It takes a meltdown to change a business

How do you improve the whole organization, not just parts of it? The über challenge for process improvement in organizations has always been to successfully make improvements across functions. But have any sizable organizations assigned people to manage their major end-to-end processes — and actually been successful?

I got this question from a process leader at a UK bank. He had read my post, “Where Have All the Process Owners Gone?,” and contacted me because his bank has had success in managing departmental processes, but is struggling to crack the cross-functional, end-to-end management of processes. (An example of an “end-to-end process” is all the work involved from the time a customer places an order until it is delivered, including order entry, order fulfillment, and billing.)

This particular bank is currently on a major “Lean” journey (adopting Toyota’s production system methods and thinking), which was started three years ago, and they are making continuous improvement part of their standard work. He said it has gone well, but only at a functional level. Trying to get end-to-end improvements has proven to be very difficult and virtually impossible to do without a special initiative or project driving the change. They now have some significant resources and imperatives to make cross-functional process ownership happen. But with the scale and complexity of the organization, he is concerned that they may never get over the “managing by function” problem.

I checked with my friend Nick Bush, a consultant who has worked extensively in UK banking, and he said the main reason why there are no process owners — perhaps surprisingly given the state of the banking industry— is that there is not yet a compelling enough reason to change. His most recent client (another bank) had a similar process approach with plenty of supporting documentation and improvement work, but having achieved only the beginnings of end-to-end transformation (process managers were not yet in place). The reason, he concluded, was because “In UK banking, we may need to wait for a sufficiently disruptive event — regulation- or market-driven — that causes the established banks to radically re-think what they do.”

Nick’s assessment of the dearth of end-to-end process owners fits with dynamics I see in organizations between their “performance engines,” which operate the business day-to-day, and their management systems for innovation. Most organizations are optimized for current operational performance. The presumption is that tomorrow will look like today, so all we need to do is fine tune our successful model. We can make incremental change, often called continuous improvement, within the performance engine. More dramatic improvement (innovation, transformation) requires a motivator: a feeling that our world is being disrupted. In this increasingly common condition, the environment appears to be turbulent and unpredictable. The kinds of change required to accommodate a world of increasing disruption requires a different organization to run experiments — to try stuff and learn. (Not fine tune, but innovate.)

The operating model for experimentation needs an organization with process owners who manage big changes across functions and departments. The challenge is, most of us have a relationship scope of about 100-200 people, so we like to work with these “tribes” of people like us. It’s more difficult with big end-to-end processes to have a tribe that has ownership of the overall goal and a process owner who is also the tribal leader.

In the absence of a significant disruptive event, or obvious proof that the world is changing, the gravitational forces in organizations pull strongly towards the performance engine: functional, hierarchical, command-and-control, rigid. And this engine gets improved and streamlined only with small, incremental changes. I have seen organizations implement complex process management structures (with process executives, process owners, process champions, and process councils) to support the implementation of a major enterprise system. However, the process ownership role then appears to become redundant and hard to justify once the system has been implemented and is delivering the intended benefits.

End-to-end process owners can indeed make a difference in effecting cross-functional change. But organizational leaders must help them fight the powerful, gravitational forces of the command-and-control performance engine that maintain the status quo. To overcome these forces, a good disruption can help. But in an environment that is increasingly unpredictable and volatile, leaders must devote more resources to sensing and responding to threats and opportunities, and then must communicate to the organization what “responding” means in terms of changing the way it does its work. Without a clear and compelling, motivating case being made by leaders, successful cross-functional changes will remain few and far between.

This piece was first published on The Harvard Business Review and has been lightly edited.