Process Re-Engineering: Re-Designing the Business of Healthcare - Industry Trend or Event

Health Management Technology, May, 1999 by Jim Reitsema

Business transformation, process improvement, process re-engineering. The terms get confusing, so the basic concepts need to be defined. Let's start with the most basic and important term, "business process." The work of any organization consists of business processes. Simply stated, these are sets of related activities that combine to complete a unit of work. Each process has a customer, either internal or external.

In many companies, business processes are not very visible to management. Instead of understanding and supporting the goals of an entire process, department managers often focus on the small pieces of the process that fall within their department. But, it is process performance --not departmental performance--that determines an organization's effectiveness and success.

So, it is a matter of the "whole being greater than the sum of its parts." To be efficient and effective, organizations must manage overall business processes, not just the separate parts.

Pro-Active Managed Steps

The other basic terms, process improvement, process re-engineering and business transformation all refer to pro-active, managed steps that an organization can take to improve process performance. Process improvement refers to any process changes that eliminate waste, enhance flexibility or improve quality.

Process re-engineering is a very structured and deep version of process improvement. Process re-engineering dramatically streamlines business processes and clearly and closely aligns them with customers' needs.

Business transformation is a broader concept that involves coordinated re-engineering of processes, changes to employee responsibilities, modification of other aspects of a company's operations, and introduction of new information system technologies. Profound changes in a company's business or competitive environment require comprehensive business information.

The process of process re-engineering can be simply described. It begins by bringing visibility to prevailing business processes by clearly defining the content and boundaries of each process. Process flow diagrams then summarize the actual business processes. Next, we identify the customers of the process and assess their needs. At that point, we evaluate the extent to which existing business processes align with customers' needs. On the basis of that evaluation, we define necessary activities and work flows and then formulate an implementation program to help the organization adapt.

The Keys to Effective Process Management

Because most organizations have a departmental view of activities, end-to-end processes are not clearly defined or effectively managed. For example, organizations tend to measure resource utilization and performance by department; they typically have very little information about overall process performance. And accountability for process performance is usually diffused throughout the organization.

As organizations become more "process aware," they recognize that their functional organizational structure is an impediment to effective process management. Too much effort is spent on coordination, often through team meetings, memos, and complex computer systems. Too much time is wasted on hands-off and quality problems between departments.

The first step to overcoming this impediment is to assign accountability for process performance to a single process leader who can be held responsible for process outcomes. But simply assigning a process leader will not result in success. The process leader must have authority to manage the activities that make up the process.

There are two general approaches for empowering process leaders. One approach is to create cross-functional process management teams that include representatives from each workgroup involved in a process. The second approach is to rebuild the organizational structure around processes. In the long-term, organizations are most effective when end-to-end responsibilities for core processes reside within a single department or workgroup.

Rapid and Relentless Change

It is the onset of rapid and relentless change that forces industries to learn the discipline of managed business transformation. The ability to adapt to change becomes a survival skill when an entire industry undergoes radical change. In the long-term, only those organizations that learn to adapt will survive.

Process re-engineering is relatively new in healthcare, but it is well established in other industries. This approach to business change originated in the Japanese auto industry in the 1980s. The Japanese developed a post-war manufacturing capability that was able to adapt to changing business requirements. When American manufacturers could not effectively respond to the oil embargo of the early '80s, Japanese firms started delivering cars that buyers wanted. Very quickly, the Japanese captured a huge share of the American market. It took close to a decade for American car companies to learn how to match that level of flexibility.