CIO As Chief Process Officer, Not Strategic Leader

CIO as Chief Process Officer, Not Strategic Leader
October 3, 2007

Few people have had a bigger impact on how the modern corporation is run than Michael Hammer. With James Champy, Hammer wrote the bestseller Reengineering the Corporation: A Manifesto for Business Revolution (HarperCollins, 1993). The book, which argued that companies could radically improve their performance if they rethought and rebuilt their processes, spurred the transformation of businesses around the world.

A former computer science professor at Massachusetts Institute of Technology, Hammer heads Hammer and Co., a management consultancy that specializes in business process.

Hammer sees the chief information officer well positioned in the enterprise to be a catalyst for corporate transformation. While he argues that process management improvements must be led by senior, business-line executives, he says CIOs can play a pivotal role as chief process officers.

A chief process officer, Hammer says, is an organization's chief of staff for process work, the center of its expertise and the keeper of its skills and methodology.

In a recent conversation with contributing editor John McCormick, he expanded on this idea and offered insights into how CIOs can be effective chief process officers.

This is an edited version of their conversation.

Next Page: Improving Processes

CIO INSIGHT: We've been studying process management and process improvement for years, but it seems many companies flounder when trying to figuring out how to improve their processes. Why is that?

MICHAEL HAMMER: Many organizations have made a lot of progress. It's also important to distinguish between process improvement and process management. Without getting too technical, process improvement is not as hard to do because it doesn't involve much organizational change. Process management, on the other hand, involves a lot of organizational change, and that's fundamentally what makes it hard to do.

The issue with process management is that it requires new managerial responsibilities in the organization. Someone has to take responsibility for processes that cross organizational boundaries. The title we often use for this role is process owner. And the challenge is that the process owner takes authority away from functional managers.

That doesn't happen so much with process improvement because functional managers can make their own local improvements. But process management really entails a transfer of authority from functional managers to process owners, and that's a very difficult shift.

Because it involves so much fundamental change, this only can happen if it's driven from the top of the enterprise. This is not something that happens bottom up. And the problem is that in a lot of organizations the senior leadership is distracted by other things, unfamiliar with these ideas, and so is unready to do anything about them, or not focused on operational issues because they're accustomed to business being easy over the last several years.

In a variety of ways—not just because of the credit problem [collapse of the subprime mortgage industry]—it's a much tougher time in business. And I think this is directing more and more people to pay attention to operations generally and their cross-functional processes specifically.

Next Page: CIO as Catalyst, Not Leader

CIOs usually have a pretty good view of the corporation and understand how processes work. Are CIOs better able to effect these types of business management changes compared with other executives?

HAMMER: In general—there are exceptions to everything—the CIO is not in a position to drive and lead this effort. It can only be done by a senior, business-line executive.

But the CIO is extremely well positioned to be what I call a catalyst, where the CIO—because IT sits outside the various functions—really has a bird's-eye perspective on the process issues in the enterprise.

In fact, a lot of these process issues often show up in systems terms. And the CIO can really be the catalyst to alert senior executive management to the problems with processes and to the opportunities that process management presents.

Once an organization gets going with processes, the CIO often becomes what I call the chief process officer. The chief process officer is not the boss of the process owners. The chief process officer is sort of the organization's chief of staff for process work, the center of expertise, the keeper of skills and methodology. And we see more and more organizations where the CIO takes on this additional role of chief process officer.

If you're the chief process officer—the change agent within the company that's bringing about these process management improvements—where do you start?

HAMMER: The first thing to do is to assess your readiness as an organization to proceed. Do you have the leadership? Do you have the right culture in the organization? And if not, you have to start working on those gaps.

What you need to do is identify your processes. If you don't know what they are, you're nowhere.

You also need to do a major assessment of those processes in terms of some key issues: What's the status of the design of that process? Do you have one? Is it a good one or not? What about the metrics? Do you have end-to-end metrics or not? Do you have a process owner or not? Do the people who work in the process understand it? Does your infrastructure, which includes your IT systems, support the process?

Based on that audit, you've identified what issues you need to work on. And so you say, "OK, I'm pretty good in process owner, not good in process metrics. Let me work on process metrics."

Next Page: Process and Enterprise Maturity Model

This audit is embedded in something you call the Process and Enterprise Maturity Model, a tool that helps companies plan and manage business transformations. Please explain PEMM.

HAMMER: There are two parts to it. One is the maturity of your enterprise. The other is the maturity of individual processes.

The first thing you do is set up the maturity of your enterprise. There are four things you look at there. Do you have knowledgeable, committed leadership at the executive level? Do you have a corporate culture that supports process? Do you have institutionalized expertise in the organization? Do you have a governance mechanism for managing process projects?

You use the model to identify any gaps and weaknesses. If you have them, you need to address them, because you won't get anywhere on your process without that.

That'll lead you, for instance, to say, "Gee, I need to strengthen my leadership." Then you, the CIO, would deal with your executive team, educating them, communicating with them, getting them to understand the problems that poor-performing processes lead to and so on.

Once you've made progress in understanding where you are enterprisewide, you can begin to use the process part of it—namely, looking at individual processes and asking yourself: Do we have owners for them? Do we have designs? Do we have metrics and so on? That gives you a plan for how you go about filling those gaps.

