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Business Process Reengineering

Using Radical Change to Improve Organizational Performance

Business Process Reengineering - Using Radical Change to Improve Organizational Performance

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Incremental change or radical rethink?

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

He studies his biggest costs and decides to buy some new cutting-edge manufacturing equipment and downsize his staff. But a year later, Stan's profit margin is in an even worse shape. So he starts looking for other cost-saving opportunities.

The problem is that, although Stan has implemented more efficient processes, it's still achieving the same things. This means his solution is only addressing one side of the issue. He should have been looking into whether what he's doing is actually necessary, or being done in the right way.

For instance, perhaps he could have looked at different bottle designs, invested in a new product or looked at improving his supply chains. If he'd done this, instead of just focusing on the manufacturing process, he would have discovered better ways to meet his customers' needs. And he would have saved money.

This is known as Business Process Reengineering – a radical rethink of business processes to achieve dramatic improvements. In this article, we'll introduce the key concepts involved in BPR, as well as the pros and cons involved in using it.

Business Process Reengineering Definition

Business Process Reengineering was first developed by Michael Hammer, a former MIT professor, in the 1990s. [1] He argued that a "radical redesign" of business processes was needed to keep up with the fast-paced changes in markets and technology occurring during that decade.

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

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. You can learn more about the relationships between various organizational structures with models like McKinsey's 7-S Framework, Leavitt's Diamond, and the Burke-Litwin Change Model.

Other management experts of the time, such as Peter Drucker and Tom Peters, supported similar 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 efficiencies gained through downsizing, because many businesses were looking for ways to use their resources more effectively.

Note:

Thomas Davenport, of Ernst & Young, published a similar paper in the Sloan Management Review the same year as Hammer. [2] And in 1993, Davenport wrote "Process Innovation: Reengineering Work Through Information Technology." [3]

Continuous Improvement Vs. Business Process Reengineering

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 BPR:

Factor Continuous Improvement Model BPR 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 often results in massive changes within many organizations. Often technological change instigates a desire for BPR because it offers significantly different and more efficient ways of doing things.

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.
  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.

Business Process Reengineering Example

One of the most famous examples of BPR in action was Ford Motor Co.'s restructure of its accounts payable department. Keen to cut down on its overhead costs, Ford began to look at ways of making the organization more cost efficient. It found that it's accounts payable department had increased significantly over the years – at one point employing 500 people.

When it compared the department's headcount to that of other competitors the results were shocking. Mazda, a smaller competitor, had an accounts payable department that only consisted of five people. When Ford looked closer it found that, by implementing similar accounts technology to that used by Mazda, it could reduce its accounts payable department to 100 workers.

The new accounts technology effectively cancelled out the need for multiple departments to sign off on invoices and submit them manually – all of which had created bottlenecks and delays. So, Ford decided to introduce new computer software and databases to store and transfer its accounts information automatically. By automating this process, Ford was able to cut down on the time it took to process payments and downsize its accounts department to a more manageable size.

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Business Process Reengineering Steps

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 being examined.

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

  • 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.

Because of the radical nature of BPR, it's vital that organizations think hard about whether it's the right direction for them before implementing any plans. Here are a few questions to ask yourself before embarking on BPR:

  • Is your organization willing and able to endure the pain that BPR can cause?
  • 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.
  • Are you prepared to lose staff who simply cannot handle the change?

The Pitfalls of BPR

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 negative results – massive layoffs, difficulty for staff adjusting to radical changes to corporate culture, and only mediocre success.

Many 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.

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, too.

Key Points

Business process reengineering refers to the implementation of radical changes to business processes, with the aim of creating efficiencies and improving the business as a whole.

The approach became particularly popular during the 1990s, when many organizations were struggling to stay competitive following rapid changes in technology, alongside the impact of globalization.

Some companies have benefited signficiantly from BPR, and have used it to introduce forward-thinking, competitive processes. However, BPR has also come under significant criticism, particularly in recent years because it doesn't always consider the unique nature of organizational culture, or the resistance and resentment that such massive change can cause.

The strategies are still used today. However, planning and implementation tend to be more gradual and less radical than the original idea.

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Comments (10)
  • Over a month ago Yolande wrote
    Hi deniserorabaugh

    A warm welcome to the forums and thanks for sharing more about your thoughts and experience with us. Mergers aren't easy, but as you said - it moved your company forward.

    One of the great things about the forums is that we all get to help and learn from one another by sharing our thoughts, challenges and ideas. Please feel free to do so - we'd love to hear more from you. Career Cafe Central is the forum with the most traffic, so if you'd like input on something, that's definitely your 'place' to hang out.

    If you need any help around the forums, please don't hesitate to let me know - I'd be only too glad to assist where I can.

    Kind regards
    Yolandé
  • Over a month ago deniserorabaugh wrote
    My only experience with BPR was in 2004 when our company was facing low stock prices and challenges from a merger of two companies that were previously competitors with different processes, policies, and strategies. It was the key to moving our company forward while providing a single face to our customers. Of critical importance was buy-in of upper management, in our case the CEO was the biggest supporter, so everyone else either bought in or jumped ship. We had to also provide frequent communications to the business of the exciting opportunities that were on the horizon as part of the change management. Budgeting & planning for frequent communications and training to support the implementation were also keys to success. We did this in conjunction with a major SAP system upgrade and have been running on most of these same processes successfully since then with more minor changes along the way.
  • Over a month ago Dianna wrote
    Hi motheman,

    Is BPR it something you have experience worth? We'd love to hear from someone who's been through it and share the lessons you've learned. Any type of large scale change project like this is bound to have more than a few 'how could we have done it better?' opportunities.

    Dianna
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