Business process re-engineering isn't just talked about now, it's done. Peter Bartram presents two very different case studies.
Times are tough for management fads these days. Not just any old panacea can survive the competitive, cut-throat world of those professional business doctors - the gurus, consultants, management authors and academics. But that newest corporate fix-all, business process re-engineering (BPR), seems to be holding its own. Since Management Today last tackled BPR in August 1993, interest has gathered pace. According to a recent survey by Computer Sciences Corporation, 56% of companies in Europe with turnovers of more than $250 million have BPR projects under way. A further 22% are discussing the technique.
Despite growing interest, the verdict on BPR is still uncertain. Five years or so down the BPR road, some managers admit they still don't wholly grasp the concept. Is BPR any different from earlier business improvement methods such as total quality management? Does BPR really add up to more than a heap of hyperbolic managerial beans? And, if you do decide to jump on the bandwagon, what is the best way of making the leap?
But as more and more companies attempt BPR, a clearer definition is emerging. According to a new report, Re-engineering: the critical success factors, re-engineering means making radical improvements in performance through the redesign of core business processes. Says author David Harvey: 'It is distinct from, but compatible with, other methods of raising performance, such as total quality and continuous improvement programmes.' Re-engineering involves a rethink of how an organisation delivers its products and services. The focus is the customer. The aim: step-change improvements in customer service. In companies which stay at the leading-edge of their industries, a life of continuous improvement is punctuated by periods of BPR. There is no one 'right way' to carry out BPR, although Harvey has established eight critical success factors. But companies generally come at it from one of two directions.
A handful such as BT and National and Provincial Building Society aim for the 'big bang' approach. This involves creating what N and P chief executive David O'Brien calls a 'process design organisation. The only thing you can do in a volatile business environment is to create an organisation that has the capacity to live in a permanent state of change.' Most companies aim for what is best called the 'patchwork quilt' approach. Instead of seeking to re-engineer the whole company in one grand plan, they pick off individual business processes for improvement. Eventually, the separate pieces of the quilt join up to create a wholly re-engineered organisation. This slower but arguably safer approach is the method adopted by British Alcan Aluminium.
Whichever method is chosen, Harvey warns: 'Re-engineering is not a substitute for a sound business strategy, nor can it save a company whose basic products or services are out of touch with market requirements.'
Re-engineering: the critical success factors is a major new Management Today report on British companies' experience of re-engineering, researched and prepared by Business Intelligence. Price £175. For details call 081-544 1830.
British Alcan Aluminium.
British Alcan Aluminium has adopted the 'patchwork quilt' approach to BPR. In three years, it has completed some modest but effective projects.
The company's experience has been sufficiently successful to make it a paradigm for other manufacturing companies with re-engineering dilemmas. It has developed a novel way to train managers in BPR techniques and has also identified four preconditions necessary to make re-engineering successful.
British Alcan's move into re-engineering started in response to the need to improve efficiency and deliver better customer service. The organisation's link with Nippon Light Metal - its Japanese sister company in which Alcan has a 49% stake - has proved especially beneficial.
In fact, Jon Woolven, a business analyst at British Alcan, says the company's approach to BPR grows out of kaizen, the continuous improvement methodology perfected in Japan. But BPR is qualitatively different to kaizen and aims for step-change rather than incremental performance improvements.
Woolven says that Alcan's approach to BPR is tailored to suit its own culture and business needs. 'We stress the value of participation, rigorous analysis of data, visual displays of problems and performance and the documentation of agreed procedures,' he says. 'We believe in looking outwards, focusing improvements on the customer.' In a typical Alcan BPR project there are four phases - preparation, classroom training, analysis and design, and reorganisation.
Preparation generally lasts about a month. During it, managers focus on understanding the problem and exploring options. They collect data, choose a project team and define the target. Says Woolven: 'That really is the make or break stage. It is crucial to get all of that right.' Next comes classroom training. But rather than subjecting managers to boring chalk and talk, this is based on a computerised simulation exercise. Managers reengineer an imaginary quotation process encountering the kind of problems they will meet in a real-life project.
