An Integrated Framework of Process Formation: a Scientific Way of

An Integrated Framework of Process Formation: a Scientific Way of
Process Management
Xie Bing Xie Jun Yao Jie
School of ManagementSouth-Central University for Nationalities, Wuhan, Hubei, China
School of Management Jinan University, Guangzhou, Guangdong, China
School of Foreign LanguagesJianghan University, Wuhan, Hubei, China
Abstract: Firms and academies have been studying the theory and application of process for a long
time. Especially recent years, the studies of process from the view of strategic management have
attracted much more attention. As a lot of researches focus on analyzing process implementation, the
current theoretic research into process formation still seems inadequate. Based on the extant literature
on process, this paper tries to draw a clear concept of “process”. It also introduces the analytic
framework of process formation, which states that process formation involves six phases: Learning by
Doing, Experience Knowledge Accumulation, Routines, Knowledge Articulation, Knowledge
Codification, and Process online. Finally, it proposes the principles of process design and
reengineering.
Key Words: Process formation, Organizational learning, Dynamic capabilities, Routines, Process
Design, Process Reengineering
Introduction
Process management and its applications (e.g. Total Quality Management, Six Sigma and ISO 9000)
might be the most important innovation of the last two decades (Benner and Tushman, 2002), and it has
become a managerial fashion. Scholars just keep on exploring the nature and boundary of process
management (Benner and Tushman, 2002). Some of them agree that the core of process management
is to improve the operational speed and the organizational efficiency through reducing variances and
enhancing process control (Benner and Tushman, 2002). From the view of strategic management,
more and more scholars apply various approaches to the studies of process (Nelson and Winter, 1982;
Porter, 1980; Sinclair and Zairi, 1995). Their studies mainly focus on the nature of process (Feldman,
2000), the relationship between process and dynamic capability (Teece, Pisano and Shuen, 1997; Zollo
and Winter, 2000), and the process impact on performance (Sinclair and Zairi, 1995). So far, the
studies of process have achieved a lot fruits, but further research into some certain problems is
absolutely necessary. While the current literature emphasizes the method, skill and implementation of
process design and reengineering (Peppard, 2003), the studies how to form a process seem inadequate.
Lacking the knowledge of process formation and its mechanism will lead to the failure of process design
and reengineering. In 1993, Hammer and Champy, who proposed process reengineering, pointed out
that about 70 percent of firms’ efforts into process reengineering failed to realize their expectations.
Therefore, on the basis of the extant literature, this paper intends to further study the process nature and
its formation. In addition, it will propose the principles of process design and reengineering.
1.
The Nature of Process
As for the concept of process, various schools define it differently due to their respective angles. From
the evolutionary perspective, processes are defined as repeated patterns of behavior that are bound by
riles and customs and that do not change very much from one iteration to another (Feldman, 2000;
Nelson and Winter, 1982). The perspective of dynamic capability regards processes as means how
organizations work, or models how organizations operate and learn (Teece, Pisano and Shuen, 1997).
In the field of Industrial Organization, particularly Porter’s competitive strategy theory identifies
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processes with value chains formed by a series of activities. Business processes, for example, may
include the process of supplying or acquiring raw materials, the process of producing products and its
related services, the process of providing customers products and services, as well as the process of
providing customers services after sales (Porter, 1980). For Ray and Barney (2004), business
processes are activities done by organizations for realizing some particular business purposes and
objectives. The organizational learning theory is of opinion that processes are stable behavior models
characterized by organizations’ reactions to the diversified internal or external stimuli (Zollo and Winter,
2002).
