Business Excellence Module - Essay Example

Business Excellence Module Introduction Business people are always looking for methods of eliminating the challenges encountered in business. These challenges include variations in the quality of goods produced, variations in the time taken to service a customer and so on. It is in the face of these variations that people in businesses seek to improve their profit margins. They look for better and more efficient methods of reducing or eradicating these business challenges. These methods, which are referred to as business improvement methodologies, are numerous, but only four have been discussed in this part, including six sigma methodologies, business process reengineering and balanced scorecard and total quality management (TQM) (de Waal 2003). Six sigma Modern organizations are undergoing turbulent economic times in today’s world and for their survival; each company should be ahead of the set benchmarks. Breakthroughs in technology and performance excellence are the most dominant requisites for a company to succeed. This business improvement methodology focuses on improvement of customer satisfaction. However, most of the firms today fall short of this important requirement. Six sigma includes reduction of defects, reduction of cycle time and ensuring customer satisfaction. To achieve process improvement and variation reduction, this methodology attempts to implement measurement based strategy. The methodology is hinged on two models, that is, DMAIC (Define, measure, Analyze, Design and verify) process and DMADV process. The first process focuses on existing processes that falls short of set specifications by putting more emphasis on incremental improvement. On the other hand, the former process tends to develop new processes. Six sigma methodologies ensure application of structured methodology and process metrics to opportunities directly related to organizational goals. In addition, this methodology helps predications to model their business strategies to achieve critical improvement efforts, speed business results, accumulate resources to take advantage of the available opportunities and lastly to oversee that improvements are sustained. The financial metrics of Sigma model includes activity based costing cost of poor quality amongst others. On the other hand, its contractual metrics comprises mean time taken to repair, cycle and lead time data, and total amount of rework hours among others. However, it should be noted that collecting and computing of sigma metrics is not a guarantee for a company’s success, and thus, for a company to be successful, it should apply these metrics in innovative means to solve the clients’ problems. Sigma metrics should be aligned to the key business processes. As such, Six sigma tend to instill clarity around the business strategy, and also try to identify measures to determine the success of business strategy. Six sigma is a data driven methodology that takes into account the measure of how often an already made business plan meets its intended requirements through identification of errors, reduction of the variations, rework and wastefulness. Motorola Company is believed to have originated this idea. In particular, Jack Welch facilitated the spread of this business improvement method. Any business process, which is initiated, falls within a fifty-fifty range of being accepted or dropped. This statistical methodology represents an error of 3.4 per million error opportunities. It aims at eliminating variations in any process, through a six standard deviation between the nearest specification requirement and the mean; and from the manufacturing process to the point of transacting extending from product to the service it offers. It is a recently discovered management approach, with little of its information having been written so far. Great research is required to develop an in-depth understanding of this methodology, in order to separate facts from fiction. The techniques for the practice of this methodology are similar to other management approaches; however, its practice totally represents a new structural improvement approach. It aids an organization by providing it with a structural switch that enables it to act more organically, in unveiling new ideas of enhancing improvement and operational mechanisms improvements. It further employs many mechanisms that promote the conflicting demands of exploring and controlling improvement efforts. It is identified by four elements that help to clarify it further, including parallel structure, structured method, performance metrics and improvement specialists. Parallel structures are external operations that do not directly interfere with an organization’s operations. Six sigma is, therefore, a parallel operation structure that does not alter the organizations operations, but facilitates in improving it. This element is, however, not new in quality management and is exceedingly compared with quality circles. Six sigma is further considered an example of a meso structure as it is described as a combination of macro and micro-organizational strategies and it foresees’ a hierarchical structure, where it incorporates