Idea 6 - BPR (50 Management ideas you really need to know)

Idea 6 - BPR

Business Process Reengineering (BPR) was the hot management idea of the 1990s. Enthusiasm for it has cooled, but its underlying principles still make good sense, particularly when applied to bigger, older companies that have become set in their ways.

BPR was popularized, if not exactly invented, by Michael Hammer and James Champy in their 1993 book, reengineering the Corporation. Hammer liked to say that BPR was about 'reversing the Industrial Revolution'. What he meant was that, while customer wants and needs were continually shifting in the new Information Age, the way in which many companies met those needs was fixed in concrete.

Unlike total quality management (TQM), which tended to end at the doors of each department, BPR took a bird's-eye view of the entire business, and tried to pries open the vertical hierarchies - 'silos' or 'smokestacks' - that had developed over time. It reasoned that satisfying customer needs involved processes that spread across smokestacks, and that activities needed to be reassessed in the light of the total process.
Hammer staked out BPR's foundations in a 1990 paper called 'reengineering work: don't automate, obliterate'. His thesis was that, instead of automating work that did not add value, companies should get rid of it. This was then worked up into a full-blown theory. Hammer and Champy 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'. Underpinning it was the recurring question of how to add value for the customer.
The words in the definition were carefully chosen. BPR is fundamental, because it asks the questions 'why do we do this?' and 'why do we do it this way?' People must question the old rules and assumptions.
It's radical because it starts with a clean sheet, disregarding existing structures and procedures. Reengineering is not reorganizing. It's dramatic because it seeks to make substantial improvements, not marginal tweaks. Many of the companies that implemented BPR did so because they were in serious trouble or could see that they might be one day soon.

Processes are pivotal to BPR. Classically, organizations are divided into departments, and processes are divided into tasks that are then distributed across those departments. BPR reviews those tasks in the light of the ultimate purpose they are designed to achieve and focuses sharply on customer needs.

Hammer and Champy quote the example of IBM Credit Corporation's credit approval process, which used to take an average of six days but could last up to two weeks. During that time IBM would often lose the order to a competitor. It was a five-step process. The salesperson called in with a finance request which was written down on paper by an operator in central office. The paper went to the credit department, where the customer's credit was checked, the result noted on the paper, and the paper sent to the business practices department. The business practices department would modify the standard loan contract to suit the customer's special requests, attach any special terms to the paper, and forward the paper to the price department. The price department would decide the appropriate interest rate for the customer and add it to the paper, before sending it to administration. Administration produced a quotation letter, which went to the salesperson, who delivered it to the customer - if they still had one.
After trying a number of unsuccessful fixes, executives took a request for finance and literally walked it through the five steps. It took them one and a half hours, end to end. The problem lay not in how long people took to do the job but in the structure of the process itself and all those handovers.
Closer analysis revealed a hidden assumption that every request was unique and had to be assessed by specialists - four of them. In fact, most requests were fairly standard and could easily be handled by a generalist, as long as they were supported by a computer system that was easy to use. This use of information technology as an enabler is integral to BPR, as long as it is not used simply to automate the old tasks, and as long as the IT department is not involved in redesigning the tasks.
Hammer and Champy suggested the following BPR principles:
Ø  organize around outcomes, not tasks;
Ø  integrate information processing work into the real work that produces
Ø  the information;
Ø  treat geographically dispersed resources as though they were centralized- IT can help;
Ø  link parallel workflow activities instead of just integrating their results;
Ø  put the decision-making point where the work is performed and build
Ø  control into the process;
Ø  Capture information once - at the source.
No manual: There is no step-by-step manual for BPR, but common methods include combining several jobs into one, allowing workers to make decisions, minimizing reconciliation, and providing a single point of contact for the customer. Factors that could prevent BPR success include:

Ø  trying to fix a process instead of changing it;
Ø  trying to make it happen from the bottom up;
Ø  settling for minor results;
Ø  quitting too early;
Ø  skimping on resources;
Ø  concentrating exclusively on design;
Ø  placing prior constraints on problem definition or scope of the effort;
Ø  Trying not to make anyone unhappy.

Apart from IBM, companies that claimed success with BPR include Procter & Gamble, General Motors and Ford. Yet up to 70% of BPR projects have failed, possibly due to some of the factors listed above. After its first burst of popularity, the theory was criticized for its lack of attention to the human dimension. Some called it 'the new Taylorism' and said it was merely an excuse for getting rid of employees. Hammer later recanted somewhat, admitting he had neglected people's values and beliefs and insisting that these should not be ignored. Subsequent and gentler, less radical versions of BPR are called business process redesign, business process improvement and business process management.

Reference: 50 Management Ideas You Really Need to Know
Book by Edward Russell-Walling

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