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MICHAEL HAMMERMICHAEL HAMMER

Dr. Michael Hammeris one of the worlds

foremost business thinkers. He is the

originator of both reengineering and

process-catering, two ideas that have

transformed the modern business world. Heis the author of Reengineering the

Corporation: A Manifesto for Business

Revolution and Beyond Reengineering: How

the Process-Centered Organization is

Changing Our Work and Our Lives. Dr.

Hammer was formerly a professor ofComputer Science at the Massachusetts

Institute of Technology and was named by

Business Week as one of four preeminent

management thinkers of the 1990s

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The Existing SetupThe Existing Setup

yy Division ofDivision of Labour(StageLabour(Stage 1)1)

Jobs are broken to simple tasks and assigned to Specialists who can performJobs are broken to simple tasks and assigned to Specialists who can performonly that broken part (principle of Adam Smith which was successfully used byonly that broken part (principle of Adam Smith which was successfully used by

Henry Ford)Henry Ford)

yy ManagersManagers Responsibilities(StageResponsibilities(Stage 2)2)

To look at the numbersTo look at the numbers sales, profit, inventory, market share of varioussales, profit, inventory, market share of variousdivisions and check for appropriate action if they deviate from defined targetsdivisions and check for appropriate action if they deviate from defined targets

HenrytyHenryty FordFord--Assembly lineAssembly line

yy OrganizationOrganization Structure(StageStructure(Stage 4)4)

Functionally fragmented departments, big team of executives, senior managers,Functionally fragmented departments, big team of executives, senior managers,auditors, planners ferreting data about performance and intervening and modifyingauditors, planners ferreting data about performance and intervening and modifyingplans of operating managersplans of operating managers

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FLAWS IN THEFLAWS IN THE

CURRENT SYSTEMCURRENT SYSTEMyy DELAY AND ERRORSDELAY AND ERRORS

yy

RIGIDITYRIGIDITYyy HIGH OVERHEAD COSTSHIGH OVERHEAD COSTS

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GnirenineerGnirenineer??????????

yy Reengineering DefinitionReengineering Definition

yy Reengineering, properly, is the fundamental rethinking and radical redesignReengineering, properly, is the fundamental rethinking and radical redesignof business process to achieve dramatic improvements in critical ,of business process to achieve dramatic improvements in critical ,contemporary measures of performance, such as cost, quality, service andcontemporary measures of performance, such as cost, quality, service andspeed.speed.

yy Reengineering is the opportunity to develop the rules by which business in theReengineering is the opportunity to develop the rules by which business in thefuture will be conducted rather than being forced tooperate by the rulesfuture will be conducted rather than being forced tooperate by the rulesimposed by someone else. As such, reengineering underpins every attempt toimposed by someone else. As such, reengineering underpins every attempt to

seize and maintain a true co

mpetitive advantage.seize and maintain a true co

mpetitive advantage.

yy To achieve reengineering success, a fresh perspective and approach isTo achieve reengineering success, a fresh perspective and approach isrequired. A clean sheet of paper is taken and, given what is currently knownrequired. A clean sheet of paper is taken and, given what is currently knownabout customers and their preferences, a new organization is developed whichabout customers and their preferences, a new organization is developed whichwill optimize the process of creating satisfied customers.will optimize the process of creating satisfied customers.

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REENGINEERINGREENGINEERING

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FOUR KEY ELEMENTSFOUR KEY ELEMENTS

OF REENGINEERINGOF REENGINEERINGyy FUNDAMENTAL RETHINKINGFUNDAMENTAL RETHINKING

yy

RADICAL REDESIGNINGRADICAL REDESIGNINGyy DRAMATIC IMPROVEMENTSDRAMATIC IMPROVEMENTS

yy KEY PROCESSESKEY PROCESSES

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WHO REQUIREWHO REQUIRE

REENGINEERING?REENGINEERING?yy COMPANIES UNDER DEEP TROUBLECOMPANIES UNDER DEEP TROUBLE

yy

COMPANIES FORESEEING TROUBLE IN THECOMPANIES FORESEEING TROUBLE IN THENEAR FUTURENEAR FUTURE

yy COMPANIES WHICH ARE AMBITIOUS ANDCOMPANIES WHICH ARE AMBITIOUS ANDAGGRESSIVEAGGRESSIVE

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REENGINEERINGREENGINEERINGTHEMES????THEMES????

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SEVERALJOBS ARESEVERALJOBS ARECOMBINED INTOCOMBINED INTO

ONEONE

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DECISION MAKINGDECISION MAKINGFALLS TO THEFALLS TO THEWORKERS,NOTWORKERS,NOT

MANAGERSMANAGERS

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PROCESSES STEPSPROCESSES STEPSARE PERFORMEDARE PERFORMEDLOGICALLY ANDLOGICALLY AND

NATURALLYNATURALLY

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THE END OFTHE END OF

STANDARDIZATIONSTANDARDIZATION

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THE WORK ISTHE WORK ISPERFORMEDPERFORMED

WHRE IT MAKESWHRE IT MAKESMORE SENSEMORE SENSE

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CHECKS ANDCHECKS ANDCONTROLS ARECONTROLS ARE

REDUCED ORREDUCED ORELIMINATEDELIMINATED

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HAND OFF ANDHAND OFF AND

RECONCILLIATIONSRECONCILLIATIONSARE MINIMIZEDARE MINIMIZED

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CUSTOMERS ENJOY THECUSTOMERS ENJOY THE

BENEFITS OF CENTRALIZEDBENEFITS OF CENTRALIZEDPURCHASING ANDPURCHASING ANDDECENTRALIZESDECENTRALIZES

PURCHASINV POWERPURCHASINV POWER

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The Characteristics of aThe Characteristics of aREENGINEERED CORPORATIONREENGINEERED CORPORATION

yy Business processes are simplifiedBusiness processes are simplified

rather than being made morerather than being made morecomplex.complex.

yyJob descriptions expand andJob descriptions expand and

become multibecome multi--dimensional peopledimensional peopleperform a broader range of tasks.perform a broader range of tasks.

