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www.hbrreprints.orgTOOL KITThe Process Auditby Michael Hammer•A new framework, ascomprehensive as it is easy toapply, is helping companiesplan and execute processbased transformations.Reprint R0704HTOOL KITThe Process Auditby Michael Hammerharvard business review • april 2007 page 1COPYRIGHT © 2007 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.A new framework, as comprehensive as it is easy to apply, is helpingcompanies plan and execute process-based transformations.Business has embraced process managementas a way of life. New and controversial when Ifirst described the concept 17 years ago in thepages of this magazine (see “ReengineeringWork: Don’t Automate, Obliterate,” HBR July–August 1990), the process-based approach totransformation is now used routinely by enterprises all over the world. Few executivesquestion the idea that redesigning businessprocesses—work that runs from end to endacross an enterprise—can lead to dramatic enhancements in performance, enabling organizations to deliver greater value to customersin ways that also generate higher profits forshareholders. In virtually every industry, companies of all sizes have achieved extraordinaryimprovements in cost, quality, speed, profitability, and other key areas by focusing on,measuring, and redesigning their customerfacing and internal processes.Sadly, however, casualties litter the road.Since 2000, I have personally observed hundreds of companies try to rejuvenate themselves by creating or redesigning businessprocesses. In spite of their intentions and investments, many have made slow or littleprogress. Even businesses that succeeded intransforming themselves have found the endeavor arduous and harrowing. All changeprojects are tough to pull off, but processbased change is particularly difficult. Contraryto widespread assumptions, designing newbusiness processes involves more than rearranging work flows—who does what tasks, inwhat locations, and in what sequence. To makenew processes work, companies must redefinejobs more broadly, increase training to supportthose jobs and enable decision making byfrontline personnel, and redirect reward systems to focus on processes as well as outcomes.As if that weren’t enough, enterprises alsohave to reshape organizational cultures to emphasize teamwork, personal accountability,and the customer’s importance; redefine rolesand responsibilities so that managers oversee processes instead of activities and develop people rather than supervise them; andrealign information systems so they help crossThe Process Audit•••TOOL KITharvard business review • april 2007 page 2functional processes work smoothly ratherthan simply support departments.In most of the companies I studied, executives were floundering. They realized that theyneeded to change many things to harness thepower of processes, but they were unsureabout what exactly needed to be changed, byhow much, and when. Their uncertainty wasmanifest in hesitant decisions and confusedplanning, in endless debates and unproductivediscussions, in unwarranted complacency andequally unwarranted despair, in errors and rework, in delays and abandoned efforts. Peoplekept asking one another questions such as, Didwe start with the right thing? How do we knowwe are making progress? What will the organization look like when we finish? Moreover, executives, especially when they work in different functions, often disagree about the factorsthat aid process-based transformations. Eachhas a pet idea based on his or her expertise.Like the six blind men and the elephant, onefocuses on technology, another on human resource issues, a third on organizational structure, and so on, creating confusion and conflict. Managers also have a tendency to swingfrom wild optimism that developing new processes will be painless to unremitting gloomthat the task is hopeless. Without knowingwhat they must concentrate on and when, executives have been unable to master the science of transforming business processes.Five years ago, I started a research project inconjunction with the Phoenix Consortium—agroup of leading companies with which I workclosely—to develop a process implementationroad map. My aim was to create a frameworkthat would help executives comprehend, plan,and assess process-based transformation efforts. Over time, I identified two distinctgroups of characteristics that are needed forbusiness processes to perform well and to sustain that performance (see the exhibit “TheProcess and Enterprise Maturity Model”). Oneset of features applies to individual processes.These process enablers determine how well aprocess is able to function over time. They encompass the comprehensiveness of a process’sdesign, the abilities of the people who operatethe process, the appointment of a top-levelprocess owner to oversee the process’s implementation and performance, the match betweenthe organization’s information and management systems and the process’s needs, and thequality of the metrics that the company usesto measure process performance. My researchshows that not all organizations are equallyprepared to put these enablers in place.Companies that are able to do so possess important enterprisewide capabilities: Their senior executives support a focus on processes;their employees greatly value customers, teamwork, and personal accountability; they employ people who know how to redesign processes; and