Generic Process Transformation Model: Transition to Process- based ...

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WORKING PAPER SERIES
Paper No. 08-07



Tomislav Hernaus
Generic Process Transformation
Model: Transition to Process-
based Organization

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Generic Process Transformation Model:
Transition to Process-based
Organization


Tomislav Hernaus
thernaus@efzg.hr
Faculty of Economics and Business
University of Zagreb
Trg J. F. Kennedya 6
10 000 Zagreb, Croatia


























The views expressed in this working paper are those of the author(s) and not necessarily represent those of the Faculty of
Economics and Business – Zagreb. The paper has not undergone formal review or approval. The paper is published to bring
forth comments on research in progress before it appears in final form in an academic journal or elsewhere.

Copyright 2008 by Tomislav Hernaus
Al rights reserved.
Sections of text may be quoted provided that full credit is given to the source.
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Abstract

The competitive global market climate of the new millennium has raised awareness of business processes as
the most important management paradigm (Levi, 2002). Consequently, process elements, as well as process-
based organizational solutions, have become an emergent need. However, the question is how companies
should transform themselves to become more process-oriented? Many attempts under the helm of Business
Process Reengineering movement were not successful in reaching benefits of lateral orientation, what
additionally emphasizes the delicacy of business process transformation.

Concerning the literature, there is a lack of clarity and presence of organizational change models which could
provide managers with guidance for process transformation. The models are mostly focused on the
transformation generally, and they do not address the specificity of a change from traditional to process
paradigm. Furthermore, they are mostly single-oriented, either on the organizational elements or steps which
should be taken during the change, thus only partially answering the dilemma.

The purpose of the paper is to present an overview of existing transformation models which could be relevant
for taking a process journey, as well as propose a Generic Process Transformation Model which should be able
to ensure smooth transition, with emphasis on specific problems related to process transformation. Although
the proposed model is theoretically and logically based, without empirical evidence, it represents a first step in
convergence of process transformation concepts to business world. Ultimately, only its usage in a real world
would or would not prove its severity.

Keywords
process transformation, process-based organization, organizational change, transformation models

JEL classification
L22, M10, M15
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Introduction

The 1990s witnessed fundamental changes in organizational design philosophy, work structuring
and management (Ghobadian, O’Reagan, Gallear, & Viney, 2004). The changes are caused by evolving
customer-centric environment, where new value proposition is essential. Furthermore, it has been realized
that companies must be flexible to be able to respond to competitive and market changes. They must
benchmark continuously to achieve best practice, outsource aggressively to gain efficiencies, and nurture a
few core competencies in race to stay ahead of rivals (Porter, 1996). One of the ways to achieve these
changes and requirements by providing the expected value to customers is a more horizontal way of
organizing.
The competitive global market climate of the new millennium has raised awareness of business
processes as the most important management paradigm (Levi, 2002). Consequently, process elements, as
well as process-based organizational solutions, have become an emergent need. Mainly through the concept
of business processes and business process orientation, as well as business process reengineering, a new
horizontal approach to organization design, and consequently organizational change, began to attract
attention from academia and business (Davenport, 1993). The benefits were obvious: a more synchronized
supply chain yields better customer service, higher quality, faster delivery, lower inventory, and timely
order fulfillment, etc.; providing successful business endeavors in the new economy (Tsai, 2003).
However, after several years it became clear on the basis of high level of unsuccessful BPR projects
that something went wrong. Numerous studies indicated that as many as two-thirds of all restructuring and
reengineering efforts failed in some way (Trahant, Burke, & Koonce, 1997). Such negative outcomes have
led into question the whole process paradigm. Fortunately, under the helm of Business Process
Management (BPM) the process approach has survived and continued to acquire attention of business
world (Burlton, 2001; Harmon, 2003; Spanyi, 2003; Jeston, & Nelis, 2006; Smith, & Fingar, 2006).
As a consequence of many BPR failures, there are still a lot of skeptics. They can change their
attitudes and be convinced only by explaining reasons for BPR failures and by providing new, more
complete models of process implementation concepts. While there is an extensive work considering BPR
failures, it seems that in the literature there is a lack of findings about the process concepts such as process
organization, process organizational structure, process management, process culture, process metrics and
measurement, process transformation, etc. Aforementioned concepts are mostly addressed by practitioners
and consultants through case studies which do not offer generalized knowledge (e.g., Scheer, Abalhassan,
Jost, & Kirchmer, 2003; Tonchia, & Tramontano, 2004; Scheer, Kruppke, Jost, & Kindermann, 2006).
Trying to broaden the knowledge about particular process concept – process transformation – a way
how to move toward process-based organization design, the paper takes systematic approach over existing
theoretical and practical evidence, and eventually proposes a generic model of process transformation. In
the paper, following introduction, organizational changes are defined with particular focus on
organizational transformations. In another words, the context is provided for analysis of possible transition
models toward a process-based organization. After a review of existing transformation models for process
environment, the new model is developed. Finally, summary of the main findings and directions for future
research is presented as well as the limitations of the study.


