A T H O U G H T PA P E R

Defrag or DIE!
How Fragmented Business Processes Destroy Value
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Fragmentation is a killer.
When your computer’s hard drive gets fragmented, more work must be done to retrieve data. Performance
deteriorates. In an extreme case, loss of data can occur.

When a habitat is fragmented in ecological systems, genetic recombination is hindered because the area of
any usable patch of habitat is severely reduced. Imagine planting a field of corn in hundreds of individual clay
pots, each separated by miles from its neighbors and you get the idea. As a result of this fragmentation, genetic
diversity decreases, and a population’s ability to adapt to environmental changes suffers. Species go extinct.

When organizations are fragmented, the effect is a catastrophic combination of the problems described
above. More work is required to deliver value to the customer, and the ability of the organization to adapt to
environmental changes suffers. In extreme cases, the loss of value is lethal. Businesses go extinct.

What causes businesses to become fragmented?

Business fragmentation occurs when critical processes aren’t managed as an integrated whole. Transactions
travel helter-skelter through a complex series of handoffs between functions, jobs, and information systems.
Each handoff is an opportunity for error, delay, and unnecessary cost. Without an integrated process man-
agement framework, transaction value deteriorates. What’s more, with no unifying focus, local process
variations grow so far apart that standardizing to best practices becomes a daunting change management
task. The potential for resistance increases and the speed of implementing improvements decreases.

Processes in a highly fragmented organization resemble a labyrinthine system of poorly joined plumbing,
with pipes that leak time, money, and customer value. Core business transactions are pushed, pulled, disin-
tegrated and re-integrated numerous times on their way to the customer. This alone would be cause for great
suffering and gnashing of teeth. Unfortunately, most businesses today are subject to a number of
variables that are making the problem still worse…

Silo-vision
In their article “How Process Enterprises Really Work” (Harvard Business Review, Nov-Dec
1999), authors Mike Hammer and Steven Stanton state:

The power in most companies still resides in vertical units—sometimes

focused on regions, sometimes on products, sometimes on functions—and those
fiefdoms still jealously guard their turf, their people, and their resources.

