BEST PRACTICES IN REENGINEERING

INTRODUCTION

Reengineering, when properly implemented, results in tremendous, almost miraculous results. But, there are also plenty of failures. Some estimate as much as two of three efforts fall short. It is clear that companies are having problems getting the results they want from reengineering.

The process isn't at fault. The companies usually are.

There are many ways to go wrong. Incomplete communication with employees, flagging support from top management, and attempts to reengineer too many processes arc among the mistakes that can sabotage your reengineering effort.

David Carr and Henry Johansson of Coopers & Lybrand, after studying the reengineering programs of forty-seven American and European companies, compiled a comprehensive list of best practices as guide to the reengineering process.

WHAT IS REENGINEERING?

Reengineering, also known as Business Process Reengineering (BPR). emerged from the groundbreaking "7otal Quality Management" (TQM) philosophies of Joseph Juran and W. Edwards Deming.

The goal of TQM is to continuously improve processes.

A process is a set of linked activities that take input, transform it and create an output. Manufacturing for instance, is a process: it takes raw materials and transforms them into a product.

TQM addresses problems that arise in processes and tries to solve them. It is evolutionary, a constant but plodding effort to mike gradual improvements. It's also a blanket effort, covering the entire company.

But TQM tries to mike the process better, it doesn't question whether that process should exist. That is the next step taken by BPR. Reengineering radically redesigns selected processes in order to dramatically improve a company’s competitiveness. It looks at processes from a broad business perspective that crosses the narrow borders of specific functions.

Going substantially beyond TQM tinkering, it can focus only on two or three specific processes at a time. Reengineering is revolutionary, challenging the operation and even existence of fundamental processes. It not only improves the old way of doing business, it seeks to create a new and better way.

Factors

TQM

BPR

Type of Change Evolutionary – a better way to compete Revolutionary- a new way of doing business
Method Adds value to existing processes Challenges process fundamentals and their very existence
Scope Encompasses whole processes Focuses on core business processes
Role of Technology Traditional support (eg. MIS) Use as enabler

Fundamental differences between TQM and BPR

What Are Core Processes?To dramatically improve competitiveness reengineering must attack your company’s core business processes. Core processes directly touch your customers or your suppliers. They are the processes that are critical to competitive success in your industry. For example, new product development is critical for success in the car industry. Order fulfilment is a core business process for a component manufacturer. Underwriting is a core process for an insurance company.

By contrast support processes are completely internal to the company. They are intended to support the core processes. Your company’s payroll system is a support process. While important to the operations of your company, it does not affect your success against the competition.

You can reengineer some support processes and get impressive cost savings. But this type of reengineering is not going to radically change how you do business or dramatically increase your competitiveness.

Best Practice 1: Recognize and articulate an "extremely compelling" need to change.

Why change? To mobilize your company behind the reengineering effort. you first have to show your employee and managers that there is a compelling need for change. The compelling need to change is driven by market forces and articulated through the corporate mission and strategy. Some examples of compelling need are: to increase competitiveness, losing market share, regulatory changes, market opportunities, increasing customer complaints, privatization or cost pressures.

Your job as leader is not simply to argue the need for change. You have to set the direction for change. One way is to set goals that are specific, measureable, achievable, realistic and time-bounded (SMART). But most important, you have to create a vision of the new company,. That vision is articulated through the company’s mission and strategy. At Aetna, for example, the vision called for the to change to a customer focused culture. At AlliedSignal, the vision specified customer focus, teamwork. innovation, and speed as the keys to the future.

Building on market pressures, you’ve created a vision of a better company. Now, you must make that vision the engine of organizational change. You can't do it alone.

Best Practice 2: Start with and maintain executive-level support.

You depend on your top management team to carry the vision and direction to the next level of day to-day organization and operations. Top managers can't lead change until they become committed to change themselves. Convince them first of the need for change, and support them continuously as they work with the organization. Reengineering brings dramatic changes to your organizational. But without continued leadership from you and your management team, the effort will falter and die.

Best Practice 3: Understand the firm's readiness to chance.

Take a closer look it your organizational. The rest of the organization may not be willing or ready to Change . Are your people ready for change? Do they have a positive attitude toward change? And do they have the ability to implement the change once it has been defined?

Answering these questions will help you create a plan for facing resistance and implementing change.

Change management entrust be allowed to happen. You hive to plan for it. Train people to fullfill the new functions brought by the changes. And be prepared for resistance to change. There will be concerns and fears about the changes.

