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© 1999 Sandholm Associates Leadership in a process organisationDr Lars Sörqvist Many of today’s companies and organisations are endeavouring to give their business activities a process orientation. Most of them are at present in the phase where they are mainly concerned with defining and analysing their processes. As yet, few firms have reached the final phase when the business is also managed and controlled through processes, i.e. it has become a process organisation. However, many of them have established that as their goal.Despite this, few companies have become aware that a process organisation will have a very great impact on both managers and employees. Entirely new demands will be made and with them the need for an entirely new style of leadership. Experiences from those companies that have made most progress in their process orientation suggest that this often causes serious problems. This article has three aims: to examine the difficulties and obstacles that often arise when a company decides to give its business a process orientation, to discuss the new leadership demands that will be made in a process organisation, and to describe the role of management in a process organisation. The article is based on the author’s research at the Royal Institute of Technology in Stockholm, which has been carried out in co-operation with numerous Swedish companies and organisations. The research method had a qualitative focus and the results are largely based on direct observations and in-depth interviews. 1. Obstacles to process orientationIn most companies, numerous obstacles and difficulties exist that severely restrict the scope for giving the business a process orientation. These obstacles can be divided into five types: financial, strategic, cultural, individual and structural. A. Financial obstacles. Economic and financial obstacles often have a serious effect on efforts to introduce a process orientation in a company. Most companies have well-established systems of financial responsibility for costs that are based on functions and departments. This means the departments will tend to oppose cross-functional co-operation, and prefer to optimise their own financial position. At overall level in the company this will often result in sub-optimisation. The company’s budget activities, by a similar mechanism, also set up effective barriers to process orientation, as resources are specifically earmarked for individual departments in the budgets. Wage formation is another monetary factor that is of great importance for process orientation. Normally, wages/salaries tend to be increased most as employees move up in a vertical direction, which tends to underpin hierarchical and functional thinking in the company. The rewards and bonuses received by employees as well as managers are also normally related to their work in a function, which presents a further obstacle to the introduction of a process-oriented approach. B. Strategic obstacles. The company’s goals and key ratios are in many cases chosen and deployed on the basis of the functions in the organisation. The employees’ efforts will thus mainly be directed towards functional goals, and the process approach can easily be lost sight of. Job descriptions and definitions of employees’ responsibility and authority are also based on functions, and thus have the same tendency to impede the introduction of process orientation. Often the company’s business idea, vision, corporate values, etc, are inadequately defined, deployed and communicated to the personnel. This means that managers need to control the business, which also tends to promote a hierarchical leadership structure. At present, measures to introduce process thinking are very adversely influenced by the fact that companies, subject to growing pressures on account of the short-termism applied to yield requirements, are compelled to introduce exaggerated cost rationalisation. Consequently, they are being optimised in relation to necessary day-to-day activities while their ability to improve and develop in the future has been impaired. As a consequence, it is becoming far harder to make the radical changes that process orientation involves on account of a lack of resources. C. Cultural obstacles. In modern companies there are numerous phenomena that appear to do much to prevent the introduction of a process-oriented approach. Functional and hierarchical leadership/management, in which managers base their power position and confidence on specialist expertise previously acquired within the function, tends to work counter to cross-functional co-ordination. The normal career structure in a modern company means that the most rewarding career in terms of prestige and income is the vertical, hierarchical one of the manager. Discussions on alternative types of career path have not produced any significant effect in most companies. Attitudes towards and confidence in the personnel are not what they might be, in many companies. Even though the knowledge and competence of the personnel have increased greatly over the years, it often turns out that management reveals in its way of managing and controlling individuals a lack of confidence in the ability and enthusiasm of the personnel. There are many companies that still pay more attention to hours worked and details than to the result achieved. This is one of the main conditions impeding the introduction of process organisations, which require a major element of empowerment and delegation (to be discussed later in this article). D. Obstacles due to individuals. It is very common for employees and managers in companies to lack an overall view and understanding of the company and the world in which it operates. The individuals working for the company are often highly specialised and segmented in their own specific areas, which makes it very hard to work across functional boundaries. Specialisation of this type is nowadays deeply rooted in society, where people make their choice of education and interests at an early stage in their lives and then acquire qualifications in their own selected fields. Moreover, in many companies there is also considerable resistance to process orientation on the part of managers who feel threatened by changes in the organisational structure. This resistance is in actual fact based on the insecurity of managers whose confidence is based entirely on the power their specialised competence gives them. The situation can be further worsened by the fact that the leadership skills of managers are often very adequate. E. Structural obstacles. Modern companies are in most cases based on strong, functional organisational structures that have been cemented into place over the years. The difficulties faced when attempting to change and dismantle these structures are often immense. Management systems that exist in the business are often linked to functions and tend to have a conserving effect. In some cases, such systems are even certificated in accordance with ISO 9000, for example, by external organisations and are of great importance for marketing purposes. 