The Bottom Line
What do you believe are the most direct effects or influences that business process improvement have on the bottom line?
Perhaps the most direct influence or outcome of process improvements are related to an increase in sales or a reduction in cost of doing business. For example, the improvement might be done to reduce bottleneck in the sales process, but by doing so a customer benefits in that he/she notes the efficiency or timeliness of the sales staff. Consequently, that customer is satisfied and becomes a repeat customer, if he/she is not one already.
Nice examples Estrella! Do you think that the customer always benefits from improvements in efficiency or timeliness when it comes to process improvements?
The most direct effects that BPI have on the bottom line is customer satisfaction which can result in repeat customers. Secondly, it can change the culture of an organization by involving employees at all levels resulting in a business process mindset. Taking this approach will empower employees, encourage them to take interest and ownership in the project which can be a win/win situation for all involved. Lastly, BPI can result in reduce errors which will lower the cost of operating the business.
A few things that come to mind that could improve with process change are:
Employee morale
Customer Satisfaction
Public image/relations
Bill,
Thanks Bill for the response and you make some excellent points. How do you determine where to start with process change and which change is likely to make the biggest difference?
Dr. Eric Goodman
I think determining where to start is dependant on what the problems are. Clearly one would want to start by fixing the issues with the furthest reaching results. However, there may be some things that might not take a lot of time, money or resources that could be fixed easily with fairly immediate results. Then move on to the more global issues.
Bill,
Thanks for the reply and great points about fixing the issues with the furthest reaching results! And as you suggest sometimes there may be what I like to think of as "low hanging fruit" that are easily fixed that can have immediate results. Those are a great opportunity to build momentum.
Best wishes!
Dr. Eric Goodman
The most direct impact would be happier customers due to better processes. Happier customers will result in an increase of repeat sales or visits. In addition an efficient process will result in productive use of resources, less money spent on overtime to finish a task and more time spent of driving future or incremental business. More sales, less payroll spend, equals higher overall operating margins.
Steve,
Great point about the impact of happier customers! I'm wondering what happens though as you increase the number of sales or visits at many customers? How does that tend to impact service levels?
Dr. Eric Goodman
I would say the most direct effects are increased profits, increased employee satisfaction, increased customer satisfaction, and cost reduction.
Catherine,
Great points and what would be some of the indirect effects? Also, I'm wondering if there is any order that you'd anticipate to see the effects in...in other words would you expect cost reduction first and then increased profits, etc?
Dr. Eric Goodman
If a Business Process Improvement proves effective, then one would hope the bottom line would also improve (increase). To be clear, my use of "bottom line" here equates to income/profit. Then when income improves, the quality of life can improve for all: through perhaps an increase in employee compensation (share the wealth), customer satisfaction (share the happiness), and finally, the cooperative pleasure that can come from undertaking the challenge of taking something that has not worked so well and transforming it into a process that does.
Dar,
Great points and yes one would "hope" that is the case. However please be sure to keep in mind the notion that effective could be doing the "right things" while efficient could be doing "things right" (process)...so you need to be careful in thinking about processes to ensure you are both effective and efficient.
Best,
Eric
Dr. Eric Goodman
I believe that some of the most common direct consequences of business process improvement are the following:
1. Cost reduction: gained from finding ways to work that are both more highly efficient and effective;
2. Revenue enhancement: gained, in part, through cost reduction as described above, but also through potential increases in customer loyalty and positive referrals;
3. Increased employee satisfaction; gained through engaging the workforce in the redesign of what they do each and every day, and then in allowing them to feel the success of change that allows everyone to "work smarter" in better achieving corporate goals;
4. Increased customer satisfaction: derived by associating with a company that is always looking for methods / processes to increase quality in its goods and services; and
5. Attaining recognition as an "employer of choice:" this is the sort of company where highly talented seek employment!
Loretta,
Thanks for the very well thought out answer! You've identified some critical areas that are impacted. While this may not be a fair question if your boss asked you to prioritize the benefits for a business case what would you say?
Dr. Eric Goodman
Believe it or not – I am an oddball and often see that improved processes lead to happier and more focused people within a system. Although measures improve, sure no doubt there, the general mindset and atmosphere improves. To me, that’s the first tangible sign that not only is a system working and has sound processes, but that are also compatible with the actors, customers, and worldviews trapped within the system. When that happens, then I know something good is happening and to foster its growth.
Does it affect the bottom line? Sure it does. But I’ve see some amazing effects on the people in the system—and sometimes I think that’s the big indicator leading into improvements in the bottom line.
Steven,
Great point about the system improvements leading to happier people. Not sure how that makes you an oddball? Seems pretty sharp on your part to recognize that people play a major role in the bottom line!
Dr. Eric Goodman
