1. Introduction
The analysis shows that an approach based on process
could not be fully utilized due to lack of scientifically substantiated
methodology that could embrace all aspects
of corporate operation. A practical mechanism for implementation of a
process based approach was absent. Today the theory called systematic
process modeling (SPM) has been created and actively developed. The theory
operates with a developed postulation system and definitions harmonized with
cybernetics, system analysis, theory of solution of invention tasks, theory of
self-organization, theory of physical structures, fractal theory, etc. SPM does
not only explore and explain in depth mechanisms of corporate functioning, but
also provides a powerful practical tool for solution of a multitude of practical
production and management tasks. In essence efficient management practices for
which people paid dearly could be logically derived from solution of the tasks.
SPM is not another tool for corporate
management or recipe for its improvement, but a technology for designing these
tools “here and now” in a form most adopted for the situation. SPM is a theory that explains
the composition and functioning of the company as it is.
SPM adopts an essential view on operation of the
company and it explains the main reason for low efficiency of systematic
approach adopted under ISO 9000 standards. It turned out that what they erroneously call “processes” are in
essence functions, operations, activities. But each of these terms have its own
inherent semantics! Process is not an activity but its consequences;
changes that occur in the object to which the activity is applied. Process is a transition of the object or
the event from the state with certain initial characteristics to the state with
different finite characteristics. The difference between terms “process”,
“operation” and “function” is shown in the following chart:
Chart 1. Process, operation, function.
2. Corporate processes as they are in essence
What
is the main process? From the first sight the answer is evident – it is a
transformation of a resource to which efforts are applied aimed at obtaining a
more valuable resource or at multiplication of the existing resource.
Consequentially the main process is a
chain of transformation of the money being a universal resource and being
the means of valuation of all other resources, which is reflected in the famous
formula “money – commodity – money plus profit: M Þ C Þ M’. It is reflected
in a Harvard definition of commerce: «commerce is a means of satisfaction of customer’s
demand which brings profit to the provider”.
According
to chart 1 the company (provider) will be processing venture capital M into commodity C and back into capital
plus profit (M’) – which is
the result of the main process for the owner of the company (consumer of
the result).
But
from the point of view of the management of the company the main process will
be transformation of inputs into the commodity (I Þ C), because in absence of the commodity there is nothing to sell. From the
point of view of suppliers of inputs the main process will be transformation of
their commodity into money for their company: I Þ M. The consumer views the situation differently: he becomes a consumer
when he exchanges his money for the commodity provided by the company, but in order
to do that it is necessary to transform a potential consumer into an actual
consumer: Cp Þ C. Only after that exchange of consumer’s money for the commodity takes
place C Þ M’. For the government the main process here is transformation of money
into taxes: M Þ T, etc.
It
is evident that there is no overall main process for the company, but only the
processes which are perceived as main
by specific users (stakeholders) of specific results. Description of each of
these processes presents an ideal picture – the model that reflects corporate
behavior within a certain interaction. The company as any other material object
can be characterized through a multitude of external and internal interactions.
External (main) interactions and processes are ensured through internal (main)
interactions and processes. Thus other users could perceive the process perceived
by one user as the main as subordinate.
At
the same time all processes are interconnected. For example, the main element
in the chain of processes M Þ C Þ M’ is the commodity.
But the final result of the chain occurs only when company’s product interacts
with the consumer – owner of the money. The exchange takes place only if the consumer has a demand, wants to
satisfy it and selects the products. It is evident that he has to undergo a
number of transformations (processes) from a “potential consumer” to “user of
the commodity”. Ultimately he may turn into a “loyal consumer”. For every
company the aim of these processes is the main
sequence of processes (MSP) applied to the consumer – the company gradually
drives a kind of conveyor undergoing which the consumer into direction
desirable to the company:
Chart 2. Main sequence of processes.
Number of links in the chain depends on the
competition – the tougher the competition is the longer is the chain. The chain
may consist of up to complete 15 links. The more detailed description for MSP
you provide the more effective you may develop necessary strategy for the
company (operations). In essence MSP is the basis for building up marketing
strategy for the company or any other strategy necessary for the company from
HR management to production process management.