Organizational Change and Transformation Defined

Organizational changes exist as long as there is a proof of organizations’ presence. They are
inevitable and present all the time. Researchers and practitioners alike have shown a keen interest in
organizational changes, as many firms have resorted to modifying their strategies, structures, and processes
in order to remain competitive in a demanding business environment characterized by rapid technological
change, globalization, and deregulation (Wischnevsky, & Damanpour, 2006).
Naturally, change practices differ according to level impact, scope, speed, focus, structure, nature,
etc. Consequently, there are several different categorizations or types of organizational changes in the
literature. Burke (2008) tried to exemplify the language that scholars and practitioners currently use
considering the types as follows: Revolutionary versus Evolutionary; Discontinuous versus Continuous;
Episodic versus Continuous flow; Transformational versus Transactional; Strategic versus Operational;
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Total system versus Local option. Those classifications are not exhaustive, and they are intertwined.
Different types require different tools and techniques. There is diversity considering magnitude and pace of
change that is involved in the change process, as well as conceptual difference in terms of both the content
(what actually changes) and the process (how the change occurs). Especially important for understanding
organizational changes are last mentioned content and process issues. Enough research has been conducted
on organizational change to make it clear that, in most situations, both content and process factors ought to
be evaluated. Yet, theories and analyses of organizational change often tend to address only one dimension
(Barnett, & Carroll, 1995).
By determining relevant elements of each organizational change and by analyzing possible types of
organizational change, the discussion should focus more on a specific type of change – organizational
transformation. It could be said that it is a type of a large-scale organizational change, which is defined by
Mohrman (1989) as “a lasting change in the character of an organization that significantly alters its
performance” (Whitsett, & Burling, 1996). Organizational transformation is a transition between
organizational states that differ substantially (Wischnevsky, & Damanpour, 2006) and it occurs over a
period of years through a complex process involving a series of stages (Davidson, 1994). Moreover,
Kilman and Covin (1989) defined transformation as “a system-wide change in an organization that
demands new ways of perceiving, thinking, and behaving by all its members”. It could be classified as a
type of radical change, because the organizational transformation is about pursuing new and different
strategies, structures, processes, rewards, capabilities and resources, supported with new and different core
values – new culture.
Step further was made by Blumenthal and Haspeslagh (1994), from simple definition and basic
characteristics of an organizational transformation, who distinguished among three types of organizational
transformation: an operational improvement, a corporate self-renewal program, and a strategic
transformation. The operational improvement is based on the re-engineering business processes to
restructure ideas, move organizational boundaries and change work and information flow. Corporate self-
renewals seek to create organizational relationships and cultural processes that will allow the company to
continuously adapt to changing situations thus avoiding performance gaps in the future. Finally, strategic
transformation represents the process of re-establishing competitive advantage in the marketplace by
recreating a productive match between core competencies and market opportunities. Many problems are
caused because change initiatives frequently combine these three aspects in an undifferentiated
transformation program. However, there should be a hierarchy among the three types (Lemak, Henderson,
& Wenger, 2004).
The aforementioned types and causality of the different categories is in accordance with Leavitt
(1965), who pointed that one does not produce real change by relying on single means such as reward
systems or structure. Instead, organization designs are integrated systems consisting of structure, formal
systems, informal processes, reward and measurement systems, and human resources practices. Effective
change requires changing a combination of policies, or all of them, to create a new and integrated design. In
addition, all of the policies must be aligned or mutually reinforced. Leavitt’s ideas have been translated into
organization design models such as the Star Model and the McKinsey 7S Model (Beer, & Nohria, 2000).
Although there are numerous integrative models for conducting organizational transformation (e.g.,
Star Model, McKinsey 7S Model, Nadler and Tushman Congruence Model, Weisbord’s Six Box Model,
etc.), demanding a comprehensive methodology that addresses critical design components required to
implement long-term change (Shields, 1999), there is a lack of specific models for conducting transition
toward a process-based organization design. However, the topic of transition toward the process-based
organization is emerging. About 5 to 10 percent of profitable and growing companies have transformed or
redefined their core business fundamentally in the past decade (Zook, & Allen, 2001). Moreover, most of
the Fortune 500 companies have significantly invested into new sources of competitive advantage – cross-
functional process orientation. Finally, inclusiveness of process management category in Malcolm Baldrige
National Quality Award and EFQM Model of Excellence, as well as some mandatory requirements of
Sarbanes-Oxley Act, emphasize the importance of focusing and organizing around business processes.


