In the Business Process Investment framework, necessary elements of everyday operations such as payroll and accounts
 payable processes and the mass of administrative workflows that characterize most companies' operations are termed background processes. They are contrasted with identity processes that define a business to itself, its customers, and its investors, that make a company "different" or "special," and priority processes that drive daily business performance and, thus, exert a strong influence on a firm's competitive positioning and growth.The background label should be applied judiciously. What is background for one business may well be in the foreground for another. Distribution may be a background process for a pharmaceutical company but a priority process for a retailer; yet for Dell Computer and Lands' End, it is an identity process. Identity and priority processes relate directly to a firm's strategic vision and competitive strengths. Because background processes generally do not, they represent, by and large, financial liabilities. They consume capital without generating value. Take payroll. Can you imagine the CEO of any company sending a message to the staff announcing a bonus and special celebration because "This week we had the best payroll process we've had in our entire history-it was great!" Obviously not. Payroll is a background process. It is important that it be handled well and that any opportunity to cut costs and improve quality (i.e., reliability and accuracy) be examined. But even were quality to be improved by a factor of two, the process improvement, unlike improvements in priority and identity processes, would not add value, though it might reduce costs.
A review of published accounts of business process reengineering projects will reveal a disproportionate number of background liability processes among the targets. There are four clear reasons for this.
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Background, especially administrative and customer support processes, embody many of the organizational ailments the reengineering movement seeks to redress, namely: functional division of labor; many departments, steps, and delays; complex controls and supervisory mechanisms; too much paper; and fiefdoms and "bureaucracy."
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Workflows are clearly identifiable and inputs (customer requests) and outputs (documents, loans, transactions) well defined, making such processes easy to conceptualize and model.
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Information technology has been used to automate, and often bureaucratize, the processes or been little used at all, leaving opportunities to exploit telecommunications, information, and customer service workstations to dramatically simplify, speed up, and streamline sequences of workflows and decision making.
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Because they are part of "internal" operations and have evolved over many years to meet internal organizational needs, expectations, budgets, and structures, background processes are almost invariably designed with limited attention to customer needs.
Although a natural focus for the industrial engineering approaches of reengineering and total quality management, turning background liability processes in background asset processes by cutting costs and thereby freeing up capital can consume substantial resources and involve complex organizational change and yield only limited results. They may be obvious, yet not be the right processes to get right. Consider the classic case of Mutual Benefit. Its success at cutting the insurance policy issuing process from weeks to hours was widely publicized in an article that, in effect, launched the reengineering movement, yet the firm flirted with bankruptcy and was taken over by state insurance regulators. Why? Because it had neglected priority liability processes for managing both its investment portfolio and relationships with customers, investors, and regulators. The reengineering achievement broke new ground and was a striking success, but, because it was accomplished for a background process, it could not yield benefits sufficient to offset the company's other process liabilities.
Background liability processes do waste resources and engender complexity and bureaucracy, but they can be addressed by other value builders than reengineering. A useful principle for Process Investment is to outsource background liability processes to firms for which they are identity asset processes. Payroll, a background liability process for the typical firm, is the identity asset process for ADP, the company that processes roughly half of all U.S. payroll transactions. Similarly, tax reporting and accounting are background liability processes for British Petroleum but identity asset processes for the Big Six accounting firms. Outsourcing guided by this proviso is generally a win-win situation.
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