BUSINESS PROCESS REENGINEERING CONCEPTS

1. BUSINESS PROCESS REENGINEERING CONCEPTS Chapter 1 - “Know Where You Are”

2. Learning Objectives At the end of the course, you will be able to: • Define business process redesign • Describe the nine dimensions of BPR • Discuss the benefits of BPR • Identify and describe the situations in which BPR becomes necessary • Describe the warning signs of trouble that indicate the need for reengineering • Identify and describe the critical success factors for BPR projects

3. What is Business Process Reengineering or Redesign? • Reengineering business processes means tossing aside existing process and starting over. Business Process Reengineering is defined as; “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as costs, quality and speed”. (Hammer and Champy, 1993) ***Business process re-engineering is also known as business process redesign, business transformation, or business process change management.

5. This definition contains four key words: • Fundamental Fundamental implies that everything – every assumption, every reason, every activity – is challenged by asking why it should be continued. The implication is nothing should be accepted as scared. Over time, practices that were once required become obsolete and need to be removed. • Radical Do not try to improve the existing situation, invent(create/design) completely new ways of accomplishing(complete/achieve) work.

6. This definition contains four key words: • Dramatic Do not use business process redesign to obtain marginal (small slight) improvements, aim at order-of-magnitude improvements (ten times). If the marginal gains – 5 to 10 percent – are the goal, then continuous improvement is a more appropriate path than reengineering. • Process Focus on the business processes instead of organizational structures.

7. What is a Business Process? A business process may be defined as “a set of logically related tasks performed to achieve a defined business outcome” (Davenport, 1990) OR “activities that takes one or more kinds of input and create an output that is of value to customer” (Hammer and Champy, 1993) OR “a set of business events that together enable the creation and delivery of an organization’s products or services to its customers” (Gelinas et. al, 2004)

8. Dimensions of Business Reengineering Reengineering takes time, larger project takes even more time. Reengineering requires process,organization and technology changes. Reengineering also requires infrastructure changes and cultural transformation). - Once the “radical” changes takes place, they must continuously improve the process, practices in the business operation to prevent future deterioration and ensure preventive maintenance. Continuous Process Improvement Implementation Design Time Figure 1.1: The Business Reengineering Continuum

9. Dimensions of Business Reengineering Physical Technical Layer More concrete easiest to change Process Structure Technology Structure Organization Structure Infrastructure Layer Reward Structure Measurement Systems Management Methods Value Layer More difficult to change less concrete Organizational Culture Political Power Individual Belief Systems Figure 1.2: The Dimensions of Business Reengineering

10. Dimensions of Business Reengineering 1.0The Physical /Technical Dimensionsare what people can easily see and do. Include; • Process structureconsists of the business processes, outcomes, policies, practices and procedures that support the processes. (process structure is what, when and how work is performed) Process can be triggered by internal events, timing cycles, or external stimuli. Some processes originate by designs, others may emerge informally to meet real or perceived organizational needs (that is why we need business process reengineering). There are undocumented, inconsistently applied and personality dependent processes. No single organization has the same processes Process produce business outcomes. Its true purpose is to produce a “quality” outcome in a timely and predictable manner.

11. Dimensions of Business Reengineering b.Technology structurewhich consists of the automated communications, networking, and computer systems used to support the process structure. The sensible (rational/reasonable) application of technology depends on the competent integration of technology with work processes. Organization structuredefines who performs, manages, and is accountable for each business process. When process and organization structures are out of alignments, there are gaps in accountability.

12. Dimensions of Business Reengineering 2.0The Infrastructure Dimensions refers to interpretation of policies and procedures which heavily influences how the physical/technical dimensions on a day-to-day basis. If the physical/technical dimensions change, the infrastructure must also change because they reinforce desired performance operational behavior. a.Reward structureregulates behavior. Rewards may be formal or informal, financial or recognition based. Ideally, well-designed jobs provide a work environment that is rewarding in and of itself.

