An activity is an essential link between what a business spends on its resources and what it delivers as products and services to customers. Activities are the work performed by employees. This link can be viewed as a stepping stone on a path the business follows to add value as it converts inputs into saleable products.
Defining activities for the first time requires a balance of multiple considerations whether for a back of the envelope analysis for a small business or for an ongoing ABC model for a larger business. Activity analysis is valuable no matter which end of this spectrum your business falls into.
An activity may be performed by multiple functional units or departments within a business. Even though it may be the same activity, creating each instance of the activity in their respective departments will be the most versatile and yield the most value. Later, when an analysis requires a scan of multiple departments, the individual activity instances can be easily added together. However, if they were initially combined together, it is more difficult to separate later.
In practice, I’ve observed ABC models where the novice modelers adopted a standard activity dictionary with an appropriate activity hierarchy. They have assigned all resources directly to this activity structure while ignoring the departmental distinctions. Later on, when asked to provide activity information about individual departments, they’ve struggled to split out the activities and have had to degrade their model to answer these questions. A better course of action would have been to maintain the departmental distinction. Later, software easily adds activities together on demand. As a rule of thumb, always maintain an organizational or departmental dimension through activities. As activities are later assigned to products, services or customers the department dimension should then be omitted.
A business process is a set of activities having a common purpose or output. A business process ignores organizational or functional boundaries and disciplines. Process analysis and process management are powerful ways to promote cross functional efficiency in producing/delivering products and services. Designating a process manager brings focus to the process.
Some companies have gone so far as to organize entirely by process and discard all functional organizations. Subsequently, these companies have found that they have lost skills and professional development that come from a functional or departmental organization. In practice, most businesses have found it better to have a traditional functional organization for its benefits that in turn is supported by cross functional process management for process benefits. Activity analysis is initially completed within the functional department then linked together for process analysis. This supports the best of both management approaches.
If we imagine a yardstick with activities in the middle and processes on one end, tasks are on the opposite end. Tasks are very detailed, almost mini or micro activities. The risk in activity analysis is to define activities with this level of detail which yields a huge number of activities and a very large model. Some people seek to justify their jobs by defining every single thing they do as an activity. Economic pressures aggravate this environment. But this must be confronted to have an effective activity model.
In one case, an accounting department defined over eighty activities. While they, in fact, did every bit of that work, it did not warrant analysis at that level of detail. In practice, use this task level detail to define and describe higher level activities. Selecting a few key outputs and grouping tasks around these outputs helps appropriate activity definition.
Activities are indeed essential on our path between resources we buy and products we deliver. They need to be at a comfortable stride. Striding at a process level is a strain; it’s too far. We want this view but there are other, better ways to have it. Striding at a task level requires too many steps; consequently too much work for the value we receive. In this case, instead of walking at a toddler’s rate, let’s pick up the toddler so we can get on with the business of making good decisions leading to better profitability.