Business Process Reengineering
Business Process Reengineering
Business Process Reengineering
Process reengineering is redesigning or reinventing how people perform their daily work, and it is a concept that is applicable to all industries regardless of size, type, and location.
While selected elements of process reengineering are well documented in the late nineteenth and early twentieth centuries, process reengineering as a body of knowledge (or as an improvement initiative) takes the best of the historical management and improvement principles and combines them with more recent philosophies and principles; in theory, this makes all people in an organization function as process owners and reinvent processes. It is this combination of the old and the new as well as the emphasis on dramatic, rapid reinvention that makes process reengineering an exciting concept.
The beginning of business process reengineering is often cited as an MIT research project conducted from 1984 to 1989, showing that managers were beginning to recreate their businesses using new technology and ideas. The concept traveled quickly through the business world, jumpstarted by a 1990 article by Michael Hammer called “Re-engineering Work: Don't Automate, Obliterate.” Neil Botten and Adrian Sims explain Hammer's idea in their 2007 CIMA textbook, Management Accounting-Business Strategy and use as an example the reengineering of credit sales at IBM. The IBM sales force processed certain sales in a series of steps, each step requiring separate authorization: authorization of the sale, approval by the legal department, allocation of funds from the financial, and so on. This process took weeks, and was often too long to make a sale. Realizing the entire process needed only a few minutes to complete, IBM used technology to reinvent the steps, and today the IBM sales force uses laptops to carry out all authorizations on a demand basis.
BPR (business process reengineering) is often compared to TQM (total quality management), and the rise in one has corresponded to the rise in the other in recent years. In Malhotra's 1998 article “Business Process Redesign: An Overview,” he cites clear differentiation between the two regarding how they are carried out. TQM is seen as being composed of small, incremental steps, all aimed at improving the company's efficiency over time. In contrast, BPR is composed of much larger steps; it is an overhaul, a radical redesigning of the business's plans and ways of reaching goals.
The process of BPR can begin in many different ways and on many different levels within an organization. Peter Carter, in his Introductory Guide to BPR (2005), suggests that BPR can start with an organization's mission or vision statement. Profound changes in a mission statement can give a company new direction, serving as a base for reengineering across company levels. Since mission and vision statements often include goals and areas of focus for organizations, any change in them trickles down to change the entire organization. (Other principle ways to implement business process reengineering are covered later in the article.)
In today's technological business world, many tools for BPR can be found in software or in a company's online
structures. Carter gives several examples, such as easy and instant electronic documentation of processes, simulation analysis, and “object oriented technology,” allowing decisions made in the network to affect all parts of that network. The advent of ERP (enterprise resource planning) systems helped organizations unite many departments into integrated online resources, making BRP much easier.
BASICS OF PROCESS REENGINEERING
The first question in process reengineering is: “Why are we doing this at all?” Answering this question is the beginning of the immediate, dramatic change and the application of supporting technical and behavioral concepts and tools that are necessary to implement process reengineering. To accomplish this, organizations must foster an environment that encourages quantum leaps in improvement by throwing out existing systems and processes and inventing new ones.
The intent of process reengineering is to make organizations significantly more flexible, responsive, efficient, and effective for their customers, employees, and other stakeholders. According to field experts Hammer and James Champy, process reengineering requires the “fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.”
If process reengineering is to work, a business's priorities must change in the following ways: (1) from boss to customer focus; (2) from controlled workers to empowered, involved process owners and decision makers;(3) from activity-based work to a results orientation;(4) from scorekeeping to leading and teaching so that people measure their own results; (5) from functional (vertical) to process (horizontal or cross functional) orientation; (6) from serial to concurrent operations; (7) from complex to simple, streamlined processes; (8) from empire building and guarding the status quo to inventing new systems and processes and looking toward the future(i.e., from the caretaker mentality to visionary leadership).
As organizational priorities change, the culture will change as well. As people understand the vision for a better culture with better capabilities and results, they will be able—individually and as members of teams—to contribute positively to make the organizational vision a reality.
REASONS FOR PROCESS REENGINEERING
There are several reasons for organizations to reengineer their business processes: (1) to re-invent the way they do work to satisfy their customers; (2) to be competitive;(3) to cure systemic process and behavioral problems;(4) to enhance their capability to expand to other industries; (5) to accommodate an era of change; (6) to satisfy their customers, employees, and other stakeholders who want them to be dramatically different and/or to produce different results; (7) to survive and be successful in the long term; and (8) to invent the “rules of the game.”
