Process Reengineering
1.4 Process Reengineering Body of Knowledge
An Overview
For many years, an organization’s success was considered secure if it was competitive in one of three areas: (1) cost/productivity, (2) quality/service, and (3) responsiveness/flexibility. More recently, however, many organizations are recognizing that to survive in a rapidly changing environment, it is essential to excel simultaneously in all three of these major areas. To accomplish this inte- grated performance, organizations must develop new processes to produce results that are important to their clients/customers. They must look for ways to become more flexible and responsive, while providing high quality products/services for a relatively low cost.
Michael Hammer is generally credited with coining the term “reengineer- ing” in a 1990 article in theHarvard Business Review. He made the point that traditional methods of improving business performance to achieve this integra- tion often did not produce the desired results. Information technology, for the most part, was not the solution either. He suggested that, in many cases, such technology has only caused inefficient processes to be performed more quickly.
TABLE6.1 Underlying Principles of Process Reengineering
Focus on customer-driven results: Eliminate barriers that inhibit decision-making and the flow of work.
Compress time: Develop concurrent rather than sequential steps; utilize a standard methodology for consistency and efficiency; increase process velocity; and develop teams with customer or end-user focus.
Eliminate nonvalue-added activities: It has been estimated that 50% to 90% of the steps in any process are nonvalue-added (i.e., steps that customers would not feel good about paying for if they knew they were part of the process).
Define end-to-end solutions: Take a holistic view—processes should be examined across all functional and organizational boundaries (including customers, suppliers, and partners). Respect the “20/80 rule”—if you just do 80% of the job, you will only get 20% of the planned benefits.
Align to meet customer or end-user expectations: Determine what customers or end-users want and when they want it.
Empower people/distribute work: Align responsibility and accountability by giving employees the power to make decisions and incentives to utilize that authority. Drive decision-making into the organization so that those closest to the information are empowered to make the call. Provide the knowledge, tools, and authority needed to make decisions and execute processes effectively and thereby, foster a feeling of ownership at all levels of the organization.
Set far-reaching goals and measure improvements: Goals should be both aggressive and realistic and should directly support the organizational strategy. Employees must be challenged to beat the goals.
Quality at the source: Build in quality at the source by supplying timely performance feedback. Encourage self-inspection and peer assessments. Have the right people (well- trained, motivated, and organized), applying the right tools and systems, to carry out simplified processes, to produce products and services that have been designed for productivity, within the appropriate organizational infrastructure.
Implement continuous improvements: Aggressively question all procedures and practices in an ongoing basis to continually exploit opportunities.
Identify and communicate interdependencies: An organization is made up of a series of complex processes carried out by interdependent units. The linkages among these processes and units must be clearly understood by all participants.
Adapt cost-effective, leading-edge technology: State-of-the-art technology should em- power employees to make decisions, increase flexibility, compress development time, and expand the capacity for positive change and improvement.
Do things once correctly: Enter data at the source that have been mutually agreed-upon as appropriate for effective decision-making; store and maintain these data centrally (replicated as necessary), and achieve one coherent view of administrative processes.
Process reengineering requires an organization to consider the final product of its efforts. Hammer believes that, used properly, information technology can be instrumental in redesigning the way organizations do business. However, information technology cannot serve as the “tail wagging the dog”—it must be the other way around. Management must lead the way with technology serving as an invaluable assistant.
When the environment was fairly stable, work was divided into simple, repetitive tasks to create efficiencies of scale. Layers of supervision and control were created to link these simple tasks together. As a consequence, the resulting processes became more and more complex.
Now, ever-increasing demands for flexibility and responsiveness are driving organizations to develop processes whereby people can perform relatively com- plex, multidisciplinary tasks with a minimum of “overhead.” Too much time is required for a complex command structure to respond to changing conditions.
Therefore, these new improved processes must be “governed” by a general under- standing of an “organizational vision” and a consensus on appropriate procedures.
Following Hammer’s 1990 article, numerous books were written on af- fecting dramatic and radical organizational changes, primarily focusing on ap- plications in the private sector. H. James Harrington suggested that management devoted too much time correcting problems that should not have occurred in the first place if appropriate processes were in place [5]. The focus of management should be on preventing problem—on developing processes that work error-free.
Harrington provided extensive lists of essential information that should be used in evaluating and improving processes.
Thomas Davenport covered the entire spectrum of topics essential to a successful reengineering effort, placing significant emphasis on how information technology can facilitate the overall reengineering effort [6]. Davenport made the point that marginal improvements in operating performance can not ensure long-term survival in a global economy and atmosphere of intense competition.
A whole new view of how organizations do business must be explored, and that exploration must probe the very depths of the organization.
