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Tuesday, April 16, 2013

PROCESS CONSULTING FOR SMALL AND MEDIUM SIZED ENTERPRISES



Hello World,
Having worked as a Business Consultant with a management consulting firm, I think I have quite a view of what business analysis is, more specifically process design for SME’s (Small & Medium Enterprises). I have read quite a bit on the internet about this and I happened to notice that most of the information provided is superficial and the in-depth analysis or reporting is usually absent. It makes perfect sense when we come across such information on the websites of consulting firms and freelance business consultants because they only want you to know the top cream so there comes a demand for the cake below which may mean business to them. The other resources available however are very informative from one or the other standpoints but still stop at throwing the proverbial wisdom of process design/streamlining, business transformation and consulting in general.  I feel, a little glimpse into the nuts and bolts of a typical consulting exercise would help people interpret and work out the proverbial wisdom that they have already been rammed with. So here I am writing about how the Process Design/Streamlining Exercise would be, especially when engaging an external consultant for the cause. Click here to download the pdf version of this post.



Let’s Mark the Corners
SME generally covers a whole bunch of businesses and there is so much diversity within the group, even within segments owing to reasons far beyond the scope of this article. However, from the business process standpoint, they all have a common science dissolved in their composition. This means that whatever we discuss here might suit to every business provided the appropriate interpretations and analogies are made prior to verifying its applicability to the concerned business. I would however attempt to educate the budding entrepreneurs and start-up’s with the basics that I have learned so that they can assess the state of their business and identify room for improvement. The well-established businesses can however verify the vulnerability of their business processes and do a superficial health-check. Overall this article will help you gain a perspective with which you can assume your business as a living being, identify and analyze its anatomy to understand the basic necessities of a business……things that are required to keep the business up and running. A missing part is more dangerous than a bad paint job. I guess we can proceed now.  


System Study alias Process Understanding
Quite similar to the need for a Guidance, Navigation and Control system employed in aircraft and spacecraft, the businesses need to know where they are, where they are headed and how are they are moving towards their future state of position. We consultants call it System Study or Process Understanding. It is a neutral diagnostic tool we use to assess the current size, structure and working of the business. The objective of a System Study would be, to deeply identify the business elements and processes, their workflow pattern, data input/output/storage capacity and to map down the entire business. 

How we do this is simple. We meet with the concerned process owners (employees of the organization) and ask them to narrate what their job is and how they proceed with their day-to-day operations. We note down the details they give us, sometimes even record our conversations and then transform their narration into a neutral position/department specific Process Flow Diagram. The process flow diagram would contain a flow chart with each step of the process described with the mentions of data inputs/outputs and storage. Here’s an example layout (Fig.1):



MS Visio can be a good tool to draft process flow diagrams. It is nothing but boxes, lines and text. All we need to know is what box would hold what text connected to what other boxes by what lines. Read it again if you wish to amuse yourself but MS Visio is a very simple tool that anybody can use. Beware of those who would say only certain expertise can make someone use Visio. They might as well steal your kidneys while you are still alive. My opinion on MS Visio is that elementary school kids can use it for their homework. They might have to provide medical help to their teachers who would later fall unconscious to the ground but using MS Visio is definitely within everyone’s grasp.


The process flow diagram (PFD) would be given to the concerned process owners for review and after their clearance, recorded into the final PFD Documents that we would compile for all the departments of the business. From this point on, the PFD’s would serve as the basis for discussing process design and dynamics. So we always make sure we got it right. We would also get the concerned division head’s approval on the same. The simple reason is that, sometimes, employees lie about what they do fearing replacement/reprimanding. A simple participation during the project initiation meeting would prevent most of the chaos. So my advice to business owners is that always include your teammates in important meetings where their participation is discussed so that they would know that at some point of time, their direct involvement with a consultant like me would be necessary and their cooperation is being appreciated. Also they might add valuable points to our exercise and we would never know until we engage them in these meetings.