they are well organized to tacklecomplex projects.Together, the enablers and capabilities provide an effective way for companies to planand evaluate process-based transformations. Ipresented the model’s first version to the Phoenix Consortium’s members in 2004, and theytested and revised it extensively. In 2006, I finalized the framework, which I call the Processand Enterprise Maturity Model (PEMM). Inthe following pages, I discuss the five processenablers and four enterprise capabilities indetail. I also show how companies that usePEMM can take the task of process transformation out of the arena of intuition and mysteryand subject it to measurement, evaluation, improvement, and replication.Can Your Processes Deliver HighPerformance?My two decades of experience with businessprocesses have taught me that form influencesfunction—that is, process design determinesperformance. By design, I mean the specification of which people must perform what tasks,in what order, in what location, under whatcircumstances, with what information, and towhat degree of precision. Certainly, companies can use techniques such as Six Sigma andTQM to ensure that employees execute processes correctly. However, redesigning processes is often the only way to improve theirperformance dramatically. Doing so eliminates many of the nonvalue-adding activitiesthat are the source of costs, errors, and delaysand helps companies come up with process innovations (see my article “Deep Change: HowOperational Innovation Can Transform YourCompany,” HBR April 2004).Although process redesign is no longer theterra incognita it once was, one issue stubbornly persists: Most companies tend tooverlay new processes on already establishedfunctional organizations. However, the appurMichael Hammer ([email protected]) is the founder ofHammer and Company, a managementresearch and education firm based inCambridge, Massachusetts.The Process Audit•••TOOL KITharvard business review • april 2007 page 3tenances of a traditional organization—such asjob definitions, performance measurement systems, and managerial hierarchies—don’t always support high-performance processes. Forinstance, senior executives might encouragemanagers to create a cross-functional processbut then prevent them from altering the company’s performance measurement system appropriately. That’s shortsighted. The revampedbusiness process needs employees to focus on abroad, common outcome; if the organizationmeasures performance as it has always done, itwill reward people for focusing on narrow,functional goals. How can the process live upto its potential under those circumstances?Companies will invest in retraining employeesto work in a new process, but they balk at footing the bill for helping people understand howthe process works as a whole. If employeesdon’t know the context in which they work,they will be prone to making decisions thataren’t in the best interests of the entireprocess. Similarly, leaders will try to createprocesses without altering managerial responsibilities. That’s problematic, too. A highperformance process extends across functionalboundaries, so a senior executive must supervise it. Without such a person, the processwon’t gain traction within the organization.While studying organizations that were implementing new processes, I kept track oftheir errors of omission. I also analyzed thevarious factors that were necessary to sustainbusiness processes. I tested both lists overseveral years and winnowed them down tothe five characteristics that I find are essentialfor any process to perform well. A processmust have a well-specified design; otherwise,the people performing it won’t know what todo or when. The people who execute the process, the performers, must have appropriateskills and knowledge; otherwise, they won’tbe able to implement the design. There has tobe an owner, a senior executive who has theresponsibility and authority to ensure that theprocess delivers results; otherwise, it willfall between the cracks. The company mustalign its infrastructure, such as informationtechnologies and HR systems, to support theprocess; otherwise, they will impede its performance. Finally, the company must developand use the right metrics to assess the performance of the process over time; otherwise, itwon’t deliver the right results. These enablers give a process the potential to deliverhigh performance.The enablers are mutually interdependent:If any are missing, the others will prove to beineffective. A weak owner can’t implement astrong process design, poorly trained performers can’t carry out the design, a bad design cannot optimize the process metrics no matterhow well thought-out they are, and so on. Aprocess that is missing an enabler might deliver results in the short term through superhuman performance or executive intervention,but those results won’t last. Of course, havingall the enablers in place doesn’t guarantee thata process will perform well; for instance, themere existence of a process design doesn’tmean it’s a good one.I have witnessed repeatedly how missing enablers can derail processes. At a well-knownelectronics giant, for example, a team designeda new order-fulfillment process and conducteda successful pilot. However, the process ownerdidn’t have the authority to force unit heads toimplement it, so the effort floundered. In another instance, a major consumer goods manufacturer created a new process and trained itsworkers to