Woolven says: 'The simulation exercise shows the team it is possible to make startling improvements in a business process. That is a good lesson before they meet the real world, because that are often very sceptical of their ability to do that.' The analysis and design phase of a project typically takes about five days. The BPR team works with a facilitator or coach to redesign the process and document the new procedures that will apply. With that successfully completed, the team starts the implementation phase, usually taking about a month.
An example from British Alcan's patchwork quilt shows how this approach works in practice.
A small British Alcan company which assembles luggage racks and light fittings for British Rail and other trains was half ways through a contract. It was falling further behind schedule and, says Woolven, 'on-time delivery was awful'.
He explains: 'The customer was for ever calling up and changing its mind about the sequence of deliveries, but since the production lead time was three weeks, the company could never respond intime, The shop floor was piled high with inventory.' And ominously, the contract was due for renewal.
the contract wasd due for renewal.
Using the four-stage BPR approach, a team devised a five-point solution. This involved relaying out the plant, making a small product redesign, multi-skilling the fabricators to form a production cell, discarding redundant stock and introducing a kanban scheduling system.
As a result, the company was able to hold a stock of components which it could assemble to order in two days. Says Woolven: 'Within three months, the company was ahead of schedule with virtually 100% of on-time delivery' Inventory was reduced. Most important, the contract was renewed and the company also won a contract for a different product.
Woolven warns there are a few preconditions if a company is to reap the benefit from Alcan's approach to BPR. 'First and foremost, the business must be well managed with good open communications to explain the reasons for change - otherwise you are just going to re rearranging the deckchairs on the Titanic.
A second precondition is to make BPR part of a strategic plan. Too many companies like the sound of BPR, are impressed by the benefits others have won but have no idea what to apply it to in their own organisation. Says Woolven: 'It shouldn't work that way round. You have got to see how BPR can serve your strategic need.' The third precondition is backing from top managers. 'Managers must demonstrate their comitment up front to follow through with the changes,' says Woolven.
The final point is where the hard decision comes. Many BPR projects aim to reduced the headcount in organisations. Woolven says this should not be part of the responsibility of the BPR team. 'We had one example in our company where we attempted that and it set peer and against peer. We are still trying to recover from the morale problems which came from that.' Cutting staff is a management responsibility, suggests Woolven. 'They have to grasp that message and they can't delegate it to the rest of the organisation.' Alcan's patchwork quilt approach to BPR has produced some real benefits. But these are isolated in islands of reengineered processes. Although 'big bang' re-engineering is much riskier, it also offers the richest prizes.
As Woolven admits: 'We can't put our hands on our hearts and say that we've produced a miracle transformation of our whole business.'
British Telecom sprints on the spot.
If medals were awarded for bravery in business re-engineering, BT would merit the VC. But in this battle, ground has been gained slowly and at some cost.
BT's re-engineering experience is a warning to other large companies contemplating the problematic shift from functional to process management. Yet it also highlights the tantalising prizes available to a company with the courage to go for the 'big bang' approach. For BT these include the opportunity to complete 99% of all residential and business orders within the time agreed with the customer by March 1996 and to reduce the number of unsuccessful residential and business fault repairs by at least 90% within a five-year period. BT's pay bill and related costs could also be cut in half over the next five years.
But such benefits don't come easily. Despite nearly seven years of re-engineering activity, results at BT are still patchy. And along the way, the company has suffered ructions in the boardroom, at least one walk-out by a senior executive and entrenched resistance from many managers. Asked to cite one concrete benefit BT has won as a result of its efforts to date, Roger Cartwright, manager of BT's business model, admits: 'I think it might still be too early days to start quoting results coming from the work.' Persuading BT's managers to adopt business re-engineering has proved an uphill struggle. One problem is that the emerging process design of the company lies across the familiar line management structure. As a result, too may managers still focus on their line rather than process management responsibilities. Says Cartwright, 'Process management is still very remote to many employees. The activity largely runs in parallel to line responsibility, rather than being an integral part of it.' As a result of such problems the success of business re-engineering projects has been patchy. In the personal communications division, for example, BPR is 'alive and kicking' largely as the result of top-level management sponsorship. In other parts of the company, staff still resent the attempt to foist new ways of working on them.
