UK: WHAT THE EXPERTS SAY - RE-ENGINEERING.

UK: WHAT THE EXPERTS SAY - RE-ENGINEERING. - Terry Finerty - Partner, Arthur Andersen.

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Last Updated: 31 Aug 2010

Terry Finerty - Partner, Arthur Andersen.

Why re-engineer?

As global competition grows more and more intense, companies who want to achieve or sustain a leading position within their industries will need to make quantum improvements in terms of quality, time and cost. All companies, therefore, even successful ones, should consider re-engineering (often described as 'starting with a blank sheet of paper'), whereby they challenge every aspect of how they do business as part of a programme designed to improve performance substantially. Thinking about their processes and challenging current reality enables companies to improve their service to customers by compressing time cycles, improving quality and reducing costs. When willingness to challenge the organisation's status quo is applied with a process perspective that cuts across traditional functional barriers, companies are able to re-invent the way they do business, deliver world-class performance in the processes critical to their markets and begin to create the rules of the game in their industry.

What is new about BPR?

Is it not simply good business practice?

Re-engineering is not just good practice - rather it leads to best practice: we often call it 'bold moves by careful people that deliver lasting results'. BPR asks fundamental questions about the processes a company is performing; why these activities are necessary, and whether significantly faster, more efficient and more effective ways of achieving the same end-result exist. The scope of BPR, which aims at quantum change in performance, is in marked contrast to traditional incremental process improvement techniques. Traditional efforts, often initiated by the head of a function or department, review the general performance of that department and produce a set of recommendations which focus internally on their specific operations. Such reviews miss the opportunities for interdepartmental improvement which can be gained when processes are linked across a number of functions. This traditional approach leads to incremental improvements in performance rather than the step changes in the efficiency and effectiveness of operations which are the distinguishing feature of BPR. While productivity improvement efforts merely refine existing processes, BPR searches out new ways of doing work and questions why processes are done at all.

The new aspect of BPR is its holistic nature: strategy, process, technology and people are aligned to achieve outstanding results. When an organisation wholly commits itself to BPR, the most significant impact is on its employees. A successful BPR project motivates employees to take on new challenges and continually pursue step change improvement.

How would you go about re-engineering an organisation? What success can be achieved?

The consistent message behind BPR is the need to articulate, achieve and manage change. We set BPR in motion through a project team which aims to a) understand the scope and objectives of the programme b) involve a broad constituency of employees in the process c) engender an attitude of openness to new ideas d) closely manage both the human and technical aspects of change in the programme. Commitment, clear focus and communication are critical: over-communication is impossible during BPR.

The project team first establishes a consistent view of 'current reality' or the 'as is' position in the organisation, a shared view of the organisation's overall vision and the operational targets the programme is designed to achieve. The team then focuses on both long-term redesign efforts and shorter term 'quick hit' alternatives. The team synthesises solutions both from a bottom-up understanding of current processes and a top-down view of global best practices. Next, it creatively applies technologies and processes to meet the operating vision identified. The team moves quickly from solution identification to the pilot and trial stage.

An example of BPR success is a telecommunications client which reduced its product development cycle from four years to six months, reduced administrative process costs by 50%, increased sales rep productivity by 300-1200% and increased customer satisfaction by 35 - 95%.

Why do BPR initiatives fail?

Stalled or failed BPR efforts are mostly caused by failure to manage the people side of the process, to demonstrate organisational commitment and build shared vision. The company must have a view of its longer term strategy and its core skills. Without that focus, the substantial effort and resources dedicated to BPR are likely to be wasted on areas of the business which are not critical to success. Another cause of failure is 'analysis paralysis' - companies over-analyse situations and attempt to quantify costs and benefits to an unnecessary degree.

Will BPR fizzle or flourish in the 1990s?

BPR will continue to evolve in the 1990s until the majority of companies have incorporated new modes of operation consistent with today's environment. Successful BPR is an ongoing rather than one-off project, as well managed BPR programmes encourage organisations to see beyond their current mental models and continually challenge themselves to learn and generate new processes that support continual improvement.