leadership engagement and strategic project selection (Barney 2002). Structure method is the method used by six sigma methodology in the process of improvement. The DMAIC (define, measure, analyze, improve and control) method is one of the structured methods of the six sigma methodology that help in identification of the main cause of problems, when used both at the MFG and SERV, a Cause-effect charts, FMEA and statistical process control are part of the standard quality tools employed by this business improvement method, and they are part of the tools used in problem identification and diagnosis. Improvement specialist is an element that involves training of employees. The trained employees act as intermediaries between the senior managers and individuals working in the improvement projects. Their main responsibilities include serving as instructors who providing assistance and mentoring services. Performance metrics can be classified either as financial or customer-oriented metrics. In MFG and SERV, sigma performance metrics were employed at multiple levels of the organization and in the administrative, service and manufacturing processes (Schroeder et al, 2008). They also stated the importance of customer requirements for being part of the six sigma. The customer oriented metrics takes into account the importance of understanding the customers’ current needs and their future desires. This has the effect of designing new products and services to meet customers’ requirements; this is a fundamental aspect of the six sigma methodologies known as Critical to Quality (CTQ) characteristic. The financial metrics of the six sigma methodology are determined by the financial personnel present in the organization and reveals the financial benefits of the project. All these elements are arranged in a model framework that has its result as improvement in performance. Six sigma can be seen from two different structural dimensions: structural exploration that is rooted in communication and boundary spanning roles, and as structural control, which has its interest at the control theory. Proper understanding of this modulation requires consideration of what is new in the organization, and comparing it to previous quality management approaches. Though six sigma methodologies is skeptically claimed to lack discriminative validity over prior approaches to quality management, many organizations, however, are continuously adopting it to enhance their performance (Schroeder et al. 2007). The structural differences realized in six sigma promote exploration and control in efforts aimed at realizing improvement. More and refined scholarly research needs to be carried out for this method to prevent the spread of propaganda about it, and also to avoid its quick dismissal. Business Process Re-engineering (BPM) This mythology refers to redesigning of how daily work is carried out. This improvement methodology incorporates the historical management principles with the most recent ones, making all the people in an organization function properly. Notably, Process re-engineering makes the firm more responsive, flexible and efficient to customers. However, process re-engineering requires a comprehensive improvement in all critical areas of business processes. The Business process reengineering, which is commonly known by its acronym BPR, is a method that organizations incorporate to influence the performance directly. A BPR project is best incorporated first by stating the statements that define the purpose of the organization and where the organization is going. These are further derived into business strategies that cut out a clear description of the aims of the business, and the characters that the business should adopt in order to achieve these objectives. This also produces a performance evaluation key to track the progress. Performance improvement is further achieved by identifying initiatives for improvement, and relating them to the organization’s culture (Spence 1994). Reengineering is the process of redoing what one has done before, but this time in a much better way. In business, reengineering involves rethinking and redesigning business processes so as to achieve rapid improvements in cost, speed, service and quality among other critical and contemporary measures of performance (Muthu et al. 1999). This concept was pioneered in the early 1990’s by Henri Fayol. BPR is considered a technique rather than theory and stresses on team work, though there must be a leader who drives this team. In reengineering, it is pertinent to note that the focus needs be on the processes and not on thoughts of the organization. Business process, in this situation, is a series of both internal and external steps. These steps are taken when producing a product or service, in order to meet the customer’s requirements. Organizations are divided in departments whereby each a step is carried out, and the overall merging of activities of the departmental steps is the complete product or service production. Introduction of process maps, which show a picture of how work flows through the organization, aids each department in realizing the importance of their process and that of others. BPR