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Review of Existing Process Transformation Models

When an organization wants to conduct a transformation typically it uses certain methodology.
Although its use is not mandatory, an examination of BPR research shows that companies need a
methodology that takes a holistic view of the organization (Stoica, Chawat, & Shin, 2004). Knowledge of
various existing approaches enables organizations to be familiar with steps, to compare and contrast
approaches, analyze parts, synthesize or tailor an approach to meet circumstance, or derive a new approach
(Ibrahim, & Hirmanpour, 1995).
Fueled by the continuing demand for corporate transformation, during last two decades there has
been a proliferation of methodologies, techniques and tools for conducting business process change projects
(Manganelli, & Klein, 1994; Grover, & Kettinger, 1995; Kettinger, Teng, & Guha, 1997; Al-Mashari, &
Zairi, 2000). Although a plethora of BPR methodologies have been identified in the literature, large number
of these appeared to have many limitations (Valiris, & Glykas, 2000), besides which the most important is
their narrow, non-systematic focus.
Yet, the higher-level goal for organizations is not reengineering which during the years became a
management fad, but enterprise transformation. Organizations seek the proper alignment and integration of
their strategy, structure, people, technology, and business processes. Reengineering of processes is only a
part of the procedure by which these components are aligned (Winslow, & Bramer, 1994). Furthermore,
according to Vanhoenacker, Bryant and Dedene (1999), current perceptions of the business process
phenomenon and its methodologies were too narrow in focus. In that way, the focus should be more on
broader approaches/models for corporate/organizational transformation, rather then on narrow BPR
methodologies.
Basically, a distinction should be made between two categories of approaches to organizational
transformation:
• Frameworks;
• Methodologies.
Frameworks represent transformation models which explicitly overlook a transformation process
with respect to a problem from the holistic perspective. They are more content-oriented and more
comprehensive with regard to planned changes trying to determine numerous internal and external
relationships and elements which need to be taken into consideration when developing a new organizational
solution. Methodologies are not strategically oriented and are not focused on the environment, but are more
process-oriented, straightforward and represent operative steps which lead an organization throughout the
transformation process. They explicitly address the necessary steps and their sequence for implementing
particular type of organizational change. As numerous methodologies and frameworks exist for process
transformation, focus in the study will be on the several most important. However, it should be stated once
more that BPR methodologies are excluded from the analysis because of the reasons mentioned above.
Process Renewal Group (PRG) has developed PRG’s Business Process Management Framework,
which is mostly focused on a business process improvement, but it can also be used for implementing
business process concepts into the organization. The Model consists of 8 steps: (1) understanding the
context; (2) build and align; (3) defining the process project; (4) understanding the process; (5) changing
the process; (6) developing capabilities; (7) implementation; and (8) continuous improvement (Burlton,
2001). Those steps can be divided in four categories/levels: first two belong to strategic level, next three to
process design, following two into implementation level, and the last to operative level.
Rummler and Brache (1995) founded a Rummler-Brache Process Improvement and Management
Methodology. They focused on a dilemma how to structure processes and activities which would ensure
efficient work of all organizational members. Their solution starts from the strategy, on the basis of which
an improvement plan is developed. Following steps is conditioned with the cognition whether an
improvement plan depends on process efficiency or with possible problems in process performance. In the
latter case, there is a need to redefine a project, conduct its analysis and design, and implement the solution.
Afterwards, the process improvement follows, characterized by continuous improvement of process
activities deploying process management practice. The mentioned methodology was very popular and often
used in mid-1990s.
Gardner (2004) created a classical example of a specific, direct model, based on a process maturity
concept. He determined 6 levels of process maturity which confounds following approach: (1) level of
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understanding inside a process; (2) practical use of process management (e.g., standardization,
measurement, corrective actions, training); and (3) achieved results/outputs (e.g., customer satisfaction,
process capabilities, competencies, and efficiency). As business processes progress through the maturity
continuum, they show higher level of efficiency and effectiveness. The methodology describes five steps
which allow progress in the continuum. Each step is upgrading on the previous one so that improvement
strategy can be applied for a particular maturity level.
Harrington (1991) suggested five-step process management approach: (1) organizing for quality;
