Reengineering Work : Don’t Automate, Obliterate

-Michael Hammer

RAHUL BABAR

CONTENTPast & Current Scenario (1980’s -90’s)Where it’s going wrong ?Ford Motor CompanyMutual Benefit LifePrinciples of ReengineeringImpact of ReengineeringConclusion

Despite Restructuring and Downsizing, US companies were still struggling in 80’s.

Rapid changes in TechnologyShorter Product Life CycleSlow Product Development

Asset UtilizationHigh Inventory Level

Solution by USA companies: Rationalization & Automation

Current Scenario ( Early 90’s )

Customer Oriented

High Error in Order Fulfillment Customer enquiries unanswered

Japan Developed Product:

2x Faster production8x Asset Utilization

10x Faster Response to Customer

Where it’s going wrong ?

Automating Outdated/Traditional

Automating Useless thing will still remain useless in the end. You are just doing useless

thing faster than you did before !!

Environment has become a lot more competitive and customer oriented.

Ford Motor companyAutomotive Industry was in great depression in

early 80’s

Ford Motor identified problem in one of their Accounts payable process

Ford Should be aiming at 5 times less and not 20%

500 People 400 People Aim 20% less

In Mazda same process was carried out by 5 People

Earlier Process

Purchase Order CopyBy Purchase Dept

Good’s Received Copy by Materials Dept

Vendor Sends Invoice

Accounts payable Receives & Checking

Accounts payable personal took a lot of time in checking and investigating in case of error or mismatch. He had to separately

cross check with each.

Reengineered Process

Centralized Database & Every department does its job of entering + checking entries and taking further decisions.

Purchase Order InputBy Purchase Dept

Good’s Received by Materials Dept match

with PO

Issue Payment Return Order

Mismatch

Result from Reengineering Accounts payable process

Reduction in headcount by 75% i.e. Ford managed to reduce number from 500 employees to 125 employees for same work.

“Invoice-less Processing”

We pay when invoice is received

We pay when Goods are received

Mutual Benefit LifeInsurance Application Process Reengineering

Credit checking, quoting, rating, underwriting, etc.

It took 30 steps, 5 departments & 19 People

Took 22 days in process but worked on for just 17 minutes

DEPARTMENT DEPARTMENT1 day at best or

Avg. 5 -25 days to transfer info.

Solution was Centralized database & expert system for Insurance application process

60% improvement in the efficiencyNow application was completed in 4 hours

Case manager was appointed who could now handle twice the work and 100 field office

positions were removed.

Industrial Revolution

Post World War

• Specialization of labour & economies of scale.

• Narrow Defined Tasks.• Dept. wise re-aggregation,

installed managers as administers.

• Imposed control & Discipline• Cost, Growth without going

broke

Few Professionals Entry Level abundant

Current Scenario

Narrow look & ApproachWork handing over reason for errors

Accountability Blurs

Work structure pace didn’t keep up with technology, demographics and business objective.

IT should be used not to automate existing process but to enable new one.

What most of companies are doing is..“ Rearranging Deck chairs on Titanic ”

Reengineering Principles

1. Organize around outcomes, not tasks

Mutual Benefit Life ( Case Manager performs all functions )

Initially it was done dept wise.

Solution :Customer Service Representative

Customer Req.

Internal Product coding

Convey Plant & Warehouse

Assembling

Deliver & Install

2. Have those who use the output of the process perform the process

It was observed that purchasing non-expensive/ secondary items were more expensive.

Industrial automationIn case of breakage or breakdown customer must be given instructions for repairs in case

of non complex. Spares must be kept with customer using automated inventory system

and reduce breakdown time

3. Subsume Information processing work into the real work that produces

the information

Ford Motor’s Centralized database idea

The Person who is gathering information can also carry out processing job as well with use

of expert system for decision taking. This reduces time & cost.

4. Treat Geographically dispersed resources as though they were

centralized.Hewlett-packard Centralized Purchasing

Purchasing dept. shared same database related to vendors and market prices, instead of different depts. In different regions

having their own vendor database.

Result:Purchasing at lower cost

150% improvement in on time delivery.50% reduction in lead time

75% reduction in failure rates

5. Link Parallel activities instead of integrating their results.

Useful in Product Development

Different activity worked on separately saves time but at integration of those activities into one fails, because of some mismatches in certain

aspects while testing.

Solution: Shared Database, communication network & teleconferencing.

6. Put the decision point where the work is performed and build control

into the processMBL eliminated need for layers of managers instead

created CASE MANAGER who overlooks both processing as well as decisional responsibilities.

IT can help capture & process data, while expert system can supply knowledge & decisional expertise.

Manager role changed from controller/supervisor to supporter/facilitator

7. Capture Information Once and at the Source

An Insurance company had to capture same data 5 times separately. So they centralized system

and gave access to all 5 departments.

Maintaining Online live database which is accessible to all concerned at a time, reduces

time wastage in gathering information and maintaining.

CHANGES

FORDEmployees had to get familiar with computersEmployees were given decision making

responsibilitiesVendors are looked more as partners instead of

adversaries.

Mutual Benefit LifeNew Job rating schemes and compensation policies.Culture change as workers were now looked upon

as more important than those supervising.

CONCLUSION

Business Process Reengineering will bring changes:

Not just process but Job Designs, Organizational Structure, Management System.

Will lead to New Career Paths, Jobs, Recruitment and Training methods.

“ Big Companies are not Dinosaurs who are doomed to extinct but layers of

unproductive overheads and army of unproductive workers to be shed. ”

DECISIONS TECHNOLOGY

TECHNOLOGY DECISIONS