MSP for the consumer objectively frames
production process sequence – an algorithm of efforts applied to transform the
consumer from his initial state into his final state:
Chart 3. Sequence of processes and operations
MSP for the consumer requires resources: both
material and information resources. Resources should be available and finished
by the time operation occurs. But, as a rule, finished resources do not exist,
they should be processed into finished state. Processes for preparation of
resources for the main process are called main
processes and they also make up chains:
Chart 4. Chain of resource preparation processes
That is,
organization of the main process does not differ substantially from consumer’s
MSP apart from changeable resource and is common for all companies: the only
difference is in number and length of chains. Number of intermediate resources
(length of the conveyor) is defined by the technology. Finished resources are
also necessary for execution of main processes. So the chain of processes
consists of nods, cross-sections of
the chains of processes, which include necessary resources as inputs and products
and waste as outputs. Expenditure of resources occurs in the nods, which
correspondingly leads to occurrence of costs:
Chart 5. Process
organization (process nod).
Process nods can be used for analysis of the
overall complex of the factors that influence each of the processes and correspondingly
final result. Probability of obtaining
preset parameters and characteristics (references) during transition from
initial to final state is a criterion of quality of organization of the chain
of processes.
All process chains have their initiation and
their completion: partially within the company, partially outside. But external
initiation and completion of the process chains is arbitrary: before and after
processes occur that are outside company’s control and management. That is why
its homeostasis may be improved through extension of the homeostasis for
uncontrolled processes, which is shaped as vertical integration. Control over
processes of product consumption ensures stronger influence of provider on
consumer. Sometimes this control logically leads to setting up conditionally
wasteless productions that include utilization of wastes generated by
independent consumers. Analysis of external process chains provides for
designing and implementing operations and technologies for their management,
which includes generation of flawless business ideas. As an example we can
provide consumer’s MPS all of which is practically located externally.
Combination of the external process chains that are directly or indirectly
managed by the company makes up thermostat
of the company. Thermostat is a kind of cocoon or an artificial oasis that
ensures favorable conditions for operation of the company.
The complex of process chains makes up a tree
with the branches that represent sequences of main processes of different levels:
Chart 6. Process
tree (fragment)
The process tree is characterized by the fact
that the management of the company has to realize all its sequences regardless
of its competence or preferences. It is the objective factor that in reality
provides the structure for interactions and functions for the employees of the
company. Their interaction is more logical and more graphic when organizing of
the process tree if fully realized. It remains unchanged regardless of all administrative modernizations. The
process tree ensures optimization of positioning of control points and
monitoring of processes. Strictly speaking, only through interaction of
processes that transform different resources it is possible to ensure viability
of the company.
Essentially it is difficult to present the
whole tree. Conventionally it can be presented as a system of parallel chains
made up from nods of processes for every resource:
Chart 7. System
of processes (fragment)
Each chain may be represented as a set of
functions of different variables (resources). Complex of the functions allows
us to tackle mathematical modeling of the company.
3. Signaling and Regulatory Systems
SPM is based on perception of the company as a living extrabiological object – social
organism. As any organism the company seeks for stability of internal processes
under changing circumstances – homeostasis which acts as natural attractor for open biological and
extrabiological structures (organisms) and companies also fall under the
category. Viability of the company improves when homeostasis is stable
with flexible responses to changing external conditions. It is better when
responses are proactive. Toward this end the company possesses a regulatory
mechanism – homeostat. It exists objectively (even though, as a rule,
unconsciously), otherwise the company would not be able to survive a day.
Homeostat is a complex of systems of company management. Efficiency of
homeostat ensures viability of the company. For example, one of the elements of
homeostat is a marketing in its advanced forms, when the signals that denote
current or impending changes generated by it are of imperative character strengthened
by response models, that is by innovation technologies.
Homeostasis, homeostat and thermostat are not
new notions, they have been in use since the 30s of the previous century. But
they were not applicable to corporate practices. The simplest and at the same
time the most complete homeostat is a complex of management contours:
Chart 8. Management
contour
In
essence it is a graphic presentation of the general principle of any business.
Here we see occurrence of signaling
regulatory systems (SRS) that regulate the “provider’s” feedback with
remote consequences of its operation. SRS ensures analysis of external and
internal environment, prognosis for changes and actions aimed at support of
homeostasis of a certain process. Management contour is the first fully-fledged
homeostat within a series of multiple attempts to build up an elementary management
structure. It not only stabilizes the process per se but also ensures its
adequacy to changing conditions of external environment. Each its link is a nod
of processes.