Process Gap Analysis
This is where we business shrinks huddle up and talk the process run we are going to execute. We would share the process flow diagrams among ourselves and go over each of them, individually and as a team. We would identify the process design gaps and their probable impacts on the business. We would do a Risk Based Internal Audit to assess the current vulnerabilities of the system and match the issues identified with the Process Gaps. Now Risk Based Internal Audit is a whole different phase of management consulting which has to be isolated and discussed separately owing to its vastness and quite frankly, the funny stuff we consultants do with it. I will try to get one of my future posts dedicated to Risk Based Internal Audits. I am sure that would be fun. Let’s get back to process gap analysis.

Any part of the process where the current design fails to provide adequate measures to capture and process business data would be classified as a process gap. For example, in the purchase process, if there is no room for vendor/supplier analysis, there is no room for the business to validate the selection of a vendor for a particular product. This would mean that the business is dependent on the purchase personnel for proper selection of the vendors/suppliers. This in turn means that the business, in the purchase aspect is more people dependent and not process dependent. This makes room for human errors and non-uniform execution of the purchase process that renders it vulnerable. With such a process gap, the purchase process cannot be streamlined to meet changing management policies. This would hold back the organization from progressing into the future to grow and adapt to the dynamic business world.

In case of start-up’s, we would do the System Study with the owner alone and draft the process as the business owner has envisioned for his/her business. Quite frankly, it is easier to avoid the trash than to clean it after it clogs the system. 

Once we identify process gaps and note them down, we try to come up with necessary process elements and control measures that may fit into the current process and fill the gaps appropriately. The controls may be systemic or manual depending on the organizational need. It is always important to keep the base process unchanged while adding new elements. Only where the process has too many gaps to be filled, or is contradicting the business goals/mission/vision, we can design a whole new process. The understanding of the business goals, mission and vision is very important for this. However, after the addition of new process controls/elements, it is absolutely necessary to verify the interaction of the edited process with the rest of them so as to avoid compatibility issues.

The new updated Process Flow Diagrams are then compiled based on the already captured process and the newly developed ones. All the document outputs are separately marked next to the concerned stages of the process. To give a better perspective of the workflow, we may, depending on the need, prepare what we call as the Process Wise Document Flow List, which would essentially contain a table with fields for Document Name, Prepared by, Verified by, Approved by, Submitted to, Frequency of Submission, Mode of Submission, Filed/Stored in and anything more in case of specific need. Based on the updated PFD’s, we fill out the Process Wise Document Flow List (PWDF List)with the document movement data. This list gives a more data-oriented view of the process. Often times, we tend to identify the need for important control procedures from this list. 

Once the updated PFD’s and PWDF Lists are ready, we sit with the business owner and process owners and go over them step by step. It is often considered boring or unrelated by some but I have seen business owners who are more serious than us when it comes to process design and related details. During this process run with the business owner, we stop at crucial points in the process where we have added new elements and discuss the significance of the new process. The actual PFD is termed as “As-Is” PFD and the updated/proposed PFD is termed “To-Be” PFD. Just a little jargon that is commonly used in the field of consulting. After we do the process run, we try to brainstorm with the business owner regarding the process gaps, possible options and the viability of the process. With SME’s, most often the clients want what their big brothers in business already have, assuming that would benefit their business. The hard fact is that one business process cannot fit or suit another business, be it the same kind in the same industry. Some business owners, mostly the CEO’s and Founders of start-up’s do show immense sense of enthusiasm in creating a process design very specific to their business needs. Heads of established businesses often tend to clean-up what is already there and leave it as it is. It is truly a matter of choice, given the state of the business and the future goals of the entrepreneur. Once we find a common ground to settle on for the process design, we mark the changes and freeze the processes. 

