Business Process Management (BPM)

Corporate Governance, as we know it today, has undergone a drastic change from the past. In yesteryears, Corporate Governance, was open to interpretations by individuals who were assigned the responsibility for individual tasks.

The board of directors used to hold meeting with senior management wherein they would assess, review and plan performance, goals, duties, etc. After obtaining the status, feedback and results from the individuals for tasks assigned to them, further goals and plans were chalked out.

However, today, the scenario has undergone a sea change with requirements and expectations being definitive and clearly sketched out. In addition, the end deliverables are clear with periodic checks and strict adherence to schedules and standards.

Moreover, the introduction of independent directors on board has enabled organizations to obtain objective and totally unbiased inputs and assessment regarding its performance.

Corporate Governance is no longer merely a ritual to be completed, but needs to be ingrained in the way an organization functions. It entails fulfilling the demands of various stakeholders, shareholders, customers, employees, regulatory bodies, and civic authorities. To make the task more complicated, each demand is unique, depending upon the stakeholder. This necessitates individual and customized addressing of demands.

Corporate Governance is about presenting the true picture of the health of the company by accurate financial reporting, assessing all the business dealings for possible risks, establishing controls for risk mitigation, and calculating the residual risks and bringing them upfront.

The days of individual accountability for every task are long gone. In a board meeting, a labor officer pronouncing everything hunky-dory on the employee front, a company secretary vouching for appropriate and timely financial reporting, and similar other familiar-but-inapt methods are nowhere to be seen in today’s business environment. This old approach believed in assigning specific responsibilities to individuals and making them responsible for any hiccups in their assigned tasks.

In today’s dynamic business environment, such an approach is nothing but perfect recipe for disaster. Listed companies have high visibility; a single instance of a lapse by an individual could tarnish the image of the whole organization with unfavorable media reports, thus plummeting shareholders value in no time. Enron, the former power giant, stands testimony to this – a great organization brought down to dumps by a few acts of omission and commission.

Today, the CEO/CFO is accountable for all acts of omission and commission as done by anyone in the organization. To minimize misinterpretations of such instances, the work is to be defined in detail to such an extent so as to leave little scope for individual definitions and interpretations.

By including Corporate Governance under the realms of their duties, CEO’s and CFO’s job has become even tougher. They operate in fiercely competitive environment, meeting quarterly numbers, facing the analysts among a plethora of other tasks. Amidst this, the added responsibility of Corporate Governance, which effectively encapsulates every activity in the organization, could easily overwhelm most dynamic CEOs and CFOs.

The need of the hour, therefore, is a comprehensive Business Process Management (BPM) approach. This requires every business process to be documented, in detail and with maximum clarity. All possible risks, whether financial, strategic, reputation, or operational, have to be identified, and controls for mitigating these risks have to be established.

Processes have to be continually audited to ensure proper implementation and to identify the weakness. Finally, the processes have to be redefined to rectify the identified weaknesses and, thus, continuously improve and refine processes.

All this might sound overwhelming. However, if a group of informed people brainstorm to systematically analyze processes, build controls, and ensure proper execution, with risk advisory consultants bringing fresh ideas and best practices of the industry and auditors looking at the feasibility of implementation and audit, there are minimal chances of things going wrong.

The case of order execution will help make the case of process-based approach stronger. A company receives a very large LOI. It immediately swings into action, making huge investments for executing the order quickly. Some time later, the LOI gets canceled. The company, unable to bear the loss, gets wiped out from existence. If only a separate process for order execution- one which took care of all the dynamics involved- would have been built and used, the company would still be existing, probably thriving.

In another example, suppose a production floor of an auto ancillary company churns out different types of auto components, a production line dedicated to each type of component. All production lines are capable of producing variable number of components depending upon the number of employees assigned to the production line.

The company, working in a dynamic environment, has to cater to frequently-changing demands for different components. For this, number of employees working on a particular production line have to be increased or decreased to compensate for other production line(s). The key is to quickly and accurately assess the exact number of workers needed for each production line.

A manual system cannot even be conceived to handle the speed and accuracy required in such dynamic environment. However, a BPM system, can immediately determine the number of workers to be assigned to different assembly lines for optimum output.

Therefore, every activity has to made process oriented. This would mean individuals functioning only as per the defined, documented, and established process. In absence of any established process, instead of a quick-fix solution, a new process would first need to be defined and approved, and only then the action will be taken. This would ensure nothing goes wrong inadvertently.

This will also stop the ritual of finding a scapegoat everytime something goes wrong. For example, there would be no need to sue a sales director, when he leaves the company, for wrongdoing in dealers’ commissions; a finance officer need not be crucified for financial wrongdoing.

A well-defined process would catch all this in the early stages, and consequently, the process would be improved upon to eliminate such instances.

With hundreds of processes, ranging from assessing sticky receivables, ensuring good sales of assets, employee benefits and civic authority sanctions to environmental clearances, it is a gigantic task.

Manually managing all the process documentation, ensuring accurate implementation, and tracking and auditing the process is unfeasible as it involves mammoth effort, which outweighs the advantage of implementing a process. At the same time, only a systematic and meticulous approach to establish processes can bring in the real benefits.

Therefore, it has become imperative to implement a BPM system to automate these processes, monitor the implementation, and improve the processes continuously.

In a complex and dynamic enterprise environment, with a multitude of intricately intertwined factors, things may still go astray. However, with a properly audited and well-documented system, comprehensive audit trails would prove the intent of the management and collective responsibility.

Clearly, all this would require substantial resources, both in terms of time and money. However, the biggest and most profound requirement for establishing a process-driven approach using BPM systems is the mindshare and time of today’s CEOs and CFOs. It’s an arduous task, no doubt.

However, once a properly implemented process-oriented system is in place, it will bring long-term benefits to the organization. It will encourage independent directors to come on board and contribute confidently. At the same time, it will enable CEOs and CFOs to work aggressively and effectively, resulting in continuous growth of organization.