1. Example of
Business Process
Improvement
By Martin Smith
Contact Martin Smith at mesmithjr@aol.com.
Abstract: This project is an example of business process
improvement, or re-engineering as it is sometimes called. The
corporation was not radically re-structured; instead, one
department achieved significant gains in efficiency and
quality of service by re-designing several processes. A small
team of front-line supervisors and managers did the design
work and then carried out the implementation of the new
process design. Two internal consultants supported the team.
The project was characterized by a disciplined approach,
strong executive support and quantified results.

2. Situation: The setting was the Accounting Department of a local telephone company.
The department had about 500 employees. Most were assigned to two work centers. 3.5
million bills were issued each month to business and residence customers.
Critical Business Issue: Reduce expenses by 8-10% in each of the next five years.
Intervention: Re-design the CASH PROCESS. This process involves receipt of the
customer’s payment, crediting the customer’s account and depositing the amount in the
company’s account.
Exhibit 1. Relationship Map Specific to Cash Process
Revenue
Accounting
Office
Customers
Payment
Agents
Bank
Corporate
Data
Center
Information
Systems
Support
Group
Public
Communi-
cations
Customer
Service
Centers
Central
Cash Unit
Corporate
books
Treasury
Regional Telephone Company
Local Telephone Company
Accounting Department
Refunds
Refund DataBalance
Sheet Data
Coin Collections
Dishonored Checks
Unidentified
Payments
Investigation
Requests
Investigation
Requests
Investigation Requests
Inquiries
Payments
Payments
Dishonored Checks
Unidentified
Payments
Dishonored
Checks
Inquiries
Data
Corrections
Cash
Summary
Error
Reports
Notify of Out
of Balance
Proof for
Cash
Summary

3. Exhibit 2. Schedule for Design Phase
Project Activity
1. Train the Team
2. Plan the Project
3. Prepare
Relationship Map
4. Build ISMap
5. Identify
Disconnects
6. Patch or Re-
design?
7. Define Attributes
8. Build SHOULD
Map
9. Specify
Measures
10. Stakeholder
Review
12. Revise
13. Formulate
Recommendations
14. Decide What to
Implement
Week
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Start: Sept 17
End: Dec15
17
NOTE:TheProjectTeamworkedfull timefor 4weeksandparttimefor10weeks.

4. Exhibit 3. Flowchart for Sub-Process, Dishonored Checks, BEFORE the Re-design
NOTE. Do not try to read the content of the process steps but rather understand the diagramming conventions.
Rows represent work groups or computer systems. Boxes indicate steps where work is performed. Diamonds are
decision points. Lines crossing the boundaries between rows represent hand-offs from one function to another.
Compare Exhibit 7 to Exhibit 3. The old design had 50 steps compared to the 24 steps in the new design.
Bank
Central
Cash Unit
Cash
Ope ration
Data Entry
Group
Com puter
Room
Customer
service
Center
Systems
Dishonored Check
Received from
Customer's Bank
1
End
3 Bank Files
Updated
24
Correct
32 Process
Payment
47
Our
Customer
?
2
Resident
of XYZ
State?
4
Prepare
Formto
Re-bill
Customer
6 Prepare
Formto
Adjust
Customer's
Account
7
Enter
Adjustment
into Business
Office Support
System
12
System
Correctly
Updated?
14
Correct
Error
16 Alert
Service
Rep
17
Daily Cash
Sheets (Form
508)Prepared
toReflect
Dishonored
Checks
19
MailCopy
20 File
dishonored
Checks
21 Balance
Daily
Bank
Statement
30
Balance
?
31
End
33
Pull
Check and
CallBank
41
Funds
Available
?
43
EnterNote in
Business
Office Support
System
44
EnterNote
in BOSS
and
Prepare
Memo
Card
45
Mail
Check to
Customer
46
Prepare
Transaction
Form 770
5
Re-balance
Form 508's
26
Batch
508's
27 Verify
Printout
29
Printout
Correct?
34
Correct
Errors
35
Key Data
8
Data
Keyed
28
Transmit
Batch
Listing
36
Execute
9
Execute
Run 1
37
Contact
Customer
18
Re-
deposit?
38
Check
Returned
?
39
End
40
Contact
Customer
to Resolve
50
Service
Order
System
10
Business
Office Support
System
15
Business
Office
Support
System
48
Business
Office
Support
System
49
Cash
System
51
No
Check
Yes
No
Yes
Form
Transaction Ticket
Electroni c Transmission
Electroni c Transmission
Account
Debi t
No
Yes
Correction
UpdatedCustomer
Account Data
Form 508
Batched
Forms
Daily Bank Statement
No
Yes
No
Yes
Printout
Corrections
No
Yes
No
MemoCard
No
Yes
Yes
Electronic
Message
Notificationto Return Customer Check