How and what exactly do you measure? That's always one of the toughest things for corporations to figure out. As you pointed out in previous works, a lot of companies do that poorly.

HAMMER: Yes. Metrics are a big problem because most metrics are functional, historical and financial. Those aren't the kind of metrics we need. We need real-time, or at least current, metrics, we need end-to-end process metrics, and we need metrics that measure much more than financial performance, but things like speed, customer satisfaction, quality and the like.

I wrote an article for the Spring 2007 [MIT] Sloan Management Review called "The Seven Deadly Sins of Performance Measurement and How to Avoid Them." It provides some guidance on how to develop metrics.

Basically you need to identify your key strategic business goals and which of your processes impact those goals.

So, for example, being first to market with new products is a strategic goal; the processes that impact that are things like product development. Speed or product development becomes the key metric you have to focus on to achieve your strategic objective. That's a real crude summary of what that article suggests.

Next Page: Good and Bad of Metrics The Sloan Management Review article says many of the metrics we use are worthless.

HAMMER: Organizations, to be blunt, really screw this up a lot.

It's mind-boggling how bad most organizations are with metrics. It's just shocking. You would think this is something they would have fixed a long time ago, but it's a persistent problem.

It seems that corporations consistently fall back into the seven deadly sins you define: vanity, or measuring just what you're good at; provincialism, or measuring just your department's part in a process instead of the entire process; narcissism, or measuring corporate goals instead of customer satisfaction; laziness, or not taking the time to figure out what should really be measured; pettiness, or measuring just small pieces of a process; inanity, or not considering the drain your measurement will have on the organization; and frivolity, or not taking measurements seriously.

HAMMER: They continue to make these same mistakes because those mistakes are a consequence of a lack of executive attention to the issue, complacency, not focusing end to end.

I know some organizations that have done a terrific job, but a lot still have a long way to go.

There's a number of business process management software tools on the market. Do they help, and if so, how much or how little?

HAMMER: My attitude about the business process management software is that it won't hurt, but it's not going to do you all that much good.

The critical elements in success with process are executive leadership, creativity to come up with new ideas, the management of change and the management of complex implementation. None of these have much to do with software tools. Yes, BPM software can help you model your processes, can help you in some cases simulate them, and in some case will allow you to create real-time support systems for your processes. It can't hurt. But it's not the difference between success and failure, not at this stage, at least.

Other software tools help organizations get a handle on their processes: knowledge management tools, business intelligence tools. Don't they all have a place?

HAMMER: Yes, but again, they are components that can support you in a process management effort.

My attitude is the same about them. They can't hurt unless you put too much attention on them and if you delude yourself into thinking they make the difference between success and failure.

Next Page: Process First, Technology Second

I'm reminded of an article you wrote about a retailer that wanted to find out how many people who went into its store bought something. They just hired a bunch of kids to count the people who went in and then count the ones who came out with something.

HAMMER: Right. They were measuring the percentage of customers who actually bought something.

There is a temptation among people in the IT world to look for technological solutions before they're needed.

Look, I used to be a professor of computer science at MIT, so it's not as though I'm afraid of computers. But I know people who will use a computer to do something as long as it's not too much more awkward than doing it manually. So somehow using a computer is a virtue in itself.

A good rule of thumb—it's not always doable—is try to implement new processes without technology, and afterward bring in technology to boost them rather than make them dependent on technology out of the box.

Isn't that almost the reverse of what companies do today?

HAMMER: Yes, but the companies that take the approach I just described are often very successful with it because it gets clarity about their processes. Otherwise, you end up with what I call paving the cow path; you're overlaying new technology on a bad process.

Which companies are the best at process management? You've mentioned some, such as Air Products and Chemicals, in your work. Could you name a couple more?

HAMMER: There are quite a lot. Naming 20 would be easy. Naming just two or three is hard. A few, off the top of my head: Shell; PepsiCo, especially in Latin America; and Tetra Pak, a company based in Europe that makes packaging equipment.

What characteristics make them successful?

HAMMER: Overwhelmingly No. 1 is executive commitment. Second is "thoroughgoing"—in other words, they did it by the book and they addressed everything that needed to be addressed. They didn't leave stuff out. Those probably are the two most important things.

Next Page: Empathizing with People

How important is making sure people are ready to adapt to the change? Obviously, that plays a huge role in any process.

HAMMER: It does. The problem is, a lot of organizations don't want to bother with it. They think it's easy. They think it's not important.

What it really requires is sort of empathizing with people in the organization and what they're experiencing, communicating with them much more than you think you need to, listening to their concerns, giving them support during a transition, showing them you're absolutely committed, readjusting the reward system to encourage them. And, it's very doable. It just requires serious commitment.

Giving them the tools so they can do their jobs better.

HAMMER: Precisely. Training, education and tools.

If you talk to a group of CIOs who want to be catalysts for business process management, business process improvement, what are the two or three things you would tell them to do?

HAMMER: No. 1, educate yourselves about it. Make sure you really understand it, not just know a few catchwords.

Secondly, start working on getting the senior executive team comfortable with the concept, which often includes taking them on a visit to other companies that are doing well with it.

And, certainly, start pilot projects right away, because you need pilot projects to demonstrate to the organization that this stuff really works.