How to Analyze a Business Process

Last Updated: January 18, 2023 Approved

Business process is a system used by a company to reach a goal. It can also be defined as a set of steps used to create value for customers. Managers analyze business processes to judge how well a certain process works. The manager first analyzes the current process. After that review, management may decide on changes to improve the existing process. The improved process may help the company save time, lower costs, or create a more desirable product for customers.

Part 1

Part 1 of 2:

Determining How A Business Processes Is Created

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Define a business process. A business process refers to activities that employees perform on a day-to-day basis that accomplish an organizational goal. The process represents what a company does to reach a particular goal. A business process should cover any variations or exceptions to the process. To understand how to analyze a business process, you need to consider how a process is created.^{[1]
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- Consider the scope of the task (how extensive it is).
- For example, if you're updating the process you use to send invoices, you may determine you send 200 invoices a month.
- Determine your desired outcome.
- In this case, you want an accurate invoice sent (both as a hard copy and email) to each customer as soon as your product is delivered.
- Break the process into a list of steps or a flowchart.
- Note sub-processes that exist within processes. The more specific the process, the easier to analyze and improve.
- Define the departments who participate in the process and list their inputs and outputs.
- For example, making payroll requires input from production for people and hours worked, input from HR for wages rates and salary deductibles, etc.
- Write down any exceptions or variations to the process.
- For instance, consider special clients or circumstances like bulk orders.
2
Classify the type of process you’ve created. Separating each process by type can help you analyze the process and make improvements. If two processes are the same type, their process improvements may be similar. A particular process may be an operating, support, or management process.^{[2]
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- Operating processes refer to the day-to-day tasks you complete to deliver a product or service to a client.
- Your client invoicing process can be thought of as an operating process.
- Support processes, as the name implies, assist the operations of your firm but may not reach clients directly.
- The human resources (HR) department is a good example of a support area.
- Management processes refer to running the overall direction of the business.
- For example, planning and implementing a budget is a management process.
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3
Compare inputs and outputs to spot process inefficiency. An input is an asset you use to produce revenue and profits. An output is a physical product or service. Labor, energy, materials and capital equipment are considered inputs. Your process should use inputs efficiently to produce outputs.
- For example, if you manage auto repair shops, your inputs are labor, equipment, and repair parts. Your output is a repaired customer vehicle.
- Long repair times or large work backlogs are an indication that something is wrong with your process. The problem may be that you’re scheduling repairs too close together.
- If the cost of your replacement parts is far higher than you budgeted, that is another indication that something is wrong.
- Specifically, you may have a problem with your purchasing department, or with the vendors who sell you parts.

Part 2

Part 2 of 2:

Analyzing Your Business Process

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Talk with key personnel about the process. Once you identify a process to fix, discuss the process with the people responsible for implementation. Take the time to interview key participants, and ask them to identify any potential improvements.^{[3]
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- Ask your staff what steps they take in their job and why.
- Determine the inputs needed to perform each task and where you obtain each input.
- If you manufacture denim jeans, for example, you need to know who supplies your denim and how often the vendor ships the denim material to you.
- Identify the outputs of each task and who receives the output.
- Ask for suggestions on how to resolve process inefficiencies that your staff uncovers.
2
Create a business process flowchart for each process. A process flowchart can help you visualize a business process. You can use the documentation from your process discussions to create the flowchart. The flowchart should contain all of the steps required to complete a particular business process.^{[4]
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- It is important to note that a business process flowchart should only contain the defined procedures that employees must follow.
- Flowcharts may be prepared manually or with software.
- You can use word processors, spreadsheet programs with charting functionality, or specialized software for designing graphics/charts.
3
Conduct a brainstorming session to find process improvements. Many processes involve more than one department in your business. Group sessions can identify process inefficiencies that impact more than one department. These sessions can also validate the information provided during your one-on-one interviews with participants.
- Summarize the information you have received and distribute it to process participants.
- Ask for feedback from everyone to get additional guidance for your analysis.
- Discussions with personnel become the basis for making changes to a process.
- Your changes may reduce costs, reduce cycle time, simplify a process or improve customer service.
- Once you make changes to a process, review the outcomes and see if the process made the improvements you expected.
- If not, analyze the process again and try to identify areas of improvement.
- Process analysis should be an ongoing task for your business.