the process approach and why is it needed? Why, in some situations, is it not possible to manage regular activities with only a functional approach?

In the middle of the last century, management began to actively apply the principles of a systematic approach, which considers the world around us as a set of interacting components. One of the basic laws of the system approach: the point of "optimal operation of the entire system" does not correspond to "the sum of the points of optimal operation of subsystems". 

A functional approach to management involves maximizing the effectiveness and efficiency of all individual participants in the business process. In such a situation, the aggregate business process will be far from maximum efficiency and effectiveness. Consider a company that manufactures and sells markers. For maximum efficiency and effectiveness, the company's sellers need to have a very large number of produced and sold colors of markers and the more, the better (meeting the widest demand). And for the production unit, maximum efficiency and effectiveness is achieved when producing markers of the same color (no losses for reconfiguration and washing of equipment, simpler accounting and storage of raw materials). 

 

The best aggregate result for the operation of the enterprise as a whole will be between these two values (for example, 6). It turns out that if manufacturers and sellers work "a little" sub optimally, then the aggregate result will benefit from this. The process approach involves adjusting the non-optimality of sub processes to achieve the maximum optimality of the business process as a whole. In addition to adjusting the non-optimality of subsystems, using the tools of the process approach, a business process is redesigned (changing the topology, sequence of stages, changing the requirements for resources and results) to improve it. Redesign can be "revolutionary" (reengineering) and "evolutionary" (engineering).
 

The system of process approach to management assumes the presence of the following subsystems:

1. A dedicated business process is a management object with the definition of the boundaries of this system (context - the external environment; subsystems and components included in the system; consumed resources and results obtained).
2. Key Performance Indicators (KPIs/ KPIs) are a system of measurable indicators that reflect the effectiveness and efficiency of the business process and are used to manage the business process (planning, control, motivation).
3. A business process owner is a participant in a business process to whom authority and responsibility for managing a business process have been delegated.
4. Business process regulations are a description of the management object in the amount necessary and sufficient for all interested parties. First of all, for participants in the business process, its owner and controllers.
5. The system of motivation of participants in the business process to achieve the planned KPIs.

At this point, I want to draw attention to the following: the development and implementation of a process approach to management is a rather complex and resource-intensive task, so it should be used only for a limited number of the most problematic business processes! Even a simple description of all business processes of the company is an unrealizable task, and it is simply impossible to apply a process approach for all processes of the company. To introduce the idea to describe all business processes in the head of the company's management is usually beneficial to unscrupulous consultants or employees of the company who are financially interested in conducting such a large-scale project. When deciding on the application of the process approach, we must always correlate the resulting effect with its cost.

Let us now analyze each subsystem of the process approach in more detail. The first identified subsystem of the process approach is a dedicated business process. To identify a business process to which the process approach will be applied is not as simple a task as it may seem at first glance. It is necessary to choose exactly those business processes in which there are problems of the course of the business process or it is necessary to adjust the suboptimality of the subsystems to obtain the maximum optimality of the business process as a whole.

An example from the practice of project management for the implementation of the process approach.

The company "R" (one of the major players in the market of medical equipment) decided to carry out work to improve the efficiency and effectiveness of the business process "Purchase, storage and shipment of equipment". Initially, the client set the task: to describe the business process and implement the tools of the process approach for it. In the process of the system analysis of the problem (analysis of the problem and the system, cause-and-effect analysis, classification of causes by the level and degree of intervention required), it was revealed that the causes of the problem lie not in the system context, but in the behavioral one. The business process is stable and its effectiveness and efficiency are beyond doubt, the adjustment of non-optimality in the reference course is not required, but there are intergroup behavioral problems - a group of employees does not perform the functions assigned to them to transfer information in the right volume and quality to their internal information consumers. The application of the process approach was considered unreasonable. An action plan was developed to eliminate this problem using the "organizational mirror" methodology. This is a fairly common mistake when the problem begins to be solved not with its diagnosis, but with the "directive purpose" of the tool for its solution.

