ABPMP Meeting, Pulte Mortgage BPM initiative with Lombardi Suite.

 

I met a gentleman through my wife who is a Certified PMP and Six Sigma professional.  His name is Paul McCasland and he is also part of the Association of Business Process Management Professionals, a group that has been organized to further the business process management (BPM) industry.  Wow, that is a mouth full!  Last night I went to one of their meetings which discussed Pulte Mortgage’s 5 year BPM implementation, their experience and results.  I wanted to take a moment to hit on a few of the points brought up from the discussion as well as highlight BPM a bit here.

The meeting was held at the Molson Coors headquarters in downtown Denver.  We were on the 32nd floor of the building, which housed a nice executive level conference room, and of course a bar featuring Coors products, for free.  Kudos to the ABPMP member that hooked this venue up for the group.  It was awesome.

What is BPM?  This is something that I’ve struggled to understand a bit and there seems to be no cut and dry answer to this question.  BPM stands, as noted above, for business process management.  In the background of any business are processes.  The easiest way to explain this would be in a production facility where lines are producing goods.  At step one, raw materials are brought to the line.  Step two involves starting to build the product.  The product goes down the line, through a series of steps before it comes off the line and heads to packaging.  As you begin to step back, you realize that there are an astounding amount of processes going on within a company.  What BPM is about, is how to manage the processes in the most efficient way.  Typically this is done by integrating technology into the process but it is not always the case to do so.  Another way of characterizing this would be business process optimization.

Based on my discussions with BPM professionals, it would seem that their approach is not so much a holistic view of the company, but more of improvement of individual processes.  I believe this to be the key difference between BPM and BPE (Business Performance Excellence).  I see it possible for many BPM initiatives to fail, because the idea is to improve the process to produce widgets whereas BPE is a fully integrated model which understands that a business exists to make money, not widgets.  It is possible, therefore, through BPM to improve numerous business processes and still see no bottom line improvements in profits.  Without viewing the entire business as one unit, it is easy to achieve sub-optimization.

Pulte Mortgage had grown over time through many mergers and acquisitions.  The result was a mortgage company operating under 36 different standard operating procedures (SOP’s).  It was unclear which metrics drove the CEO to decide he wanted to bring everything under one agreed upon process but this is how their BPM initiative began.  The important thing to note is that in order to change an organization, the change must occur from the top down.  Ultimately, what we’re going to do is change how people go about doing their work.  This change is large enough to require an entire slew of things to be done that needs to have the support of upper management. 

Pulte mortgage designed a software around the Lombardi BPM suite, which they internally named iPath.  This suite linked all of the business units together through a management information system.  New SOP’s were created to govern how Pulte was going to do business.  iPath had three main functions. 

1.)  Task the organization with prioritized lists of daily work.

2.)  Track “milestones” which enables management to adjust workloads accordingly.

3.)  Centrally locate all data so that nothing falls through the cracks.

The difficult part of the implementation was defining the process and breaking it up into tasks.  Once this master flowchart was created, iPath was able to send tasks to workers through such a system where progress through the tasks was recorded.  Instead of coming to work and spending an hour in the morning organizing what was hot, and what was not, workers were given a to do list of tasks, as well as the SOP’s associated with those tasks through a web interface.  As tasks were completed milestones moved.

One of the roadblocks to success that Pulte hadn’t thought about was the incentive to do work that was already in place.  This was particularly evident among the Underwriters.  The underwriters were incentivised on a per loan basis.  What they would do then, would be cherry pick the easiest loans because they knew they could complete them the quickest with the least amount of effort.  Many of the tougher loans sat around without being moved along the process simply because of the incentive system in place. 

Once the new iPath system was in place, cherry picking was no longer allowed.  Underwriters were required to work from top to bottom on the cued list, which was prioritized by the internal logic in iPath.  The result of the system implementation was that the underwriters became upset at their loss of income, as well as their loss of status in the organization.  Underwriting was the bottleneck of the process, and the underwriters had specialized skills that nobody else could do.  They often would hold this above people’s heads and exchange favors for loans that really needed to get done fast. 

It is important to remember that when instigating change in an organization, it may be necessary to also change the way people are incentivised.  Incentives drive behavior and you cannot expect a behavior change without changing the incentives first.  This is true for everything.  One aspect of BPE is defining KPI’s that align with the business’ strategic objectives.  Since Pulte mortgage did not have the incentive portion of the implementation figured out, I wonder what metrics they are using to drive the company and whether or not these metrics are in actuality sub-optimizing the business.

The last point to mention was the role of management.  Pre-implementation, these managers were given the difficult task of running their divisions without any visibility into them.  I’m sure it was virtually impossible to get things done at times!  Part of iPath though, was to create visibility into the process.  Now a manager can bring up a reporting screen and see each one of their workers workload and daily progress through their tasks.  This lends itself tremendously to balancing out the work load.  The question that comes to my mind then is, what value are the managers/supervisors adding to the process and product?

In my opinion, the framework has been set to succeed without supervision.  There is a system in place to produce daily progress metrics.  I envision loan teams constituting every specialized position in the process working together through a day to achieve all the required tasks.  Incentives would be team based, rather than individual.  In this way, workload balancing would be automatic because everyone on the team wants to drive the process forward by completing tasks so that they can be compensated further.  There is no reason to have a manager looking over workers shoulders all the time, making sure things are getting done.  The team is self-governed and would only need management input when a problem with a customer arises.  Even then, the proper empowerment could help to alleviate even that issue.

A common problem amongst companies operating under the customer intimacy, best total solution model for differentiation is justifying multiple levels of management.  What drives the business in this model are the empowered workers that make face to face contact with the customers.  I think if the training is enough, then management in these types of companies should be focused on strategy, value creation and the metrics associated with these that will drive the company only or with only about 15% of their efforts in managing people.

In all the meeting was a great chance to view a real life example of BPM being implemented, and to mull it over in my mind with what I’ve learned so far.  I look forward to the next event and further network building.