Whatever the reason for reengineering, managers should ask themselves: What do our customers and other stakeholders want/require? How must we change the processes to meet customer and other stakeholder requirements and be more efficient and effective? Once streamlined, should the processes be computerized (i.e., how can information technology be used to improve quality, cycle time, and other critical baselines)? Processes must be streamlined (i.e., re-invented) before they are computerized. Otherwise, the processes may produce results faster, but those results may not be the ones needed.
REQUIREMENTS FOR SUCCESSFUL PROCESS REENGINEERING
Many experts indicate that there are essential elements of process reengineering, including:
- Initiation from the top by someone with a vision for the whole process and relentless deployment of the vision throughout the organization.
- Leadership that drives rapid, dramatic process redesign.
- A new value system which includes a greater emphasis on satisfying customers and other stakeholders.
- A fundamental re-thinking of the way people perform their daily work, with an emphasis on improving results (quality, cycle time, cost, and other baselines).
- An emphasis on the use of cross-functional work teams, which may result in structural redesign as well as process redesign.
- Enhanced information dissemination (including computerization after process redesign) in order to enable process owners to make better decisions.
- Training and involvement of individuals and teams as process owners who have the knowledge and power to re-invent their processes.
- A focus on total redesign of processes with non-voluntary involvement of all internal constituents (management and non-management employees).
- Rewards based on results and a disciplined approach.
In Robert Plant and Stephen Murrell's book An Executive's Guide to Business Technology (2007), several negative issues of BRP are examined. The authors note that, because BRP is such an intense, company-wide overhaul, it has the potential to break an organization as much as make it. If the workforce is angry or is against the change, BRP can fail, despite careful planning. Plant and Murrell give the example of the drug company Foxmeyer, which attempted a massive reengineering strategy based on BRP systems but was driven to bankruptcy in 1996. Since BRP can be so greatly affected by employee attitude, Plant and Murrell advise careful expectation management of the reinvention. However, experts state there are many other reasons that process reengineering fails, including:
- Not focusing on critical processes first.
- Trying to gradually “fix” a process instead of dramatically re-inventing it.
- Making process reengineering the priority and ignoring everything else (e.g., strategy development and deployment, re-structuring based on new strategies, etc.).
- Neglecting values and culture needed to support process reengineering and allowing existing culture, attitudes, and behavior to hinder reengineering efforts (e.g., short-term thinking, bias against conflict, consensus decision making, and so forth).
- “Settling” for small successes instead of requiring dramatic results.
- Stopping the process reengineering effort too early, before results can be achieved.
- Placing prior constraints on the definition of the problem and the scope for the reengineering effort.
- Trying to implement reengineering from the bottom up instead of top down.
- Assigning someone who doesn't understand reengineering to lead the effort.
- Skimping on reengineering resources.
- Dissipating energy across too many reengineering projects at once.
- Attempting to reengineer when the CEO is near retirement.
- Failing to distinguish reengineering from, or align it with, other improvement initiatives (e.g., quality improvement, strategic alignment, right-sizing, customer-supplier partnerships, innovation, empowerment, etc.).
- Concentrating primarily on design and neglecting implementation.
- Pulling back when people resist making reengineering changes (not understanding that resistance to change is normal).
Strategic approaches that are process-focused and that are extensions of process reengineering include the following:
- Intensification—improving/re-inventing processes to better serve customers
- Extension—using strong processes to enter new markets
- Augmentation—expanding processes to provide additional services to existing customers
- Conversion—using a process that you perform well and performing that process as a service for other companies
- Innovation—applying processes that you perform well to create and deliver different goods and services
- Diversification—creating new processes to deliver new goods or services
Bjorn Anderson gives some guidelines for businesses seeking BRP in his 2007 book Business Process Improvement Toolbox. Businesses that are looking for an increase in profits or a certain percentage gain in certain areas should not attempt BRP. Although process reengineering does increase profits and growth if it is a success, it should not be attempted simply to bolster a company's income. Neither should it be attempted by organizations that are looking to solely streamline business and combine operations. Instead, process reengineering is a valuable concept for organizations that are willing to undergo dramatic change and radical process redesign. It can co-exist with ongoing gradual process improvement efforts because not all processes can be radically redesigned at once.
In process reengineering, as in all improvement initiatives, assessments should be made in terms of cost/benefit analysis, and risk analysis. However, even the assessments should be done with a sense of urgency since process reengineering requires speed as well as radical redesign. Documentation of results will serve as the baseline for future improvements.
The various improvement methodologies (i.e., continuous improvement and process reengineering) should not be used as separate efforts but rather as two approaches within a single improvement initiative. In fact, a single flowchart can be used to make choices regarding both continuous process improvement and process reengineering. Both gradual continuous improvement and process reengineering should be an integral part of process management.
SEE ALSO Continuous Improvement; Product-Process Matrix
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