Making Your Business More Competitive with Business Process Reengineering (BPR)
The concept of business process reengineering (BPR) is to rethink and break down existing business processes. This allows a company to reduce costs and improve productivity through newer, more efficient processes. It is important to remember however, that though there are instances where this is necessary, business process reengineering is not without its disadvantages. This makes it vital to weigh your decision carefully. One of the most obvious adverse effects of a company’s decision to reengineer is a lowered employee morale. Most people are vary of change and do not manage to adapt to it easily. This aspect needs to be kept in mind when trying to make the decision to go through with the activity.
In this article, we will discuss 1) the history of business process reengineering, 2) the steps to help you implement business process reengineering, 3) successes and failures of business process reengineering, and 4) some famous examples.
HISTORY OF BUSINESS PROCESS REENGINEERING
In the early 1990’s, Michael Hammer and James Champy published a book, “Reengineering the Corporation”, that stated that in some cases, radical redesign and reorganization within a company were the only way to reduce costs and improve service quality. To this end, they said, information technology was the key element for allowing this to happen.
Hammer and Champy said that most large companies made (now invalid) assumptions about their goals, people and technology that were impacting the workflow. They suggested seven principles that could be used to reengineer and help streamline workflows, thus improving quality, time management and cost.
Hammer and Champy suggested the following seven principles in their book.
- Organize around outcomes, not tasks.
- Identify all the processes in an organization and prioritize them in order of redesign urgency.
- Integrate information processing work into the real work that produces the information.
- Treat geographically dispersed resources as though they were centralized.
- Link parallel activities in the workflow instead of just integrating their results.
- Put the decision point where the work is performed, and build control into the process.
- Capture information once and at the source.
What does this mean in simpler language? Essentially, for a successful BPR effort, it is important to look at all the tasks that are working to achieve the same goal. This exercise can then allow several jobs to be combined into one. In addition, parallel processes leading to the same outcome should be connected within the process rather than just combining results at the end. Also, it is important to look at all available resources and place the actual work where it makes the most sense.
To make the process most efficient, the power to make decisions regarding it should be given to the people performing the process and any unnecessary control systems should be eliminated. Instead of having extra processes to record information relating to the process, a resource within the process should provide all necessary data to increase accuracy and reduce redundancy.
HOW TO IMPLEMENT BUSINESS PROCESS REENGINEERING IN YOUR BUSINESS
The following steps (Davenport, 1992) can help BPR realize its core principles of customer satisfaction, reduced costs of business and increased competitiveness.
1. BUSINESS VISION AND OBJECTIVES
Any BPR activity needs to begin with a clearly defined and measurable objectives. Whether the goal is reducing costs, improving quality of product, or increasing efficiency, the framework for what needs to be achieved has to be decided upon at the outset, in line with the company’s vision and mission.
2. IDENTIFICATION AND SLACKING PROCESSES
Once a clear goal is in mind, all processes need to be studied and those seen as ‘slacking’ or that can be improved need to be identified. Among these, those processes with direct impact on the company’s output or those that clash with the company’s mission become part of the ‘red’ list. This clear identification makes the difference between BPR success and failure.
3. UNDERSTAND AND MEASURE THE ‘RED’ PROCESSES
With a list of slacking processes in hand, it is imperative to identify how they were identified as such. Are they taking too much time to complete? Is the quality of the outcome being compromised? Whatever the issue, each process must be judged objectively either against industry standards or ethically obtained competitor best practices.
4. INFORMATION SYSTEM AND TECHNOLOGY CAPABILITIES
An efficient and relevant IT system is an essential BPR enabler. Without such a system, it is not possible to keep a check on all factors affecting the change. Before setting out on a radical BPR activity, it is vital to set in place information systems that can deal with the magnitude of the change.
5. DESIGN, BUILD AND TEST THE NEW PROTOTYPE
Before any new product is launched, a prototype is tested out. A failure at a testing stage should never be implemented at a larger scale. BPR projects fail more often than not for a variety of reasons but a basic reason is the inability to identify and accept any limitations at the testing stage. Among other factors, both the management’s attitude towards the new way of work and the employees’ outlook towards the change should be carefully assessed.
6. ADAPTING THE ORGANIZATION
Managing change brought about by BPR activities is the final effort towards a successful project. Providing updated documentation, organizational structures, governance models as well as updated charts of authority and responsibility leave little room for confusion and allow a smooth transition into the new way of work.
