Introduction to Business Process Re-engineering

1. When Is BPR Used?

BPR is resorted to when:

1. The competition outperforms the company.
2. There are conflicts in the re-engineer.
3. There is an extremely high frequency of meetings.
4. There is an excessive use of non-structured communication (e-mails and memos).
5. A more continuous approach of incremental improvement is not possible.

2. Key Concepts of BPR1

2.1. The Fundamental Questions

While undertaking re-engineering, always ask the following fundamental questions:

• Why do we do what we do?
• Why do we do it the way we do?

These are the most basic questions about the company and the way it operates. These force the company to look at the tacit rules and assumptions made for conducting business. Sometimes these rules may be inappropriate and irrelevant. Re-engineering first determines what a company must achieve and then offers solutions.

2.2. Radical

Radical redesign refers to getting to the root of things, not just making superficial changes and throwing away the old. This also requires a disregard for all existing structures and pro­cedures. It is about inventing completely new ways of accomplishing work that is not busi­ness improvement/enhancement/modification but reinvention.

2.3. Dramatic

From the customer’s perspective, re-engineering is about achieving quantum leaps in per­formance and not making incremental improvements. This requires deleting the old rules of business and replacing them with new ones.

2.4. Processes

BPR focuses on business processes. It requires a re-design of the strategic and value-added processes and requires a process-oriented approach with a focus on end results and the dif­ferent tasks involved. Business processes encompass a wide spectrum of activities—devel- oping a new product, procurement, order fulfillment, creating marketing plans, customer service and sales.

The functional specialization mind-set should be abandoned and those who use the output of the process should perform the process. Multi-skilled workers must be designated as process owners. Employees must be empowered and expert systems (automation) must be provided to support them. In order to cut down end-to-end business process cycle time, parallel tasks should be performed instead of sequential tasks and results should be inte­grated. Information technology plays an important role in business transformation.

2.5. Customers

The customers are the main stakeholders in this approach. All business processes should be focused on them. The customer alone is responsible for defining what constitutes the value of a product or service. Anything not valuable from the customer’s perspective must be eliminated.

Figure 12.1 shows the traditional approach, which is linear, sequential and partial, and Figure 12.2 shows the re-engineering approach, which is parallel, integrative and customer-oriented.

3. The 3 R’s of Re-engineering

Every re-engineering effort involves three basic phases—rethink, redesign and retool.

3.1. Rethink

This phase requires examining the re-engineer’s current objectives and underlying assump­tions to determine how well they incorporate the renewed commitment to customer satis­faction. Another valuable exercise in this phase is to examine critical competition and check whether they contribute to the new customer satisfaction goals.

3.2. Redesign

This phase requires an analysis of the way the re-engineer produces the products and sells its services—how jobs are structured, who accomplishes what tasks and the results of each proce­dure. Then the elements that should be redesigned to make jobs more satisfying and customer focused must be determined.

3.3. Retool

This phase requires a thorough evaluation of the uses to which advanced technologies are put currently, especially electronic data processing systems, to identify opportunities for change that can improve the quality of service and customer satisfaction.

4. Emergence of BPR

Frederick Taylor introduced the principles of scientific management in the1900s. The key to Taylor’s advances in re-engineering thinking was that the scientific method should be used to develop a “best way.” According to Taylor, business processes must continuously be re­engineered to produce a new “best way.” Early BPR activities were mainly centered on the scientific method.

During the 1950s, large firms began to explore the potential impact of computers on the efficiency and effectiveness of their business processes. Many approaches, methods and techniques have since appeared and constitute the foundation for BPR. During the 1980s, the quality revolution ushered in developments in BPR.

In 1990, Michael Hammer, a former professor of computer science at the Massachusetts Institute of Technology, published an article in the Harvard Business Review in which he claimed that the major challenge for managers was to obliterate work that did not add value rather than use technology to automate it. Hammer’s claim was simple—most of the work under­taken did not add any value for customers, and it was necessary that this be removed and not accelerated through automation. Instead, companies should re-engineer their processes in order to maximize customer value, while minimizing the consumption of resources required for delivering their products or services. Michael Hammer and James Champy, the originators and leading exponents of the concept of re-engineering, published Re-engineering the Corporation in 1993. This book is considered to be a pioneering book on BPR.