An example from the practice of managing a project on crisis management.

Company "T" (mechanical engineering). The problem formulated by the client: The acceptance period of raw materials (silver steel) is too long in terms of quantity and quality. In the process of the system analysis of the problem (analysis of the problem and the system, cause-and-effect analysis, classification of causes by the level and degree of intervention required), it was revealed that the main causes of the problem:

•    improperly organized business process,
•    lack of a system of updating the business process,
•    lack of a system for planning and monitoring the results of the business process,
•    inefficient interaction of participants in the business process,
•    excessive optimization of its work by the quality control service of raw materials.

For such a case, the use of the process approach is more than justified and in the future we managed to solve the indicated problem with its help - to reduce the acceptance period by five times with a simultaneous increase in the quality of the process.

After determining the list of business processes, the problems of which will be solved using the process approach, it is necessary to "localize" these business processes, that is, to determine the boundaries of each business process. If the boundaries are set unreasonably narrowly, then within the allocated boundaries we will not solve our problems. If the boundaries are set unreasonably widely, then in the process of further work we will spend extra resources on the study and analysis of business process zones that do not affect our problem. Once again, the problem being solved determines the choice of the necessary boundaries of the business process. In the course of determining the boundaries of the business process, there is usually a clarification and rethinking of the problem being solved, which leads to a change in its wording with the need to adjust the boundaries of the business process again. The process of clarifying the goals of the analysis (formulation of the problem to be solved) and determining the boundaries of the business process is iterative! Having suffered a little, sooner or later we must come to an exact correspondence between the problem being solved and the boundaries of the business process. I constantly encounter this problem of the discrepancy between the boundaries of the system (in our context of the business process) and the problem being solved. Inattention to this issue is the main mistake in managing complex organizational changes. High-quality study of this stage can significantly increase the likelihood of solving the management problem.

The second subsystem identified is key performance indicators (KPIs), including the system for their planning and control. This is a tool for managing business processes. There are many variants of KPI classifications. But, first of all, it is necessary to classify KPIs into two types: performance indicators (performance) and performance indicators. The first measure the ability to "do the right thing", that is, to create a result for the consumer in the required volume, the necessary quality, in the required time. 

The latter measure the ability to "do things right", that is, to achieve results with the optimal use of resources. For example, you can use the following metrics for the recruitment business process:

• •    effectiveness – the number and quality of selected personnel,
• •    efficiency – the cost of recruitment.

 

Efficiency and effectiveness usually conflict with each other. 

 

For example, if you want to improve the quality of the result (effectiveness), this is likely to lead to a decrease in efficiency, as additional resources will be required to ensure additional quality. And attempts to increase efficiency (reducing the cost of the result) can lead to a decrease in the quality of the result (effectiveness). KPI is a set of criteria (what we measure and how we measure) and indicators (target value) that reflect the effectiveness and efficiency of the business process. At the moment, in management, the term KPI is used not only to evaluate a dedicated business process, but also to other managed systems (for example, a department, a project). It is necessary to realize that in this case we are trying to assess the effectiveness and efficiency of a whole set of business processes occurring in the dedicated system.

Efficiency and effectiveness usually conflict with each other. For example, if you want to improve the quality of the result (effectiveness), this is likely to lead to a decrease in efficiency, as additional resources will be required to ensure additional quality. And attempts to increase efficiency (reducing the cost of the result) can lead to a decrease in the quality of the result (effectiveness). KPI is a set of criteria (what we measure and how we measure) and indicators (target value) that reflect the effectiveness and efficiency of the business process. 

At the moment, in management, the term KPI is used not only to evaluate a dedicated business process, but also to other managed systems (for example, a department, a project). It is necessary to realize that in this case we are trying to assess the effectiveness and efficiency of a whole set of business processes occurring in the dedicated system.