James Kelly Managing Director, Gemini Consulting.

Why re-engineer?

First, we are really only talking about re-engineering established businesses, not brand new businesses which lack established processes. Established businesses grow like weeds over the years. They have functional areas where certain practices grow and develop, but often those individual functions do not connect well to other functions. BPR makes inter-functional connections stronger, more effective, more efficient, less time-consuming and less expensive. Often, in large companies individual functions are not only poorly connected, but also almost at odds with each other. So we have a systemic problem and also the behavioural problem of people not working well together. The behavioural side of BPR is perhaps the most important - getting people to work together with their colleagues rather than compete with them.

What is new about BPR?

Is it not simply good business practice?

Historically, good business practice meant dividing the business up into functional specialities, making those specialities as good as they could be and connecting them through a hierarchy. In a sense, we have a state of good practice which harks back to the Industrial Revolution - that of multiple-level, specialised, hierarchical organisations. Today, with improved communications and information technology, that method of organising is no longer best practice. BPR often involves abandoning traditional hierarchical best practices and replacing them with more lateral, more networked, more self-managed people who can both perform their own functions well but also connect effectively and efficiently with other functions. So it is not just business as usual, not just the same best practice. BPR is new and what is new is the more lateral, networked connections of specialised components of an organisation using information, communication and behavioural support to integrate organisations rather than hierarchical management.

How would you go about re-engineering an organisation? What success can be achieved?

First, we define the issues and gain agreement whether we are dealing with the entire business or one piece. Second, the analysis and design stage. Teams work for 8-10 weeks in the company to define processes, behaviours and marketplace realities. Then they design a programme of change and improvement. By this stage we have analysed the potential for improvement, assessed where the barriers to an effective interface between various functions exist, and worked out how we would overcome those barriers during the change process.

Third, we implement the change programme using large teams - perhaps many thousands of people getting involved over months or even years. Here we embark on aligning the business to the marketplace and improving its internal teamwork.

As an example of the success which can be achieved, one of our tele-communications clients introduced a '2-3-4 programme' ie, $200 million of cost savings, $300 million of revenue enhancement and $400 million of capital cost reduction. It is now the most cost-effective telephone company in the industry, has the least number of employees per access line, the lowest number of faults per 1,000 lines, fewer complaints than its competitors and has successfully expanded its revenue base into new fields, such as fax machines. We started with line operations and looked at the main operations which involve direct service contact with the customer before moving to staff processes of accounting, HR and the functions which support line operations. It took three years - a continuing process of change which was performed in waves.

Why do BPR initiatives fail?

First, if it is not connected to the marketplace, a business can spend a lot of time improving its internal operations, only to create a product that nobody wants. Hence, that product will lose in the marketplace. Second, if BPR is viewed as something that is going to be done to the people rather than with and by the people some people will say, 'How can we be downsizing and at the same time involving people?'. But if you get into that narrow kind of mentality BPR will not work because the people who run the basic processes in an organisation and who are the specialists are the ones that have the knowledge necessary to make major change work. Part of the real skill is to harness that knowledge. Coming in with a bunch of experts who tell people how to do things better does not work. People do not like to be told. They would rather be involved even if it means that their jobs may be in jeopardy.

Will BPR flourish or fizzle in the 1990s?

BPR is important, but by itself will not transform a company permanently. That requires additional approaches that impact on both strategy and the mind-set of the organisation in an holistic way. That said, BPR is a fundamental change in the way of doing business. It is about creating brand new, technologically well-based methods of management. If you ran a business prior to the industrial age and were tempted to continue without the kinds of automation and specialisation that the industrial age brought, you would have gone out of business. That is exactly what is happening now. If you do not engage in the kinds of major improvement that your competitors are undertaking then your organisation will eventually die. But it is going to take a long time for the major corporations of the world to become really conversant with BPR.

John Houlihan Vice President, Booz Allen and Hamilton

Why re-engineer?

