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Business Process Reengineering

 
 Business Process Reengineering: A Survival Tool
Prepared By Dr. Mir F. Ali

Business Process Reengineering (BPR) is a phenomenon that revolutionized the corporate America by providing a choice either to implement radical changes to the existing business models, organizational structures, corporate culture, and human behavior in the interest of productivity, proficiency, and profitability or go bankrupt. Exemplary organizations were very much aware of the desperate situations they were in and they made a right choice to take advantage of BPR. These organizations acted rapidly to revitalize their businesses that were suffering from a keen competition and they had lost their competitive edge to superior products and services provided by the Japanese companies. Toyota, Nissan, Honda, Sony and other electronic companies bombarded the American marketplace with their decidedly better quality products and services at a significantly cheaper price. They made the American consumers happy. It took over twenty years for Japanese to achieve the level of excellence before they targeted the European and American markets. The only reason they were able to give their customers a break simply because their products and services were developed designed, and delivered based on the principles of Total Quality Management (TQM) and Just-in Time (JIT).

Japanese are known for having a strategic vision for their products and services. In the 1950s they realized that the only way to stay in business is to find ways of maximizing the quality of their products/services and minimizing the associated overheads. In their search for excellence, they spotted Edward Deming who convinced them that the purpose of using quality management techniques is to help companies stay in business. Deming taught Japanese how the “Input Costs” (People, methods, equipment, material, environment, etc.) can be reduced to lower unit costs, resulting in increased profit and higher return on investment.

Joseph M. Juran was invited to Japan in 1954 at the same time as Edward Deming to speak to Japanese senior managers on the importance of planning, organizing, and managing quality programs. Juran taught Japanese how to control quality and its management.

The TQM principles they learned from Deming and Juran enabled Japanese to control the costs and produce quality products and services capable of meeting customer needs. At the same time they perfected their processes to manufacture their products at a speed that enabled them to eliminate the need for maintaining inventory and the concept of JIT came into existence. JIT provided them with an unbelievable competitive edge over the American as well as European products and services. JIT is a unified philosophy that calls for a total reorganization of operations activities in order to minimize wasted, “non-value-adding” activities, align operations, and balance operations to demand. It focuses on lead-time reduction. In JIT improvements are focused on individual functions and continuous improvement is the watchword. TQM seeks to create an atmosphere in which “doing it right the first time” becomes the goal, where quality is designed and built into each activity rather than being inspected in after the fact. It is heavily white collar oriented, and the focus is often one that uses changes in organizational culture to drive the entire effort. The focus is on reducing the cost of quality, and it also seeks to instill a continuous improvement mind set.

BPR seeks radical rather than merely continuous improvement. It escalates the efforts of JIT and TQM to make process orientation a strategic tool and a core competence of the organization. BPR concentrates on core business processes, and uses the JIT and TQM techniques as enablers, while broadening the process vision.

According to Michael Hammer, BPR is the fundamental analysis and radical redesign of business processes and organization to achieve dramatic performance improvement and the management of the associated business change.

BPR is also defined as a strategic commitment by management to revise priorities and redesign processes to gain significant improvements in key areas of performance (i.e. Service, Quality, Cost, and Speed).

The concept of BPR is over 100 years old. In 1887, Frederic Taylor introduced the concept of reengineering and most of the business processes around us are based on the Taylor Model. In 1992, Michael Hammer published an article on the subject of Business Process Reengineering in the Harvard Business Journal with emphasis on the radical changes and dramatic performance improvement and this article turned out to be a make up call for the businesses around the world. The American businesses were desperate enough to try any thing and BPR became popular overnight. The popularity of BPR created a unique niche for consulting, training, tools and techniques. In a short period of time, it became a multibillion dollar industry.

Business processes offer a tremendous potential for reengineering the total environment. It empowers businesses to deal with the:
  • Increased Competition;
  • Changing Economic Factors;
  • Changes in Skill Requirements;
  • Budget Reductions;
  • Inefficient Business Processes;
  • Inadequate Technologies;
  • Lack of Discipline for Managing Information; and
  • Mismanagement of Human Resources.

