The simple tool to understand your financial processes. Create a SIPOC!
Introduction
In Part 1 of our FMEA article series, we identified that understanding our processes is critical to any risk assessment. The SIPOC is an easy tool to visualize or document the flows of a process. It allows you to identify the high risks and key performance indicators for any process, including where you are exposed to risk and where there are opportunities for improvement. The SIPOC methodology is widely used in many diverse fields from Finance, product design, to pharmaceutical R&D, business analysis, Six Sigma quality and IT.
SIPOC stands for: Supplier, Input, Process, Output and Customer. The SIPOC diagram shows at a glance how a process is organized and can be generated very quickly. See below:
Our free SIPOC template can be found HERE. Enjoy!
Some folks like to put Customer first, so COPIS might be to your liking. Either way, I prefer this tool due to how fast it is to complete. Deeper process mapping can always be done later if required.
Identify your core processes
SIPOC generation is a great team activity. It helps get everyone on the same page regarding processes quickly. I've also found that once a rhythm is established, you can hammer out multiple SIPOCs in a single workshop. As such, spend 10 minutes upfront to identify the Core Processes you want to document.
To do this, start by brainstorming the activities that are critical to getting your products or services out the door. These are the heart of what your team does; these activities should be repeatable and easily identified by all parties. Don't get lost in the little stuff and outputs though. Just the big ones.
The first tab in the SIPOC template allows you to capture your critical process. Below is an illustrative example:
SIPOC Steps
In a team setting, fill out this template. The SIPOC should be filled out by column from top to bottom. There is no relationship within a row.
Identify the supplier. Who is providing your inputs? Think about the upstream teams or vendors who supply data or insights.
Identify the input. This could be a person or interface that helps produce an output—for example, employees who work on projects for customers, data that comes from another team or system, etc..
Identify the process. What is happening to the input through each stage of production? This is the sausage making. How does that report or analysis actually get produced? What systems are involved? What manual steps are done by analysts? What reviews are completed? Are there quality control checks? etc…
Identify the output. What are you producing and delivering to customers, and how does it benefit them. In the Finance world, this often a polished report or dashboard. However, some reports are then transformed into presentations which is really how the customer consumes the materials.
Identify the customer. Who’s using your product or service? Think through all of the downstream uses. You might be surprised who is using your output, whether it is another Finance team or another function, such as HR or Marketing. This is critical in the risk assessment process because small upstream changes can really impact downstream users.
Highlight known process issues
SIPOC is a great tool for identifying process issues. In some cases, the issues are well known, but just haven't been documented. Noting them within the SIPOC can drive transparency and a call to action (literally highlight the process step in red to draw attention). Plus, this naturally leads to an FMEA (Failure Modes & Effects Analysis) exercise which helps quantify the risk of these process breaks. You can find a link to our FMEA article HERE.
Conclusion
The SIPOC is a simple tool to understand your core processes.
It can be used in almost any project or process and helps you identify the high-level process steps, stakeholders, inputs and outputs of your process. This helps you understand what needs improvement or attention so that you can improve it to make work easier or faster for everyone involved.
It is best when completed as a team. Many SIPOCs can be generated quickly when a group of subject matter experts focus. It is time well spent!
Understanding your SIPOCs will greatly assist in generating an FMEA for those processes (link HERE). For each item in the SIPOC, the team should consider what could go wrong. Those are your Potential Failure Modes. Easy!
Understanding your core financial processes is critical. Apollonian Consulting can lead your SIPOC generation process and facilitate discussions across your stakeholders. This will lead to lasting insights regarding your processes and key risks. Click HERE to schedule a session with us.