First, the changes that most businesses are confronted with today are essentially those that, when completed, will position them for success for the next five to eight years. A company's current success is usually based on changes made over the previous five years, so success today does not guarantee success tomorrow unless a company is already thinking ahead. For example, 10 years ago car manufacturers positioned themselves with a nine or 10 week delivery response time into the marketplace. Today the best respond in a week but it took them six or seven years to engineer that position. The reason to re-engineer, therefore, is not necessarily to do with how successful you are today, but where you want to be tomorrow. Second, I think it is wrong to believe that what is happening now is an evolutionary change in business. We are seeing a second industrial revolution. BPR is not about incremental change, not about what you can do with minor, piecemeal, local for local, programmes. It is about redefining and strengthening those fundamental capabilities of an organisation that determine its success. Finally, most organisations are still 'inside-out' - still positioned to sell a product or service they invented. They must change from asking, 'How do I respond better to complaints?', or, 'How do I improve my product?' to becoming 'outside-in' and saying, 'I can provide the product or service that the market really wants and, perhaps, even lead the market with it.' BPR is about such dramatic change.

What is new about BPR?

Is it not just good business practice?

A business can be divided into its routine stable activities and its fundamental change processes. BPR has a component in good business practice as far as continued improvement of the normal, routine, stable activities are concerned. However, to turn an organisation 'outside-in', to take perhaps 70% of the people and 90% of the time (in some processes) out of it by changing the culture from functional hierarchy to team-managed process, is certainly not business as usual. The same goes for improving quality from a 5% level of defects or rejects to a defect level of only one part per ten thousand. Or building a complex piece of medical x-ray equipment to order in two months instead of 10. It is such massive change that is the characteristic of BPR.

How would you go about re-engineering an organisation? What success can be achieved?

We think of BPR as a three-stage process. In stage one we set the competitive targets for the company's performance in, say, two to three years' time with intermediate goals. We review the strategy, assess in outline the capabilities and put this stake in the ground.In stage two we determine which business processes should best deliver these goals, with what supporting organisation, systems and asset structure. This is where key movers in middle management make their commitments to support the top-down goals of stage one. Phase three plans and follows through with implementation. There is no going back in this programme. An example of successful re-engineering is the Kingston Hospital Trust which is embracing the concept of patient focus. The concept of patient focus means that two or three people are trained to have full, continual, total service responsibility for the patient from the beginning to the end without hand-offs. The BPR programme is organising all aspects of patient care along the lines of patient service as opposed to functional hierarchies. An estimated 55% increase in levels of direct care provided is expected using the BPR approach, without any increase in total personnel-related costs.

Why do BPR initiatives fail?

Primarily because of lack of management commitment, resulting in 'turf' issues such as national rather than international perspectives, functional bias, etc. BPR is a waste of time if management is not committed to doing whatever it takes to deliver value to customers through the key processes of the business. The feudal baronies of functions have to serve the processes. That is a change that is not trivial to make. Secondly, people are still largely rewarded by impersonal measures not related to service. Changing performance measures is not trivial. It is very easy to measure tonnes output from factory - but it is not so easy to correlate that to the level of customer service. BPR does not work unless performance measures are redesigned. Thirdly, such change is daunting and many, through fear of failure, do not attempt it until it is too late. Then, they view re-engineering as a panacea or quick fix,which it is not. It is a very difficult process. Finally, the approach is important. A computer systems, mechanistic organisation and methods (O and M) mapping approach is wrong. By covering the office wall with interrelated network type charts and then looking for value-added in them, you will probably miss it completely.

Will BPR fizzle or flourish in the 1990s?

The time span of a BPR project can be two to three years, so even by 2000 many organisations will still be re-engineering. To say that you could re-engineer once at the beginning of the 1990s and that nothing would have changed by the end of the decade would be to deny the premise of rapid change. I think businesses will go through three or four phases of re-engineering. This kind of structural change is probably going to become the norm.

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