perform new jobs. However, itdidn’t educate them about the overall process.As a result, some employees made decisionsThe Process and Enterprise Maturity ModelCompanies need to ensure that theirbusiness processes become moremature—in other words, that they arecapable of delivering higher performance over time. To make that happen, companies must develop twokinds of characteristics: process enablers, which pertain to individualprocesses, and enterprise capabilities,which apply to entire organizations.There are five process enablers…Design: The comprehensiveness of thespecification of how the process is to beexecuted.Performers: The people who executethe process, particularly in terms of theirskills and knowledge.Owner: A senior executive who has responsibility for the process and its results.Infrastructure: Information and management systems that support the process.Metrics: The measures the companyuses to track the process’s performance.…and four enterprisecapabilities.Leadership: Senior executives whosupport the creation of processes.Culture: The values of customer focus,teamwork, personal accountability, and awillingness to change.Expertise: Skills in, and methodologyfor, process redesign.Governance: Mechanisms for managing complex projects and change initiatives.Companies can use their evaluationsof the enablers and capabilities, in tandem, to plan and assess the progress ofprocess-based transformations.Key pointThe Process Audit•••TOOL KITharvard business review • april 2007 page 4You can evaluate the maturity of a business process and determine how to improve its performance by using this table. Decide how the statements defining the strength levels, from P-1 toP-4, for each enabler apply to the process that youare assessing. If a statement is largely true (atleast 80% correct), color the cell green (mediumgray here); if it is somewhat true (between 20%and 80% correct), shade the cell yellow (lightgray here); and if it is largely untrue (less than20% correct), make the cell red (dark gray here).For companies trying to advance to the next levelAssessing theMaturity of YourProcessesDesignPerformersInfrastructureOwnerMetricsPurposeContextDocumentationThe process has not been designed on an end-to-end basis.Functional managers use the legacy design primarily as acontext for functional performance improvement.The process has been redesigned from end to end in orderto optimize its performance.The documentation of the process is primarily functional,but it identifies the interconnections among the organizations involved in executing the process.There is end-to-end documentation of the process design.Performers can name the process they execute and identifythe key metrics of its performance.Performers can describe the process’s overall flow; howtheir work affects customers, other employees in the process, and the process’s performance; and the required andactual performance levels.Performers are skilled in problem solving and processimprovement techniques.Performers are skilled in teamwork and self-management.Performers have some allegiance to the process, but oweprimary allegiance to their function.Performers try to follow the process design, perform it correctly, and work in ways that will enable other people whoexecute the process to do their work effectively.The process owner is an individual or a group informallycharged with improving the process’s performance.Enterprise leadership has created an official process ownerrole and has filled the position with a senior manager whohas clout and credibility.The process owner identifies and documents the process,communicates it to all the performers, and sponsors smallscale change projects.The process owner articulates the process’s performancegoals and a vision of its future; sponsors redesign and improvement efforts; plans their implementation; and ensurescompliance with the process design.The process owner lobbies for the process but can onlyencourage functional managers to make changes.The process owner can convene a process redesign teamand implement the new design and has some control overthe technology budget for the process.Fragmented legacy IT systems support the process. An IT system constructed from functional components supports the process.Functional managers reward the attainment of functionalexcellence and the resolution of functional problems in aprocess context.The process’s design drives role definitions, job descriptions, and competency profiles. Job training is based on process documentation.The process’s inputs, outputs, suppliers, and customershave been identified.The needs of the process’s customers are known and agreedupon.KnowledgeSkillsBehaviorInformationSystemsHumanResourceSystemsIdentityActivitiesAuthorityThe process has some basic cost and quality metrics. The process has end-to-end process metrics derived fromcustomer requirements.Managers use the process’s metrics to track its performance, identify root causes of faulty performance, and drivefunctional improvements.Managers use the process’s metrics to compare its performance to benchmarks, best-in-class performance, and customer needs and to set performance targets.DefinitionUsesP-1 P-2The Process Audit•••TOOL KITharvard business review • april 2007 page 5of performance, the green (medium gray) cellsindicate the enablers that aren’t impeding theprocess’s progress; the yellow (light gray) onesshow areas where the company has a lot of workto do; and the