2. New types of leadership neededIn a process organisation, the role of management will be radically altered and entirely new types of leadership will be required. Traditional leadership is often based on managers emerging from the ranks of capable specialists, who have reached their position by promotion, and who are consequently very well informed about their own areas of responsibility. In a process organisation, each individual manager acquires a broader area of responsibility as the organisational structure has become cross-functional. This means that they cannot possess detailed knowledge about all the activities within the process. Managers in this type of organisation must instead have a good overview, a holistic approach and a generalist management style. Consequently, the company finds that it needs new types of manager possessing different qualifications, all of which will affect both career structures and recruitment. If a process organisation is to function, it is essential that many of the decisions are made directly by the personnel themselves. For this to be possible, each individual situation should be so clear that the right decision is obvious and the personnel should also be empowered to make these decisions. And for this to be the case, management must devote considerable attention to establishing the business idea, visions, strategies, corporate values, etc., to breaking them down and explaining them to all the employees. It also require managers with a high degree of self-confidence, who are capable of delegating and empowering their personnel instead of trying to protect their own position on the basis of their own expertise and authority. As this change will give the employees broader responsibility and authority to handle more cross-functional tasks, it will be essential to have managers at all levels who can apply more of their time to supporting and developing individuals. This effect will be further reinforced as process orientation often tends to flatten the organisational structure, as a result of which each manager will have more subordinates to manage. Taken together, these changes mean that the manager in a process organisation will have to spend much of his time coaching his personnel. When a process organisation is introduced, the need for clear and individually defined goals towards which the personnel can direct their activities will increase greatly as a result of their empowerment. Control parameters and goals have to be identified on the basis of overall intentions, visions and strategies. A clear set of ratios/targets will be required in key areas so that the results of most importance to the business can be achieved at various levels in the company (Kaplan & Norton, 1996). Most companies will require ratios that reflect performance in such key areas as finance, customers, employees, processes and development. Moreover, the transition to a process organisation will make great demands for developing the competence of managers at all levels in the company. Knowledge of the processes as a whole, social relations among employees, and team work, etc., will also assume great importance. The ability of management to create a learning organisation for everyone will be a particularly critical factor determining how successful the process orientation is. 3. Role of management in a process organisationThe role of the manager at various levels in a company can, in process activities, be divided into two phases: process development and process management. Process development involves defining, introducing and improving the processes in the company, while process management focuses on managing processes that have been introduced. 3.1 Process development A. Define processes. Management has a very important role to play when the core processes are to be defined and then broken down into sub-processes (Rentzhog, 1996). Experience shows that companies often fail when doing this, and that the processes selected are largely coloured by the functional structure of the business. Examples of such failed processes include manufacturing process, development process, purchasing process, etc. This is probably often due to the inherent reluctance of management to change the structure upon which their power is based. For the processes to be defined successfully, management should, during this work, disregard the company’s functional structure, and instead endeavour to focus on the customers, what needs these customers have, and how these needs are to be satisfied. Account should also be taken of the company’s business idea, it’s intended and likely future development, its competitive position, technical developments, etc. By getting rid of all preconceptions, and then on the basis of this information, endeavouring to identify the flows that are necessary for running the business, management can then identify the company’s core processes (Sandholm & Sörqvist, 1999). B. Make resources available. It is of great importance that management plans the process activities in detail and allocates the necessary resources, mainly time (Hammer & Champy, 1995). In the today’s often very streamlined organisational structures, this will have a critical affect on success or failure of the process work. C. Follow-up process activities. In order to ensure that the process development work achieves agreed targets, it is important for managers at various levels in the company to regularly follow up the process work and make quite clear their interest in ensuring that results are achieved. D. Analyse processes. The first step is to describe the processes in terms of their current status (Galloway, 1994). Wishful thinking and changes should initially be avoided, even if frequent explanations and compromises are often required in order to reach agreement on the exact nature of the flow. Otherwise, there is a serious risk that the mapped processes will differ so widely from the actual situation that they will have little credibility. Improvements should, instead, be introduced systematically at a later stage, so that they are really applied in the intended manner. There is, however, a serious risk that the descriptive activities/analyses will involve unnecessary work if the current situation is documented in greater detail than required for making the improvements. The company’s management should therefore monitor this activity and do everything it can to move on to the process analysis (Melan, 1992) stage as soon as possible when circumstances permit. The processes can be analysed using a variety of instruments, typically, lead time studies, poor quality costs analyses, failure analyses, etc (Juran Institute, 1996). E. Improve processes. The financial benefits of these process activities will not be achieved until improvements have been made to the processes. It is therefore of great importance to move ahead to this phase of the activities as soon as possible. For the improvement activities to be successful, both methodology and system are required. Methodology includes aids and methods for demonstrating the need for improvements, for starting and running improvement projects, for cause analyses, for identifying new opportunities and for implementing suitable measures (Sörqvist, 1999). System means that an organisation is required to steer, perform and support the improvement activities. 