Michael Hammer and James Champy clearly identified the root cause of what is wrong with the way many American companies do business and then proceeded to outline, in concise and clear language, the steps organizations should take to reengineer their processes [7]. They suggested that many com- panies still adhere to the nearly two hundred year-old Adam Smith concept of work structure. In their opinion, these principles no longer apply in the dynamic, global-driven age in which companies compete in the 21st century. Many or- ganizations lack the necessary focus on process (the logical way products and services are produced, or the way in which work is actually done) and, perhaps more importantly, they fail to give adequate attention and concern for those who pay the bills—the customer.
Hammer and Champy developed concepts and techniques that can be employed to turn organizations around. As evidenced throughout their book, the key to reengineering lies in the willingness to start afresh—that is, to proceed with no preconceived notions as to the best way to organize to do business, to the methods employed, or to the technology used in producing goods or services. It is a “clean slate” approach to problem solving. Emphasis is also on the customer and on the competition. The organization must be willing to set aside its old ways of doing things in the interest of making improvements.
If that willingness is not there, Hammer and Champy strongly advise against attempting the reengineering effort.
Reengineering the Corporation spent many months on the nonfiction bestseller list of the New York Times [8]. Since its release, the concepts of reengineering outlined in this book have been put to the test by numerous organizations—from manufacturing concerns to nonprofit and governmental entities. Many of these organizations have documented significant increases in productivity, profits, customer satisfaction, and employee morale as a result.
On the downside, many reengineering efforts (by some estimates, 50% or more) do not succeed, or at best yield only marginal improvements. This lack of success could be due to any number of reasons, ranging from a lack of top management commitment to targeting the wrong processes or areas to reengineer.
While reengineering may not be the ultimate answer to every organization’s problems, a prudent executive would be wise to at least take a very hard look at its prospects (see Table 6.2 for a process reengineering glossary).
TABLE6.2 Process Reengineering Glossary
Activity-based costing: Set of accounting methods used to identify and describe costs and required resources for activities within processes.
“As is” process: Description of the current flow of a process, including subprocesses and activities, showing how products and services are created.
Benchmarking: Comparison of the performance of organizational processes against an internal or external standard of recognized leaders. Most often the comparison is made against a similar process in another organization considered “world class.”
Process: Collection of related, structured activities—a chain of events—that produces a specific service or product for a particular customer or customers.
Business process reengineering: Radical improvement approach that critically examines, rethinks, and redesigns mission-delivery processes and subprocesses, achieving dra- matic mission performance gains from multiple customer and stakeholder perspectives.
Clean sheet: Concept popularized by reengineering experts which contends reengineering should totally abandon a current process and start from scratch in building and deploying a new process.
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TABLE6.2 (Continued)
Core or key process: Customer-facing, management, or support process considered vital to the organization’s success and survival.
Customer: Groups or individuals who have a relationship with the organization, including direct recipients of products and services; internal customers who produce services and products for final recipients; and other organizations and entities which interact with an organization to produce products and services.
Cycle time: Time that elapses from the beginning to the end of a process or subprocess where inputs are converted into outputs.
Decomposition: Breaking down a process into subprocesses and activities.
Executive team or steering committee: Top management team responsible for developing and sustaining the process management approach in the organization, including selecting and evaluating reengineering projects.
Function: Set of related activities that are part of a process; often known as a subprocess within a process.
“Heroic” goal: Goal that requires a significant change in the performance (quality, quantity, time, or cost) of a process. Also called stretch goals, the targets are normally 50% or more.
Modeling or flowcharting: Graphic representation of the activities and subprocesses within a process and their interrelationships.
Performance gap: Gap between what customers and stakeholders expect and what each process and related subprocesses produces in terms of quality, quantity, time, and cost of services and products.
Process improvement approach: Approaches such as incremental process improvement, process redesign, and reengineering that can be used together or separately to improve processes and subprocesses.
Process owner: Individual held accountable and responsible for the workings and im- provement of one of the organization’s defined processes and its related subprocesses.
Stakeholders: Individuals or groups who influence programs, products, and services, such as legislative bodies and public interest groups.
Subprocess: Collection of activities and tasks within each process.
Timebox: A set, specified period of time during which specific tasks must be performed.
“To be” process: Description of the desired flow of a process, including subprocesses and activities, showing how products and services could be created under a new vision.
Value-added: Those activities or steps which add to or change a product or service as it goes through a process. These are the activities or steps that customers view as important and necessary.
World class organization: Organizations recognized as best for at least one critical process and held as models for other organizations.
Adapted from: National Academy of Public Administration Foundation,Reengineering for Results, Washington, D.C. (1994).