We especially emphasize the important role of process in strategic management in this paper. We
argue that the achievement of strategic goals depends on organizational capabilities. The later are
composed of processes. Moreover, we consist that the conception of process should reflect evolution of
capabilities too. In this sense, the paper defines process that a set of associated, iterated, measured
activities, which combine organizational experience and knowledge and which are used to achieve
strategic goals and business intentions of organizations. In this definition, six main features are
highlighted: 1) The aim of process is to display and realize an organization’s expected objectives. The
organizational processes have being considered as main means for organizations to realize their
objectives (Feldman and Pentland, 2003). Hence, formulating processes should be a kind of conscious
behavior. 2) The result of process implementation needs to reflect the improvement of efficiency, such
as the shortened time, the reduced cost and the improved product qualities, etc (Teece, Pisano and Shuen,
1997). 3) The processes are formulated by organizations in terms of the requirements of the iterative
activities. These iterative activities can well display the factors like knowledge, skill, management
philosophy and models formed in organizations and mastered by them. In addition, the processed
iterative activities can keep better track of the factors, so that in practice the factors are stable and
reliable. 4) The implementation of process needs support from other complementary activities because
these activities are associated (Feldman and Pentland, 2003). 5) Through processes, the activities’
procedure and outcome should be measurable for evaluating and improving the activities. 6) This
concept reflects the process formation, i.e. the process comes out after summarizing, conceptualizing
and refining the organizations’ own work experiences, the management philosophy and the theoretical
knowledge and combing with best practices.
2.
The Formation of Process
According to the evolutionary theory, the process formation is also the process that organizations
accumulate, develop, articulate and codify the tacit knowledge and capabilities (Nelson and Winter,
1982; Zollo and Winter, 2002). Probing process formation is very important for understanding the
origin of capability and has positive influence on organizational competency. From the perspective of
dynamic capability, a process is the manifestation of dynamic capability (Teece et al., 1997). Through
introducing Zollo and Winter (2002)’s model of formation of dynamic capabilities, this paper tries to
elaborate the process formation. This model applies the organizational learning theory to the analysis
of the dynamic capabilities formation, in which there are three phases—experiential knowledge
accumulation, knowledge articulation and knowledge codification.
Different from the model, this paper, the paper suggests that Nelson and Winter (1982)’s concept
“routine” should be included in order to reflect the evolution of process. This hypothesis has got support
from Martha and Feldman (2000), Feldman (2000), Benner and Tushman (2002)’s studies. Thus, this
paper claims that the process formation has to experience six phases as follows (also see figure 1):
1) Learning by Doing In this phase, people learn the experiential knowledge through “imitation”
and “trial and error” approaches (Nelson and Winter, 1982). Enlightened by some repeated work
in organizations, individuals and groups within an organization may select and retain the most
efficient one or ones from the existing working ways with reviewing both experiences and lessons
from success and failure, and then form their new knowledge about how to accomplish the work
and how to modify its implementation for effectively improving their working efficiency (Zollo
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2)
3)
4)
5)
6)
and Winter, 2002).
Experiential Knowledge Accumulation Based on the experiential knowledge, processes are
formed and applied from a new and unique angle (Peppard, 2003). Therefore, the prerequisite of
the process formation should lay emphasis on accumulating, comprehending and applying the
knowledge. Besides daily practicing, individuals and groups may accumulate, digest and master
the knowledge by training and reviewing within an organization, by exchanging information
among organizations, and by self learning and apprehending. Usually, in this phase the
knowledge is tacit (Nelson and Winter, 1982). For better understanding and discussing, the
knowledge is limited to working experiences, skills and management models in this paper.
Routine This phase is to form routines. The evolutionary theory regards routines as the
economic counterpart of gene (Nelson and Winter, 1982). There are two mechanisms to form
routines and make them work: copying and selecting. The copying mechanism mainly refers to
forming and spreading routines through imitation. The selecting mechanism, by using the “trial
and error” approach, tests the adaptability of the newly-formed routines for their further variation
and evolution. Briefly, forming routine needs the experiential knowledge which has been
summarized, refined and theorized, so as to simplify the repeated and necessary operational steps
in organizations. Forming routine aims to improve working efficiency, to effectively coordinate
production as well as the organizational operation. From the perspective of strategy management,
the difference between routines and processes exists apparently. Depending on human’s rational
nature, the stabilized habitual rules usually turn into routines in a spontaneous, inheriting or
imitating way (Nelson and Winter, 1982). The routines are still obscure and tacit; its forming is
not formulated formally. In other words, the routine forming doesn’t consciously subject to the
organizations’ strategic objectives. Obviously, it is hard to say if routines contribute to those
strategic objectives or not. Although both routines and processes form through inheriting and
imitating, processes are result of organizations’ thoughtful cognition of the experiential knowledge
in view of the strategic objectives.
