Business Process Reengineering

Business Process Reengineering

Process

a collection of activities that takes one or more kinds of inputs and creates an output that is of value to a customer.

Business Process

a group of logically related tasks using the firm's resources to provide customer-oriented results to support organisation's objectives.

Definition of Process

A process is simply a structured, measured set of activities designed to produce a specific output for a particular customers or market.

-- Thomas Davenport Characteristics:

A specific sequencing of work activities across time and place A beginning and an end Clearly defined inputs and outputs Customer-focus Measurable and meaningful performance

Processes Are Often Cross Functional Areas“Manage the white space on the organization chart!”

M arketing& S ales

P urchase P roduc tion D is tribution A ccounting

C E O

Supplier

Customer/MarketsNeeds

Value-addedProducts/Services toCustomers"We cannot improve or measure the performance of a

hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."

EXAMPLE: BUSINESS PROCESS

Steps involved when a vendor sells an item to a customer.

Business Process Reengineering Business Process Reengineering DefinitionDefinition BPR first introduced in 1990 in a Harvard Business BPR first introduced in 1990 in a Harvard Business

Review article by Michael Hammer: Review article by Michael Hammer: Reengineering Work: Don't Automate, Obliterate. Reengineering Work: Don't Automate, Obliterate.

Hammer/ChampyHammer/Champy

“Reengineering is 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.”

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OTHER DEFINITIONS OF BPR

Involves radical redesign or rebuilding in domains such as individual processes, total organisation, or of the relationships between suppliers and

customers in the marketplace By Colin Coulson Thomas in Cramer ed.

(1995)

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BUSINESS PROCESS BEFORE BPR?

Traditional premise/logic of business processes:Sequential, manual proceduresAutomation of processesEfficiency orientationPush for optimising procedures or functions,

andMaximum level of control

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MOTIVATING FACTORS FOR REENGINEERING

Severe budget cutbacks Insufficient personnel Customer dissatisfaction Stakeholder/Owner dissatisfaction Top leadership mandate Benchmarking results Push from government

GOAL OF REENGINEERING

Reengineering is typically chartered in response to a breakthrough goal for rapid, dramatic improvement in process performance.

Continuous improvement activitiespeak; time to reengineer process

BreakthroughImprovement

Continuous improvementrefines the breakthrough

Competitive Forces Model

Threat of newmarket

entrants

Bargainingpower ofsuppliers

Bargainingpower of

customers

Threat ofsubstitute

products &services

The firmIntra-

industrycompetitors

Why BPR Is Necessary

The Virtual Organization: Three C’s Driving Change Customers take charge.

Mass market v. a “market of one” Backward integration Informed consumers Demanding Sophistication Changing Needs

Competition intensifies. More and different kinds Local Global Big is not better Technology changes the nature of competition.

Why BPR Is Necessary

Change becomes constant. reduced product cycles reduced time to develop new products Technology Customer Preferences

“Companies created to thrive on mass production, stability, and growth can’t be fixed to succeed in [such] a world.”

Integrate people, technology, & organizational culture to Respond to rapidly changing technical & business environment and customer’s needs to achieve big performance gains

Customer Demands

expect us to know everything to make the right decisions to do it right now to do it with less resources to make no mistakes expect to be fully informed

Four Revolutions Affecting Business Today

NewCompetitors

New Rules ofCompetition

NewTechnologies

NewWork Force

The C’s related toOrganization Re-engineering Projects

The 3C’s of organization Re-engineering:

Customers Competition Change

The 4C’s of effective teams:

Commitment Cooperation Communication Contribution

Some of the BPR Objectives

Improve Efficiency e.g reduce time to market, provide quicker response to customers

Increase Effectiveness e.g deliver higher quality

Achieve Cost Saving in the longer run Provide more Meaningful work for employees Increase Flexibility and Adaptability to change Enable new business Growth

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INFO TECH A SOLUTION?

