Kumud Kalia needed a pro to lead his business process management (BPM) team, so he hired a professional accountant....
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Kalia, CIO and executive vice president, customer relations, at Direct Energy in Toronto, was recruited by the CEO in 2005 to help change the way the $7 billion energy retailer did business.
Trained in electronic engineering, Kalia is a champion of process engineering, a management approach that considers business processes from "end to end," rather than by the efficiency or performance of individual business processes, e.g., a crackerjack human resources benefits system or an efficient call center.
When major business processes, such as the order to cash cycle, are scrutinized from start to finish, the whole often proves less than the sum of the parts.
"Sometimes solving a problem in isolation can make the problem worse, so you really have to fix the process first, then change the system," said Kalia, who sees himself as a chief process officer.
People who can fix a process are a rare breed. "It takes someone with a process mentality first and commercial mentality second," Kalia said, and at Direct Energy, a deep understanding of the customer. "IT people can do it, but they are not naturals for the job."
The accountant Kalia hired to head his process engineering team has a degree in business analysis and an MBA, and has worked in a large, retail environment analyzing high-volume business processes. And, oh yes, that undergraduate degree is from a "very prestigious" university.
"Take all those things together and you have someone who is quite intellectual. He's an accomplished business person, in the sense that he is already a professional accountant and accustomed to auditing businesses -- to go look for problems. He's taken that to a different level by being academically trained as a professional process engineer," Kalia said. "That's a hard combination to get."
Even more important than all of those skills, however, is how the process engineer deals with resistance to change, Kalia said.
"If you have somebody who is a quality-control kind of manager, it typically won't work because when you send them to organizations they are going to say, 'This is what's wrong, and I am here it fix it,'" he said.
All together now
BPM, like most terms that are known by three letters, is imbued with its own fuzzy logic.
"Everybody and his brother uses the term to mean different things," said analyst Janelle Hill, an expert on software infrastructure at Stamford, Conn.-based Gartner Inc.
In the Gartner lexicon, BPM refers to a management theory and structured approach for improving an organization's activities and processes. BPM falls into the same category of academic theories as Total Quality Management or business process re-engineering. "BPM is the latest," Hill said.
One reason for the confusion about BPM is that many of the management disciplines under BPM are technology-enabled, Hill said.
For example, under BPM, business managers need to have an explicit understanding of their organizations' core processes. The best way to gain that understanding is to model the processes, Hill said. That can be done by putting brown butcher-block paper on the wall or by using Microsoft Visio -- both "not terribly effective" in her view -- or by using "a true process modeling tool" such as IDS Scheer AG's Aris or IBM's WebSphere platform
Over the years, this complex software has been used primarily by IT professionals, but more and more, these tools -- or at least a less technical version of them -- are being used by business people, Hill said. "A business person is going to model very much at a conceptual level," whereas IT has typically modeled the physical implementation, and the two need to be synchronized, she said.
Behind closed doors
Hill agreed that the old days of business users defining requirements, followed by IT running off to design behind closed doors then coming back to ask if this was what business really meant, are indeed obsolete. That's because, first, the once distinct roles and responsibilities associated with the business versus IT are blurring, and, more important, business cycles are dramatically accelerating in a global economy.
"The idea that I can define requirements, wait 18 months for IT to develop a prototype and another two years for them to deliver a system that is actually going to meet my needs, just doesn't work because the business cycle is too fast," Hill said.
The implication for CIOs? "They have to enable business people to essentially take control back over process improvement," she said.
Giving away ideas
Certainly, that's the goal for Direct Energy's Kalia.
Good business process managers will teach, not tell, their business colleagues about business process engineering, he said, ideally using the Socratic method to foster discussion and understanding until the new approach becomes second nature. "Generally, you have to give away your ideas to get people to change. They need to believe they thought of it themselves," Kalia said.
"You also don't want to send in an army of process engineers, because they get rejected," he said. His team is small, just four people, but the goal is to build "a community" of 20 to 30 people in each business unit, including embedded IT personnel, to carry on the work.
Generally you have to give away your ideas to get people to change. They need to believe they thought of it themselves.
Kumud Kalia, CIO and executive vice president, customer relations, Direct Energy
Kalia agreed with Gartner's Hill that the old way of doing IT doesn't work in today's economy, but BPM is hardly a quick fix. Direct Energy, which grew through acquisitions of mostly smaller competitors, was a big company run by processes designed for small companies, Kalia said. It needs scalable, high-volume transaction processes that realize the efficiencies of a big company that plans to get bigger.
Optimizing the lead-to-cash cycle, which begins with a customer prospect and goes all the way through selling, processing and fulfilling the order, billing, collecting and financial reporting, can involve many thousands of people doing that work for many millions of customers, Kalia said. And it requires the business to think about efficiency from the customer's perspective, not the company's. Most companies don't do that, he said. An example would be a call center determining efficiency by calls handled per hour, rather than by the time it took to solve a customer's problem.
Gartner's Hill said BPM adoption is an uphill battle, because most businesses are organized by function.
"The process perspective has always been viewed as a secondary perspective. It requires collaboration, hand-holding, sharing and negotiation across power centers," Hill said, and most companies don't have an incentive system that encourages working together.
But change is coming, she said. For years, organizations have relied on their senior leaders to spot trends, opportunities or changes in business conditions.
"Now what we are saying is that the pace of business has accelerated to the point where you need data-based systems, and relying on the gut instincts of experienced executives may not be sufficient anymore," Hill said. "We may be at a point where history is no longer repeating itself."
Let us know what you think about the story; email Linda Tucci, Senior News Writer.