(2) understanding the process; (3) process improvement; (4) implementation, measurement and control; (5)
continuous improvement.
According to Melan, key principles for successful process management include: (1) establishing
process owners; (2) analysis of boundaries and interfaces; (3) process definition through documentation of
work practice; (4) identification of control points and metrics; (5) process monitoring for control purposes
through implementation of process metrics; and (6) undertaking corrective actions and providing feedback
if deviation shows that process isn’t under control. On the basis of these key principles, a road to process
management can be divided into three parts: initiation, definition, and control (Laguna, & Marklund, 2005).
A Building Block Approach by Meyer (2002) represents an organizational redesign process based
on 5 basic systems of work in each organization: culture (behavioral patterns and shared values); structure
(definition of jobs and lines of authority, as well as a process which involves people in cross-functional
teams according to workflow); internal economy (way of financial flow and managing resources including
budgeting, settling commitments, etc.); methods and skills (procedures, methodologies, skills, and tools
which employees use for doing their tasks); measurement instruments and reward systems (providing
feedback which allows employees to see how they handle their job, offer an opportunity to adopt their
behavior as well as encourage performance improvement). Those five fundamental building blocks are
present at each organization. The way how are they combined in organization chart defines organization’s
health and performance, while mechanisms of teamwork (cross-functional workflows) show its
functionality.
Edosomwan (1996) created a model which integrates both approaches – framework and
methodology. He states that transformation process must be focused on management system, social system,
technical system, behavioral system, and critical competitive factors. Furthermore, in his Edosomwan 6 R's
of Organizational Transformation and Reengineering, he defined 6 key elements-activities which should be
done during a transformation: requirements (customers, process owners, suppliers, products, services);
rethink (structures, systems, procedures, rules, processes, technologies); redesign (the whole system,
reducing waste, process optimization, output optimization); retool (competitive technologies and
technological systems, supply systems, transformation models); reevaluate (results, metrics, goals);
realization (needs, challenges, threats, opportunities, strengths). These elements/activities are performed
through 10 steps with notion of delivering outputs and results like customer satisfaction, productivity and
cost reduction, product/service quality, efficiency and effectiveness, and high morale of employees.
Rapid Re is in-detail developed methodology with 5 phases including 54 steps, which allows
companies to achieve significant improvements through conducting radical changes in strategic business
processes. The methodology includes numerous management techniques which are used for analyzing
necessary information for identification of opportunities and redesigning key business processes. Each of
five phases emphasize logical part of process reengineering and creates a results useful for the next stage:
(1) preparation; (2) identification; (3) vision; (4) solution – technical and social design; and (5)
transformation (Manganelli, & Klein, 1994). In each phase, numerous management techniques are used
which accelerate a transformation process.
Arthur Andersen consulting company developed Andersen Consulting’s Business Integration
Model based on the assumption that organizational performance comes from coherence between
employees, processes, technology, and strategy. The model advocates that consistent and comprehensive
program of organizational changes need to address, indirectly or directly, four aspects of organization: (1)
strategy – establishment of strategic vision oriented to customers which will optimize long-term success;
(2) people – organization, motivation, and empowerment; (3) business processes – redefinition and
optimization of business processes so that strategic vision could be implemented and resources optimized;
(4) technology – adoption of appropriate technology which will back up optimized processes, provide
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employees with information and tools, as well as boost relationship customer-supplier (Dutta, & Manzoni,
1999).
Grover and Kettinger (1995) developed a Business Process Change Model with the following
elements: (1) management; (2) business processes; (3) information and technology; (4) people; (5)
structure; (6) products, services, and performance; (7) environmental factors.
Finally, Galbraith (1977, 1995 and 2002) developed a Star Model which defines organizational
elements needed to be aligned if an organization wants to be efficient. Designing organizations represents a
process of reaching alignment between following five categories: (1) business processes; (2) organizational
structure; (3) management processes; (4) reward systems; and (5) people competencies. Above those five
elements is the strategy, which determines an organizational pathway and guidance for all other elements.
Although mentioned model is more general in nature, its importance and applicability are reasons for
including it in this review. All aforementioned transformation approaches are summarized in the following
table.