I would like to note that in order to determine the criteria, including the formulas for their calculation, it is not necessary to know in detail what the business process consists of and how it proceeds. It is enough to fix the boundaries of the business process and get a general idea of it. For a business process of any complexity, developing criteria for assessing its effectiveness and efficiency (what we measure and how we measure) is a task for 1-2 hours of work for a group of key participants in the business process. Determining the target value requires a thorough study of the business process. The sequence of work, the level of automation, the technology used, the qualifications of the performers significantly affect the values that will be considered optimal for a particular system. In addition, the presence or absence of statistical data on the results of the business process and their reliability have a significant impact on the speed of obtaining the result (target value of KPI). The process of determining the target value for a KPI can take from a few hours to several months. In this case, we apply both the "from the achieved" approach and the "from scratch" approach.

An example from the practice of project management for the development and implementation of the organizational design of the company.

Company "C" (one of the largest distributors of radio electronic equipment in the CIS). In the process of implementing the project for the development, implementation and automation of the management system, it was necessary to develop a performance KPI for the business process "Acceptance of equipment by quantity and quality" within the boundaries: the beginning of the process - the goods were delivered from customs to the warehouse and the end of the process - the goods were accepted in quantity and quality.

 The answer to the questions "what we measure" and "how we measure" was obtained by the working group within 20-30 minutes. KPI (example – only performance):

• volume of received cargo per day / matrix: weight and number of assortment items;
• timeliness and quality of data entry into 1C / deadline for entry according to the business process standard and the absence of errors.

 

But in order to determine the target value of the first indicator, it was necessary to apply the "Delphic methodology", since there were no relevant statistical data. Three experts were involved, each of whom offered a motivated answer to the question: how much cargo can the warehouse take depending on the number of assortment items (matrix: weight and number of assortment items)? After each expert was consistently consulted with the opinion of other experts, an agreed result was developed, which was taken as a basis. Carrying out these works took several hours and was stretched in time for three days. In fact, the "from scratch" approach was used. In the future, the correctness of the result was confirmed in practice.

KPI planning and control system. 

 

When creating a system, it is necessary to maintain a balance of interests of the accounting system of the process approach and other subsystems of management accounting. If we take the classifier of management accounting subsystems proposed by Anthony and Fig1, then the following correspondence between management approaches and management accounting subsystems arises: the functional approach to management is "supported" by accounting for centers of financial responsibility, the project approach to management - taking into account differentiated costs, and, accordingly, the process approach - taking into account the full cost. Based on this classification, the system for planning and controlling the results of the business process should be built into the full cost accounting subsystem (the method of including full costs in the cost price, the method of including variable costs in the cost price, the method of including standard costs in the cost price, the method of functional cost analysis (ABC)).

The third designated subsystem is the owner of the business process. The owner of the business process is a participant (I emphasize again – the participant!) of the business process, to whom the rights and responsibilities for the effectiveness and efficiency of the entrusted business process are delegated. How do I select a business process owner from the list of participants? To answer this question, the participants of the business process are evaluated according to the following criteria:

1. Proximity to the output of the business process. This criterion is guided, first of all, when there are problems in ensuring the effectiveness of the business process. It is assumed that the closer the participant of the business process to the result, the clearer the needs of the consumer are for him, and from his position he will be able to effectively fight for the effectiveness of the business process.
2. The amount of resources consumed under the guidance of this participant in the business process under consideration. This criterion is guided, first of all, when there are problems of ensuring the efficiency of the business process (ensuring the optimal use of resources).
3. The formal level in the hierarchy of the functional management system of the participant in the business process. The importance of this factor is especially high at the stages of implementation of the process approach, when the organizational culture counteracts the matrix management structure created when using the process approach.
4. General managerial qualification of participants in the business process. The owner of the business process will have to manage a multifunctional team.