is a methodology, which is mainly used by companies at the brink of disaster to return to profitability. It helps to cut down the cost as the method is pre-existing and saves the funds that would have been used in the creation of a new method (Schermerhorn 1999). Experience gained over the years is the key to the triumph of reengineering, compared to use of the right methodology. It arises as a fact that the company has already tried the approach, identified the points of weakness and is ready to eliminate this weakness with the hope of better results. This requires retraining and reeducating the people to carry out the process. There are many limitations facing this method. One is that the company puts on hold production of new products and services, decreasing its competitive edge as its focus shifts to fighting its own internal problems. Thomas Davenport also lays the claim of the possibility of reengineering process to repeat the same mistakes done when the process was done. It falls short in dealing with new products or a service as the objectives of any strategy, which is achieved, is simply the byproduct of improved productivity (Weicher 1995). Reengineering process aims at altering peoples basic way of thinking by instigating the people involved to change and advocates for demanding hard work. BPR critics argue that it is used as a euphemism for denominator reduction by increasing productivity and cutting cost with no change in activities to increase sales or revenue. It is undertaken by firms as a precaution in the face of disaster. Others warn that, though BPR leads to competitive advantage, it is short lived based on the fact that when a company reduces its cost of operating business, others follow and the monopoly once enjoyed is lost. Business process reengineering recommends the preparation of a timetable, preferably three to six months to avoid placing the organization in limbo, accompaniment of strategic planning that address IT as a competitive tool. Placing the customer as the center of the process, the whole organization owning the process and sponsorship offered by of top executives are also part of what business process reengineering recommends. A successful Business Process Reengineering project is achieved by incorporating the whole organization and all the processes in full. It also needs the support of tools that are easy to track and analyze processes (Carter 2005). Balanced score card This is a strategic planning and management system used to streamline business activities as per the vision and strategy of the organization, improve communication internally and externally, and monitor the performance of the organization against the set goals. It is sixth most used management tool in the world and is ranked among the highest overall rating in satisfaction. It breaks monitoring of performance into four perspectives that are interconnected: internal processes, customer, financial and learning and growth. The internal operational goals of a business and the outlines governing the key processes required to deliver customers’ objectives are under the internal process perspective. Customer perspective covers matters affecting the customers, such as the final product and services, the market share goal and their satisfaction among other issues. The value of shares and the financial benefits of the organization are summed up in the financial perspective, whereas the intangible tools driving for future success such as human capital, organizational culture, databases, are covered in the learning and growth perspective. Use of the balanced scorecard methodology is associated with many benefits. These include better strategic planning, strategic and organizational alignment, and management information; improved communication, execution and performance reporting (Marr 2012). All these are compelling benefits that are never realized if the project is implemented through short cuts or half-heartedly. The business scorecard project is an idea that is unpretentious yet extremely powerful when it has a strong implementation basis. Initially, this project was designed for commercial companies; however, it has found congenial widespread in the public sector. Key commentary on the comparative analysis of the three models 1. The following aspects has been found to be common in all the three models of business improvement Customer focus Result oriented Partnership development People development and involvement Leadership and constancy of purpose 2. Sigma focus more on production process, while the other two are oriented to system 3. Balanced score card focus on mastering tactics 4. Six sigma dwells on product development and reducing error, which mostly corresponds to customer focus and result oriented in other models Other comparisons Six sigma Business process reengineering Balanced score card Focus on customer satisfaction and put emphasis on quality Cost reduction with focus on quality Cost reduction coupled with customer satisfaction and hence greater market segmentation The business is run on behalf of the customers The customers are given what they really want High performance is made possible by putting processes first