How Much Does It Cost When No One Owns a Business Process?

At IBM Credit, a financing request took six days on average to process. Sometimes it took as long as two weeks.

Yet the actual work required just 90 minutes.

The request passed through five different steps, handled by different specialists. At every stage, it could wait for someone to pick it up. No one was responsible for moving it through the entire process.

IBM eventually redesigned the workflow. The turnaround time fell to about four hours.

This example reveals a cost that is easy to overlook in business: the time and resources lost between process steps.

It happens in organisations of every size - in waiting time, manual hand-offs and problems that go unnoticed until they affect customers or margins.

Six days of waiting for 90 minutes of work

The IBM Credit example illustrates how much time and capacity can be lost between activities, even when each individual task is completed correctly.

The original process involved five steps. A request moved from the sales representative to the credit department, then to business practices, pricing and finally administration. At each stage, it could wait in a queue before someone picked it up.

Two senior managers at IBM Credit followed a request through all five steps. They discovered that the time spent actually working on it was only 90 minutes. Most of the delay came from passing the request between departments.

IBM Credit redesigned the process. Instead of sending standard requests from one specialist to another, one person - a deal structurer - handled the application from beginning to end. Specialists remained available to help with more complex cases.

The turnaround time fell to about four hours.

The case, described by Michael Hammer and James Champy in Reengineering the Corporation, shows what can happen when responsibility is organised around the complete process rather than individual tasks.

Three places where process costs accumulate

The IBM example is not limited to large financial organisations. Similar costs appear in everyday business operations.

1. Waiting between steps

A request may be ready for the next stage, but the next person does not know it is waiting. An employee may be handling other priorities, checking an inbox or waiting for missing information.

The delay rarely appears in a department's own performance figures. The task may still be completed within the expected time once someone starts working on it.

But from the customer's perspective, the process is still taking too long.

2. Manual work that keeps the process moving

In one warehouse we worked with, data-entry operators printed every waybill and courier label by hand after orders had been picked - around 600 a day.

The process required employees to move information from one stage to another and prepare documents that could have been generated automatically.

The workflow was changed. After picking an order, a warehouse employee scanned the picking list. Once packing was complete, the system asked how many parcels were being sent and printed the corresponding waybills and courier labels.

Work that had previously occupied four people was reduced to a little under three. The estimated time saving was around 8-10 hours per day, or approximately 200 hours per month.

These figures are estimates based on the operational change, not the results of a formal time-and-motion study. Even so, the example shows how repetitive manual steps can consume a significant amount of working time.

3. Problems that are noticed too late

A process can also create costs when no one is monitoring what happens after a change.

In one company, product prices and discounts were imported into the ERP system manually. During one promotion, the end date was omitted from the import. As a result, promotional prices remained active for some products after the campaign had ended.

The impact became visible through lower margins on certain product groups. The first warning sign was a shortage in the warehouse.

The price import itself had been completed. The problem was that the effect of the change was not identified in time.

This is one of the harder process costs to measure. A mistake may remain unnoticed until it affects stock levels, revenue, margins or customer expectations.

Why do these costs remain invisible?

Organisations often measure work by department, role or system.

The warehouse measures picking and packing. Finance measures invoice processing. Sales tracks orders and revenue. IT monitors whether systems are available and functioning.

These measurements are useful, but they do not necessarily show how the entire process performs.

One department may meet its targets while creating additional work for another. A task may be completed on time, but the next step may not begin for several hours. A system may show that a transaction was processed successfully, even though the business result is incorrect.

Research published by Forrester in 2007 found that only one of 57 businesses surveyed identified a single process owner for the complete order process. The finding is specific to that research and its sample, but it illustrates how easily responsibility for a process can become fragmented.

When no one has a clear view of the complete process, delays and problems can remain between departmental reports.

How can you find out what a process is really costing?

You do not need to start by reviewing every process in the company. Choose one that has a direct impact on customers, revenue or operating costs - for example, order fulfilment.

Start by following one order from the moment it is placed until it reaches the customer.

Record each step:

• Who receives the information?
• Who performs the work?
• How long does the task take?
• How long does the order wait before the next step begins?
• Is information entered or checked more than once?
• Where do employees need to intervene manually?
• What happens when something goes wrong?

Then look at a larger sample. Take the last 100 orders and map the same stages for each one. A simple spreadsheet is enough to start.

For every order, record the time spent waiting, repeated work, manual interventions and any issues that affected delivery, customer experience or margin.

This helps distinguish between the time required to do the work and the time the process takes to deliver the result.

It also gives managers something more useful than a general impression that a process is slow: evidence of where time and resources are being lost.

Who should be responsible for the process?

A process owner needs more than a title.

The role requires a clear view of how the process works across departments, access to the information needed to understand its performance, and the authority to coordinate changes when one part of the process affects another.

Research by Hajo Reijers and Roel Peeters, Process Owners in the Wild (2010), found that the formal definition of process ownership and the way the role is actually carried out in organisations can differ considerably.

That distinction matters. Assigning someone as a process owner does not automatically give them the visibility or influence needed to improve the process.

The person responsible must be able to see where work is waiting, identify recurring problems and bring the relevant people together to address them.

Without that responsibility, each department can continue improving its own part while the overall process remains slow and expensive.

What does it cost when no one owns a business process?

The cost is rarely recorded under one budget line.

It appears as hours spent on repetitive tasks, orders waiting for attention, employees checking information that has already been entered, and errors discovered only after they affect the business.

The first step is to follow the work rather than look only at departmental results.

Take one process. Follow it from beginning to end. Find out where time is spent, where information changes hands and where problems go unnoticed.

Then ask one question: Who, by name, could tell you on any given day where this process is, what it is waiting for and what needs to happen next?

If no one can answer, you may already have found one of the sources of hidden operating costs.