It is necessary to compile a rating of potential owners of business processes and, based on the results obtained, make a decision on the appointment of the owner. This moment is the most difficult for American companies. 

The absence of unity of command and even in regular activities is very difficult to imagine for a American manager. And usually this has to be "represented" against the background of a fairly authoritarian management style. And all sorts of tricks begin, significantly reducing the effectiveness of the process approach. Half of the companies (from my experience) break down business processes by the boundaries of functional units and appoint the head of this unit as the owner, which significantly limits the scope of using the capabilities of the tool and does not allow solving cross-functional problems. The second half of companies simply refuses to create the institution of business process owners, which, in my opinion, is better than the first option. In the second case, we can still solve the problems of cross-functional interaction here and now. We will not have a body responsible for the business process and keeping it up to date, but this problem can be partially solved through the institution of controllers (owners of business processes with greatly reduced functions). A process approach that is reduced in functionality is better than a process approach that is reduced to the functions of the enterprise (usually inappropriate problems that are tried to be solved using the process approach).

Consulting practice.

It is impossible not to note a very high level of efficiency and effectiveness of the Yukos management system, but the process approach declared by the company was not fully implemented. In fact, all subsystems of the process approach were created, except for the institution of business process owners. Its implementation was hindered by an organizational culture based on an authoritarian management style, which did not allow the creation of matrix management structures in regular activities. Nevertheless, even the "truncated" process approach made it possible to effectively manage the company with its very complex business processes. The most complex business process that I have encountered in my practice is the business process "Oil Production Planning" - a very large number of participants and iteratively agreed parameters (production, injection, pumps, "victims").
 

I cannot give examples from my consulting practice on the implementation of the process approach with the division of business processes by the boundaries of functional units and the appointment of their managers by the owners, since I consider it a less effective option and do not apply it. Although in the business environment there are plenty of such examples.

The fourth identified subsystem of the process approach is the business process regulations. The business process regulations are a document that answers the following questions:

1. The purpose of the system (business process). The answer to the question: why does this system exist?
2. Boundaries of the system (business process). Answer the questions: Where is the beginning and end of the business process? Who are the participants in the business process? Where is this process located in the scheme of all the processes of the company?
3. Boundaries of the model (business process regulations). The answer to the question: within what boundaries this model can be applied (what questions can be asked to the regulation, and which cannot be)? Usually this issue is given little attention and completely in vain.
4. An example from the practice of project management.
5. Company "P" (the largest carrier of cargoes of the American Federation). Project for the development and implementation of a management system, automation of operational activities and accounting (1C: 8 UPP). Within the framework of the project, regulations for the selection of personnel were created. When describing the business process, difficulties arose associated with the multivariate nature of its course. It was decided to "set the boundaries of the model" - to separately describe the process for different situations (boundaries): TOP managers (Moscow) "recruiting", TOP managers (Moscow) "headhunting", TOP managers (branch), middle managers (Moscow), middle managers (branch), line personnel (Moscow), line personnel (branch). Correct setting of the boundaries of the model made it possible to significantly increase the effectiveness and efficiency of the process of developing regulations. It is always easier to describe several variants of the course of the business process in different models (regulations) than to describe all the options in one model.
6. A business process owner is a person responsible for managing a business process and keeping its regulations up to date.
7. KPIs are criteria and indicators for planning and monitoring the results of a business process both at the execution stage and at the stage of final control.
8. Description of the business process – I strongly recommend describing the business process both in text format (for example, the table: Input / Exit / Management / Performers / ...) and using graphic standards. The ability to describe (model) business processes using graphic standards (schemes) is one of the key skills that is necessary to develop, implement and operate a process approach to management. Drawing is always better than a thousand words said about it Figure. There are three very important concepts in business process modeling:
9. The methodology for describing a business process is a set of steps that make the probability of obtaining the correct business process model significantly increases. In my opinion, one of the most appropriate methodologies for describing business processes within the framework of the process approach is the SADT methodology (Methodology for Structural Analysis and Design)2.
10. Business process description standard (modeling language). The use of a standard provides the ability to "speak" all stakeholders in the same language and adequately reflect information at different stages of modeling. In my work I usually use IDEF0, EPC standards.
11. Tools for automating work on the design of business processes (CASE-tools) are computer programs that allow you to automate the work on the description (development) of business processes. Examples of automation tools are VISIO, Business Studio, ARIS.
12. An example from the practice of project preparation management.
13. Company "T", a supplier of integrated telecommunication solutions, invited me to conduct training in the process approach to management. When conducting rapid diagnostics to clarify the goals of training, a problem was identified: a poor-quality description of business processes. The causes of this problem have been identified:
14. use of an inappropriate standard to describe business processes;
15. insufficient qualification of the company's business analysts (authors, SADT) in applying the methodology for describing business processes and standards;
16. insufficient qualification of key participants in business processes (readers, SADT) in the ability to read diagrams.
17. In the process of training, the necessary skills were developed, which made it possible to significantly increase the effectiveness and efficiency of the process of describing business processes and forming regulations. In general, I always encounter such a situation. Before implementing the process approach, it is necessary to develop to the required level the skills of creating and reading models among analysts (authors) and key participants in business processes (readers).
18. The procedure for making changes to the regulations is the process of amending the described document to ensure its constant relevance. Above is the minimum necessary list of sections of the regulation, which (if desired) can be expanded.