13. Dimensions of Business Reengineering • Measurement systemsdefine the feedback that provide information on process performance. - enables people to improve process performance; - must deliver appropriate information; - should uncover the need for change; - should be made available directly and simultaneously (at once) to process performers and managers

14. Dimensions of Business Reengineering • Management methodsconsist of the practices and techniques used to supervise, develop, and support the people who perform the business processes. It is one of the most neglected (ignored) in reengineering because it is seen as outside the project scope. Managers and supervisors must understand and learn how to support the new environment so as to gain benefits from the reengineering process.

15. Dimensions of Business Reengineering 3.0The Value Dimensions define the organization’s culture and drive behavior. Leadership and improvement philosophies must emerge from these dimensions. a. Organizational cultureconsists of the unspoken, collective rules and beliefs of the organization. It can be discerned (perceive/see) through the organization’s language, symbols, myths (legends) and rituals (ceremony). It defines what is important to the organization more forcefully than any memo from the CEO. Changing embedded corporate value is perhaps the most powerful form of change.

16. Dimensions of Business Reengineering b. Political power refers to individual who manipulate and shape the actions and behaviors of others. Both formal and informal leaders use power to promulgate (broadcast) and reinforce power. Formal authority – acquired through the position held in the organization. Personal power – acquired through expertise, knowledge, or connections.

17. Dimensions of Business Reengineering c. Individual belief systems are the attitudes and mental models that individuals apply to themselves, those they work with, and the work itself. Examples of mental models: Impatience, skepticisms, openness, control, rigidity, and flexibility Aligning the value dimensions to support the reengineered organization requires organization executives to demonstrate leadership.

18. BENEFIT OF REENGINEERING • Increase the organization’s ability to customize products and services while retaining mass-production economics. • Increase customer satisfaction with products and services so they prefer your products and services over those of your competitors. • Make it easy and pleasant (enjoyable) for customers to do business with your organizations. • Break organizational boundaries, bringing customers into the information channels through communication, networking, and computer technologies.

19. BENEFIT of REENGGINEERING 5. Decrease response time to customers, eliminate errors and complaints, and reduce product and service development and manufacturing cycle time. 6. Process more customer requests and higher volume from each customer, and deliver “value-driven” prices to customers without reducing profitability. 7. Improve the quality of work life and individual capabilities for contribution so that people experience ownership of their work and of customers and see their contributions to the organizations. 8. Improve the sharing and utilization of organization knowledge so the organization does not become/remain dependent on the expertise of a few people.

20. THE NEED FOR REENGINEERING WARNING SIGNS OF TROUBLE 1. The explosion of chaos and bureaucracy: Organizations’ work processes were not designed BUT they evolved out of the chaos of doing business. Processes become habitualized. From veteran to new staff without realising it was a mistake (e.g. a team of headquarters accountants visiting a field billing office found clerks misapplying account codes to expense vouchers. The team asked a clerk why? She replied: “Listen, I’ve been doing this job for 20 years, and you are not going to tell me I’m doing it wrong”.) 2. Thinking of customers: Too many companies design processes based on the assumption that they know what’s best for customers, thus, organization becomes inflexible, driving frustrated customers to competitors or regulatory commissions. Employees who take the initiatives to help customer would be penalised for bypassing official procedures.

21. THE NEED FOR REENGINEERING • Automation of existing bureaucracy: computerization reinforced bureaucracy rather that breaking through it. (changing paper documents to electronic document, BUT company only duplicates existing processes, thus, maintaining both paper and electronic forms of data. E.g. an insurance company’s claims department, automation created paper printouts to replace handwritten claim files, but paper continued to move from one desk to another as the claim was processed). • Bottlenecks and disconnects in critical cross-functional processes. Each unit operates as if it has no relationship to the other units. (Each unit is part of the manufacturing stream, but they each operates in costly and cumbersome processes preparing work for processing, resolving problems and errors, tracking the work in progress, thru, creating duplicate and inaccurate data. E.g. large automobile manufacturing company – each division reentered information about incoming work into its own systems, and sent paper with the outgoing work. Each department did not check with each other on what is going on in the manufacturing process).