red (dark gray) cells representobstacles to a process’s attaining greater maturity.The shaded table to the right shows the results ofsuch an exercise at a large U.S. company. In thiscase, the context of the process design and theperformers’ knowledge are the roadblocks to theprocess’s attaining the P-1 level.The process has been designed to fit with other enterpriseprocesses and with the enterprise’s IT systems in order tooptimize the enterprise’s performance.The process has been designed to fit with customer andsupplier processes in order to optimize interenterpriseperformance.The process owner and the owners of the other processeswith which the process interfaces have established mutualperformance expectations.The process owner and the owners of customer and supplierprocesses with which the process interfaces have established mutual performance expectations.The process documentation describes the process’s interfaces with, and expectations of, other processes and linksthe process to the enterprise’s system and data architecture.An electronic representation of the process design supportsits performance and management and allows analysis ofenvironmental changes and process reconfigurations.Performers are familiar both with fundamental businessconcepts and with the drivers of enterprise performance andcan describe how their work affects other processes and theenterprise’s performance.Performers are familiar with the enterprise’s industry andits trends and can describe how their work affects interenterprise performance.Performers are skilled at business decision making. Performers are skilled at change management and changeimplementation.Performers strive to ensure that the process delivers theresults needed to achieve the enterprise’s goals.Performers look for signs that the process should change,and they propose improvements to the process.The process comes first for the owner in terms of time allocation, mind share, and personal goals.The process owner is a member of the enterprise’s mostsenior decision-making body.The process owner works with other process owners tointegrate processes to achieve the enterprise’s goals.The process owner develops a rolling strategic plan for theprocess, participates in enterprise-level strategic planning,and collaborates with his or her counterparts working forcustomers and suppliers to sponsor interenterprise processredesign initiatives.The process owner controls the IT systems that support theprocess and any projects that change the process and hassome influence over personnel assignments and evaluationsas well as the process’s budget.The process owner controls the process’s budget andexerts strong influence over personnel assignments andevaluations.An integrated IT system, designed with the process in mindand adhering to enterprise standards, supports the process.An IT system with a modular architecture that adheres toindustry standards for interenterprise communication supports the process.Hiring, development, reward, and recognition systems emphasize the process’s needs and results and balance themagainst the enterprise’s needs.Hiring, development, reward, and recognition systems reinforce the importance of intra- and interenterprise collaboration, personal learning, and organizational change.The process’s metrics as well as cross-process metrics havebeen derived from the enterprise’s strategic goals.The process’s metrics have been derived from interenterprise goals.Managers present the metrics to process performers forawareness and motivation. They use dashboards based onthe metrics for day-to-day management of the process.Managers regularly review and refresh the process’s metrics and targets and use them in strategic planning.P-3 P-4 P-1 P-2 P-3 P-4largelytruesomewhattruelargelyuntrueOne U.S. Company’s SelfAssessment of a ProcessThe Process Audit•••TOOL KITharvard business review • april 2007 page 6that inadvertently created problems for colleagues, which hurt performance and moraleand forced the company to abandon the effort. In yet another case, a pharmaceuticalmanufacturer transformed its sales and marketing processes but didn’t make the effort torealign its metrics and reward systems. Thatsent conflicting signals through the organization, elicited inconsistent behavior from employees, and eventually derailed the project.What makes overhauling processes particularly tricky is the fact that these enablers arepresent in organizations at different levels ofintensity, so they vary in the degree to whichthey support a process. For instance, the question is seldom as clear-cut as whether or not organizations appoint process owners; manycompanies, after doing so, don’t give the process owners the authority to implement all thechanges that are necessary to make processeswork. I’ve identified and defined four levels ofprocess enabler strength (P-1, P-2, P-3, and P-4),each of which builds on the preceding level, asshown in the exhibit “Assessing the Maturityof Your Processes.” In the case of performers,for instance, the P-1 level denotes that employees are merely aware of the process and itsmetrics. At the P-2 stage, people must be ableto describe the process and where they fitinto it. At the P-3 level, employees can expresshow their work affects the company’s performance. Finally, at the P-4 stage, performersmust know how their work affects customersand suppliers. The stronger the enablers, thebetter the results the