The fifth designated subsystem of the process approach is the motivation system. 

 

The motivation system should stimulate the participants of the business process to achieve its target values (KPI). Indicators for motivation can be selected both from the KPI of the business process, for which we implement the process approach, and from the KPI of the business process with wider boundaries. Let me explain with an example. Let's take the business process "Recruitment" within the boundaries: A vacancy arose - the selected candidate went to work. Indicators of effectiveness (productivity) of this process - the number of selected personnel, the quality of selected personnel. We can motivate the participants of the business process to the above KPIs, or we can expand the boundaries of the business process and consider the business process "Selection and adaptation of personnel" within the boundaries: 

A vacancy arose - the candidate was adapted (or did not pass). Indicators of effectiveness (productivity) of this process - the number of employees who have successfully passed the adaptation, the quality of the results of adaptation. And we can motivate the participants of the business process "Recruitment" to the indicators of the business process "Selection and adaptation of personnel", as they make a significant contribution to the results of this business process. In this case, a high-quality system for monitoring and analyzing the causes of deviations will be required so that corrective effects have the proper result.

As noted above, the development and implementation of the process approach is quite a resource-intensive task. Don't try to implement a process approach for a large number of business processes at once. 

 

This is the main mistake of most projects

 

to implement a process approach for "all" business processes of the company. In addition, the main reason for the failure to implement the process approach in full is the unwillingness of companies to build a matrix management system, to introduce the institute of cross-functional owners of business processes, which comes into conflict with the organizational culture and management style of most American companies. With the introduction of the remaining subsystems of the process approach, there are no special problems. In general, project management for the implementation of a process approach to management is a separate topic for discussion.

It is necessary to understand that the introduction of not even all subsystems of the process approach significantly increases the effectiveness and efficiency of the management system. In the process of describing and analyzing a business process, information is exchanged between its participants, it becomes possible to form a correct, shared understanding of the business process and solve most of the systemic and behavioral problems, which is an indisputable advantage of the process approach.
In modern management, there are a large number of management tools based on the process approach: QMS (ISO), QMS (6 SIGMA), Lean Manufacturing, Mapping, BSC. When implementing any of them, it is important not to forget about the essence and importance of each subsystem of the process approach.

This article describes the main subsystems of the process approach, taking into account my practice of project management for its implementation. I would like to emphasize once again that it is necessary to take a balanced approach to the question: to apply or not to apply the process approach and to what extent to do it?