Standard Operating Procedures
Nothing happens in business without careful planning and systematic execution. At least the successful businesses have come so far only by being careful in planning and systematic in execution. Now from planning to the execution, there is always a part that reality plays which should never be skipped. All that happens while executing a plan/process needs to be documented beforehand into a comprehensive manual. Unless we define our book clearly with all the detail, we would never succeed by “Going by the Book.” The detailed write-up of all the processes, along with the PFD’s, PWDF Lists and the formats, in a department wise manual with also the mentions of the organization structure of the department/division would comprise what is called a Standard Operating Procedure. The formats however are an addition to what had already been developed. When we touch the existing processes, amend them and include new features and controls, there comes a need for additional data capture at certain points in the process that would keep it sustainable and fail-safe. Now these new data, need to be captured by either the existing forms/formats or the new ones that we may have to create. Adding an additional field in the existing format would make it easier for the process owner but sometimes, it simply won’t be feasible. In such cases, we develop the required formats and registers and review it with the process owners prior to inclusion in the Standard Operating Procedure (SOP) document. Essentially all the processes need to end at a specific storage point, usually file or folder in the computer. This is usually included in the processes. In case of a strict information security policy, the data may be required to be stored in a different location. In that case process for establishing the regular data back-up at the remote facility needs to be developed and drafted into the SOP’s. 

At every stage of the process there would be company policy that has to be implemented. Although the process description would have it in details, it is better to include a separate Policies Section in the respective SOP’s and record the process specific policies. In case of too many policies, a separate policy document may be drafted. 

This way we develop the SOP’s for all the departments of the business and proceed with the review with the business owner and process owners. The new processes, control procedures and data processing methods now get a full-fledged form. I would like to suggest here that processes would seem all creamy and nice until they are documented into the SOP’s. They have the tendency to turn poisonous the moment they are implemented. A thorough brainstorming is very necessary to analyze the feasibility options of anything before freezing on the SOP’s. With the SOP’s frozen, we would then have a documented version of the business that would, from that point onwards, dictate the business. So please think twice before freezing on them. 

Process Owner Training
Employees will always be a mixed bag. Some will welcome change, some will just go by it without questions and some may even resist. This becomes significant especially when we tend to amend a long lasting tradition within the organization that may transfer responsibilities or include new players. We need to keep in mind that without a compliant workforce, the process designs mean nothing more than paper. This is the reason it becomes important to include the process owners in the review and brainstorming sessions. Sometimes the insight that an employee gives could go far and beyond helping the process streamlining exercise. 

After the SOP’s are released, training workshops are planned to train the process owners with their processes. Some businesses have a weird iron fist work atmosphere where the SOP’s are released and we’re done!!! The implementation is either 100% or 0%....In cases like these, it is usually not more than 30%. I personally feel that workshops for each division involving the employees would make it more fun, get everyone informed at the same time and also bring about the new level of involvement among the employees. The comedy has no bounds when the business has most of its employees underpaid. They would get furious at any additional responsibility given to them. Something very common among SME’s from around this part of the globe. 

Each process owner must be provided with a copy of the SOP and Policy document along with a set of formats and registers they would be using. In case of an ERP under implementation, the screenshots of the respective pages need to be provided. Never assume that the employees can do it since they have been doing it for a long time. It is experienced employees that often make the silly blunders. Treat the workshop like a standard 101 class and explain every detail of the process and the process owner’s responsibilities. Once we get the process orientation done, we can understand that the business is ready for a trial run. 

If the business is attempting to implement an ERP Software as part of the process streamlining, then we have include one additional player, the ERP Software Vendor. Now all ERP’s are not the same and so their constraints too would be unique. It is important to include the ERP Systems Design person from the Process Gap Analysis stage. Only the concerned ERP expert can exactly narrate the ERP-related process constraints and needs that would have to be addressed and included for in the new processes. The reference for the formats in the ERP shall be the formats/registers we have already prepared using excel/word.

Start-up’s can do with excel and word formats in the beginning. These formats can later be incorporated into an ERP Software when the time comes for expansion. But without specific formats for each process, the business would remain blind on what happens and how it happens. Loss of process history is the major risk, any business, new or established must avoid under all circumstances. The business needs to know what has happened in order to evaluate the credibility and composition of the events.

