Perfect Processes - ABM Article by Tom Pryor

"PERFECT PROCESSES "
by Tom Pryor

Your processes are perfectly designed to produce the results you're experiencing today.

If you manufacture automobiles and every third car rolls off the production line missing a right front fender, your system is perfectly designed to produce that result. Or if you're a distributor and every other delivery is missing an item from the packing slip, your process is perfectly designed to provide customers that result. If you are not pleased with your organization's performance, a perfect place to begin your search for improvement is the process.

"People don't make mistakes, processes allow people to make mistakes." That principle is the only thing I remember from my 1986 Total Quality Management (TQM) training. As controller of Motorola, I assumed that part of my job was to catch people making mistakes, e.g. overspending monthly budgets. After TQM training I realized that my job should have been preventing the variances from happening.
I needed to create mistake-proof processes.

A business process is a series of activities that cross over functional boundaries. Traditional systems do not quantify processes. Activity Based Management (ABM) systems do quantify processes.

Traditional systems report cost by function and type of expense. ABM systems report cost by function,
activity and business process.
Traditional systems report cost of cost centers, e.g. Purchasing Department. ABM systems report the
cost, cycle time and quality of processes, e.g. the Procurement Process includes all the activities performed during the acquisition of raw materials, products or services.
Traditional systems "account" for departmental spending. ABM systems "measure" departmental and process output.

Using the principles of ABM to define and improve a process can result in significant cost and timesavings.

Dr. Scott Ransom D.O. used ABM to improve the process of ordering and administrating an antibiotic at the time of a caesarean section. The process that once took 22 steps was simplified to 4. According to Dr. Ransom, "We developed a new process that included four steps with dramatic
improvement in compliance and quality with a reduction in cost."
Southwestern Bell found that a simple change to a costly process could result in big benefits. Traditionally, telephone repairmen would report to the company garage to pick up their truck before
going to the first customer. Managers recently changed the process. Now repairmen take their truck home at night, allowing them to go directly to the first customer each morning. By eliminating the 30-45 minutes each morning picking up their truck, more customers (output) can be served each day without increasing headcount (cost)!
McDonalds focuses on creating mistake-proof processes. Next time you visit one of their restaurants, look at the French Fry "process". Each activity of the process is mistake-proof. For example, the aluminum scoop will consistently put 26 fries in each carton. Another benefit of a mistake-proof
process is reduced training. It takes only 4 minutes to train a new employee how to consistently make good fries!

No organization can afford to ignore the pattern and performance of its daily activities. Measuring and mapping activities helps managers and employees synchronize and simplify their work. If you are not happy with your organization's results, today is the perfect time to re-design the process.

Please e-mail comments about this article to: TomPryor@icms.net.

If this article has inspired you and your organization to cut costs this year, e-mail your needs to tompryor@icms.net.

This free e-mail is a service of ICMS, Inc.
For more information on ICMS products and services, call 817-475-2945.

Read other articles on Activity Based Management.

ICMS, Inc.
PO Box 13206 ~ Arlington, Texas 76094


	"PERFECT PROCESSES " by Tom Pryor Your processes are perfectly designed to produce the results you're experiencing today. If you manufacture automobiles and every third car rolls off the production line missing a right front fender, your system is perfectly designed to produce that result. Or if you're a distributor and every other delivery is missing an item from the packing slip, your process is perfectly designed to provide customers that result. If you are not pleased with your organization's performance, a perfect place to begin your search for improvement is the process. *"People don't make mistakes, processes allow people to make mistakes."* That principle is the only thing I remember from my 1986 Total Quality Management (TQM) training. As controller of Motorola, I assumed that part of my job was to catch people making mistakes, e.g. overspending monthly budgets. After TQM training I realized that my job should have been preventing the variances from happening. I needed to create mistake-proof processes. A business process is a series of activities that cross over functional boundaries. Traditional systems do not quantify processes. Activity Based Management (ABM) systems do quantify processes. Traditional systems report cost by function and type of expense. ABM systems report cost by function, activity and business process. Traditional systems report cost of cost centers, e.g. Purchasing Department. ABM systems report the cost, cycle time and quality of processes, e.g. the Procurement Process includes all the activities performed during the acquisition of raw materials, products or services. Traditional systems "account" for departmental spending. ABM systems "measure" departmental and process output. Using the principles of ABM to define and improve a process can result in significant cost and timesavings. Dr. Scott Ransom D.O. used ABM to improve the process of ordering and administrating an antibiotic at the time of a caesarean section. The process that once took 22 steps was simplified to 4. According to Dr. Ransom, "We developed a new process that included four steps with dramatic improvement in compliance and quality with a reduction in cost." Southwestern Bell found that a simple change to a costly process could result in big benefits. Traditionally, telephone repairmen would report to the company garage to pick up their truck before going to the first customer. Managers recently changed the process. Now repairmen take their truck home at night, allowing them to go directly to the first customer each morning. By eliminating the 30-45 minutes each morning picking up their truck, more customers (output) can be served each day without increasing headcount (cost)! McDonalds focuses on creating mistake-proof processes. Next time you visit one of their restaurants, look at the French Fry "process". Each activity of the process is mistake-proof. For example, the aluminum scoop will consistently put 26 fries in each carton. Another benefit of a mistake-proof process is reduced training. It takes only 4 minutes to train a new employee how to consistently make good fries! No organization can afford to ignore the pattern and performance of its daily activities. Measuring and mapping activities helps managers and employees synchronize and simplify their work. If you are not happy with your organization's results, today is the perfect time to re-design the process. Please e-mail comments about this article to: TomPryor@icms.net. If this article has inspired you and your organization to cut costs this year, e-mail your needs to tompryor@icms.net. This free e-mail is a service of ICMS, Inc. For more information on ICMS products and services, call 817-475-2945. Read other articles on Activity Based Management.

	ICMS, Inc. PO Box 13206 ~ Arlington, Texas 76094