process can deliver on asustained basis.The enablers’ strengths determine how mature a process is—that is, how capable it is ofdelivering higher performance over time. If allfive enablers of a process are at the P-1 level,the process itself is at the P-1 level; if all five enablers are at the P-2 level, the process is at P-2;and so on. If only four out of the five enablersrise to a particular level, however, the processcannot be said to have achieved that level; itwill belong to the one below. In particular, ifany enabler is so weak that it doesn’t meeteven the P-1 level, the process is by default at P-0. That’s the natural state of affairs when organizations haven’t focused on developing theirbusiness processes, and at this P-0 level, processes work erratically. At the P-1 level, a process is reliable and predictable; it is stable. At P-2, a process delivers superior results becausethe company has designed and implemented itfrom one end of the organization to the other.At the next level, P-3, a process delivers optimal performance because executives can integrate it, where necessary, with other internalprocesses to maximize its contribution to thecompany’s performance. Finally, at P-4, a process is best in class, transcending the company’sboundaries and extending back to suppliersand forward to customers.The exhibit displays the four levels of process maturity, with the rows showing the enablers and the columns indicating the strengthlevels. (There are 13 rows because I broke thefive enablers down into more finely grainedcomponents.) Companies using this table toevaluate the maturity of their processes find iteffective to treat the propositions regardingthe enablers (the cells of the table) not as trueor false statements, but as largely true, somewhat true, or largely untrue. Where quantitative assessments are possible, largely truemeans that the statement is at least 80% correct, somewhat true suggests that the statement is between 20% and 80% correct, andlargely untrue means the statement is less than20% correct. Executives often color the cellsgreen, yellow, or red, respectively, dependingon their responses. The green cells indicatethe things that aren’t impeding a process’sprogress and don’t need a great deal of focus;the yellow cells show areas where the company has considerable work to do; and the redcells represent roadblocks that keep the process from achieving a higher level of performance. Companies usually face red cells whenthey are ignoring problems or handling themthe wrong way, and so, they must tacklethem urgently.Let me show you how useful it can be formanagers to know the state of a company’sprocess enablers. In 2004, Michelin launched aprocess redesign effort to help increase customer focus and reduce costs. At the time, theglobal tire manufacturer’s order fulfillmentprocess forced customers to deal with multipledepartments and to go back and forth repeatedly with the company. To tackle the problem,Michelin created a new high-performanceprocess, which it named Demand to Cash (D2C).A year later, a streamlined process design—which provided large customers with singlepoints of contact, with personnel who knewthem, and with accurate information—wasHow can a process live upto its potential if anorganization measuresperformance as it hasalways done and rewardspeople for focusing onnarrow, functional goals?The Process Audit•••TOOL KITharvard business review • april 2007 page 7ready. During pilots, executives found that insome cases, the new process slashed theorder fulfillment time from four hours to 20minutes.Michelin decided to deploy the new processin 30% of its North American operations by2006 before rolling it out across the entire region. The company’s process redesign teamhad learned from my research that before itcould implement a new process that woulddeliver superior performance—that is, a P-2process—all its enablers had to be at the P-2level. When the team, led by the processowner, undertook an assessment to confirmthat was the case, it found that the human resource systems that supported the new process were below P-2. Michelin hadn’t redefined managers’ jobs and the scope of theiractivities clearly enough. Before rolling outthe new process, the company kicked off a series of workshops to clarify managers’ newroles and departmental charters and to alignthem better with the D2C process.Michelin’s enabler analysis also suggestedthat the D2C process might run into troublebecause performance-improvement projectshad proliferated in the company. Senior executives therefore placed the process owner incharge of all the projects that affected the D2Cprocess to ensure that they wouldn’t interferewith its execution or companywide rollout.Is Your Enterprise Ready for HighPerformance Processes?In order to develop high-performance processes, companies need to offer supportiveenvironments. They must possess or developorganizational capabilities in four areas: leadership, culture, expertise, and governance.First, a company’s senior executives must becommitted to the business process approach.Redesigning processes requires extensive organizational change that often provokes resistance down the line. This can sink efforts thatdon’t have the backing of senior executives.Second, only organizations whose culturesvalue customers, teamwork, personal accountability, and a willingness to change will find itpossible to move forward with process-ledchange