Table 1: Summary of relevant transformation models
Approach/Author
Type
Elements
Steps
• strategy
• work processes
Star Model
• structure
framework
-
(Galbraith)
• management processes
• reward systems
• people competencies
Business Integration
• strategy
Model
• technology
framework
-
(Arthur Andersen
• business processes
consulting)
• people
1. preparation
2. identification
Rapid Re
3. vision
methodology
-
(Klein & Manganelli)
4a. technical design
4b. social design
5. transformation
1. requirements
Edosomwan 6 R's of
• management system
2. rethink
Organizational
• social system
3. redesign
Transformation and
methodology
• behavioral system
4. retool
Reengineering
• critical competitive factors
5. reevaluate
(Edosomwan)

6. realization
• culture
• structure
The Building Block
• internal economy
Approach
framework
•
-
methods and skills
(Meyer)
• measurement instruments and
reward systems
1. establishing process
owners
2. analysis of boundaries and
Principles of successful
interfaces
process management
methodology
-
3. process definition
(Melan)
4. identification of control
points and metrics
5. process monitoring
6. corrective actions
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1. organizing for quality
2. understanding the process
Process management
3. process improvement
methodology
-
(Harrington)
4. implementation,
measurement, and control
5. continuous improvement
1. current state
Process improvement
2. improve
for systemic process
methodology
-
3. standardize
maturity development
4. manage
(Gardner)
5. optimize
1. planning performance
Rummler-Brache
improvement
methodology for
2. project definition
process improvement
methodology
-
3. process analysis and design
and management
4. implementation
(Rummler & Brache)
5. process management
1. understanding the context
2. build and align
Process Renewal BPM
3. process project definition
Framework
4. understanding the process
methodology
-
(Process Renewal
5. changing the process
Group)
6. developing competencies
7. implementation
8. continuous improvement
• management
• business processes
• information and technology
Business Process
• people
Change Model
framework
•
-
structure
(Grover & Kettinger)
• products, services and
performance
• environmental factors