Process Implementation
After the training workshops, the new set of stationery is supplied to all the process owners. This would include the new formats in hard copy (ERP software implemented in case of electronic formats). Having an ERP software expert alongside during implementation would also help trouble shooting. 

We would also appoint experienced personnel from each division as the go-to person in case of trouble during unforeseen circumstances. This way we help the individual division work and progress on its own. This is also a good way to introduce the art of mentoring within the organization. We consultants, would however be there to take all the recoil when implementation begins.

The date of implementation would be announced, starting on which the new processes and formats would replace the old ones. Usually a physical presence at the workplace helps trouble shoot problems faced. But that does not warrant a micro-managing nuisance that may irritate the process owners. Businesses where the management has specifically taught the employees to cheat the authorities and customer usually have this problem of non-compliance when micro-managed. Therefore it is advised not to encourage any short-cuts while training employees. 

It is during this implementation stage when we can actually get to know the reliability and feasibility of the process design. Sometimes the processes seem perfect on paper but in real life it won’t last an hour on the floor. This is why we discuss feasibility options during the gap analysis and have back-up plans prepared. 

Business Incubation
Once we see the new process in place, we might think it has worked pretty well but we would never know when the system would collapse. Therefore it is always required to incubate the business for at least one quarter with the help of the consulting team. Now the ideal way in my view is to create a whole new division for Operations and let that division play the role of an in-house business consultant. Things tend to change and we need someone to identify the changing trend and make necessary arrangements. This is the reason established businesses have a separate team to take care of operational effectiveness. Small businesses can either do with dedicated personnel such as a business analyst or the business owner has to step up to the job. Most small business owners don’t refrain from playing that role. 

The incubation needs to be more supportive and diagnostic in nature rather than managerial in function. The idea is to see how the business is fairing with all the new changes in place and what may be the future problems that the business may face trying to keep the implementation intact and live.

Small businesses, in turn would have a completely different challenge. They won’t have too many employees to carry out all the elaborate paperwork and data entry that would go into implementing the detailed processes. This is something the small business has to go through because, it is simpler to cut down on the process to bring down the work load but that way the business loses its capacity to grow into the one as envisioned by the entrepreneur. The process design should factor in the less personnel element but that cannot be given the priority if the business model does not allow any process compromise. We would always suggest hiring personnel for the role but then small businesses have their financial constraints. 

However, the first few hires, in my view for any small business would be an Accounts Manager and HR Manager. One for the handling the revenue and the other for handling the reason for the revenue……. that is how I see any business. These two positions can get any small business the first platform for expansion into any format. 

Tao of Process Design
If you wish to see your business grow into the future, transform your dreams into careful planning. Please look for sustainability and solidarity rather than short term financial gain. Today’s 100 is a loss compared to a daily 1 on a recurring basis. Always look into the future, see what has to happen in order to facilitate things that you expect to happen. Irrespective of the size of your business, being systematic is the only way for it to be sustainable and profitable in the long run. Learn to differentiate between symptoms and problems while making decisions. All that you do will not result in immediate revenue but all of your revenue will be a cumulative result of whatever you have done in the past. It is always the business owner who owns the problem. Outsiders including business consultants can give a million ideas but it all comes down to the efforts of the business owner with respect to implementations and further carry forward. Learn to treat advisory as advisory and nothing more. We are ready to work with you only on specific terms of agreement and the most significant one will always be your commitment. All we can do is to help you see your problems and help you repair it. Never try to copy others. Your original plan/work may not be very flashy but it carries an intrinsic value called originality that no other entity can match. Learn to categorize current and future organizational needs and take time to review them frequently. That is the only way to know your business.

Now that we have gone over a few areas of process streamlining exercise, I hope you would have, by now, gained a new perspective of planning your business and also gained a new perspective of Process Consulting for SME’s.


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