BT's experience points up the importance of winning a top-level champion for re-engineering at the outset and managing the activity in a coordinated way. With both these from the outset, BT might now be further along the road.
Yet the logic of BT's approach is inexorable and the courage with which it has tackled difficulties commendable. The story begins in 1987 when BT tried to develop a new computer system to help manage the provision and repairs of telephones, the core business. the plan ran into difficulties because every BT region has its own approach and no common focus could be found.
BT tackled the problem by creating a 'strategic systems plan' (SSP) which started managers thinking seriously about how the company might achieve its business objectives more effectively as a process-based organisation. This vision of BT as a process-based company was an important milestone on the road to total re-engineering. It promoted understanding of the business as a whole and provided a framework for charting how BT changed in response to customer needs.
Cartwright recalls how work on the vision had influence on senior managers. 'Various groups started to look at the detailed practicality of re-engineering ideas. Over time, this made a profound impact, becoming one of the key elements of the changes that took place.' One outcome was a decision - in 1990 - to reorganise BT to enable it to move more effectively towrds becoming a process-based company. The semi-autonomous regional structure was scrapped and replaced with three major divisions based on market segments. These are business communications, personal communications and special business, such as mobile communications.
Following this reorganisation in 1991 BT set up a 'group process management unit' to take the lead in re-engineering by defining the compay's core and sub-processes and modelling how they ran across the new divisions.
Cartwright explains that BT has defined its business processes in three ways: 'Business processes' which deliver products and services. These focus on external customers and include processes such as providing products or delivering a maintenance service.
'Support processes' which help the business processes to work. These consist mostly of back-up activities such as personnel, finance and network operations.
'Component processes' which are major business functions common to both business and support processes. These include work control and billing.
Cartwright admits this is a complex approach but he says its strong benefit is that it reflects how the company actually works.
Despite years of re-engineering activity, there are still outposts of resistance. Last year BT decided at top level that it had to blast away the last roadblocks. BT's executive committee launched Project Breakout designed to complete the re-engineering of the company. The project's sponsor is Michael Hepher, managing director of operations.
Breakout should eventually mop up the pockets of BPR resistance by making managers' responsibility for process management more explicit.
Says Cartwright: 'We want process management to be formalised. It must become part of management objectives so that process managers have the power to manage the people along the process line.
'Until Breakout, most managers didn't have that power - they could only change things within their own division and even that may have been difficult. On the whole, until the Breakout project, process management had been adopted half heartedly by some of our top people.' Breakout is helping to clarify for BT's managers what BPR means - especially its critical differences from other management techniques, such as total quality management. The project will also ensure that individual re-engineering initiatives within the company are coordinated.
Despite the earlier difficulties, Breakout is having a positive impact on managers' attitudes to BPR, claims Cartwright. 'It is beginning to hit them and a lot of them are now involved in projects on a rolling basis.' Even so, BT's aims are highly ambitious even by business re-engineering standards. And if the plan to trim back staffing from 170,000 to 100,000 works, many managers will find they have reengineered themselves out of a job.
Despite the BPR bravery, BT still has to learn that many VCs are awarded posthumously.
Eight critical success factors
1. Establish strategic purpose
2. Ensure top management direction and support
3. Set stretch goals (ambitious targets to meet or exceed current world-class performance)
4. Define core processes
5. Redesign and create higher level processes (ie major end-to-end activities in an organisation such as bringing new products to market)
6. Conduct effective change management
7. Establish systems to ensure that staff from different functions (eg marketing, IT) work together
8. Promote stakeholder involvement with effective planning and project management.