Considering reviewed frameworks, the elements most often represented are: strategy, business
processes, organizational structure, people competencies, and reward systems, while concerning
methodologies, the most common sequence is: analysis/understanding of the context, development of the
future state, implementation, continuous improvement. It is important to understand that each
organizational system, regardless of conceptual model taken, includes more than structure of its units. It
also includes characteristics and competencies of people, reward systems, processes and systems of HRM,
career paths and selection processes, performance management, decision-making process, information
flow, communication and implemented technologies. In addition, there should be lateral integrative
mechanisms, which significantly contribute to alignment and integration of various aspects of the
organizational system improving the work practice (Mohrman, Cohen, & Mohrman, 1995). Only such
comprehensive view would make possible successful conduct of an organizational transformation, because
otherwise, by omitting any of the elements, the whole transformation process could be endangered.
Moreover, Dichter, Gagnon and Alexander note that transformation often falls apart because of a
breakdown along one or more of the three axes of change: top-down, bottom-up, and across core processes.
Together, the three form a “transformation triangle” that the authors define as “a balanced, integrated
framework for combining separate initiatives into a coherent overall program” (Ostroff, 1999). In another
words, although it is extremely important to include all the relevant elements – content issues, equally
important is to properly address process issues – a sequence of how to conduct the transformation.


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Development of the Generic Process Transformation Model

Thorough analysis of existing process transformation approaches, as well as of existing change
models in general, is the first step in creating a specific model for transition towards process-based
organization design. An understanding of process environment and process concepts is also important. The
absence of process orientation in attitudes and actions of participating employees and managers can hinder
successful conversion of organization towards more process-based design and its implementation.
Implementation of a process-based organization is a large-scale organizational transition.
Fundamental changes of organizational practice are needed in order to improve its performance
capabilities. Transitions of this type, likewise team-based transitions, have been found to be particularly
challenging because of the following characteristics:
• They are pervasive because they include changes of almost all aspects of the organization.
• They involve the whole organization because large-scale change cannot be contained in particular
units of the organization.
• They are deep and require fundamental changes in assumptions, beliefs, and even value about how
organizations function in the best way (Mohrman, Cohen, & Mohrman, 1995).
Two basic ways of introducing process orientation into the company could be distinguished: (1)
improvement of process initiative in current organizational design setting; and (2) change of organizational
structure and other organizational elements as requirement for process initiative; while focus of the process
transformation is the latter one.
The process transformation has a clear goal – introduce a process-based organization. The process-
based organization design emerges incrementally as a result of continuous enhancements of existing
organizational structures (Manganelli, & Raspa, 1995), as well as other organizational elements, which
leads to the conclusion that process orientation can only be built and developed step-by-step. The reason for
more incremental approach is solely a nature of process transformation – where it represents a technically
complex change, but the real emphasis should be on the people and their resistance to change – social
aspects (Crosseto, & Macazaga, 2005).
Taken all challenges into consideration, the Generic Process Transformation Model was developed.
Before its detailed explanation, there should be stated that generally speaking a model developed from logic
is no substitute for sound theory. Such models can guide improvement efforts through hypothesized
relationships without having those relationships ever tested (Swanson, 2007), like in this case. With
Walton’s approach in mind, who sees models, methodologies, and frameworks as way-stations in the
development of systematic theory (Lawler et al, 1999), it was approached to development of the Generic
Process Transformation Model.
The Generic Process Transformation Model is a combination of radical redesign and evolutionary
implementation. It is integrating both content and process issues’ approaches to the transformation in a way
that it represents a combination of framework and methodology in the one. In another words, it emphasizes
important elements which should be questioned, as well as determines a sequence which should be
followed during its implementation.
The proposed model consists of 8 elements/steps which can be classified into three phases: (1)
strategic phase – solution development; (2) transitional phase – adaptability; and (3) operative phase –
process-based organization. Furthermore, phases of the process transformation in a certain way explain a
nature of a particular element or step. These are: (1) strategic analysis; (2) identifying core business
processes; (3) designing around core business processes; (4) transitional organizational forms; (5) process
culture development; (6) developing support systems; (7) implementing process mechanisms; (8)
continuous improvement.
Typically, the Model starts with the strategic analysis because the first step needed is to determine
the company’s winning value proposition from the leaders’ perspective. Strategic analysis helps managers
better to understand the context, business environment, providing them with possible opportunities. Once
that value proposition is clearly identified and articulated, they can decide if developing a process-based
organization design is appropriate and what should be the scope of change. In this initial direction-setting
phase, strategic analysis also ensures that planned changes, introduced as part of the process
transformation, will contribute to competitive success and strategic goals in general. A process vision is
created, which, as explained by Davenport (1993), describes the future state of the organization and
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