The Role of Business Process Reengineering in High-Performance Organizations John Griffin Ferris State University
2 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. It seems as if a day does not pass without a report of some factory lay-offing workers, cutting back on expenses or just plain closing. News articles express the concern that the service industry and retail are also scaling down their costs, as well. Are there that many corporations with extra ordinary costs? Could it be that this many companies are that poorly managed? The answer may simply be, “Yes.” Many companies in the United States are indeed producing at a rate lower then their potential. It is not that the companies are producing less, but, in the past few decades, many advances have come in the areas of communications, air travel, technology and labor policies have changed the landscape of modern day production. If a company has not been striving to keep up with these changes, they will continue to produce at their previous rates while competitors will begin to produce at a much higher rate. Business Process Reengineering (BPR) is a way that many companies are using to incorporate these various changes into their new environment. For some, BPR is confused as being the same as the Continuous Quality Management program or the LEAN philosophy. It is not, but they should neither be looked at as a single unit, nor should they be viewed as separate entities. BPR should be viewed as the umbrella act of changing the way a business performs its entire operation. Continuous Quality Management is the process used to re-design individual tasks. LEAN is a philosophy followed when performing the reengineered processes in a day to day setting. In order to know why you are headed in a particular direction, it is sometimes important to know from where you are coming. For almost as long as the United States
3 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. has been in existence, its companies have practiced the division of labor as put forth by Adam Smith in his book The Wealth of Nations. For that time and place in history, this strategy was exactly what was needed to give American manufacturing the appropriate boost. This is the plan that the American powerhouse companies used to launch themselves into their positions by the beginning of the 20th century. It is such a successful business plan that it was used through the mid-1900s and many companies still use it today. The premise behind the division of labor is that rather then having one laborer work a piece from start to finish, each task will be assigned to a different worker. Before, if you wanted to produce a chair, each task would be done by a single carpenter. He or she would measure and cut each piece; put the cut pieces to the latte to shape them as needed; sand each part; assemble them; and then finally stain the finished product. In Smith’s world, each task will be brought to its most basic function, and then assigned to an individual; therefore, one man would pull the wood off of the pile; then hand it to someone who would measure each piece; the next person would then cut at the marks and this would continue for the entire process. The laborer is trained in a single task, and performs this task for the duration of the work day. The expectation is that this individual will learn the most efficient way to execute that particular task. The pay off comes when every task is being performed at the maximum efficiency possible; thereby, the entire product line will run at the maximum rate possible. The division of labor gives a three-fold advantage over having one craftsman doing all tasks. As Smith (1776) states:
4 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. This great increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many. Business Process Reengineering is an attempt to break out of this mold of 18th century style thinking and to adjust the modern work places into ones that are more appropriate for the Information Age companies. It is designed to almost do the opposite of dividing labor; it is actually combining some of it back together. Now, the corporation’s tasks will be looked at as entire processes not just a collection of individual lasts. James Champy is the father of the Reengineering school of thought, upon which BPR is based, and, in the book that he co-authored, Reengineering the Corporation, he uses the definition of Reengineering (Hammer & Champy, 1995, p. 32) 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.” Most importantly, BPR involves radically changing the way that the American mind and the American businesses do business. An example of Adam Smith’s Division of Labor theory at work, and the obvious need to re-design it, was given on May 22, 2005, in a personal interview with Mark
5 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. Griffin, Inside Sales Representative for Putnam Hitch Products. He told of a customer who came to him for an exchange and explaining that they had ordered a trailer hitch but inside the box were the wrong parts. Griffin, following his delegated task of making sales and keeping customers happy, took the box to the warehouse to obtain the proper parts, he was met with hostility because he did not have the appropriate paperwork to comply with the warehouse’s task of keeping inventory of all parts that enter or leave the warehouse. Had Putnam Hitch Products reengineered there process, they would have combined the Sales Department with the Customer Service Department and then delegated the authority to sell an item to the customer, receive a return and pull the correct product from the warehouse. The actual process of BPR is the tedious analyzing of tasks required to be performed, who should be performing and if the task needs to be performed at all. During the initial BPR process, each task is reviewed to ensure that it adds value to the customer and any tasks that are found to add none are eliminated. The remaining tasks are re-designed to perform in the most logical way possible and with the authority to do the job necessary pushed to the lowest level involved as possible. Without reengineering, a company can easily be functioning with many extra steps being performed by many extra people adding extra cost yet providing no extra value to the customer. This extra weight in the process cycle turns a company into proverbial dump truck carrying unneeded equipment, yet the company could run like a well maintained race car after the reengineering has taken place and processes have been streamlined.