22. THE NEED FOR REENGINEERING • WARNING SIGNS OF TROUBLE • Elusiveness of accountability: Most organizations are structured by function (eg. Sales, manufacturing, etc.) but essential business process (eg. Customer service and support) cut across the functions. This makes it difficult, if not impossible, to establish accountability for a complete business process. • (e.g. in a manufacturing firm, the subprocesses, each assigned to different group. If any plans or budgets were late, inaccurate, or incomplete, customers’ programs could not be updated in time to avoid invoicing errors and deductions. As a result, in 5-years time, the number of changes in plans and budgets increased from 10 – 57%, and the process deteriorated from lack of management, measurement and accountability. • 6. Chaos of downsizing: It leaves survivors demoralized, the work environment inadequately staffed, and people with inadequate skills performing the work, and tasks can no longer be processed within their current configuration. (e.g. a large government organization downsized its headquarters by 40%. 1 staff was left to take up a responsibility for 4 person, he has to work 16 hours a day and before long, demanded to transfer to another location.

23. THE NEED FOR REENGINEERING 7. The turmoil of integration and merger: This creates work processes that often duplicate or conflict with each other. (e.g. Purchase of 4 companies gave the new company 4 different sets of policies, procedures and formula options for processing customer orders. In a 5-year period, over $80 million would be wasted supporting these overlapping redundant operations. Integrating the customer’s order management process will create massive difficulties as 3 of the 4 companies. Field work loads tripled, errors increased 50%, and over 100 additional clerical people were hired to prepare inputs and correct errors.

24. DIAGNOSIS OF PROCESSES OF SUSPECT PRODUCTS AND SERVICES Possible findings 1.0 Lack of a “big picture” concept and poor communication 2.0 Inattention to detail 3.0 Designer arrogance and customer exclusion 4.0 Focus on correction, not error prevention 5.0 Measurement problems 6.0 Focus only on external customers

25. CREATING A BUSINESS CASE Street-smart business reengineers know that it is critical to create a business case because “it creates massive discomfort with status quo”. The initial business case must sell executives on the VALUE OF THE CHANGE. • must show that “the cost of NOT changing is too high”. • Street smart business reengineers don’t ask people to put up with inconvenient and stressful changes without good reason. They makes two points: 1. The necessity for change. Use quantitative data that translates “what everybody already knows” into facts and numbers 2. The alternative to change. Use hard and soft data to paint a picture of the future if the organization doesn’t change

26. CREATING A BUSINESS CASE 3. Once the facts are on the table, reengineers advocates must get commitments to: - Frame the projects so it is fully defined and understood - Create a reengineered vision of the business, its values, and goals - Build a detailed process redesign of the business operations - Plan the implementation - Conduct a proof of concept (if needed) (**once this has been laid out, reengineer advocate can ask for the “big bucks” for implementation)

27. CRITICAL SUCCESS FACTORS FOR BR PROJECTS To have a successful BR, requires a strategy that incorporates these CSF: • A business focus – a focus on all dimensions. Success depends on integrating all three – process, technology, and organization, plus supporting that integration with new infrastructure and values. 2. A methodology and project approach – requires discipline and structure; methodology must be systematic and fact focused; must articulate how to secure finding, manage power struggles, and sell the new ideas. 3. Time - BR takes time. Executives must be able to stick with the program.

28. CRITICAL SUCCESS FACTORS FOR BR PROJECTS • Partnership participation – BR is accomplished only as a result of efforts by people from all over the organization. Requires flexible and trained teams. • Visible, active leadership.This is the most important of all the critical success factors. Requires long-term commitment to BR – in terms of dollars, people and executive visibility. (leaders must be careful not to use negative reinforcement, positive reinforcement is much more effective). • **Executive leaders and middle managers must: • (1) enable people to step back and evaluate how the work is done, this may mean changing work priorities, • (2) resist the temptation to silence dissident voices, • (3) simplify problem solving • (4) remove barriers and obstacles to peformance, • (5) reward and encourage ideas • (6) allow people to have fun at work.

29. CRITICAL SUCCESS FACTORS FOR BR PROJECTS • BR begins the process of transforming a dysfunctional organization into a learning, productive, quality-focused, customer driven organization. • BR must be customer driven. • Quality is defined in terms of added value, cost sensitivity, responsiveness, and functionality. • BR must enable people to handle more change successfully.