BUSINESS PROCESS REENGINEERING CONCEPTS

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BUSINESS PROCESS REENGINEERING CONCEPTS
Chapter 1 - Know Where You Are
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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

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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.
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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.

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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.

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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 organizations
  products or services to its customers
• (Gelinas et. al, 2004)

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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
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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
Organizational Culture
Political Power
Individual Belief Systems
More difficult to change less concrete
Figure 1.2 The Dimensions of Business
Reengineering
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Dimensions of Business Reengineering

• 1.0 The Physical /Technical Dimensions are what
  people can easily see and do. Include
• Process structure consists 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.

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Dimensions of Business Reengineering

• b. Technology structure which 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 structure defines who performs,
  manages, and is accountable for each business
  process.
• When process and organization structures are out
  of alignments, there are gaps in accountability.

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Dimensions of Business Reengineering

• 2.0 The 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 structure regulates 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.

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Dimensions of Business Reengineering

• Measurement systems define 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

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Dimensions of Business Reengineering

• Management methods consist 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.

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Dimensions of Business Reengineering

• 3.0 The Value Dimensions define the
  organizations culture and drive behavior.
  Leadership and improvement philosophies must
  emerge from these dimensions.
• a. Organizational culture consists of the
  unspoken, collective rules and beliefs of the
  organization.
• It can be discerned (perceive/see) through the
  organizations 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.

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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.

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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.
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BENEFIT OF REENGINEERING

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

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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.

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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, Ive been doing this job
for 20 years, and you are not going to tell me
Im doing it wrong.) 2. Thinking of customers
Too many companies design processes based on the
assumption that they know whats 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.
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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
  companys 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).

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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.

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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
  customers 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.

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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

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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 dont 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 doesnt change

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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)

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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.

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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.

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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.