What’s it all about?

Business process improvement – looking for ways to improve efficiency, effectiveness and/or control in the way things are done. Simple really... 

OK, let’s get over the stereotypes

Business process improvement consulting and internal audit: two not-so-distant cousins eyeing each other suspiciously across the room at an awkward family party. Catching the occasional glimpse of the other doing something similar – or Heaven forbid – the same as ‘what we do’. That’s how it feels sometimes, right? 

Both camps are correct that the two disciplines are closely related. In fact, in my experience, one person’s business process improvement is often another’s value-added internal audit… 

Business process improvement: what are we actually talking about?

Much of the work I do for clients comes under this banner. So, what do we actually do? Business process improvement projects generally proceed broadly like this: 

1. Some symptoms of underperformance are identified within a business process

In terms of ‘back-office’ business process improvement, typical processes which might be subject to review would include purchase to pay, sales order to cash, stock management, record to report and payroll. Generally, some symptoms of process failure or underperformance are recognised by management or by a third party looking at the organisation. For example, a typical scenario in a sales order to cash cycle would be an unexpectedly high volume and value of credit notes issued to customers. 

2. A scoping exercise is undertaken to understand the parameters of the project

In this stage, the team performing the review would sit with management to confirm the exact elements of the process within scope, who needs to be involved in the review and what data/information needs to be collected to support the exercise. In our sales order to cash example, the scope may be, quite literally, the receipt of the sales order from the customer through to the posting of cash receipts and all steps in between. 

3.  The ‘current state’ process is mapped end-to-end

The in-scope process is then mapped end-to-end following a series of interviews and/or workshops with key participants and stakeholders in the process. Extracting the right information from these interviews/workshops is a key part of the process. You can certainly learn techniques in the classroom which help but, although it is obvious to say it, straightforward experience of doing it is critical. At its most basic, when interviewing, you are trying to understand the chronology of a process and all its strengths and weaknesses – allowing the interviewee enough latitude to venture into valuable related detail but without going off at a tangent from the focus of the review. 

4.  Data is collected

In reality, this step is generally performed in parallel with Step 3 above. Data that may provide insight into the process is collected and analysed. Again, using the sales order to cash example, it would be typical to request a download of all credit notes issued (including customer name, date, amount, invoice reference – and, hopefully, reason code). 

5.  Benchmarking and analysis

In this stage, we analyse the process mapping (which we will, by now, have been validated with management) and supporting data in order to establish where the improvement opportunities lie. As part of this stage, we will compare our findings against suitable qualitative and quantitative benchmarks to get a sense of how this process compares to others we have seen. Armed with this input, we will apply our analytical skills in order to generate ideas for improvement. 

6.  Recommendations/options

Following on from stage 5, we will formulate specific recommendations for action. In some cases, we may present several options to management in respect of how they may take things forward depending on budget, appetite for change etc. These options will typically be presented outlining costs and projected benefits. It is also common for the recommendations to be presented according to our view on prioritisation, ie high/medium/low or other suitable scale. Often the recommendations will include redesigned ‘future state’ process maps. 

7.  Action planning

This final stage will often take the form of a workshop with management to review the recommendations/options and agree an action plan to take forward. 

Relevant?

Of course. The seven steps above will appear remarkably similar to conducting an internal audit. Acquiring the capability to apply an ‘improvement’ rather than, or as well as, an ‘assurance’ angle to a review exercise, can only make for a more rounded internal auditor. 

Quick wins?

The good news is that much of the skill-set to perform effective business process improvement work is common to the work that internal auditors perform: interviewing people to extract information, analysing data, formulating recommendations based on experience etc. With the right guidance, an experienced internal auditor can make the transition to business process improvement work without extensive retraining. 

So, what’s the key? Much of it is about a shift in emphasis. Frequently, business process improvement is about doing things more efficiently to reduce time taken and eliminate cost. Internal audit usually has a different primary perspective: assessing the design and operational effectiveness of controls. It is not such a huge leap to consider whether there are too many or duplicated controls, potential opportunities for increased automation within processes; or the chance to strip out unnecessary layers of governance. 

Relatively short training courses in Lean or Lean Sigma can rapidly set you on the path to adding specific process improvement skills, although, as ever, there is no substitute for hands-on practical experience. 

Business process improvement: a key part of every internal auditor’s toolkit

In short, developing the capability to perform business process improvement work will make an internal auditor more versatile and valuable to their employer or clients. Advising on driving efficiency and efficiency, as well as improving control, is a more compelling proposition. It may not be what every project demands, but it will be relevant in many scenarios. 

Mark Taylor – head of consulting for corporate markets, RSM 

About Mark

Mark is a partner focused on helping clients to improve performance in their business processes and manage organisational change. He works with a wide spectrum of organisations – ranging from SMEs to large, listed multinationals but with a particular focus on the middle market. Mark also has considerable experience of providing internal audit services to clients.