The
management contour unites participants of the process tree with the SRS complex
(represented by a dotted line with the letter ‘K’) that make up a specific
structure of the linear homeostatic system (LHS):
Chart 9. LHS as homeostatic complex of SRS
Due to evolutionary character of its
development SRS and LHS having been exposed to a multitude of accidental
factors gradually adopt more regular form lining along the process chain. But neither
SRS nor LHS possess a stable configuration and composition of elements. In
practice SRS (and even more so LHS) can be documented in the context of
production processes. Apart from that they exist more in the form of informal
personal relations (self-regulation effect). Here an important characteristic
of SPM becomes transparent: if the management structure is built on the basis
of process, the functions are delegated from bottom to top on a residual
principle, whereas when it is built on the basis of the function, it is built
vice versa. LHS is the “systems of quality management” widely referred to but
never specified.
The feeling of inadequacy of static management
schemes leads some management and consultants to adoption of reengineering,
personnel rotation, merging/splitting, project oriented units, managed chaos,
etc. But in essence nothing is changed apart from change of names and
personnel.
Is there any ultimate solution to the problem?
No, there is not. Ideal corporate organization is unattainable in principle. The ideal can be only approached, improving
certain chains and branches of process tree and subordinating one’s own actions
to support of homeostasis, improvement of homeostat and extension of thermostat
of the company with the help of SPM. This means that interaction of
providers of certain processes needs more improvement than separate units and
division of responsibilities.
Usually
improvement of company’s homeostat is carried out through evolutionary selection – using try and fail technique when the
companies that possess less useful mutations are screened out. SPM protects the
company from evolutionary screening out through deliberate adoption of useful
and efficient changes. Gradual improvement of the company is reflected in the
level of evolution of its homeostat that may be characterized by the following
parameters:
1st level – the most primitive level of
company’s evolution, period of extensive growth. Only sales based cash flow is
evaluated – the shortest SRS. Homeostasis is absent. Functional approach to
management: employer hires personnel and distributes responsibilities. No time
to analyze quality of performance – time is money and money talks! Quality of
personnel is of secondary importance. Personnel turnover is not a problem.
2nd level – attempts to evaluate quality of
homeostat through impact of previous costs on current conditions of the
company. The employer starts to think how to more effectively place the personnel
and divide responsibilities. Costs analysis becomes important. It is a
preparatory stage to operation based approach. Qualification of providers
becomes important.
3rd level – attempts to improve homeostat
through cost management. Characteristics: better quality of consumed resources,
higher profit generated, deeper processing, etc. Operation based approach to
management.
4th level
– perfection of homeostat. Evaluation of impact of budgeted costs on
subsequent conditions of the company. Qualification and loyalty of personnel
becomes really important: the higher is qualification the better is employee,
but it also makes it easier for him to leave the company. Corporate mission is
gaining substance and ceases to be a mere statement. Dependence on quality of
personnel resources and external environment becomes weaker, whereas quality of
corporate structure improves.
5th level – evaluation of impact of costs
on quality of homeostat. Further substantial weakening of dependence from
external intellectual resources. Thermostat extends through more competence
generation.
Sequence of levels is graphically presented through so
called S shaped evolution curves:
Chart 10. Resulting sequence of levels of company’s evolution.
The chart
reflects growth of levels of regulation of LHS and of quality of homeostat,
which increases independence of the company from current changes of external
environment. Elements of the company are developed similarly (units, personnel,
technologies, etc.). By the end of evolution creative intellectual potential
becomes the main product of the company. Diagnostics of the current level of
evolutionary perfection of the company allows us to accurately define critical
points for application of organizational efforts of the management, including
demand in certain consulting services.
From the
viewpoint of SPM theory there is no difference in approach to different
companies. Process trees and homeostats
of different companies occur and develop on the basis of identical fractal
principle with the only difference in dimensions and in branching. And it
does not depend on awareness of the management. It is not a coincident that
many companies are subject to identical economic rules. Certainly companies
differ to a certain extend (of course they have different products).
Individuality of the company is created by subjective perception of processes
that take place in the company and based on experience.
4. Conclusion
In the
process of its development SPM gradually transforms into a more powerful
theory, a practical and reliable tool for solution of various tasks that are
constantly faced by the managers. In essence all these tasks may be formulated
and efficiently solved with the use of one and the same model, which adequacy
is defined only by willingness of management of the company. For solution of
simple tasks simplified model is sufficient, for more complicated tasks it
could be expanded to necessary dimensions in order to find optimal
incorporation of external and internal factors.
Vladimir Alexandrovich Korolev
Systematic Process Modeling:
Basis for Efficient Management