Business Process Reengineering
Using Radical Change to Improve Organizational Performance
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.