6 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. One tool used in BPR is Continuous Quality Management. Here, CQM is the intentional practice of routinely checking a task or process to ensure that there could not be another way to perform the task that would be the most effective manner. This check is done constantly; as soon as one implementation is done, another would be started. The important difference between CQM and BPR is that CQM is done on an individual process, whereas BPR is done corporate wide. Another method that is used in BPR is LEAN. This philosophy tries to pull all of the waste (Muda, as it is called) out of a process, thereby helping it to run at peek efficiency. One such way is by producing only enough products at one station that will be used at the next station; this will prevent a bottleneck from forming. For the official definition, in the book, Lean Thinking by James Womack and Daniel Jones (1996), LEAN is “… a way to specify value, line up value-creating actions in the best sequence, conduct these activities without interruption whenever someone requests them and perform them more and more effectively.” It takes a combination of all three, BPR, CQM and LEAN to put a company on the fast track. The BPR process will require that each process be broken down into the tasks required to finish it, then analyzed to ensure they are still needed and, finally, redesigned for maximum efficiency. The next would use LEAN manufacturing to redesign the process. Then CQM would be used to continue looking for better ways to improve the performance. One of the most important parts of any company’s growth or restructuring is change. Change Management is just as it sounds, learning to manage the change that is
7 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. inevitable in a growing corporation. With Change Management, rather then allowing change to run amuck within the company, it is controlled and done in an orderly fashion to ensure that all changes are in accordance with the corporation’s guidelines and goals. If a corporation wants to survive, they must change and they must plan how that change will take place. Coca-Cola is learning this the hard way. As one author put it (Foust, 2004) An unwillingness to tamper with the structures and beliefs formed during those glory years has left the company unable to adapt to consumer demands for new kinds of beverages, from New Age teas to gourmet coffees, that have eaten into the cola king's market share. For many years, they have considered themselves as only a carbonated soft drinks company, in comparison to Pepsi who looks to be recognized as a service provider. Companies have no choice but to find a way to ensure that they are able to change in an ever changing market place, and in the dynamic workplace environment of the 21st century or they will see themselves losing the battle for customers. This holds especially true for the company that is embarking on their own BPR; for them, Change Management will be critical for the success of their reengineering plan. If they do not coordinate the changes that are going on, it would be very easy to lose control of the scope of the project, as well, as sending mixed signals to employees, customers and shareholders. If change is not understood properly, distrust of the leadership or their abilities can run
8 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. rampant within the organization; therefore it is essential to communicate that information to the affected people. These modifications will take place on several levels, one of course, being company wide changes (as in BPR) and on the opposite end are the changes involving an individual employee. Most employees will see dramatic changes to their current position, and, unfortunately, some employees may not have a position at all. Therefore, it is important to identify what effects these business policy changes will have, to whom they will affect and to what degree. Employees that are “scared for their jobs” or who do not agree with the migration of the company could react by hording information or control, undercutting projects or sabotaging them all together and a myriad of other undesirable actions. The reaction that will be the most troublesome for the company is the lack of teamwork that could arise. For the most part, communication can smooth the situation, but if a resolution cannot be found, it may require filling that position with a likeminded person. How does one communicate such changes to all affected parties? This would mostly be left to the individual situations and the creativity of the staff putting out the message. There are many forms that this message could take; it could be closed circuit television, pre-recorded video tapes, newsletters, town hall meetings, intranet pages, Internet pages, letters to the workers homes or even by a meet and greet working breakfast. The content of the message should also be considered when determining the method of delivery. If the message is going to be of a sensitive or personal matter, the
9 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. delivery should be personal. It would not be recommended to use a pre-recorded video tape to tell a factory that you will be closing the doors, tact and professionalism should always be used. In this reengineering process, communication is not the only need for Information Technology, will be also be used for sharing data and work loads between team members. In fact, many of the changes that are available for companies now, would never be possible without the IT field’s advancements. Now with two properly reengineered companies, a work order can go from Company A’s procurement clerk in New York City to the Company B’s factory floor in Beijing in less then five minutes. Data entered by the customer service clerk at a distant call center (even one overseas) will be immediately available to the service technician in the local area. When Champy and Hammer wrote their book in 1996, their take on IT’s contribution to the reengineering process was that databases could be shared amongst many workers; although this is true, in the nearly a decade since then, IT is added even more tools to allow a company to work seamlessly. It may be a question akin to “Which came first the chicken or the egg,” but since the reengineering craze has begun, many software companies (Microsoft, Lotus and Groove, just to name a few) have developed collaboration software to allow shared files, instant messaging, shared “whiteboards” and instant access over the network. So, which came first the online collaboration software or the demand for it? In the modern office, most all tasks are done on the computer. Handwritten notes mailed through the inter-departmental mail system are a thing of the past. Word