Initially IT only used for automation of processes Short-term improvements of existing fragmented

processes Localised, incremental approach created complex

processes with little contribution to overall effectiveness (Guha et al (1993)

Did not cope with environmental dynamics Inflexible organisational change

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BPR CONCEPT

Rethinking of business activities Remove unnecessary activities Replace archaic, functional processes with

cross-functional activities IT as enabler of change

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VALUE CREATION OF BPR

Cost Speed Productivity Service Quality Innovation

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BPR IS REDESIGN OF:

Organisational Structure Job Definitions Reward Structure Business work flows Control processes Organisational culture and philosophy

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THE REENGINEERED ORGANISATION Flexible to adjust to changing conditions Lean to rival and beat competition Innovative to have new products and services Dedicated enough to deliver maximum quality

and efficient customer service Ready to accept innovations so as to take

advantage of new technologies

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Reengineering: The Business System Diamond

Business Processes

Values and

Beliefs

Jobs and Structures

Management &

Measurement Systems

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BPR CHARACTERS

Reengineering Leader Process owner Reengineering team:

Insiders of processOutsiders of process;

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FOUR DIMENSIONS OF ORGANISATION

Strategies

PeopleTechnology

Processes

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STRATEGIES

Strategies must be reconsidered and redefined Types of strategies

Organisation strategy Technology strategy Human Resources strategy

Determine strategies according to externalities Must be aligned to organisational vision and

consider constraints

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PROCESSES

Identify core processes that satisfy customer needs and add value;

Processes should be defined by customer requirements, not organisational requirements

Redesign of Human Activity Systems (Checkland, 1981)

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TECHNOLOGY

IT is major enabler for spanning processes over functional and organisational boundaries;

Use of new technologies, new methods of using the technologies

Includes acceptance for the changes brought by IT

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PEOPLE

Human activity systems are the most critical factor for BPR

Top management support Change agents Acceptance not resistance Align work force with strategies Address variable cultural and environmental

contexts Empowerment of work force

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TOP TEN MISTAKES OF BPR

Not reengineering but claiming you are; Not focusing on processes Spending too much time analysing current situation; Proceeding before obtaining strong executive leadership; Timid in redesigning; Going directly from conceptual design to implementation; Reengineering slowly; Placing some aspects of the business off-limits; Adopting conventional implementation style; Ignoring concerns of your people;

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IN CLASS ASSIGNMENT

Who should lead a BPR project? Why? By level:

Front-line managers? Middle managers? Top managers?

By title: CEO? COO? CFO? CIO?

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WHO SHOULD LEAD BPR?

Chief Operating Officer (COO)

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WHY COO SHOULD BE REENGINEERING LEADER In a position to compel compliance of all parties

involved in the reengineering; Have authority over the entire end-to-end

processes to be reengineered; Have sufficient stature to demand supporting

staff organisations to adopt operations to meet needs of the new process;

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3S TOOLS OF REENGINEERING LEADERSHIP

SignalsExplicit communications

SymbolsPersonal Behaviour

SystemsMeasurements and Rewards

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AN EFFECTIVE REENGINEERING LEADER Visionary Communicator Leg-breaker

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REENGINEERING WORK

Content Context Style

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REENGINEERING CONTENT

Understanding weaknesses of old process and customer performance requirements;

Inventing a new process design that shatters long-held assumptions;

Constructing the new process; Selling the new way of working and living

to the new organisation;

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REENGINEERING CONTEXT

Uncertainty eliminated gradually over project lifetime;

Experimentation so as to learn mistakes; Pressure: Operate under conditions of

great urgency and intensity;

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REENGINEERING STYLE

Exploration and discovery; “Stumbling forward”

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PROFILE OF A REENGINEER Process-orientation Holistic perspective Creativity Restlessness Enthusiasm

Optimism Persistence Tact Team Player Communication

Skills

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ISSUES TO BE CONSIDERED BY REENGINEERING CZAR ABOUT REENGINEERING TEAM MEMBERS Career Paths Compensation Celebration Communications Care and Compassion

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PROS AND CONS OF USING CONSULTANTS FOR REENGINEERING

The ability to leverage other companies’ experiences

Getting access to essential skills

Third-party objectivity

The risk of outsourcing an important capability

Incurring significant expense

Diffuse accountability

PROS CONS

BPR is Not?

