Business Process Reengineering

Using Radical Change to Improve Organizational Performance

Business Process Reengineering - Using Radical Change To Improve Organizational Performance

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Don't keep trying to do the same thing more efficiently. Do something more radical, instead.

Stan runs a soft drinks company. His revenues, and his profits, have been steadily dropping for the past year.

He studies his major cost centers, and he worries that he might have to "right size" the assembly line (in other words, lay off workers) to reduce costs.

Currently, there are six stations that need human monitoring. The assembly line runs OK, but Stan can purchase new technology to remove the need for monitoring at three stations. This means that he can reduce his workforce by nine people (three shifts a day). So Stan buys the new equipment and, with regret, lays off nine workers.

Now it's a year later, and Stan's profit margin is in even worse shape. What happened? The technology that was supposed to lower his costs hasn't helped profits at all! So he looks for other cost-saving opportunities and ways to complete the work more efficiently.

Do you think Stan is likely to solve his problem?

Maybe not. Why? Because he's looking for more efficient ways to do the SAME things. This addresses only one side of the issue. The other side involves determining if WHAT he's doing is actually necessary, or done the right way.

If Stan had investigated different bottle designs, he could have filled the bottles and had them ready for shipping in half the time – and he would have delivered a bottle that his customers actually preferred. If he had thought about how to redesign the manufacturing process, instead of just how his production line functioned, he would have discovered better ways to meet his customers' needs – and he would have saved money.

A Different Kind of Solution

In 1990, Michael Hammer, a former MIT professor, published a Harvard Business Review article that described this management approach. It was called business process reengineering (BPR), and it became very popular.

Hammer defined BPR as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed."

Thomas Davenport, of Ernst & Young, published a similar paper in the Sloan Management Review the same year as Hammer. And in 1993, Davenport wrote "Process Innovation: Reengineering Work Through Information Technology."

Soon after Hammer's article, management experts (for example, Peter Drucker and Tom Peters) supported business transformation as a way to achieve enormous improvements across a variety of performance measures. Big consulting firms quickly began to sell this new management strategy to their clients.

By the mid-1990s, corporate managers everywhere were talking about BPR. Its customer focus was very appealing – many companies' profits were suffering from increased global competition. And soon, many people automatically connected BPR to downsizing, because many businesses were looking for ways to use their resources more efficiently.

What Makes BPR Unique?

The key difference between business process reengineering and other business improvement strategies, like Total Quality Management and Just In Time, is this: BPR = process innovation.

BPR is not about slow and steady improvement – it's about radical, dramatic changes to the framework and culture of a business. Rather than improving what's already there, BPR starts from the beginning and builds an entirely new process.

Here are some key ways that continuous improvement differs from the innovation of BPR:

Factor Continuous Improvement Model Innovation Model
Degree of change Incremental, small steps Radical, extreme
Starting point Existing processes Clean slate, starting from new
Frequency of change Continuous (may be one-time) One-time
Participation Bottom up Top down
Typical scope Narrow, within functions Broad, cross-functional

As you can see, BPR is radical in every way, and it caused massive changes within many organizations. Typically, management starts BPR because of a technological change that can offer significantly different and more efficient ways of doing things. Information technology changes aren't always necessary for BPR, however they tend to come at the same time.

Note:

A business process is a set of logical, linked activities that (1) can cross many functional areas, (2) have a clear beginning and end, and (3) end in the desired result for an internal or external customer. Business processes can be things like manufacturing, customer service, order fulfillment, or developing a new product.

BPR focuses on how key business elements are connected, and how they work with or against one another, depending on the structure of relationships. For the best results, the company's structure, people, technology, strategy, and other resources have to work together to meet organizational goals. Learn more about the relationships between various organizational structures with models like McKinsey's 7Ss, Leavitt's Diamond, and the Burke-Litwin Change Model.

The Basic BPR Methodology

The steps for complete business process reengineering are too detailed for this article. Also, BPR's exact method is significantly influenced by the specific organization and process that's examined.

However, some key common elements of any BPR plan include the following:

  • Defining the project (limits and scope).
  • Determining the vision for the redesign.
  • Creating a plan or model for the redesign.
  • Completing a cost-benefit analysis.
  • Developing a detailed plan for implementation.
  • Establishing performance measures for evaluation.

BPR Today

Business process reengineering is still discussed today, but not as often as it once was. This is because the extreme nature of BPR initiatives can lead to many problems, and BPR has had some negative results – massive layoffs, difficulty adjusting to radical changes to corporate culture, and only mediocre success. Most BPR projects have failed to produce the results expected because of unrealistic expectations, inadequate resources, loss of management commitment (because they took too long), and resistance to change.

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Softer, gentler approaches are now more popular. Instead of dramatic changes to processes, you're more likely to see gradual innovation through continuous improvement strategies.

Many executives have avoided the BPR approach for fear of causing disruption and disorder in a company. This is unfortunate, because BPR provides a great opportunity to take strong and definitive action to turn a company around. And its fundamental message is strong: Don't just look for ways to do the same things better, because you may continue to do the "wrong" thing. Consider focusing instead on doing different – and better – things as well

Key Points

Business process reengineering, business transformation, business process innovation – these are all different names for the same basic strategy: creating radical changes to business processes to respond to customer needs, reduce costs, and do things more efficiently. In the 1990s, many organizations tried this approach to be more profitable in the face of expanding global competition.

Some companies got the method right and committed to the plan, and they benefited greatly from new and improved business processes. But some organizations didn't get it right, and they suffered significantly, because BPR doesn't always consider the unique nature of people, and the resistance and resentment created by such massive change.

The strategy still lives. However, its planning and implementation tend to be more gradual and less radical than the original idea.

Apply This to Your Life

If you think BPR might be right for your organization, here are a few questions to answer:

  1. Is your company willing and able to endure the pain that BPR can cause?
  2. Is your top management team personally involved and committed to completing the project? The costs of stopping the process in the middle are high, so make sure you know what you're starting.
  3. Are you prepared to lose staff who simply cannot handle the change?