Business Process Reengineering (Encyclopedia of Management)
Process reengineering is redesigning or reinventing how we perform our daily work, and it is a concept that is applicable to all industries regardless of size, type, and location.
While selected elements of process reengineering are well documented in the late 1800s and early 1900s, process reengineering as a body of knowledge or as an improvement initiative, takes the best of the historical management and improvement principles and combines them with more recent philosophies and principles, which make all people in an organization function as process owners and reinvent processes. It is this combination of the old and the new as well as the emphasis on dramatic, rapid reinvention that makes process reengineering an exciting concept. The differences between continuous process improvement and process reengineering are outlined in Figure 1.
The first question in process reengineering is: "Why are we doing this at all?" Answering this question is the beginning of the immediate, dramatic change and the application of supporting technical and behavioral concepts and tools that are necessary to implement process reengineering. To accomplish this, organizations must foster an environment that encourages quantum leaps in improvement by throwing out existing systems and processes and inventing new ones.
The intent of process reengineering is to make organizations significantly more flexible, responsive, efficient, and effective for their customers, employees and other stakeholders. According to field experts Michael Hammer and James Champy, process reengineering requires 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."
If process reengineering is to work, a business's priorities must change in the following ways: (1) from boss to customer focus; (2) from controlled workers to empowered, involved process owners and decision makers; (3) from activity-based work to a results orientation; (4) from scorekeeping to leading and teaching so that people measure their own results; (5) from functional (vertical) to process (horizontal or cross functional) orientation; (6) from serial to concurrent operations; (7) from complex to simple, streamlined processes; (8) from empire building and guarding the status quo to inventing new systems and processes and looking toward the future (i.e., from the caretaker mentality to visionary leadership).
As organizational priorities change, the culture will change as well. As people understand the vision for a better culture with better capabilities and results,
REASONS FOR PROCESS REENGINEERING
There are several reasons for organizations to reengineer their business processes: (1) to re-invent the way they do work to satisfy their customers; (2) to be competitive; (3) to cure systemic process and behavioral problems; (4) to enhance their capability to expand to other industries; (5) to accommodate an era of change; (6) to satisfy their customers, employees, and other stakeholders who want them to be dramatically different and/or to produce different results (7) to survive and be successful in the long term; and (8) to invent the "rules of the game."
Whatever the reason for reengineering, managers should ask themselves: What do our customers and other stakeholders want/require? How must we change the processes to meet customer and other stakeholder requirements and be more efficient and effective? Once streamlined, should the processes be computerized (i.e., how can information technology be used to improve quality, cycle time, and other critical baselines)? Processes must be streamlined (i.e., re-invented) before they are computerized. Otherwise, the processes may produce results faster, but those results may not be the ones needed.
REQUIREMENTS FOR SUCCESSFUL PROCESS REENGINEERING
Many experts indicate that there are essential elements of process reengineering, including:
- Initiation from the top by someone with a vision for the whole process and relentless deployment of the vision throughout the organization.
- Leadership that drives rapid, dramatic process redesign.
- A new value system which includes a greater emphasis on satisfying customers and other stakeholders.
- A fundamental re-thinking of the way people perform their daily work, with an emphasis on improving results (quality, cycle time, cost, and other baselines).
- An emphasis on the use of cross-functional work teams which may result in structural redesign as well as process redesign.
- Enhanced information dissemination (including computerization after process redesign) in order to enable process owners to make better decisions.
- Training and involvement of individuals and teams as process owners who have the knowledge and power to re-invent their processes.
- A focus on total redesign of processes with non-voluntary involvement of all internal constituents (management and non-management employees).
- Rewards based on results; and a disciplined approach.
Those same experts state there are many reasons that process reengineering fails, including:
- Not focusing on critical processes first.
- Trying to gradually "fix" a process instead of dramatically re-inventing it.
- Making process reengineering the priority and ignoring everything else (e.g., strategy development and deployment, re-structuring based on new strategies, etc.).
- Neglecting values and culture needed to support process reengineering and allowing existing culture, attitudes, and behavior to hinder reengineering efforts (e.g., short-term thinking, bias against conflict and consensus decision making, etc.).
- "Settling" for small successes instead of requiring dramatic results.
- Stopping the process reengineering effort too early before results can be achieved.