Best Practice 4: Communicate effectively to create buy-in.

The best way to overcome fears is communication. Secrets in a company create anger, tension and resentment. When rumours and fears of what the change will mean become magnified, your change process is almost certainly doomed to failure - or to face spirited opposition.

To prevent these problems, communicate clearly and completely, with your entire organization from the beginning. Give the good news as well as the bad. For example, BPR often results in fewer people needed to do a job. Communicate clearly and early what will happen to those people. You can set up meetings between managers and employees, sent weekly updates to all employees and published a monthly newsletter.

In communicating, you must also appeal to emotions. You’ve got to buy in with their befits and their bellies, not just their minds.

Best Practice 5: Create top-notch teams.

You’ve mobilized your people for change. Now put in place the structure that will actually create the change a structure based on teams.

There are two sets of teams involved in the BPR process:

Because teamwork is the basic operating tool of reengineering, the selection of team members is vital to the success of the effort. When building teams for BPR, look for creativity and expertise. You need the best and the brightest. The fact that team members are composed of the best of the best you can expect success from the reengineering effort. But don't make the mistake of just choosing an all-star team. Although sports all-stars are the best players in their league, the all-star team would probably lose a series against a regular league team. In addition to talent and creativity, you need people with team skills who can work together consistently over the long haul. Team skills together with talent contribute as much as 40% to the success of the reengineering effort.

Best Practice 6: Use a structured framework.

But neither talent or team skills was the reason most cited in the survey for team success. Sixty per cent of the respondents said that the ability to focus on the BPR vision and objectives was a key success factor.

You won't find a connect-the-dots guide to reengineering. The goals, players, and context of BPR initiatives are too diverse. However, finding or creating a framework will help you define and organize the process. A framework breaks down the process into recognizable and pieces and creates a common language.

Specifically, a framework gives you methods to:

You can use a framework developed in-house. An internal framework has the advantage of coming from your company's culture and using your company's language. On the other hand, an outside framework from a consultant has the advantage of being based on experience with many different companies. To get the best results combine the two: use an external framework adapted to the company.

Best Practice 7: Use consultants effectively.

In addition to providing frameworks, consultants can also provide coaching and facilitation expertise to the process - especially in the planning phases. In the authors' survey, companies used consultants mostly for management strategy, project management and change management and training. When choosing a consulting firm, make sure it has experience with BPR in your industry and a thorough understanding of your business and marketplace. Also look for a track record for real innovation not just recycling of old ideas.

Best Practice 8: Link goals to corporate strategy.

Start with the standard strategists' questions: What product or service will the company offer? Where will it offer that product or service (which market segment)?

To answer these two strategic questions use customer research, competitive analysis, and benchmarking. Remember that the goal in reengineering should always be related to customer needs.

Now shift your search to internal processes. What processes civil/ support the product or service in the targeted segment? To answer this question, conduct internal reviews. Conduct a financial review to see how well your company, is reaching its financial goals, and which processes are the financial levers.

Best Practice 9: Listen to the voice of the customer.

Core business processes connect adult customers. It's important to get feedback from them before choosing processes to reengineer. Customer surreys and customer focus groups are the best way to listen to your customer.

Ask your customers to grade the company on quality, cost, delivery, reliability, and after-sales service and support. Also ask customers to rank competitors against these attributes to see how you measure up. Finally, ask customers how you can stay competitive today - and five years from today.

In addition to showing your strengths and weaknesses, customers may cause you to redefine some core businesses. For example, if shorter lead-time is very important to customers in the future, you may define order entry as a core business process - thus strategically important - rather than a support, process.

Best Practice 10: Select the right processes for reengineering.

And conduct an operational review to see what the company does well and where it needs to improve. As part of this review, diagram the procedures of your core business processes (those that affect customers and suppliers) and support processes (internal processes). These "quick maps" give you a first indication of where changes are needed - although later, you probably must break the core business processes down into sub-processes to actually reengineer.

A strategic continuum map will help you pinpoint which processes to choose. This map compares a process's strategic importance to its performance.

The most strategically important processes are Identity processes. They define the company to outsiders. Marketing is an example. Priority processes, which significantly affect everyday performance of the company, come next. After sales service is an example. Both of these are core business processes.

Background processes are internal but necessary for the business to survive. Human resource development is one example. Finally, the least strategically important processes are those mandated by government or other regulations. Most accounting practices fall into this category.