Measurements are made part of managing rather than accounting Financial, customer, and internal process aspects are put on the front line. Learning and growth aspects are also very critical. References Barney, MF 2002, The New Six Sigma: A Leader’s Guide to Rapid Business Improvement and Sustainable Results, Prentice Hall, Saddle. Bridge, W 2003, Managing Transitions: Making the Most of Change, Da Capo Press, Cambridge. Carroll, R 2012, Four Business Improvement Methods You Should Know About, Viewed 12 June 2012, http://www.boxtheorygold.com/blog/bid/49839/Four-Business-Improvement- Methods-You-Should-Know-About Carter, P 2005, Business Process Reengineering: An Introductory Guide, viewed 12 June 2012, http://www.teamtechnology.co.uk/business-process-reengineering.html. de Waal, AA 2003, ‘The Future of the Balanced Scorecard: an interview with Professor R S Kaplan’, Measuring Business Excellence, vol. 7 no. 1, pp. 30-35. Dell 2011, About dell: our history, viewed 15 June 2012, http://content.dell.com/us/en/corp/about- Dell, M 2012, National Press Club Summary: National Public Radio. Viewed 28 May 2012, http://www.npr.org/programs/npc/2000/000608.mdell.html Howard, R 1993, Foreword: introduction. In R. Howard. The learning imperative, Harvard Business Review Press, Boston, MA. Liker, JK & Morgan, JM 2006, ‘The Toyota way in service: the case of lean product development’, Academy of Management Perspectives, vol. 20 no. 2, pp. 5 – 20 Madhusoodhan, M 2012, Business process re-engineering: A Strategic Approach For Aligned Process Improvement in Information Technology, viewed on 12 June 2012 from http://www.isssp.com/media/archives/kn/A-0807-281.pdf. Marr, B 2012, What is a Business scorecard? Viewed June 12 2012,http://www.ap- institute.com/Balanced%20Scorecard.html. Muthu, S, Whitman, L & Cheraghi, HS 1999, Business process Reengineering: A Consolidated Methodology, Wichita State University, Texas. Rumelt, R 2009, ‘Strategy in a ‘Structural Break’. McKinsey Quarterly, vol.1no.2, pp. 35-42 Schermerhorn, J 1999, Management (6th ed), Wiley, New York. Scherrer-Rathje, M, Boyle, TA & Deflorin, P 2009, ‘Lean, take two! Reflections from a second attempt at lean implementation’, Business Horizons, vol. 52 no.1, pp. 79-88 Schroeder, R, Linderman, K, Liedtke, C & Choo, SA 2008, Six sigma: Definition and Underlying theory, Viewed 12 June 2012, https://mywebspace.wisc.edu Spence, WR 1994, Innovation, The Communication of Change Ideas, Practices and Products. Chapman Hall, New York. Walton, M 1986, The Deming Management Method, Perigee Books, New York, NY. Weicher, M, Chu, W & Lin, CW 1995, Business Process Reengineering Analysis and Recommendations, City University, New York. Winn, R 1990, How much testing is enough? Proceedings of Frontiers in Education '90, Vienna, Austria. Bibliography Breyfogle, FW, Cupello, JM & Meadows, B 2003, Managing Six Sigma: A practical guide to understanding, assessing, an implementing the strategy that yields bottom-line success, John Wiley & Sons, New York. Eckes, G 2001, The Six Sigma revolution: How General Electric and others turned process into profits, John Wiley & Sons, New York. Eckes, G 2000, Six Sigma for everyone, John Wiley & Sons, New York. Foster, ST 2004, Managing quality: An integrative approach, Upper Saddle River, New Jersey. Kerzner, H 2003, Project management: a systems approach to planning, scheduling, and controlling, Pearson Prentice Hall, New Jersey. Kinicki, A & Kreitner, R 2003, Organizational behavior: key concepts, skills & best practices, McGraw Hill, New York. Appendix: comparison of BPIs advantages disadvantages Six sigma Six Sigma contributes to employee involvementSix sigma leads to reduction of costs for the business, especially the ones concerned with reduction of time due to process improvements, as well as through reduction of the loss that could result from cases of rework. Six sigma is also very important as it lead to customer satisfaction. Application of Six Sigma and lean manufacturing in organizations is challenging because its emphasis on process goes against the benefits of creativity and innovation. Innovation in an organization is not possible without production deviations, insufficient studies, unusual solutions and redundancy, all of which contradicts with the principles of Six Sigma. Business process reengineering It contributes to effectiveness of business It lead to reduction of costs The employees are motivated to perform well The approach in the organization is greatly improved Implementation of BPR lead to business growth Some workers can lose morale as they can fail to adapt to BPR changes Balanced Score card It allows organizations to tie their mission statement to their goals and day to day activities It ensures recognition of the concerns of the customers Process improvement techniques such as lean manufacturing, as well as innovation is recognized as a corporate goal Relationships of different aspects of goals are demonstrated visually The performance of this methodology is subjective It does not incorporate risk management such as risk calculations and opportunity Sometimes it only adds new type of reporting without contributing to any quality improvement Read More