How to Analyze a Business Process

Two Parts:Determining How A Business Processes Is CreatedAnalyzing Your Business Process

Business process is a system used by a company to reach a goal. It can also be defined as a set of steps used to create value for customers. Managers analyze business processes to judge how well a certain process works. The manager first analyzes the current process. After that review, management may decide on changes to improve the existing process. The improved process may help the company save time, lower costs, or create a more desirable product for customers.

Part 1
Determining How A Business Processes Is Created

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    Define a business process. A business process refers to activities that employees perform on a day-to-day basis that accomplish an organizational goal. The process represents what a company does to reach a particular goal. A business process should cover any variations or exceptions to the process. To understand how to analyze a business process, you need to consider how a process is created.[1]
    • Consider the scope of the task. Assume that you’re updating the process you use to send invoices to clients. The scope of the task refers to how extensive the task is. In this case, assume the scope is every invoice sent to a client. You determine that, on average, you send 200 invoices a month.
    • Determine your desired outcome. Think about what it is that you want to accomplish using the process. In this case, you want an accurate invoice sent to each customer as soon as your product is delivered. You will send a hard copy of the invoice when you ship the order. You’ll also email the invoice to each client.
    • Note that sub-processes exist within processes. The more specific the process, the easier to analyze and improve.
    • Document the business process. You can document the process as a list of steps and also consider creating a flowchart. A process will often cross between different departments in a large organization. Your invoicing process, for example, will involve the billing department and your accounting area.
    • Define the departments or functions of the entities in the processes as well as any inputs and out puts. For example, making payroll requires input from production for people and hours worked, wages rates and salary deductibles from the HR department, etc.
    • Write down any exceptions to the process. Just about every business procedure will have exceptions or variations. For instance, you may have certain clients that receive large discounts. These customers order a large amount of product from you. The large discounts require your billing staff to bypass the discounts calculated in your invoicing software. The larger discount must be manually entered to create an accurate invoice.
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    Document your business process and think about what type of process you’ve created. Separating each process by type can help you analyze the process and make improvements. If two processes are the same type, their process improvements may be similar. A particular process may be an operating, support, or management process.[2]
    • Your operations refer to the day-to-day tasks you complete to deliver a product or service to a client. Your client invoicing process can be thought of as an operating process. It’s critical for you to send accurate invoices to clients so that you can collect their payments quickly.
    • A support process, as the name implies, supports the operations of your firm. The human resources (HR) department is a good example of a support area. HR helps the invoicing department manager with interviewing and hiring new staff. While HR is not directly involved with clients, they support operations departments.
    • Every organization needs management to run the overall direction of the business. The process of planning and implementing a budget is a management process. Every company should have a formal process to create a budget. That process should require management to discuss their department’s budget with the firm’s chief financial officer.
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    Analyze business process for signs of process inefficiency. A business process consists of inputs and outputs. Labor, energy, materials and capital equipment are considered inputs. An input is an asset you use to produce revenue and profits. An output, on the other hand, is a physical product or service. Inputs go into your process and create an output. You need to perform analysis to find inefficiencies.[3]
    • Your process should use inputs efficiently to produce outputs. Say, for example, that you manage a chain on auto repair shops. Your inputs are labor, equipment and repair parts. Your output is a repaired customer vehicle.
    • Long repair times or large work backlogs are an indication that something is wrong with your process. The problem may be that you’re scheduling repairs too close together.
    • If the cost of your replacements parts is far higher than you budgeted, that is another indication that something is wrong. Specifically, you may have a problem with your purchasing department, or the with vendors who sell you parts
    • Based on the problems you identify, decide which processes need to be improved. If you need to prioritize between several processes, select the process that has the biggest impact on your business. For example, you may want to fix the wait time process first. Long wait times may cause you to lose customers. Make fixing that process your first priority.

Part 2
Analyzing Your Business Process

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    Talk with key personnel about the process. Once you identify a process to fix, discuss the process with the people responsible for implementation. Take the time to interview key participants, and ask them to identify any potential improvements.[4]
    • Ask your staff what they do and why they do it.
    • Determine the inputs needed to perform each task and where you obtain each input. If you manufacture denim jeans, for example, you need to know who supplies your denim and how often the vendor ships the denim material to you.
    • Identify the outputs of each task, and who receives the output. If you manage a car repair shop, your repair staff should document the work they perform. The repair staff should forward that information to your billing department. The billing area produces a bill for the customer
    • Ask for suggestions on how to resolve process inefficiencies that your staff uncovers.
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    Conduct a brainstorming session to find process improvements. Many processes involve more than one department in your business. Group sessions can identify process inefficiencies that impact more than one department. These sessions can also validate the information provided during your one-on-one interviews with participants.[5]
    • Summarize the information you have received and distribute it to process participants. This should include both participants you have interviewed and others that you did not interview. Ask for feedback from everyone. The feedback will provide additional guidance for your analysis.
    • Information received from participants in the process should provide you with a clear idea how the process works, and what its issues are.
    • The discussions with personnel become the basis for making changes to a process. Your changes may reduce costs, reduce cycle time, simplify a process or improve customer service.
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    Create a business process flowchart for each process. A process flowchart can help you visualize a business process. You can use the documentation from your process discussions to create the flowchart. The flowchart should contain all of the steps required to complete a particular business process.[6]
    • It is important to note that a business process flowchart should only contain the defined procedures that employees must follow.
    • Flowcharts may be prepared manually or with the use of software. Word processors and spreadsheet programs with charting functionality can be used. You can also find software that is designed to draw flowcharts.
    • The flowchart is an excellent tool to clearly see the business process in front of you. This visual tool can make it is much easier to identify and fix inefficiencies.
    • Once you make changes to a process, review the outcomes and see if the process made the improvements you expected. If not, analyze the process again and try to identify areas of improvement. Process analysis should be an ongoing task for your business.

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