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yyPeople within thePeople within the

organization becomeorganization becomeempowered as opposedempowered as opposed

tobeing controlledtobeing controlled

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yy The organizational structure isThe organizational structure is

transfo

rmed fro

m a hierarchy to

atransfo

rmed fro

m a hierarchy to

aflatter arrangement.flatter arrangement.

yy Professionals become the key focusProfessionals become the key focus

points for the organization, not thepoints for the organization, not themanagers.managers.

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yy The organization becomes aligned withThe organization becomes aligned withthe endthe end--toto--end process rather than beingend process rather than beingfocused on departments.focused on departments.

yy The basis for measurement ofThe basis for measurement ofperformance and compensation movesperformance and compensation movesaway from activity towards results.away from activity towards results.

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The Characteristics of a REENGINEEREDThe Characteristics of a REENGINEEREDCORPORATIONCORPORATION

yy The role and purpose of the managerThe role and purpose of the manager

changes fro

m superviso

r to

co

ach.changes fro

m superviso

r to

co

ach.yy People in the organization no longerPeople in the organization no longer

worry about pleasing the bossworry about pleasing the boss ---- theythey

focus instead on pleasing thefocus instead on pleasing thecustomercustomer

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yyThe organizations valueThe organizations value

system transforms from beingsystem transforms from beingprotective tobeingprotective tobeingproductive.productive.

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REENGINEERINGREENGINEERING

STRUCTURESTRUCTURE

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REENGINEERING CASEREENGINEERING CASE

STUDIESSTUDIESyy IBM CREDIT POLICYIBM CREDIT POLICY

yy FORD MOTOR COMPANYFORD MOTOR COMPANY

yyHALLMARKHALLMARK

yyTACO BELLTACO BELL

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MAIN IDEAMAIN IDEA

yy A FOCUS ON PROCESSES RATHER THANA FOCUS ON PROCESSES RATHER THANORGANIZATIONAL BOUNDARIESORGANIZATIONAL BOUNDARIES

yy THE AMBITION TO CREATE BREAK THROUGHTHE AMBITION TO CREATE BREAK THROUGHPERFORMANCE GAINSPERFORMANCE GAINS

yy A WILLINGNESS TO BREAK WITH OLDA WILLINGNESS TO BREAK WITH OLDTRADITIONS AND RULESTRADITIONS AND RULES

yy A CREATIVE USE OF NEW INFORMATIONA CREATIVE USE OF NEW INFORMATIONTECHNOLOGYTECHNOLOGY

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IBM CREDITIBM CREDIT

CORPORATIONCORPORATIONIBM Credit finances the computers, software and servicessoldby IBM Corporation. Processing a finance application used to

take between six days and two weeks as the applicationwoundits way from the credit department to the pricing departmenttoan administrator who wrote out a formal quote letter.When IBM Credit realized that processing an application

actuallytookonly about 90-minutes and the rest of the normalprocessingtime was spent with the application sitting on a pile on aspecialists desk waiting tobe looked at, they decided toreengineer the entire process.

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FORD MOTORFORD MOTOR

COMPANYCOMPANYIn the early 1980s, Ford looked at its 500-person accountspayable department closely.It was soon realized that the majority ofeach employees time was spent tracking

down discrepancies between purchaseorders, shipping receipts and invoices.Ford decided to reengineer the entireparts procurement process.

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HALLMARKHALLMARK

Hallmark totally dominates the U.S. greeting card industry.Despite its success, the company decided to embarkon a

reengineering program with the objective of reducing the timelapse between noting a new niche market to serving it with a cardon the retailers shelf. (At that time, it took 2 -- 3 years to get anew line of greeting cards from concept to market. The companywas making about 50,000 revisions to designs each year, and

Hallmark had no accurate way of finding out what was sellingwell and what was not).

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TACO BELLTACO BELL

In 1983, the Taco Bell subsidiaryIn 1983, the Taco Bell subsidiary

of PepsiCo had fewer than 1,500of PepsiCo had fewer than 1,500restaurants and $500 million inrestaurants and $500 million intotal sales. The company hadtotal sales. The company had

stalled, with little or no growthstalled, with little or no growthover the previous five years.over the previous five years.

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The key to ReengineeringThe key to Reengineering

successsuccessyy Always start with the customer and workAlways start with the customer and work

backwards.backwards.

yy Move fast.Move fast.

yy Tolerate risk.Tolerate risk.

yy Accept imperfections along the way.Accept imperfections along the way.

yy Dont stop too soon.Dont stop too soon.

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yyA PRESENTATIONA PRESENTATIONBY GROUP 5BY GROUP 5

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THE ENDTHE END

Hammer A5

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