Placing processes on a strategic continuum shows the processes that are most and those that need to be improved.

Best Practice 11: Maintain Focus.

Don't try to reengineer too many processes. Focus on three or fewer processes. If too much is going on. the goals and objectives of the entire reengineering initiative will be lost in the confusion.

Best Practice 12: Maintain teams as the key vehicle for change.

Executive steering committees aided by small work teams, chose the processes to be redesigned.

Actually redesigning the processes requires BPR teams that know the process well. The new members of the teams should come from different functions. Cross-functional membership allows teams to address all the functions touched by the process in question. For example, information technology (IT) experts on teams can address IT questions while human resources experts address problems related to human resources.

To maintain continuity, retain some members from -the preliminary, phase in the redesign phase. Division heads are often retained on teams throughout the process.

Best Practice 13: Quickly come to an "as-is" understanding of the processes to be reengineered.

Now, comes the time to break apart the old process and redesign it. Break down the processes into sub-processes and create detailed diagrams of the process flows for each. These diagrams are "as-is" maps. Detail is key. You meant to know all of the activities and all of the people involved in those activities. Of course, not every minute detail is necessary.

To get a quick estimate of the process costs of employees. multiply, the annual salary of each employee involved by the percentage of a year spent by that person on the process, then add the results. Design parameters, set by the steering committee, provide guidelines on how to reengineer the process. These parameters, for example, could include:

Reengineering teams must create i vision specifically for the redesigned processes. This vision shows expected performance improvements in time, quality, cost, and service. 1t also shows how the process supports company strategy, responds to customers, and responds to the competitive challenge faced by the company.

Armed with detailed analysis of the current process, the design parameters, and the process vision, You now create the process flow diagrams for the "to-be" processes.

The complexity of the process will decide what technique you use to create your models. You may want complex, computer-generated, three-dimensional models. However, since reengineering is supposed to simplify, processes, you should be able to map the new process in a simple flow diagram. If you can't, you probably haven’t reengineered enough.

Best Practice 14: Choose and use the right metrics.

Measurements such as cycle time, process cost, and on-time delivery will tell you if the new process is fulfilling the process vision. Don't implement the reengineered process until a formal performance measurement process is ill place.

Best Practice I5: Understand the risks and develop contingency plans.

When you implement a reengineered process, you'll invariably encounter problems no matter how well you plan. Here are seine implementation tips:

Despite these steps. your reengineering initiative - and any profound change initiatives - will still encounter resistance. This "organizational" risk is compounded by a technical risk: that the lick, processes don't work. When implementing reengineered processes. be prepared to face and counter both types of risks.

When dealing with cultural resistance to implementation, the first policy, is communication. Even though you communicated widely during the planning stages, the initiative is about to lilt home. For the first time, people's lives will be directly, affected. Under these new circumstances, you need to say again what you said earlier. Better communication is achieved through kick-off meetings, implementation newsletters, question-and answer sessions and workshop.

Starting small, with a pilot program, will help you counter resistance (by showing that it works) and also help you test the new process. Starting small doesn't mean implementing a sub-process, but an entire process on a small scale. For example, if you plan to reengineer the logistical processes in all of your factories, begin with one factory - but reengineer the entire process.

With reenginering, you ask employees to lose the comfort of old habits to learn new tasks and take on new responsibilities. Learning and risk taking are rarely, present in heavily bureaucratic, hierarchical organizations.

For reengineering to be successful in the long term, the top-down, command structure must be replaced by an organization based on autonomous, goal-directed teams. Management must encourage these teams to take action and get results. In this learning atmosphere, a reengineered process stands a greater chance of being accepted and taking hold.

Best Practice 16: Have plans for continuous improvement.

Business process reengineering leads to a breakthrough ill performance. But don't rest on your laurels, or that breakthrough performance will eventually start to decay.

Degenerating performance following a breakthrough can happen for a variety of reasons: people stop using standard procedures, equipment is poorly, maintained. or increased demands strain capacity. Or competitors may reach a new level of performance that makes Yours obsolete.

With continuous improvement, you gradually raise performance levels beyond the level reached through BPR. As a result, competitors must strive harder to reach your ever-climbing performance level.

 

Reference:

David Karr and Henry Joliansson, Best Practices in Reengineering; MeGraw Hill, New York, 1995

Michael Hammer. Beyond Reengineering., Harper Collins. New York, 1996

Joseph Juran and W. Edwards Deming. Quality Circles. New York. 1963