5. Exhibit 7. Flowchart for Sub-Process, Dishonored Checks, AFTER the Re-design
Cycle Time
Ba nk,
Payment
Proce ssing
Agent, or
Ele ctronic
Funds
Transfe r
Cash
Operation
Data Entry
Group
Computer
Room
Treasury
Systems
Dishonored
Check
Received
1 Check
Presented
Second Time
for Payment
2
Returned
Again?
3
Can
Check Be
Auto-
debited?
4
Debits
Listed
5 Checks &
Listing
Forwarded
6
End
7
Customer
Account
Debited
9
Total
Entered on
Daily
Worksheet
12
Data Entered
into Business
Office Support
System
13
Daily
Bank
Statement
Balanced
17
Statements
Filed
18 Resident
of XYZ
State?
19
$5 Charge
Debited to
Customer's
Account
20
End
21
Run 1
Executed
10
Batch Listing
Transmitted
22
Run AB01
Executed
23
Balance
Posted to
Treasury
Daily
Report
14
End
15
Cash
System
11 Business
Office
Support
System
16
Customer
Record
Info
System
24
No
Yes
No
Yes
Check
Electronic
Transaction
Data
List
List and
Check s
Work sheet
Data
No
Yes
List
Batch
(7 Days) (1 Day) (1 Day)

6. Exhibit 4. Categories of Disconnects (total of 62)
• Duplication of effort
• Steps that should be performed by other departments
• Discrepancies between the two processing centers
• Unnecessary steps
• Cycle time delays
• Opportunities for automation.
Exhibit 5. Categories of Recommendations (total of 32)
• Automation of manual activities
• Work elimination
• Transfer of responsibilities and personnel from one department to another
• Job redesign
• Measurement plan for tracking process performance
• Documentation of work procedures
• Training to cover the new procedures
• Re-arrangement of the work force
Exhibit 6. Design Attributes for “Dishonored Checks” Sub-process
Element Attributes
Inputs • Automatic check debiting
• All checks processed twice by the bank
• Non-company check volume reduced
Processing • No re-depositing of checks
• Fewer hand-offs
• Manual forms eliminated
Outputs • Debit reflected ASAP
• “Uncollectables” reduced

7. Implementation: 29 of the 32 recommendations were implemented within 12
months of the executive decision to proceed. A year-to-year comparison yielded
the following results.
Exhibit 8. Results
Measure Result
Process Steps • 44% Reduction from 422 to
237 steps
Manually Processed Payments • 90% reduction from 42,000 to
4,000 per month
Unplaced cash (payment cannot
be credited to an account)
• 43% reduction
Customer Queries about
processing of payment
• 44% reduction
Force • 45% fewer employees assigned
to Cash process
Operating Expense • $930,000 reduction in annual
expense
Postscript: the General Manager commissioned another project at the time this
project entered the implementation phase. Over the next two years, two additional
projects were undertaken. Together, these projects encompassed about 75% of the
department’s work activity.

8. Exhibit 9. Lessons According to the Project Team
• Start with a small process, something that can be done in a short timeframe.
• Set clear time lines. Keep them firm. Keep short intervals between target dates.
This policy reinforces accountabilities and maintains momentum of the project.
• Don’t dissipate resources over too many projects. Limit the organization to
two projects at one time, one in design and the other in implementation.
• Include key stakeholders on the project team. Work units responsible for the
process must be represented on the team. The staff who maintain the supporting
computer systems should also be represented.
• Focus on short term pay-offs. Pay-offs should be quantified in terms of
financial, cycle time and customer service results.
• Use a PC for all flowcharting and documentation. Capture entries on the PC
while the team is working out the design on the easel. Edit the draft off-line.
• Manage the on-going process immediately. Don’t wait for all the changes to
be implemented. Collect measurement data as soon as practical. Schedule
process reviews as part of the GM’s staff meeting at least once a month.
Exhibit 10. Lessons According to the Author
• The support of the General Manager and the senior management team was
essential. They enforced strict adherence to the project schedule. They attended
the same training as the team. They met at decision points with the project
team. The GM initiated quarterly sessions with all management and
representative non-management personnel to review the status of each of
several processes. Measurement trends and improvement plans were reviewed
for each process.
• Any given change effort requires coordination with other change efforts to
ensure adequate resources.
• Another alignment issue was the coordination of the process change with
departmental strategy on one hand, and job-level design on the other hand.
Further Information:
Bisson, B., Folk, V. and Smith, M.E. (2000). Case study: How to do a business
process improvement. Quality and Participation, 23 (1), pp. 58-63.
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