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How Process Enterprises Really Work

How Process Enterprises Really Work. by Michael Hammer and Steven Stanton. Harvard Business Review, November-December 1999. Presented by Jeff Schott CS457 Fall 2005. Process Enterprises. What is a Process Enterprise?

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How Process Enterprises Really Work

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  1. How Process Enterprises Really Work by Michael Hammer and Steven Stanton Harvard Business Review, November-December 1999 Presented by Jeff Schott CS457 Fall 2005

  2. Process Enterprises • What is a Process Enterprise? • “Flexible groupings of intertwined work and information flows that cut horizontally across the business, ending at points of contact with customers.” • Replaces traditional organizations • Sets of discrete units • Well-defined boundaries

  3. Business Process Reengineering • Benefits • Operate faster and more efficiently • Use information technology more productively • Employees have more authority and a better view of the big picture • Higher-quality products and service • Dividends to shareholders through reduced costs, increased revenues, and higher stock values

  4. Impediments to BPR • Many companies have reorganized core processes, but not the entire organization • Power still resides in vertical units • Integrated processes and fragmented organizations create cognitive dissonance

  5. Successful BPR Implementation • Appoint best managers to be process owners • Give process owners authority over work and budgets • Shift focus to process goals • Base pay and advancement on process performance • Focus training on whole process • Cultural focus on teamwork and customers

  6. Case Study – Texas Instruments • Calculator development teams • Drawn from various departments • Responsibility from inception to launch • Initial results not encouraging • Teams barely functioned • Sabotaged by existing organization • Unwilling to cede people, space, responsibility • Conflicting orders from team, department

  7. Case Study – Texas Instruments • Organization changed • Teams became primary business units • Old departments refocused on training • Process owner management role created • Budgeting by process • Office space reconfigured • Improvements • Time to launch reduced by 50% • Break-even points reduced by 80%

  8. Case Study – IBM • Standardize Global Operations • Processes assigned to members of the Executive Committee • Units expected to follow processes • Improvements • 75% reduction in time to market • Increased on-time deliveries • Increased customer satisfaction • $9 billion savings

  9. Case Study – Owens Corning • Enterprise Resource Planning System • Managers were rejecting or modifying ERP • Companywide process teams created • Improvements • 50% increase in inventory turns • 20% reduction in administrative costs • Millions in logistics savings

  10. Process Owners • Senior managers with end-to-end responsibility for processes • Must have authority over design, measurement, and training • Process ownership is permanent • Process designs evolve with business • Old organizational structures will reassert themselves • Separates control of work from management of workers

  11. Case Study – Duke Power • Improve customer service in the face of deregulation • Identified 5 core processes • Each assigned an owner • Owners given authority over • Designing process • Setting performance targets • Improvements • More installations per day • Meets 98% of construction commitments (up from 30 - 50%)

  12. New Style of Management • Cooperation is unavoidable • With other managers • With process workers • Duke Power developed a “decision rights matrix” • Which managers make certain decisions • Who is consulted beforehand • Who is consulted afterward

  13. Process Standardization • Benefits • Lowers overhead costs • Presents one face to customers • Increase organizational flexibility • Disadvantages • Different customers cannot be served differently • Some companies do both • Standardize as much as possible while still meeting diverse customer needs • Harder to impose standard than allow diversity

  14. Making the Transition • Determine relevant changes • Connect to overall strategy • Appoint high-profile executives as process owners • Set realistic expectations • Don’t try to do everything at once • Choose one unit as a prototype • Gain commitment of senior employees to avoid resistance

  15. New Process Infrastructure • Measurement • Compensation • Facilities • Training and Development • Career Paths

  16. Is It Worth It? • Capitalize on new opportunities • Process is as important as presentation • Dynamic processes for changing markets

  17. Does it Work? • 70% failure rate • Excuse for job cuts • Ignores human dimension • Is actually time sensitive • New processes means new problems • Untested solutions • Security issues • Is being phased into ERP, BPM, Six Sigma Source: Wikipedia [Business Process Reengineering] http://en.wikipedia.org/wiki/Business_process_reengineering

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