Business Process Reengineering

Manoj Kumar Singh Research Scholar; Department of Management Studies Indian Institute of Technology, Delhi

Business Process Reengineering

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. Hammer & Champy 1993
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Key Words
Fundamental Why do we do what we do? Ignore what is and concentrate on what should be. Radical Business reinvention vs. business improvement Dramatic Reengineering should be brought in when a need exits for heavy blasting.

Companies in deep trouble. Companies that see trouble coming. Companies that are in peak condition.
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Key Words
Process: A specific ordering of work activities across time and space, with a beginning, an end, and clearly identified inputs and outputs: a structure for action. -- Thomas Davenport Business Process a collection of activities that takes one or more kinds of inputs and creates an output that is of value to a customer.

Processes Are Often Cross Functional Areas

"Manage the white space on the organization chart!"
CEO

Supplier
Marketing & Sales Purchase Production Distribution Accounting

Customer/ Markets Needs

"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."

Value-added Products/ Services to Customers

What is a Business Process?

A group of logically related tasks that use the firm's resources to provide customeroriented results in support of the organization's objectives

Characteristics of BPR: A specific sequencing of work activities across time and place A beginning and an end

Clearly defined inputs and outputs

Customer-focus How the work is done

Process ownership
Measurable and meaningful performance

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, or spin-off companies.

BPR is Not?
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.

BPR Principles
Organize around outcomes, not tasks. Have those who use the output of the process perform the process. Subsume information-processing work into the real work that produces the information. Treat geographically dispersed resources as though they were centralized. Link parallel activities instead of integrating their results. Put decision points where the work is performed and build controls into the process. Capture information once and at the source.

Key Characteristics
Systems Philosophy Global Perspective on Business Processes Radical Improvement Integrated Change People Centred Focus on End-Customers Process-Based

Business Process Reengineering Life Cycle

Define corporate visions and business goals Identify business processes to be reengineered Analyze and measure an existing process

Visioning Identifying

Enterprise-wide engineering

Analyzing Redesigning
Evaluating

Identify enabling IT & generate alternative process redesigns Evaluate and select a process redesign

Process-specific engineering

Implement the reengineered process Continuous improvement of the process

Implementing
Improving

Manage change and stakeholder interests

Methodology #1 1. 2. 3. 4. Activity# Develop vision & strategy Create desired culture Integrate & Improve enterprise 5. Develop technology solutions Methodology #2 1. Determine Customer Requirements &Goals for the Process 2. Map and Measure the Existing Process 3. Analyze and Modify Existing Process 4. Design a Reengineered Process 5. Implement the Reengineered Process

Methodology#3
1. 2. 3. 4. 5. 6. 7. Motivating Reengineering Justifying Reengineering Planning Reengineering Setting up for Reengineering As Is Description & Analysis: To-Be Design and Validation Implementation

Methodology# 4 1. Preparation 2. Identification 3. Vision 4. Technical & Social design 5. Transformation

Methodology #
1. 2. 3. 4. 5. 6. 7.

Set Direction Baseline and Benchmark Create the Vision Launch Problem Solving Projects Design Improvements Implement Change Embed Continuous Improvement

Criteria for Selecting Processes

Broken Bottleneck Cross-functional or cross-organizational units Core processes that have high impacts Front-line and customer serving - the moment of the truth Value-adding New processes and services Feasible

Identify BPR opportunities

Identify the core/high level processes. Recognize potential change-enablers Gather performance metrics within the industry. Gather performance metrics outside the industry. Select processes that should be reengineered. Prioritize selected processes.

Phase 4: Redesigning
Identify enabling IT & generate alternative process redesigns
How can business processes be transformed using IT?

Business Reengineering

Business-pulled

Technology-driven Information Technology

How can IT support business processes?

Source: Thomas H. Davenport and James E. Short, The New Industrial Engineering: Information technology and Business Process Redesign, Sloan Management Review, Summer 1990, pp. 11-26.

IT Enabling Effects
Dimensions & Type
Organization Entity Interorganizational

Examples
Order from a supplier

IT Enabling Effects
Lower transaction costs Eliminate intermediaries

Interfunctional
Interpersonal

Develop a new product

Approve a bank loan

Work across geography Greater concurrency

Integrate role and task

Objects Physical Informational

Manufacture a product

Increase outcome flexibility Control process Routinize complex decision

Prepare a proposal Fill a customer order Develop a budget

Activities Operational Managerial

Reduce time and costs Increase output quality Improve analysis Increase participation

Adapted from: Davenport, T. H. and Short, J. E., "The New Industrial Engineering: Information Technology and Business Process Redesign," Sloan Management Review, Summer 1990, p. 17.

Reengineering & Continuous Improvement--Similarities

Reengineering Similarities Basis of analysis Performance measurement Organizational change Behavioral change Time investment Process Rigorous Significant Significant Substantial Continuous Improvement Process Rigorous Significant Significant Substantial

Reengineering & Continuous Improvement--Differences

Differences
Level of change Starting point Participation Typical scope Risk Primary enabler Type of change

Reengineering
Radical Clean slate Top-down Broad, cross-functional High Information technology Cultural and structural

Continuous Improvement
Incremental Existing process Bottom-up Narrow, within functions Moderate Statistical control Cultural

Reengineering Is ...
Extremist's View

Obliterate what you have now and start from scratch. Transform every aspect of your organization.

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 Strong
REMEMBER - If it isnt 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.

Enablers of BPR
A.Information Technology 1. Changes the nature of work 2. Integrates the Business Functions

3. Transforms competitive forces

4. Decision making (Centralization or Decentralization) 5. Organisational Hierarchies 6. Job Satisfaction and skill

IT Capabilities
a.

Storage
Retrieval Sharing Transfer Transfer Forwarding

b. c. d. e. f.

B. Organisational
1. Structure Self managing team work Cross functional teams Simple task team

2. People Empowerment and participation in decision making Culture and cultural change 3. Technology
4. Organizational Activities and Tasks

C. Human Resource Enablers

New Skills
a. Training Programme b. Training Assessment Motivation

a. Skill variety b. Task Identity c. Task significance d. Autonomy

D. Total Quality Management

It can act as foundation to BPR having similar underlying Principals focusing on : Customers Cultural Change Best Practices Integrated approach for doing work.

Thank you