Business Process Reengineering: Constantly Adapting to Change

The classic definition of Business Process Reengineering (BPR) is given in Michael Hammer’s and John Champy’s pioneering book, "Reengineering the Corporation-A Manifesto for Business Revolution," published by Harper Collins, 1993. They define BPR as,"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." From this definition it is clear that BBR is an ongoing, iterative process itself requiring strong commitment and vision from senior management.

John Martin, Taco Bells CEO, used BBR to transform Taco Bell from a failing 500 million dollar regional Mexican fast food chain returning negative 16% annually to a company that since 1989 has grown at a 22%+ annual clip with 3+ billion dollars of sales. Similar stories abound of companies radically transforming key business processes to stave off disaster or to retain industry leadership.

What then are the BPR techniques and approaches used by companies such as Bell Atlantic, Kodak, IBM Credit Corporation, Hallmark, Blue Cross, Grossman’s Hardware, Capital Holding Corporation and others to revolutionize their businesses? Can these techniques be used by companies of all sizes to remain competitive?

BPR involves the total creative rethinking of one or more of a company’s key business processes. No business assumption or organizational structure is sacred. All to often these structures evolved during a time when consumer markets were less competitive and access to information was controlled by centralized, unresponsive IS departments using technology obsolete by today’s standards. Often this rethinking is triggered by an existing or looming crisis. In the case of Bell Atlantic, their Carrier Access Services division was losing accounts left and right because it took them 4 times as long as MCI, Sprint and others to provide customers connect services. In the case of Hallmark, their print/capacity costs were escalating while market share was declining. Grossman’s Hardware, a Massachusetts based chain of over 160 retail stores, realized that to compete with the truly big hardware chains they needed to shift their market focus from the average homeowner to the more specialized needs of the professional contractor or knowledgeable do-it-your-selfer.

To be successful the reengineering effort must be spearheaded by at least one senior executive with clout. The executive’s authority and influence needs to cut across functional departments. Business processes such as order fulfillment, sales, service and product development often span functional departments such as purchasing, shipping, and engineering. This senior executive must be a key player in developing the business case, i.e., why there is a need for change, and finally stating the ultimate goals and vision for the company. He also plays a key role in determining which processes require reengineering. The level of dysfunction, impact on the company and the feasibility of change influence which processes to tackle first. Finally, senior management’s support is crucial since dramatic change often triggers changes in the reward/compensation system, shifts in the corporate mission, significant personnel changes and considerable uncertainty at all levels.

Senior executives, in turn, appoint from their "best and brightest," process owners, responsible for reengineering a specific process. A reengineering team is assembled consisting of those currently working inside the process and outsiders, who are not involved with the process, hence able to bring fresh perspectives.

The process of reengineering itself has no fixed rules. Hammer, in his landmark book, identified common themes found in reengineered processes. Some of these include:

· Several jobs are combined into one. Work normally performed by a number of specialists in different functional departments can now be performed by one individual or team. Through shared databases and decision support systems this generalist has access to all the required information and expert systems to make a sound decision.

· Workers make real decisions. They have a full grasp of the entire process and can take responsibility if a customer is dissatisfied. Creativity, ability to work independently and a sense of responsibility are required attributes of this "new worker." Managers act more as coaches than "bean counters."

· Work is performed where it makes the most sense. A product development team, for example, instead of being spread out over multiple locations and departments is now under one roof or group. When a team member makes design changes those changes are immediately propagated to other team members for review.

· Checks and Controls are reduced

· Reconciliation, and the associated overhead, is minimized. For example, in the case of Ford Motor Company invoices are no longer reconciled with what is shipped because a shipment is not received unless it agrees with the original invoice. Further, suppliers are not paid until their parts are actually used in production, thus forcing the supplier to deliver quality and to be in tune with Ford’s production schedules.

· A case manager provides a single point of contact. When a customer calls with a complaint, one person is responsible and takes ownership for the resolution of that complaint.

The classic example of a reengineered process is the way IBM Credit Corporation now handles credit issuance. IBM Credit Corporation, if independent, would be a Fortune 100 company. Prior to reengineering, it took IBM Credit from 6 days to two weeks to issue credit. Often they would lose customers during the lengthy approval process. Today, the process takes only minutes or hours. Initially, to fix this process, IBM put computer terminals on everyone’s desk to pass information electronically. Next they attempted queuing theory and linear programming techniques. Finally they tried setting rigid factory like performance standards for each employee involved in the credit approval process. In each instance their changes failed to reduce the time it took to approve credit applications.

Finally, quoting Hammer’s book, "IBM Credit had a brainstorm. Executives took a financing request and walked through all five ladders in the approval process, asking personnel in each of the five offices to put aside what they were doing and to process this request as they normally would, only without delay of having it sit in a pile on someone’s desk. They learned from their experiments that performing the actual work in total took only 90 minutes. The remainder, now more than seven days on the average-was consumed by handing the form off from one department to the next. In the end, IBM Credit replaced its specialists- the credit checkers, pricers, etc. with generalists. Now instead of sending an application from office to office, one person called a deal structurer, processes the entire application from beginning to end."

IBM Credit developed decision support systems for the deal structurers to guide them through the credit issuance process. They gave them rapid computer access to all the key information required to issue credit. They developed a triage approach by allowing routine applications to quickly go through the approval process and having the more complex, troublesome requests addressed by a small pool of specialists.

Again, according to Hammer, there a number of common pitfalls that company’s fall into while reengineering key business processes. These include:

· Trying to fix a process instead of changing it.

· Ignoring everything except process redesign. Sometimes reengineering teams fail to address needed changes in job designs, management systems and organizational structures that are required for a successful outcome.

· Neglecting people’s values, beliefs and the corporate culture.

· Placing prior constraints on the definition of the problem and the scope of the reengineering effort. An example might be defining the problem in the context of the way the company is doing business today, not the way it will need to do business in the future. Reengineering is not simply about making a process faster or more efficient, though ROI (Return on Investment), ROA (Profit/Assets) and ROM (Management)are important measures of success.

· Trying to make reengineering happen from the bottom up.

· Concentrating exclusively on design, to the exclusion of actual implementation through pilot or full blown projects.

BPR is not just for large corporations. Personally, I have worked with a number of small to mid size local companies that failed to anticipate change brought about by economic downturn, deregulation and stringent customer quality expectations. One of our goals is to help prospective clients reengineer key business processes in order to thrive in a changing environment. Another goal is to help our clients leverage and expand their information technology to address their reengineering needs.

Finally, just as companies allow themselves to decline and get locked into old assumptions and habits, so do individuals and entire societies. And like companies, it all to often takes a major crisis to shatter old assumptions and begin anew.