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Business Process Reengineering

M. ParthibanDept of Mech Engineering

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Learning Objectives

• Explain the role of Business Process Reengineering (BPR) within the organization

• Understand the origins and key characteristics of BPR• Understand and be able to implement a BPR Strategy

• Understand the main challenges in implementing a BPR Strategy

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BPR & The Organization

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What is BPR?

• Reengineering is the fundamental rethinking and redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed.

(Hammer & Champy, 1993)

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BUSINESS PROCESS REENGINEERING

“An organizational make-over”

“Reengineering is new, and it has to be done.”Peter F. Drucker

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BUSINESS PROCESS REENGINEERING

• The search for, and implementation of, radical change in business processes to achieve breakthrough results

• Synonyms: business process redesign, business transformation, process innovation, business reinvention, change integration

• Starting point: clean sheet of paper

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What is Business Process Reengineering?

• An organizational change method used to redesign an organization to drive improved efficiency, effectiveness, and economy.

• Organizational change tools may include:– Activity based costing analysis– Baselining and benchmarking studies– Business case analysis– Functionality assessment– Industrial engineering techniques– Organization analysis– Productivity assessment– Workforce analysis– Others, as needed (e.g., human capital tools)

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BUSINESS PROCESS REENGINEERING

• Start from the future and work backwards

• BPR is not easy - serious work

• BPR is not free - financial & cultural

• BPR often driven by fear and greed

• Change is a “struggle”; BPR is a “war”

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BPR: LESSONS LEARNED

• Get the strategy straight first

• Lead from the top

• Create a sense of urgency

• Design from the outside in (customer)

• Combine top-down & bottom-up efforts

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BPR: STRATEGY*

• Stakeholder Assessment - shareholders, customers, employees

• Determine which stakeholder expectations should be met to gain competitive advantage

• Determine how to redesign to meet expectations

• Map out IT solutions to support

• Develop & implement new processes, etc.

* Adapted from A.D. Little Inc.

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SOFTWARE REENGINEERING

• RESTRUCTURING - Transforming unstructured (“spaghetti code”) code into structured code equivalent [10% penetration]

• REENGINEERING - Gradually “clean up” old software without affecting user functionality

• REVERSE ENGINEERING - Uncover or rediscover the design specification from existing code; then apply forward engineering

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BPR is Not?

• Automation

• Downsizing

• Outsourcing

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BPR Versus Process Simplification

Process Reengineering

Radical TransformationVision-Led

Change Attitudes & BehaviorsDirector-Led

Limited Number of Initiatives

Process Simplification

Incremental ChangeProcess-Led

Assume Attitudes & BehaviorsManagement-Led

Various Simultaneous Projects

(Source Coulson-Thomas, 1992)

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BPR Versus Continuous Improvement

Process Reengineering

Radical TransformationPeople & Technology Focus

High InvestmentRebuild

Champion Driven

Continuous Improvement

Incremental ChangePeople Focus

Low InvestmentImprove ExistingWork Unit Driven

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What is a Process?

• A specific ordering of work activities across time and space, with a beginning, an end, and clearly identified inputs and outputs: a structure for action.

(Davenport, 1993)

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What is a Business Process?

• A group of logically related tasks that use the firm's resources to provide customer-oriented results in support of the organization's objectives

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Why Reengineer?

• Customers– Demanding

– Sophistication

– Changing Needs

• Competition– Local

– Global

• Change– Technology

– Customer Preferences

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Why Organizations Don’t Reengineer?

• Complacency

• Political Resistance

• New Developments

• Fear of Unknown and Failure

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Performance

• BPR seeks improvements of

– Cost– Quality– Service– Speed

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Origins

• Scientific Management. FW Taylor (1856-1915).

• Frederick Herzberg - Job Enrichment

• Deming et al - Total Quality Management and Kaizen

• In Search of Excellence (Peters and Waterman)

• Value-Added Analysis (Porter).