projects. Business processes, which cutacross functions, must be operated by peoplewith those values. Third, businesses must havesome people with skills in, and knowledge of,process redesign; this is not work for amateursor improvisers. And fourth, enterprises mustbe sure to have ways of governing projects andchange initiatives if they don’t want chaos andconflict to bog them down.Unless all these capabilities are in placeacross a company, it will be impossible for theorganization to institutionalize the enablersand sustain the performance of its processes.Executives may be able to force some enablersinto place even if the capabilities aren’tpresent, but the performance of their processes won’t endure. Organizations need basiccompetence in all the enterprise capabilities toget started on process redesign projects; theyneed greater competence if they are toprogress with them. Just as there were four levels of process enabler strength, there are fourlevels of enterprise capability: E-1, E-2, E-3, andE-4. If an enterprise has E-1 capabilities, it is atthe first level of enterprise maturity. Thatmeans different things in the case of each capability. For instance, an organization at the E-1level for culture must have some experiencewith teamwork. In order to get ahead, however, the enterprise must have an E-2 culture,in which it commonly uses cross-functionalproject teams and its people are familiar withteamwork. To achieve the E-3 level, teamworkmust be the norm inside the company. To attain the highest capability level, E-4, teamworkwith suppliers and customers must be routine.Stronger organizational capabilities makefor stronger enablers, which allow for betterprocess performance. Thus, when an enterprise has E-1 capabilities in leadership, culture,expertise, and governance, it is ready to advance all its processes to the P-1 level; when allfour capabilities reach E-2, the company canmove along its processes to P-2; and so on. Theexhibit “Evaluating the Maturity of Your Enterprise” presents the four levels of enterprise maturity with the four capabilities broken into 13elements. (The match with the number of elements in the process enablers table is pure coincidence.) Executives can assess enterprisematurity levels much the same way they canassess process enabler levels: by evaluatingwhether each proposition is largely true, somewhat true, or largely untrue of their organizations. They can then use colors to identifythose aspects of the company that welcomeprocesses (green), still need work (yellow), andare positively hostile to them (red).Many companies take their enterprise capaStronger organizationalcapabilities make forstronger enablers, whichallow for better processperformance.The Process Audit•••TOOL KITharvard business review • april 2007 page 8Evaluating theMaturity of YourEnterpriseTo determine if your organization is ready to support a process-based transformation, evaluate thestatements in this table.They show the strengthlevels, from E-1 to E-4, of the capabilities that enterprises need in order to develop their businessprocesses. If a statement is at least 80% correct,color the cell green (medium gray here); if it isbetween 20% and 80% correct, shade it yellow(light gray here); and if it is less than 20% correct,make it red (dark gray here). Companies mustLeadership Awareness The enterprise’s senior executive team recognizes the needto improve operational performance but has only a limitedunderstanding of the power of business processes.At least one senior executive deeply understands the business process concept, how the enterprise can use it to improve performance, and what is involved in implementing it.The leadership of the process program lies in the middlemanagement ranks.A senior executive has taken leadership of, and responsibility for, the process program.A senior executive endorses and invests in operationalimprovement.A senior executive has publicly set stretch performancegoals in customer terms and is prepared to commit resources, make deep changes, and remove roadblocks inorder to achieve those goals.The senior executive team has started shifting from a topdown, hierarchical style to an open, collaborative style.The senior executive team leading the process program ispassionate about the need to change and about process asthe key tool for change.Teamwork is project focused, occasional, and atypical. The enterprise commonly uses cross-functional projectteams for improvement efforts.There is a widespread belief that customer focus is important, but there is limited appreciation of what that means.There is also uncertainty and conflict about how to meetcustomers’ needs.Employees realize that the purpose of their work is todeliver extraordinary customer value.Accountability for results rests with managers. Frontline personnel begin to take ownership of results.There is growing acceptance in the enterprise about theneed to make modest change.Employees are prepared for significant change in how workis performed.A small group of people has a deep appreciation for thepower of processes.A cadre of experts has skills in process redesign and implementation, project management, communications, andchange management.The enterprise uses one or more methodologies for solvingexecution problems and making incremental processimprovements.Process redesign teams have access to a basic methodologyfor process redesign.The enterprise has identified some business processes.