One of the major critical factors for the success of any BPR initiative is the selection and application of a BPR methodology that is suitable for the environments. While Michael Hammer gave the rebirth to the whole concept of BPR in a timely fashion and provided the consulting and training services to promote and market this concept around the world, he did not push for a particular methodology. This was left Up to the individual businesses and consulting companies to develop and use a methodology that is workable to accomplish the BPR objectives. This provided us with a strategic opportunity.

Perhaps we were one of the first companies that recognized the niche and wanted to capitalize on the concept of BPR. We had an established practice in the information technology and management consulting areas. We had extensive experience developing, designing, and implementing application systems in the banking, retail, and government industries; we had assisted several clients to deal with the issues associated with the management of information as a corporate assets; and we had also conducted several studies on the subjects of strategic business planning, strategic information systems planning, organizational reviews, and systems audits. We were reasonably successful in assisting our clients to achieve improvements but these improvements were incremental not radical and we thought BPR can give us the tools and techniques, not to mention the leverage, to assist our clients to gain the dramatic performance improvements.

It was only fair to understand and analyze what Hammer was preaching and promoting in the name of BPR before any investment was made in the development of a BPR methodology. The findings of the investigation were very favorable. However, it became clear that Hammer's major focus was the process improvement and while it was reasonably convincing that it could potentially lead to the radical redesign of business processes but it was not convincing at all that it would produce the dramatic performance improvement. Therefore, it was decided to redefine the dramatic performance improvement in the context of radical changes.

It was no secret that organizations are overloaded with the information and unfortunately, most of the people involved in the decision making process in their organizations are not realizing the fact that information redundancy and information bottlenecks are contributing a great deal to their corporate inefficiency, incompetence, and mismanagement. It is true what Peter Ducker said about the Information-Based Organizations:

  • The business organizations should be structured around the flow of information. The information-based structure is flat, with far fewer levels of management. The information-based organization does not actually required advanced information technology. All it requires is willingness to ask, Who requires what information, when and where?
  • However, it could be argued that information technologies have a great deal to offer. Information technologies could have a direct positive impact on the total corporate efficiency by assisting decision makers to use information effectively and efficiently. It is entirely up to the corporations to decide how and where which technology is capable of supporting the information/business processing requirements.

It was our conclusion that in order to realize the dramatic performance improvement, not only the business process but also the use of information, technology, and organization be reengineered. We were convinced that we could accomplish the dramatic performance by designing a BPR methodology based on the following guiding principles that will allow us to implement radical changes:

  • Business must support the corporate vision, objectives, strategic drivers, and critical success factors;
  • Information with relevancy, consistency, and accuracy must support every aspect of the business;
  • Technology must be used to capture, store, and maintain information with the focus to provide access from wherever, however, and whenever is needed for making business decisions;
  • Organization with adequate skills, expertise, and experience must be structured logically to minimize human interfaces and improve human behavior; and Changes must be made without interrupting the current level of service.

These principles guided to come up with an initial design of BPR methodology that was refined again and again based on the experiences gained in implementing BPR in various organizations. The initiation phase that is not shown on the graph is the critical part of the methodology. It sets the scene by:

  • Establishing a Steering Committee based on the Process Owners with the understanding that the chair person for this committee becomes the sponsor of the project;
  • Establishing a Process Reengineering Team based on the representatives from each functional area;
  • Defining and documenting the rules and responsibilities for these committees;
  • Verifying and finalizing the project scope, objectives, and critical success factors; Identifying the project deliverables and deadlines; and
  • Seeking a formal approval from the project sponsor.

Please click here to see a diagram which illustrates the refined version of BPR methodology.

Current Environments (AS-IS Model):
The total focus of this methodology is on clients and services. It requires modeling the current environment (AS-IS Model) by documenting and defining:

  • Who are the internal as well as external clients?
  • What kinds of services are being provided to which client?
  • How who is performing business functions, processes, and activities?
  • What kind of information is required to perform these activities and where does the information come from?
  • What kind of information is being created/modified as a result of performing activities and where the information is sent?
  • How the information is captured, stored, and maintained? What kind of technologies are being used to process information?
  • How the organization is structured? Are there any service level agreements in place? Etc.