Knowledge Articulation The cause and effect relationship between routines and performance
seems vague, particularly in various situations which keep changing quickly (Zollo and Winter,
2002). Peppard (2003) pointed it out that organizations often find that in many cases the routines
are not necessary for the demanded output at all, they even don’t know why they should follow the
routines. Hence, this phase of knowledge articulation can help groups learn and effectively
interpret the ambiguous cause and effect relationship between working routines and performance,
the relationship between newly changed activities and performance as well. Through such a
course of variation, selection and retention, the organizations may find the truly helpful routines
which influence their performance positively. In fact, Zollo and Winter followed Nelson and
Winter’s adaptability. Briefly, knowledge articulation means, group members with sharing,
exchanging, discussing and examining the experiential knowledge, can better understand the cause
and effect relationship, i.e. what they should do step by step to accomplish a task and what
consequences will be if they do so.
Knowledge Codification This phase is to further develop the articulated routines, which
including using the descriptive words, the measurable and functional criteria, and the acceptable,
practical procedures to display and stabilize the organizational knowledge, management
philosophy and culture.
Processes Online It is the stage of forming process. After knowledge codification, the final fruit
processes are going to come out. Yet, to form the processes, organizations should pay attention to
the following links in this phase. First, based on the above phases, organizations should turn the
optimized routines into the organizational policies and rules in written tools, which are the basis of
product and service transmitted in organizations. Second, the organizations should executive the
optimized routines rationally for improving those connected individuals and groups’ interfaces’ and
their handoffs’ efficiency. The third link lies on persistence of implementation. The
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organizations should ensure that the processes can be implemented repeatedly to achieve
continuous improvement on the working efficiency (Benner and Tushman, 2002). As a result,
processes as supporting systems should be stabilized in the written or software forms.
Additionally, the external environment can influence the process formation with no doubt. Here, at
least three reasons may explain this viewpoint. First, the external environment provides the useful
knowledge and best practices as references for the process formation, even for every phase or link of
processing. Through such exchanging with the external environment, organizations get more relevant
information which may help them deepen their understanding of the extant knowledge; they learn the
best practices from other organizations, too. Associating the useful knowledge and the best practice
with their own realities, the organizations can modify and perfect the organizational processes. Second,
the external environment provides the final criteria for evaluating the working efficiency of processes.
The processes aim to help organizations accomplish their business tasks so as to reach their
organizational strategic objectives finally. To evaluate the accomplishment of tasks and objectives, the
final criteria is to see if the organizations’ product and service can meet the demands of the external
environment, and to see how adaptable the product and service are to the external environment.
Consequently, the feedback from the external environment provides realistic proofs for the
organizations’ modifying and perfecting. Thirdly, the external environment promotes the process
improvement. The changes of the external environment, (e.g. the changes of the customers’ demands,
the presence of the new technology and the new management modes), require the organizations to
reform their processes for adapting those changes. As a result, the processes can realize their dynamic
development through constantly interacting with the external environment.
Internal organization
Environment
Learn by
Doing
Knowledge
Accumulati
on
Routines
Process
Online
Knowledge
Codification
Knowledge
Articulation
Figure 1: An Integrated Framework of Process Formation
Comprehensively, processes are the final results of the articulated and then codified working routines.
During the course of articulating the organizational routine, the most important step is to combine the
routine behavior which emphasizes the individual experiential knowledge with the organizational
objectives and efficiency. The organizational routine comes from the organization and its members’
experiences accumulation in the long term of practicing. Simply, the organizational routine is the
“warehouse” of the organizational tacit knowledge, which includes the experiential knowledge helping
individuals complete various tasks and the coordinating knowledge about how the individuals cooperate
with each other.