- Placing prior constraints on the definition of the problem and the scope for the reengineering effort.
- Trying to implement reengineering from the bottom up instead of top down.
- Assigning someone who doesn't understand Reengineering to lead the effort.
- Skimping on reengineering resources.
- Dissipating energy across too many Reengineering projects at once.
- Attempting to reengineer when the CEO is near retirement.
- Failing to distinguish reengineering from, or align it with, other improvement initiatives (e.g., quality improvement, strategic alignment, right-sizing, customer-supplier partnerships, innovation, empowerment, etc.)
- Concentrating primarily on design and neglecting implementation.
- Pulling back when people resist making reengineering changes (not understanding that resistance to change is normal).
Strategic approaches that are process-focused and that are extensions of process reengineering:
- Intensification-improving/re-inventing processes to better serve customers.
- Extension-using strong processes to enter new markets.
- Augmentation-expanding processes to provide additional services to existing customers.
- Conversion-using a process that you perform well and performing that process as a service for other companies.
- Innovation-applying processes that you perform well to create and deliver different goods and services.
- Diversification-creating new processes to deliver new goods or services.
Process reengineering is a valuable concept for organizations that are willing to undergo dramatic change and radical process redesign. It can co-exist with ongoing gradual process improvement efforts because not all processes can be radically redesigned at once.
In process reengineering, as in all improvement initiatives, assessments should be made in terms of cost/benefit analysis, and risk analysis. However, even the assessments should be done with a sense of urgency since process reengineering requires speed as well as radical redesign. Documentation of results will serve as the baseline for future improvements.
The various improvement methodologies (i.e., continuous improvement and process reengineering) should not be used as separate efforts but rather as two approaches within a single improvement initiative. In fact, a single flowchart can be used to make choices regarding both continuous process improvement and process reengineering (see Figure 2). Both gradual continuous improvement and process reengineering should be an integral part of process management.
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Reengineering (Encyclopedia of Small Business)
Reengineering is a management tool that became popular in the late 1980s and early 1990s. Like many such tools, it aims to cut costs while at the same time increasing productivity and providing higher levels of service. And while all this is true, reengineering still offers companies much more. The concept that is at the heart of all reengineering projects is the need to stay competitive in today's business world, and this broad concept involves costs, quality, productivity, and a host of other business elements. All of this is achieved by taking drastic steps to radically change an organization in areas like staffing, technology, and office culture.
When a business decides to reengineer, it often does so as a last resort because previous efforts to change have failed. The situation has become serious enough that drastic measures must be taken. When this decision is made, the company must first determine what the problems within the company are and what needs to be done about them. When this is determined, a basic reengineering model is developed. Next, the company's core processes are discussed and redesigned. The final stage is to adopt the new design.
While this seems like a simple plan, recent studies suggest that between 50 and 70 percent of reengineering projects ultimately fail within their first five years. This is usually the result of a faulty new design or the inability to implement one once it is created. Lack of support from management and employees also contribute to this surprisingly large rate of failure.
One concept that is included in many reengineering models is downsizing or the reduction of staff. Getting rid of excess staff members is an obvious and many times painful way to cut costs. When this happens, the layoffs should be handled in such a fashion as to not strike fear into the main employee base, causing the company to lose its competitive edge while its most valuable assets (the employees) wonder what's going to happen next. If it is decided that the majority of the problems lie at the top of the company, then managers are often among the first to be let go. When this happens, the new business management team is expected to lead the company forward in their reengineering efforts. It is their job to get the rest of the company's employees on board with their new line of thinking. This participation involves trust, cooperation, and commitment from everyone involved.
In order to successfully achieve this goal, an internal reengineering team should be formed. The chances for success are greater if people with differing opinions are selected for the team. This can include people who are familiar with the inner workings of the company, those with little knowledge in this area, customers, and outside consultants. When choosing team members from within the company, it is best to consider people who have different areas of expertise in order to get more diverse and numerous ideas. Despite all these requirements, the team should not get too big, because it could become unmanageable. A team of no more than ten is suggested.
Because reengineering can be a drastic process, employees within the company can often experience a groundswell of emotions, including shock, fear, denial, anger, and anxiety. Most of these feelings can be attributed to the strong sense of change that is in the air. Management should be quick to notice these tendencies and work hard to calm any resentment that could be growing from within the company. They should also stress the excitement of the rebirth of the organization and try to muster enthusiasm from within. If they are successful, the fears of the employees could be replaced with anticipation as they help the company grow into a more competitive entity.