A similar idea was advocated by Thomas H. Davenport and J. Short in 1990 in a paper “The New Industrial Engineering: Information Technology and Business Process Redesign,” pub­lished in the Sloan Management Review. This idea, to review a company’s business processes, was rapidly adopted by a huge number of firms, which were striving for renewed competitiveness that they had lost due to the entrance of foreign competitors in the market, their own inability to satisfy customer needs and their insufficient cost structure. According to T. H. Davenport, the six areas that influenced the emergence of BPR include the total quality approach, industrial engineering, the systems approach, the socio-technical approach, the diffusion of innovations and the use of information systems for competitive advantage.

Well-established management thinkers, such as Peter Drucker and Tom Peters, accepted and advocated BPR as a new tool for (re-)achieving success in a dynamic world. In the follow­ing years, a number of publications, books and journal articles were dedicated to BPR, and many consulting firms embarked on this trend and developed BPR methods. However, the critics were fast to claim that BPR was a way to dehumanize the workplace, increase manage­rial control and justify downsizing, i.e. major reductions in the workforce and a rebirth of Taylorism under a different labels.

Despite this critique, re-engineering was adopted at an accelerating pace and by 1993, as many as 65 per cent of the Fortune 500 companies claimed to have either initiated re­engineering efforts, or had plans to do so. This trend was fueled by the fast adoption of BPR by the consulting industry and also by the study Made in America, conducted by MIT, which showed how companies in many US industries had lagged behind their foreign counter­parts in terms of competitiveness, time-to-market and productivity. In an early BPR project, the IBM Credit Corporation reorganized the credit function by employing one person to perform all the tasks of an erstwhile credit department by using a new computer applica­tion system. Amazon.com is currently the world’s largest virtual book store. Its selection and ordering process would have been impossible if not for the developments in Internet technology. In India, Ford and Mahindra and Mahindra implemented BPR initiatives and reported several benefits after implementation. Several banks in the country also imple­mented BPR. Box 12.1 discusses the BPR exercise undertaken by the Bank of Baroda.

The period from 1995-1996 witnessed the publication of critiques by some of the early exponents of BPR. This was coupled with abuse and misuse of the concept by others, which led to the re-engineering initiatives in the United States of America waning away. Since then, considering business processes as a starting point for business analysis and redesign has become a widely accepted approach and is a standard part of the change methodology port­folio. However, it is typically performed in a less radical way as originally proposed. The future of BPR can be said to revolve around process management, advancements in IT and developments in the re-engineer structure.

More recently, the concept of business process management (BPM) gained major attention in the corporate world. It was considered to be a successor to the BPR wave of the 1990s as it was evenly driven by a striving for process efficiency supported by information technology. Equivalent to the critique of BPR, BPM is now accused of focusing on technology and disre­garding the people’s aspect of change. Chapter 13 of this book deals with the concept of BPM.

Box 12.1 BPR Initiatives of the Bank of Baroda

The Bank of Baroda (BoB) is the third-largest public-sector bank in India. It offers banking prod­ucts and services to industrial, commercial, retail and agricultural customers across the country. In June 2009, BoB appointed the global management consulting firm McKinsey & Company as its BPR consultant. The Bank launched a BPR exercise internally named Navnirman to rejuvenate and turn around its working style. The exercise is expected to be completed in two years.

McKinsey would focus on diagnosing the prevailing reporting hierarchy and decision-making structure among senior executives in crucial departments of the bank. As part of the BPR project, the bank is aiming at elevating the working style of its executives so that it is at par with the report­ing methodology prevailing among senior executives of multinational banks. The emphasis would be on cutting down the turnaround time of key executives in order to accelerate the customer ser­vice process.

As part of a rebranding exercise undertaken in 2005, BoB’s 100-year old logo was replaced by a colourful “Baroda Sun”, and cricketer Rahul Dravid was appointed as its brand ambassador. The Rs 0.2-billion makeover was mainly aimed at projecting BoB as a modern and techno-savvy bank. The rebranding exercise helped the bank regain its number three position among peer banks in India.

Source: Poornima M. Charantimath (2017), Total Quality Management, Pearson; 3rd edition.