Business process Reengineering

Chapter I

Need to Redefine the Management Concepts

BPR was conceptualized because there arose a need to redefine management concept.

The need to redefine management concepts arose because today, way we do business is quite different from the way business was conducted when the old management concepts were written by Fayol & F.W.Taylor.

Lets look at few of them

Fayol gave the concept of Unity of Command & Scalar Chain. But in today’s corporations employees has more than one superior under Team Management & the information can flow from Multi-dimensional sources.

Adam Smith broke down work in specialized tasks.

F.W.Taylor in his Scientific Management emphasizes on division of labour. But modern corporations prefer the employees with multi-skills

Previously corporations used to look for specialized skills.. But empowerment goes hand- in-hand with generalization.

Modern organizations also desire to recruit the candidates with multi-cultural, skills, job & organizational background. These, modern day organizations believe in the emerging view that “rolling stone gather masses.”

Hierarchical corporate structures no longer a match for the dynamism of global markets.

Function oriented hierarchical organizations require rigid information flows & they lead to long lead times for internal & external orders.

The organizational principles were designed for relatively stable environmental conditions.

Today the change is no longer slow & evolutionary but rapid & revolutionary.

There is also a change from industrial society to Information society.

Customer requirements & expectations of the quality of the products & level of services are also taking a new direction.

Previously the product was designed according to the convenience of the organization. But today they are designed to meet the expectation of the consumers keeping in view the competition.

Most of the organizations still follow the principles, structures & management concepts written down more than two centuries ago.

Michael Hammer & James Champy suggests that the time have come to retire these principles & adopt a new set. They should re-engineer their business process in order to improve their efficiency & meet the competition effectively.

But the key question is what is the new set that the organizations should adopt?

What is process?A process is "a structured, measured set of

activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization"

Processes have two important characteristics:

(i) They have customers (internal or external),

(ii)They cross organizational boundaries, i.e., they occur across or between organizational sub units.

What is business process?

Davenport & Short (1990) define business process as "a set of logically related tasks performed to achieve a defined business outcome."

Business enterprise foresee / forecast the needs of the customers & then standardize these needs.

-Firms design the products based on these standardized needs, estimate the raw materials, parts, finance, human resources, technology, machinery & equipments, tools,etc,

-procure them,

-convert the input into output,

-Appoint the market intermediaries

-provide pre-sales & post sales services,

-The firm solicit customers grievances for the modification of products & services .

The various infrastructural facilities like

-transportation

-banking

-insurance

-warehousing,etc.

Helps to complete these activities smoothly & at fast rate.

The process of conversion of inputs into output & meeting the customer needs is called business process.

Thus, according to Michael Hammer & James Champy “Business process is a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.

What is Reengineering?

Reengineering (or re-engineering) is the radical redesign of an organization's processes, especially its business processes. Rather than organizing a firm into functional specialties (like production, accounting, marketing, etc.) and looking at the tasks that each function performs, we should be looking at complete processes from materials acquisition, to production, to marketing and distribution. The firm should be re-engineered into a series of processes.

Michael Hammer & James Champy have defined re-engineering 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 & speed.”

Definition of Reengineering

The word fundamental in the definition indicates that the business people in doing reengineering must ask the basic questions like

-Why do we do what we do?

-Why do we do it the way we do?

-How can we do the present work more efficiently?

Radical redesign means changing from the roots but not superficial level. Radical redesign in reengineering refers to “disregarding all existing structures & procedures.” and developing the new methods of doing the work.

Reengineering is “Business reinvention.”

The word dramatic in the definition refers to “Achieving quantum leaps in performance.”

What is business process reengineering (BPR)?

According to Michael Hammer & James Champy BPR can be thought of as the task of combining the business tasks jobs, functions, departments & structures into a coherent business process.

What is not Reengineering?

•Downsizing the organizational business

•Restructuring the organizational business

•Automation or technology upgradation

•Software Engineering

•Reorganizing or changing the structure from tall to flat or vice-versa.

•Delayering

•Quality improvement

•Total Quality Management (TQM)

•Total Quality & Productivity Management (TPQM)

•Continuous increment and slow improvement (Kaizen)

Reengineering is about REVERSING the industrial revolution.

Reengineering rejects the concept like economies of scale, division of labour, hierarchical control & the like.

Characteristics

Reengineering varies from one business to another. Some common characters in the reengineering process are:

•It requires a critical rethinking of the business.

•It views the business as set of processes rather than as functional department.

•Customer focus is critical to the success of Reengineering

•Its planning,design & implementation involves the entire organization

•Several jobs are combined into one, mostly based on customer needs / preference.

•Integrating jobs / process reduce the errors, misunderstandings, eliminate the delays and reworking, and administrative overheads Jobs are compressed on the basis of job enrichment & job enlargement.

•Workers are empowered and make decision as decision-making is part of the work of the workers.

•Work is compressed not only horizontally but also vertically as it reduces delays, overhead costs and better customer response and satisfaction.

•The steps in the process are performed in natural order. Straight-line sequence is avoided.