10 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. processing programs, spreadsheets and presentation software are all where most work is done. In June, 2005, Redmond magazine ran an interview with Ray Ozzie, a Chief Technology Officer for Microsoft Corporation, where he was commenting on the future of collaboration software. He (Barney, 2005) remarked, “Today you don’t create content without doing something with other people, whether it’s presenting it to other people or working on it with other people.” Information Technology is what allows this to happen and is the mortar that holds a reengineered process together. Even if a company now has decided to perform a Business Process Reengineering plan; they have began to look for ways to perform a LEAN method of operation, as well, as a plan to perform continuous quality management; they have their Change Management plan in place; they have a solid grasp on IT; they still may not be successful in the endeavors, it has been estimated that 70% of reengineering programs do not reach their maximum potential. There are many variables in this equation before a definite answer can be found, and that answer is a successful reengineering of the companies processes. In general, the reasons for failure tend to fall into one of two broad categories; lack of people support and lack of planning. It should be remembered that by themselves most causes would not prevent a successful reengineering; it is the combination of several different factors. Three of the largest factors are people’s natural resistance to change (both for employees and managers), the executives not reaching a consensus and not being able to get a high enough level of “champion” for the cause. Other times it is simply that the company did not reengineer their processes, they simply attempted to tweak what was
11 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. already there or by misplacing the focus of attention (either too much on the process or not enough). Before embarking on the project, it would be wise to research why other companies have either succeeded or failed. To succeed, an organization must ensure that they do not allow themselves to do the things that have made other companies fail, but how do they do that? First, they need to have the full backing of the senior management, these changes are corporation wide and deep rooted changes, and they cannot be performed by a manager shy of an executive. Also, these senior leaders need to have heavy involvement; this can not be delegated away. Another thing that is needed is a definable goal; an example would be to state that the process will not stop until production has been raised production by a minimum of 300%. Third is that you must “win the hearts and minds of the masses,” if resistance is met from the everyday worker, the reengineering process will be much more difficult if not impossible. The most important step that will bring success to a reengineering project is planning! Planning must be done before every stage, then followed by confirming that everything is being done as planned and then to follow up and document what happened for the next area that will be reengineered. With all of the changes that will happen, the planning needed, the upgrades in information technology, it will, undoubtedly, have a major effect on both the company and its employees. In the work force, the most engrained employees are the ones that need to be on the various committees for redesigning the process since they know more about the process is run or should be run then probably anyone else. Now not only are
12 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. your brightest employees in meetings all day and not producing, the company cannot put all work on hold, while teams reengineer each and every task. Hopefully, the other employees are able and competent enough to perform the extra workload and carry the company through this. Management will have several changes, too. First, they may loose their position. If employees are given the authority to make decisions on their own, the company should be able to function well and be more profitable without so many managers. Also, they will need to learn to function in a “flatter” environment, and to allow the authority to flow through them, to their employees. After all of this is done, is reengineering going to be the cure for our factory closings and lay-offs? Maybe, or maybe not, some companies can perform the BPR process and still fail. Every company CEO, President or managers, owe it to the company to look at BPR and determine for themselves if they are running the best that they could be, or if they are willing to scrap their current way of doing business and then reap the benefits of profit increases being measured by the hundreds.
13 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. References 1. A Primer for Change Management Retrieved July 2, 2005, from Change Management Learning Center Webpage http://www.change-management.com/tutorialprimer.htm 2. Barney, D, It’s Groove Baby! Redmond July 2005, P.39 3. Champy, J. (1995) Reengineering Management New York, NY HarperBusiness 4. Covert, M. Successfully Performing BPR, Visible Systems Corporation, 1997 5. Foust, D., Gone Flat BusinessWeek December 2004 6. Hammer, M. & Champy, J. (1993) Reengineering the Corporation New York, NY HarperBusiness p. 32 7. Hammer, M. Successful Implementation of Change In Agenda: What Every Business Must Do to Dominate the Decade (pp. 229-242) New York, New York Crown Business 2001 8. Reengineering Best Practices Study, Prosci 1998 9. Smith, A. (1776) An Inquiry into the Nature and Causes of the Wealth of Nations London: Methuen and Co., Ltd., 10. Sytsma, S Lean Thinking Synopsis of Womack, J. & Jones, D. Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Simon & Schuster, New York, 1996 11. Sytsma, S Process Reengineering Continuous Quality Improvement vs. Business: What are the Differences?
14 John Griffin MMBA 705 The Role of Business Process Reengineering in High-Performance Organization. 12. Womack, J. & Jones, D. Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Simon & Schuster, New York, 1996