BPR may sometimes be mistaken for the following five tools:

1. Automation is an automatic, as opposed to human, operation or control of a process, equipment or a system; or the techniques and equipment used to achieve this. Automation is most often applied to computer (or at least electronic) control of a manufacturing process.

2. Downsizing is the reduction of expenditures in order to become financial stable. Those expenditures could include but are not limited to: the total number of employees at a company & retirements

3. Outsourcing involves paying another company to provide the services a company might otherwise have employed its own staff to perform. Outsourcing is readily seen in the software development sector.

4. Continuous improvement emphasizes small and measurable refinements to an organization's current processes and systems. Continuous improvements’ origins were derived from total quality management (TQM) and Six Sigma.

Reengineering & Continuous Improvement--Similarities

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Reengineering Continuous ImprovementSimilaritiesBasis of analysis Process ProcessPerformance measurement Rigorous RigorousOrganizational change Significant SignificantBehavioral change Significant SignificantTime investment Substantial Substantial

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Reengineering & Continuous Improvement--Differences

Reengineering Continuous ImprovementDifferencesLevel of change Radical IncrementalStarting point Clean slate Existing processParticipation Top-down Bottom-upTypical scope Broad, cross-functional Narrow, within functionsRisk High ModeratePrimary enabler Information technology Statistical controlType of change Cultural and structural Cultural

Key Steps

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan

BUSINESS PROCESS REENGINEERING: A CONSOLIDATED METHODOLOGY

ACTIVITY 1

ACTIVITY 2

ACTIVITY 3

ACTIVITY 4

ACTIVITY 5

Common Problems with BPR

Process Simplification is Common - True BPR is Not

Desire to Change Not Strong Enough Start Point the Existing Process Not a Blank

Slate Commitment to Existing Processes Too

StrongREMEMBER - “If it isn’t broke …”

Common Problems with BPR

Process under review too big or too small Reliance on existing process too strong The Costs of the Change Seem Too Large BPR Isolated Activity not Aligned to the

Business Objectives Allocation of Resources Poor Timing and Planning Keeping the Team and Organization on Target

How to Avoid BPR Failure

To avoid failure of the BPR process it is recommended that: BPR must be accompanied by strategic planning, which

addresses leveraging Information technology as a competitive tool.

Place the customer at the centre of the reengineering effort, concentrate on reengineering fragmented processes that lead to delays or other negative impacts on customer service.

BPR must be "owned" throughout the organization, not driven by a group of outside consultants.

Case teams must be comprised of both managers as well as those who will actually do the work.

How to Avoid BPR Failure

The Information technology group should be an integral part of the reengineering team from the start.

BPR must be sponsored by top executives, who are not about to leave or retire.

BPR projects must have a timetable, ideally between three to six months, so that the organization is not in a state of "limbo".

BPR must not ignore corporate culture and must emphasize constant communication and feedback.

Ford Motor CompanyFord Motor CompanyAccounts Payable functionAccounts Payable function500 people500 peopleMost work on mistakes betweenMost work on mistakes between

PurchaseOrders

ReceivingDocuments Invoices

Ford (cont)Ford (cont)

Ford (cont)Ford (cont)

WHY DOES REENGINEERING FAIL?

Trying to fix a process instead of changing it Ignoring everything except the process design Quitting too early Reengineering from the bottom up Neglecting people’s values and beliefs Being willing to settle for minor results Assigning someone who does not understand

reengineering to lead the effort

Conclusion BPR is a multi-discipline approach for strategic change Methodology provides missing “how to” that must

follow the “why” BPR must be managed as a project BPR must be owned by the organization, not driven by

consultants BPR requires constant communication and feedback Ultimate test of reengineering is the value creation; Intended and unintended consequences

Individual Assignment

Examine some business processes at the university (CASE/UTM) or at your workplace. Identify TWO processes that need to be redesigned. Using your creativity, how should it be redesigned? How can IT support the new business process? Draw the before & after process in form of a rich

picture.

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