The role of business processes in electric utilities

Use the word internal controls and you may lose your audience as their eyes glaze over....."that's for auditors" is a common response. But business processes are nothing more than another name for internal controls, i.e. “how we get things done in our organization”.

Now tie this in with the word faith. Faith, is “confidence in what we hope for and assurance about what we do not see”. In other words, once we have designed and tested a business process and made it part of our official policies and procedures, we have faith that it will perform and deliver the results we had hoped for on its initialization without our constant review and oversight. But, sometimes that faith in the process needs to be revisited to ensure processes are still working as designed. 

What is the “process” for designing business processes? 

In a nutshell, designing a tight business process involves asking a lot of questions of process owners about “what do you do as part of your role in the process of xyz”? Then documenting the “xyz” process and dissecting it to determine if it is effective or needs improvement. An overall workplan that can be used in analyzing business processes follows these steps:

1. Interview process owners for the process under review.

2. Document the detailed steps in the process via narrative or process mapping.

3. Test the process in action from beginning to end to determine that process owners are doing what they said they do in the interview.

4. Analyze the process for inefficiencies or improvements.

5. Make recommendations for change

6. Train process owners the new process7.

7. Perform follow-up testing to determine the process is working as designed

8. Train process owners and repeat as necessary until the new process is operating as desired

In this article we dig a bit deeper into Steps 3, 4 and 5 of the above workplan.

Analyzing the process - do they need business process reengineering?

How processes are designed are not always how they are performed. Operation of a policy and procedure may degrade over time, even as the originally designed process may still be sound.

Contrarily, some processes defined by policies and procedures must change over time, due to changes in technology or the core business process. Often, the current owner of a business process may have excellent ideas on how the process can work most effectively. You must be willing to toss out or modify the playbook on the process to gain those efficiencies. Interviewing process owners, documenting their steps through business process mapping, then analyzing the steps for efficiencies is part of Step 4.

The Step 4 analysis will be most effective with the current process owner, not only to ensure you have a proper understanding of what steps are being performed and why, but to glean the insights of the process owner for modifications.

Making recommendations and testing processes

Once the process has been defined and refined, a business process map of the process should be made. On approval of the new process, appropriate employees should be trained step-by-step in the new process. After an interval of time for these process owners to gain confidence in the new process, internal audit or another "testor" should do a walk-through of the process to determine whether it is being performed as designed. If it isn't, then re-training and retesting should be done again to gain faith that the process is now on auto-pilot.

Even with faith, retesting should be done at intervals as a regular part of an internal audit plan.

Applying business processes to the overall organization

Described above is the workplan to use for one process or area. This approach should be applied to all of the key processes in an organization, which can be a vast but necessary undertaking. Developing workplans to revisit each area, or hire outside outsourced internal audit assistance should be made part of the business process improvement culture of the organization.

About Russ Hissom - Article Author

Russ Hissom, CPA is a principal of Utility Accounting & Rates Specialists a firm that provides power and utilities rate, expert witness, and consulting services, and online/on-demand courses on accounting, rates, FERC/RUS construction accounting, financial analysis, and business process improvement services. Russ was a partner in a national accounting and consulting firm for 20 years. He works with electric investor-owned and public power utilities, electric cooperatives, broadband providers, and gas, water, and wastewater utilities. His goal is to share industry best practices to help your business perform effectively and efficiently and meet the challenges of the changing power and utilities industry.  

Find out more about Utility Accounting & Rates Specialists here, or you can reach Russ at russ.hissom@utilityeducation.com.

The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided by Utility Accounting & Rates Specialists. You should seek formal advice on this topic from your accounting or legal advisor.