3.
The Principles Of Process management
With the analysis above, the paper suggests that the following principles should be considered for an
organization to manage their processes, especially when they attempt to design process and reengineer
them:
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1)
2)
3)
4)
Organizational strategic planning and improved performance should be the center of
process management. As constructs of organizational capabilities, the suitability of process
design not only influences the operational efficiency directly, but also plays the key role in forming
the organizational capabilities which are necessary for realizing the organizational strategy. First,
the process design should be functional for stimulating individual’s capabilities in various process
links; it should also be able to coordinate cooperation within various process links and among
various processes. In this way, the process design works on improving the organizational
efficiency. Secondly, certain of the organizational strategies often need support from the
particular process designing, e.g. the market-oriented strategic planning requires the particular
process design facing up to customers. Thirdly, the process design should be helpful for
enhancing the whole organizational, not only certain branches, groups or individuals’ performance
and efficiency.
Process Management should be based on the existing organizational routines. Since
processes are varied from the organizational routines, the process design and improvement should
be based on the existing routines in organizations. Their internal routines not only reflect the
level of the accumulated knowledge within those organizations, but also contain the habitual rules
which coordinate various links within organizations. The habitual rules are often connected with
the organizations culture and policies (Teece et al., 1997). Usually, firms tend to introduce the
external benchmark knowledge into their own operation. Although the external best practice has
been proved effect on particular links in organizations, also there must be some knowledge that is
not compatible because of the existing differences among organizations. Thus, any blind
introduction without considering the particularity of every organizational environment will
certainly cause disorder and resistance in organizations. In a word, an organization’s process
design and improvement should be based on its own routines.
Process Management should be done with fully understanding the knowledge systems
existing in an organization. So-called knowledge systems existing in organizations refer to the
accumulation of routines and experiential knowledge formed in organizations over a long time.
The knowledge systems are the foundation of process formation, as well as the foundation of
process design and improvement. These routines and experiential knowledge have been accepted
and possessed as the common habits, customs and working ways which are shared by most
members in organizations. Besides, for an organization, the knowledge systems are also the
foundation of success. However, just because the routines and experiential knowledge are still
tacit and ambiguous, the organizations should keep on developing and refining the knowledge
systems, and then make the knowledge systems articulated and codified.
Process variation requires right opportunities and directions. The process reengineering must
be carried on once the organizational strategies have changed, or the external environment has new
requirements for the organizational capabilities. Before reengineering processes, organizations
should well learn their foundations of the experiential knowledge and the existing routines, and
further analyze if the extant processes still work for the new strategic planning and the requirement
of higher efficiency. That is to say, when an organization reengineers the existing processes, it
should complete articulation and codification of the extant knowledge, with full understanding of
various links in their operation. At the same time, the rigidities feature of the organizational
processes not only ensures an organization being stable, but also limits the selection for its
reformation. Hence, the organizational process reengineering can not be beyond the limitations of
the existing routines. One of current problems is that many firms blindly believe some popular
processes mode like horizontal organization, team working management and so on, while they
ignore or give up their own existing culture, policies and routines without analyzing thoroughly.
The serious consequence must cause the firms fail to reengineer the processes.
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4.
Conclusion
With summarizing the existing literature on process studies, this paper has drawn a definition of
process from the view of the strategy management, and introduced the analytic framework of process
formation. For a long term, the literature on strategy management pays less attention to the origins of
the organizational resources and its capabilities. The contribution of this paper is to exploit the origins
of the organizational resources and its capabilities. The paper states that processes have contained the
knowledge, especially tacit knowledge accumulated by organization. The process formation has to
experience six phases: Learning by Doing, Experience Knowledge Accumulation, Routines, Knowledge
Articulation, Knowledge Codification, and Processes. However, it still needs further studies to
discover how processes influence the organizational performance and efficiency, particularly, to find out
what exact influence on the organizational performance and efficiency may has by each process (e.g.
process of supplying, producing and customer service).
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