How to fund process improvement initiatives
Blog: KWKeirstead's Blog
Every organization has processes, the processes are either documented or undocumented. They may exist only in the minds of workers or be on paper, online, or in-line.
Every organization has “best practices”. In the absence of any declared best practices, the practices in use are the organization’s “best practices” until these are replaced by better practices.
Processes are key for building and enhancing competitive advantage. The singular purpose of a process is to convert inputs to outputs.
All good, except that conversion requires time, money and resources that are typically in short supply.
The question that therefore often arises is which processes should be improved, to what extent, and how should process improvement initiatives be funded?
Option 1 – Fix your broken processes
If a process has bottlenecks, shuts down frequently or produces inconsistent outcomes it’s a prime candidate for improvement. Automated or manual inspection of process run-time logs will typically reveal bottlenecks and shutdowns.
If a step or series of steps show inconsistent outcomes, consider automating these.
A simple financial analysis is usually sufficient to justify fixing broken processes. Some need to be replaced outright.
When fixing processes, consider updating and improving these.
Option 2 – Go for the low-hanging fruit when looking to improve processes
If your organization has a “continuous process improvement” unit, bear in mind that most change is disruptive and that too much tweaking of some processes takes you to diminishing returns. Guard against having a “hammer looking for nails” mentality within such units.
With respect to the identification of candidate processes for improvement it makes sense to focus on easy, inexpensive, fast-track, low-risk, high return initiatives.
Some of these span silos and can have an important impact on an organization. Others do not.
Most processes in this category can be funded out of annual operating budgets.
Option 3 – Manage significant change
Wider, more complex initiatives require ROI submissions.
Objectives need to be clearly defined, benefits need to be stated, resources, timelines and funding need to be put in place.
Periodic monitoring is needed with, at times, re-setting of objectives.
Why many ROI-based initiatives fail.
It sounds simplistic but going through the motions of preparing an ROI and then not bothering to monitor performance, time, cost and outcomes over the life cycle of the initiative means the benefits as declared in the ROI stand a good chance of not being attained.
The reason is things change from the time of preparation of an ROI to implementation of initiatives – if things have changed to where the projected ROI of an initiative is trending negative, it is important to “know when to hold and when to fold”.
Worst case scenarios include being leapfrogged by a competitor before “new technology” gets to market. It may be best to shut down an initiative and put your scarce resources to initiatives with more promising outcomes.