Strategic Directions:
The AS-IS Model provides an appreciation for the current practices and services of the organization. Depending upon the availability of qualified resources on the project team, the strategic analysis phase can be conducted parallel to the AS-IS Model to define and document the strategic directions. The definition and documentation of strategic directions required the following:

  • Conduct SWOT (Strengths, Weakness, Opportunities, and threats) Analysis;
  • Build on a Corporate Vision; Refine the Mission Statement; Set measurable Objectives; Identify resource commitment for supporting strategies; and
  • Secure overall senior management Commitment for the initiative.

Following the development of AS-IS Model and the articulation of Strategic Directions, the Strategic Drivers have to be developed to provide specific guidelines for focusing and redesigning the TO-BE Model. This will be done by answering and documenting the following questions:

  • What are the core business processes;
  • What should be the minimum/maximum limits for improvement;
  • What are the political realities and what kind of compromises are to be made;
  • What should be the goals for each corporate objective already defined; and
  • What will be the ways to measure and sustain improvements?

Target Environments (TO-BE Model):
The development and redesign of the TO-BE Model is required extensive analysis to:

  • Business Model: Refine/redesign business activities / processes/ functions by conducting the vertical and horizontal analysis, by classifying activities into the core, critical, and value-added categories, by combining and deleting activities, etc.
  • Business Design Facility (A modeling tool from Texas Instruments) and BPwin (A modeling tool from LogicWorks) are used for developing the Business Models as well as the Process Models. This modeling tool is designed to support the IDEF0 methodology.
  • Information Model: Refine/redesign information to meet the business requirements by conducting relevancy and consistency analysis, by modeling and documenting information with the emphasis on the redesigned business model, by identifying the information bottlenecks, etc. ERwin (A data modeling tool from LogicWorks) is used to model information requirements. This modeling tool is designed to support the IDEFIX methodology.
  • Technology Model (Architecture): Refine/redesign the technology architecture by removing the identified information bottlenecks and recommending the secured pipelines to provide information to the right people on right time, by suggesting new technologies, by preparing business cases to justify the further investment in technologies, etc.

The following technologies are recommended depending on the suitability:

  • Smartcard;
  • Imaging;
  • Electronic Data Interchange (EDI);
  • Electronic Funds Transfer (EFT);
  • Voice Response Systems;
  • Executive Information Systems;
  • Artificial Intelligent Systems;
  • Interactive Video Conferencing Cellular Networking;
  • Client Server; Etc.

Organizational Model (Structure): Refine/Redesign the organizational structure by aligning all relevant business activities under a logical business process/function, by identifying the skills requirements for each redesigned business activity, by analyzing the current available skills and identifying the skill gap, by recommending training for each individual responsible for performing these activities to bridge the gap, etc.

The organizational document includes:

  • Job classification and pay levels; Job classification titles; Job duties, responsibilities, and the associated functions/processes; Skills requirements; Etc.

The following tools are recommended from Profiles International for the evaluation and selection of employees:

  • Prevue Assessment: An employee evaluation tool; Career Mapper: An employee selection tool; and DISCplus: A method for measuring the key personality factors.

Transition/Implementation (Change Management): Perhaps the most important phase of the methodology is the Transition/Implementation (Change Management) phase. There are two specific steps to be performed under this phase:

  • The development of a roadmap to indicate what needed to be done to transform from the existing environments (AS-IS) to the desired target environments (TO-BE) that is designed to achieve the corporate vision. The emphasis here is on WHAT; and The preparation of a document explaining how each identified item can be implemented to accomplish the desired results. This document is also used to monitor and measure how each deliverable is achieved following the roadmap. The emphasis here in HOW.

Kurt Lewin's change management model is proposed for making changes the recommended changes in the organization. Lewin, a leading behavioral scientist, introduced Force Field Analysis to recognize the two sets of opposing forces - Driving Forces and Restraining Forces. He showed how Driving Forces could be made stronger than Restraining Forces to make change occur.

This methodology was tested in various organizations. Indeed a methodology provides a discipline to implement changes systematically. However, it has to be understood clearly that BPR is a journey, not a destination. Consultants can help organizations to accomplish the desired level of improvement but the user team must be championed and empowered with the tools and techniques to ensure that improvements are made on a continuous basis.
 

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