Many times reengineering involves reinventing the company from the ground up. While the concept of starting from scratch can be an exciting one, it can also be quite intimidating. Old habits should be abandoned and new ones adopted. This should be done in grand sweeping motions rather than small tiny steps, because the latter often offers the chance for the company to fall back into its old habits. This mind set can lead to things like liquidations, outsourcing of jobs, and mergers. Still, important things like customer relationships, company history, and the strengths of other past assets should not be forsaken during this period of starting over.
REENGINEERING ADVICE FROM THE OUTSIDE
Reengineering often tends to be a long, painful, and even confusing process. Many companies try to undertake reengineering internally, but with failed results. For these reasons, outside firms can be consulted to help develop the new business design. These firms offer their expertise on important matters that members of the internal management team need help on. The ideas that originate with outside reengineering consultants are often considered radical and fresh because they are not influenced by the history and current state of the company that is undergoing the reengineering effort.
For the most part, these outside consultants concentrate on the new business design and do not exhaust too much energy struggling to understand the current state of the company. Since one of the central reengineering ideas is to essentially start from scratch, this notion makes a lot of sense. These consultants are trained to take risks and create a sense of urgency in order to help make the sweeping changes necessary for reengineering success a reality. For this reason, most of the new business designs by outside firms happen rather quickly, while the overall implementation of the reengineering efforts can take a lot longer.
Reengineering can be a costly process. Outside consultants do not come cheaply and the implementation of a radically new business design can be expensive. Often a company under-budgets a reengineering effort and then is forced to go back and spend more than what was originally estimated.
WHY REENGINEERING OFTEN FAILS
As mentioned earlier, more than 50 percent of reengineering projects are unsuccessful within their first five years. With such a high rate of failure, it is curious why reengineering still exists as a management tool. Before totally condemning it, the main reasons for reengineering failures should be examined further.
Most reengineering projects fail because of a lack of support from upper management. While they are usually the ones who initiate the reengineering effort, they often fail to back it up because the changes are so great. Without proper management support, the necessary tools for a successful reengineering project (including money, leadership, and resources) may not be available.
Once the support from management becomes evident, the managers should keep the lines of communication open and honest so the necessary changes can successfully take effect. If everything is done amidst a cloud of secrecy, the chances for dissension and failure become greater.
A lack of strategy is another reason why reengineering fails. Before the project is undertaken, a lot of soul searching must be done within the organization. This most often requires that a simple, concise, business case study of the organization be written that identifies the problems, the goals of the reengineering effort, possible solutions, and how much time, money, resources, and people are needed for the project. The possible implications of standing pat and doing nothing should also be considered. This is a very important step in an reengineering project and if it is not done properly the results will almost certainly point to failure.
Of course, the possibility that those in charge are the main source of the company's problems is great. Many times management becomes too comfortable and out of touch with the ever-changing marketplace. They cannot see the problems with the company, because all too often they are responsible for them. This lack of objectivity and focus can sabotage even the most sincere reengineering efforts. Unfortunately, those that are not a part of upper management can do little to stop it.
When a company opts for changes that are just too radical, then the reengineering effort has a good chance of failure. All efforts should be in line with the company's previous goals and strategies, but different enough to make the necessary changes. While complex, reengineering should be simple enough that its goals are understandable by everyone involved.
REENGINEERING AND SMALL BUSINESSES
In the business world, large corporations often have large problems and seem to be the most likely candidates for a major overhaul through reengineering. That being said, reengineering can work for a small business too. With cost issues coming into play, an internal reengineering effort would seem like the logical choice for a small business. In order for this to be successful, a small business should scale their approach according to their size. They should become educated about reengineering and what it entails and study past cases to find an existing model or plan that could possibly work for them. If it is decided that outside help is needed, then the company should proceed carefully with a constant eye on their ultimate goal.
Since a smaller business would require a smaller reengineering plan, scrapping everything and starting from scratch may not necessarily be required. But as in larger businesses, reengineering requires careful planning, commitment, and an understanding of the company's goals. By reengineering its processes or functions, a small business has the chance to rebuild, grow, and remain competitive with their larger counterparts.
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