3.2 Process management A. Aligning employees. As discussed above, it is of very great importance in a process organisation that as many decisions as possible are made by the employees themselves, as the managers will find their ability to exercise detailed control limited. For this to be done, it is essential that the company’s business idea, vision, policies, strategies and corporate values are all carefully defined, broken down and communicated to all employees. The aim is that in as many decision-making situations as possible what is to be decided should be obvious and logical (Kotter, 1990). Quantifiable and challenging objectives that are then broken down and explained to all the company’s employees shall also be established. Management by objectives sharpens the focus of the activities and enables the employees to make decisions independently (Carlzon, 1989). The company’s managers shall also contribute by encouraging and supporting creativity and new thinking among the personnel. B. Organising and co-ordinating. Success when introducing a process organisation will depend on the company’s management creating a well-defined and functioning organisational structure. Nowadays, we hear a lot about matrix organisations (Stoner et al, 1995) in which functions, processes and projects are the three possible dimensions. Many companies attempt to divide the work among these three dimensions by means of demarcation and structuring. However, reality shows that this is rarely possible. In most companies, one dimension tends to dominate over the other two. It may well be so that a matrix organisation in which the dimensions are in balance is an impossibility. Management shall appoint process owners (Harrington 1991). A typical difficulty is how people are chosen for these positions. It should be kept in mind that this selection indicates to the other personnel the priority and importance of the processes. Far too often one sees cases where the process owners appointed are more developers and administrators than leaders. There is then a considerable risk that the process organisation will become the secondary organisation. The responsibility and authority of the process owners shall also be established. Some companies endeavour to delegate responsibility for day-to-day activities to the processes and responsibility for learning and development to the functions. Other companies delegate responsibility for resources to the process and responsibility for the work force to the functions. C. Controlling and leading. The company’s management has overall responsibility for the business as a whole and for ensuring that important decisions are made and acted upon. Visible and clear leadership is of great importance in a process organisation if this is to be successful. Managers and supervisors should set good examples. What management does is in most cases far more important than what it says. By combining properly considered behaviour on the part of management with effective communication and information, important messages are more likely to penetrate the organisation (Galvin, 1991). D. Developing personnel and corporate culture. The process organisation acquires its strength and success from strong and competent personnel. It is therefore of great importance that suitable employees are recruited and given constant support in the form of competence development and learning (Senge, 1992 and Their, 1996). As already noted, delegation and empowerment of employees is of great importance. For success in this regard the company requires deeply involved and motivated personnel and fully committed managers with an open attitude. The ability of management to listen and discuss, to give praise and express criticism, to draw attention to good performances and to see they are recognised are all, therefore, of great importance. E. Developing and improving the business. To achieve lasting success in the longer term, it is essential that the company introduces an improvement process that is intended to improve and make more efficient all the goods, services and processes in the business. It should be constantly on the look out for new ways of satisfying customer needs more successfully. As noted above, this means that the company should have a methodology and a systematic approach for driving the improvement process. F. Follow-up. Experience shows that a common factor behind the lack of success, is the absence of follow-up. Follow-up should always take place in three dimensions. The result of the work performed shall be followed up to verify that it has produced the intended results. The methodology and method of approach shall be followed up so that learning is created in the company. The return on the investments shall be followed up to ensure that the efficiency of the work can be assessed and credibility created. 4. ConclusionsIt is difficult to convert a company’s organisation into a process organisation. The current state of affairs is that the serious problems that can arise when companies decide to manage their business on the basis of processes are often not observed or disregarded. However, the need for a new type of leadership is becoming increasingly apparent. Nowadays, companies attempt to handle the transition by changing the organisation physically. However, one important lesson that can be learned is that the success of a process organisation does not depend on how the process is organised so much as on how successful the company is in developing and empowering each individual employee.
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ReferencesCarlzon J, 1989, Moments of Truth, Haper, San Francisco Galloway D, 1994, Mapping Work Processes, ASQ Quality Press, Milwaukee Galvin, R W, 1991, The Ideas of Ideas, Motorola University Press, Schaumburg Godfrey A B, Juran J M, 1999, Jurans Quality Handbook, McGraw-Hill, New York Hammer M, Champy J, 1995, Re-engineering the Corporation, Nichlas Brealey arrington H J, 1991, Business Process Improvement, McGraw-Hill, New York Juran Institute, 1996, Business Process Teams Training, Juran Institute, Wilton Kaplan R, Norton D, 1996, The balanced scorecard, Harvard Business School Press, Boston Kotter J P, 1990, A Force of Change, The Free Press, New York Melan E H, 1992, Process management: Methods for improving products and service, McGraw-Hill, New York Rentzhog O, 1996, Core Process Management, University of Linköpimg, Sweden Sandholm L, 1997, Total Quality Management, Studentlitteratur, Lund Sandholm L, Sörqvist L, 1999, Processorientering och processledning, Sandholm Associates, Djursholm Senge P M, 1992, The Fifth Dicipline, Century Press, London Stoner A F, et al, 1995, Management, Prentice Hall Sörqvist L, 1999, Lönsamt kvalitetsarbete – att implementera en effektiv förbättringsprocess, PLAN:s forsknings och tillämpningskonferens, Mälardalens Högskola, Västerås Their S, 1996, Det pedagogiska ledarskapet, Mermerus, Mariehamn |
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