Business process reengineering is a radical change activity that cannot be repeated if it goes wrong the first time. It is often a high risk activity that involves monetary investment and a risk of demotivated employees. In is essential to have buy in all the way from top management down and it should have a broad functional scope.
SUCCESSES AND FAILURES OF BUSINESS PROVESS REENGINEERING
It is important to acknowledge and understand that BPR is not a foolproof method of success. As with all activities it runs the risk of failure.
A BPR program can be successful if:
- Customer needs are made the priority and this vision is used to appropriately direct business practices.
- There are cost advantages to be achieved that help the organization become more competitive in its industry
- A strategic view of all operational processes is taken with relevant questions being asked about the established way of work and how it can be developed over the long term into more efficient business practices
- There is a willingness to look beyond tasks and traditional functional boundaries with a focus outcomes. Through this, entire processes can be eliminated or amalgamated into fewer but more relevant and powerful processes throughout the organization.
- There is a real desire to simplify the way of work by objectively assessing all activities and tasks and eliminating any that add less value and more complexity.
A BPR program will fail if:
- It is seen as a way to make minor adjustments and improvements to existing processes. If there is no clear willingness to put all existing process onto the chopping block, there is no chance of success
- It is seen as a one-time cost cutting exercise. In reality, cost reductions are often a handy by product of the activity but not the primary concern. It is also not a one-time activity but an ongoing change in mindset
- There is no success in gaining dedicated long term commitment from management and the employees. Bringing people onboard is a difficult task and many BPR initiatives never take off because enough effort is not put into securing support
- There is less effort to redesign and more to automate
- One department is prioritized at the expense of the process. There needs to be an openness towards studying every single process in detail and a willingness to change whatever is needed to achieve overall efficiency
- There is too much internal focus and not enough of an eye on the industry and what competitor best practices can be used as benchmarks
SOME FAMOUS EXAMPLES OF BUSINESS PROCESS REENGINEERING
In his suggestions to Ford, Michael Hammer proposed something radical: Eliminate the invoice. In the new scenario, a buyer no longer needed to send a copy of the purchasing order form to the creditor administration. Instead, he registers an order in the online database. When the items appear at the store, the storekeeper check whether these correspond to the purchase order form in the system. In the old system he did not have access to this form. If the items match the order, he accepts them and registers this in the computer system. If they do not, the items are returned. Hammer reported that Ford benefited drastically from this change with an almost 75% decrease in workforce in the accounts payable department.
Taco Bell reimagined their business, focusing more on the retail service aspect and centralizing the manufacturing area. The K-Minus program was created and the meat, corn shells, beans, lettuce, cheese and tomatoes for their restaurants were now prepared in central commissaries outside the restaurant. At the restaurants, the prepared ingredients are assembled when ordered by a customer. Better employee morale, increased quality control, fewer accidents and injuries, bigger savings and more time for focusing on customer business processes are some of the successes of the new way of work. Taco Bell has gone from being a $500 million company in 1982 to a $3 billion company (Early 1990s).
Hallmark used to spend 3 years in bringing new products to the market. With more niche markets identified Hallmark executives were convinced that the product development process needed to be redesigned. Using reengineering, the goal was set to change cycle time to one year. They discovered to their surprise that two thirds of the product cycle was spent on planning and conceptualizing the card rather than on printing and production rework as had previously been thought. The concept spent 90% time waiting for a creative staffer to complete a new iteration till it was eventually finalized, In 1991, a new line of cards was brought to market in 8 months, ahead of schedule, by creating a cross functional team for product development.
Although there have been many BPR success stories, the process became somewhat unpopular in the late 1990s. There were many organizations who went through the attempts to redesign processes but did not manage to reap any of the myriad benefits promised. So it is essential to plan carefully before undertaking this exercise. First and foremost, a business problem needs to be identified. Are we manufacturing at higher costs than our industry? Is there a newer way of work that we have not brought into our processes? Do our processes seem overly complex? Are too many people doing too many similar things? After setting clear objectives and securing support from all levels of management within the company, it is important to approach the process as one of continuous learning and to keep an eye on new and emerging problems as well the existing way of work. The success of any BPR initiative hinges on how deeply a process improvement mindset is created and nurtured by both management and the process owners themselves.
For further learning you can read through the following presentation.
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