DEFRAG OR DIE! | A THOUGHT PAPER

 The “silo-vision” described by Hammer and Stanton is reinforced
by functionally oriented metrics that have no discernable connection
to process performance. Managers are rewarded for such things as
completing key projects, hitting local financial targets, or reducing
headcount within their silo. While these may be desirable goals,
failing to understand how these objectives will affect process
performance puts the organization at risk.
Of course, there are valid reasons to structure reporting relation-
ships on principles other than process. However, process should be
the underlying organizing principle for operations for any business.
In other words, regardless of what the org chart says, the attention
and efforts of employees should be focused on getting products and
services out the door as effectively and efficiently as possible.
Processes are your direct connection to customers. Customers are
your direct connection to revenue. In the long run, all other con-
siderations are subordinate. Without process metrics or manage-
ment systems, the silos will obscure this essential connection and
fragmentation will increase. Silo-vision leads to two forms of frag-
mentation:
Physical Fragmentation: This is the inevitable result of spatial
separation of functions. One consequence of separation is the time
it takes a transaction to travel from one group to the next, time in
which no value is being added. Potentially more serious, however,
is the degradation of information associated with transactions as
they travel. It’s like the game “telephone,” where one person within
a small circle starts a message that each person whispers into his or
her neighbor’s ear until it returns to the originator, hopelessly gar-
bled. In addition to being delayed or misinterpreted, there is always
the possibility that the transaction will simply fall through the
cracks. How many times have you placed an order with a company
that simply vanished? Never, right?
Cultural Fragmentation: This type of fragmentation is less obvi-
ous than physical fragmentation but is often far more damaging. It
stems from a lack of alignment on priorities, which is exacerbated by
functionally focused metrics. Items that are top priority in one
group’s work queue move to the back burner as organizational bar-
riers are crossed. As the degree of misalignment increases, so too
does the “leakage” of value. The effect is analogous to driving down
a highway where speed limits, traffic laws, signage conventions, and
investment in road maintenance change dramatically each time you
cross a county line. A business transaction traveling such a highway
loses momentum and takes a real beating before it finally reaches its
destination—a paying customer.
The Turnover Trap
In the absence of integrated process management, high employee
turnover accelerates fragmentation. Tribal knowledge about best
practices and the variables that affect process performance walks out
the door with each exiting employee. Without a clear understanding
of how their work fits into the process as a whole and no process
metrics to focus their attention, new employees will gravitate toward
practices that make their lives easier. Who can blame them? In the
absence of meaningful feedback, where would you focus? Without a
process context, jobs lose their meaning, employee moral drops and
turnover accelerates. This vicious cycle can be difficult to break.
The Systems Snowball
Businesses are utterly reliant on the systems that facilitate the flow
of information to where it is needed. This web of interactions can
be quite complex. A single system can support multiple business
processes, while a single process can be supported by multiple
systems.
In some organizations, the sheer number of systems and interrela-
tionships seem to grow exponentially with little rhyme or reason.
New systems are added without an overall strategy, legacy systems are
left running even as the people who understand them are leaving, and
homegrown applications with duplicate functionality pop up like
weeds. When this growth occurs without a process framework, busi-
ness fragmentation increases.
“Ouch”-sourcing
Outsourcing an intact process that is not a core competency can
offer significant advantages to a business. On the other hand, out-
sourcing a “chunk” of a critical process to an outside vendor can lead
to disaster if little thought is given to how its linkage to the rest of
the process will be managed. Such piecemeal outsourcing can lead
to serious performance problems.
Consider the example of a cable company hiring a third party to
manage repair calls from consumers. How can customer satisfaction
be ensured when the entity making commitments and qualifying
calls is completely disconnected from accurate, timely information
about the rest of the process? Unless process requirements are clear,
information exchange is flawless, and service level agreements are
aggressively managed, the outsourced call center will focus on
minimizing their cost for handling each call at the expense of the
ultimate customer.
In this scenario, pressure will increase to reduce the time spent
understanding each customer’s problem. The information captured
will lose important detail. Customer irritation will grow when they
sense they are being rushed.
With less useful information, the effectiveness of repairs decreases.
This causes customer satisfaction to plummet and there will be no
remedy until the contract is up for review. In the long run, the unfor-
tunate cable company ends up with a process that is more costly, less
effective, and risks driving customers into the arms of its competitors.
Perhaps the most damaging thing about fragmented organizations
is the way they respond to performance issues. Without a coherent
picture of how the business operates, efforts to improve amount to
little more than flailing in the dark. Sometimes the “fixes” create
more problems than they solve. Fortunately, there are steps you can
take to stop or even reverse the fragmentation of your business
without sacrificing flexibility.
Focus on Critical Processes
Critical processes are those processes that will make or break your
business in the foreseeable future. They are essential to achieving
your strategic goals. Looking forward is important, because the
processes that defined success in the past may not be the ones that
will ensure your business survives and thrives in the future. Once
these processes are identified, the next step is to quickly build process
management systems that redirect organizational attention to where
it’s needed.
Empower Process Managers
Before you redesign or improve your critical processes, it’s essential
to make sure that they are managed. The good news is that it won’t
require a huge investment of time or money to design and deploy
metrics. The bad news is that it may require a fundamental change
in mindset. Process management relies on process ownership.
Ownership means that each process has an individual who is
accountable for process performance and has the authority to make
any necessary changes. This individual’s voice must be louder than
the voices representing the silos. If resources are needed to address a
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performance gap, then the process owner needs the power to mobi-
lize them. As mentioned earlier, functional priorities must be subor-
dinate. Too many organizations assign process owners in name only,
while the real power remains with the functional fiefdoms.
Manage First, Then Tweak
Your first step is to adopt a simple, disciplined approach to defining,
integrating, and managing processes. After this is accomplished, you
can concentrate on enabling employees to analyze and refine critical
processes.
What? No radical redesign? No cutting edge software? No cadre of
black belts flexing their statistical muscles?
All in good time…
A systematic approach for evaluating and changing the design of
processes to improve performance is an important component of
process management. However, basic process management systems
should be in place before adopting a rigorous improvement method-
ology such as Six Sigma. Incremental improvements work best in an
integrated system. Individual pieces of a process can be optimized,
and these improvements often add up to big improvements to the
process as a whole. On the other hand, improvements made in the
absence of a process context can accelerate fragmentation and the
resulting deterioration of performance. The only way to know when a
piece of a process can be isolated and improved independently is to
have a clear grasp of the big picture and a robust system for managing
performance.
In the face of so many variables conspiring to increase fragmentation,
the job of reversing the trend may seem overwhelming. Don’t fall prey
to this illusion. If you follow the steps outlined above with sustained
management support and commitment, measurable results will follow
in fairly short order. There are well-established tools and methodolo-
gies to help your organization begin this journey.
The important thing is to start defragging—today.