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Key Characteristics

• Systems Philosophy

• Global Perspective on Business Processes

• Radical Improvement

• Integrated Change

• People Centred

• Focus on End-Customers

• Process-Based

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TransformationInputs Outputs

Feedback

Environment

Systems Perspective

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Process Based

• Added Value– BPR Initiatives must add-value over and above the

existing process

• Customer-Led – BPR Initiatives must meet the needs of the customer

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Radical Improvement

• Sustainable– Process improvements need to become firmly rooted

within the organization

• Stepped Approach– Process improvements will not happen over night

they need to be gradually introduced– Also assists the acceptance by staff of the change

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Integrated Change

• Viable Solutions– Process improvements must be viable and practical

• Balanced Improvements– Process improvements must be realistic

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People-Centred

• Business Understanding

• Empowerment & Participation

• Organizational Culture

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Focus on End-Customers

• Process improvements must relate to the needs of the organization and be relevant to the end-customers to which they are designed to serve

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Implementing a BPR Strategy

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Business Process Reengineering (BPR)

An organization fundamentally and radically

redesigns its business process to achieve

dramatic improvement

− From the restructuring of an organization

− To the redesigning of individual processes

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Key Steps

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan

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Select the Process & Appoint Process Team

• Two Crucial Tasks

– Select The Process to be Reengineered

– Appoint the Process Team to Lead the Reengineering Initiative

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Select the Process

• Review Business Strategy and Customer Requirements

• Select Core Processes

• Understand Customer Needs

• Don’t Assume Anything

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Select the Process

• Select Correct Path for Change

• Remember Assumptions can Hide Failures

• Competition and Choice to Go Elsewhere

• Ask - Questionnaires, Meetings, Focus Groups

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Appoint the Process Team

• Appoint BPR Champion

• Identify Process Owners

• Establish Executive Improvement Team

• Provide Training to Executive Team

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Core Skills Required

• Capacity to view the organization as a whole• Ability to focus on end-customers• Ability to challenge fundamental assumptions• Courage to deliver and venture into unknown areas• Ability to assume individual and collective

responsibility• Employ ‘Bridge Builders’

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Use of Consultants

• Used to generate internal capacity

• Appropriate when a implementation is needed quickly

• Ensure that adequate consultation is sought from staff so that the initiative is organization-led and not consultant-driven

• Control should never be handed over to the consultant

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Understand the Current Process

• Develop a Process Overview

• Clearly define the process – Mission– Scope– Boundaries

• Set business and customer measurements

• Understand customers expectations from the process (staff including process team)

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Understand the Current Process

• Clearly Identify Improvement Opportunities– Quality– Rework

• Document the Process– Cost– Time – Value Data

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Understand the Current Process

• Carefully resolve any inconsistencies– Existing -- New Process

– Ideal -- Realistic Process

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Develop & Communicate Vision of Improved Process

• Communicate with all employees so that they are aware of the vision of the future

• Always provide information on the progress of the BPR initiative - good and bad.

• Demonstrate assurance that the BPR initiative is both necessary and properly managed

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Develop & Communicate Vision of Improved Process

• Promote individual development by indicating options that are available

• Indicate actions required and those responsible

• Tackle any actions that need resolution

• Direct communication to reinforce new patterns of desired behavior

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Identify Action Plan

• Develop an Improvement Plan

• Appoint Process Owners

• Simplify the Process to Reduce Process Time

• Remove any Bureaucracy that may hinder implementation

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Identify Action Plan

• Remove no-value-added activities

• Standardize Process and Automate Where Possible

• Up-grade Equipment

• Plan/schedule the changes

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Identify Action Plan

• Construct in-house metrics and targets

• Introduce and firmly establish a feedback system

• Audit, Audit, Audit

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Execute Plan

• Qualify/certify the process

• Perform periodic qualification reviews

• Define and eliminate process problems

• Evaluate the change impact on the business and on customers

• Benchmark the process

• Provide advanced team training

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Follow-up processing

pre- qualification

documentgeneration

applicationprocessing

credit analysis& underwriting

approval& closing

paymentprocessing

escrowmanagement

customerservice

collections& foreclosures

valuation &risk analysis

transfer tosecondary mkt

BPR Example - Loan processingDesk-to-desk approach credit

reporting

Servicing of loan

Origination of loan

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BPR example - Loan processingTeam approach

Field replaptop

Regionalproductioncenter

Loanoriginationteam

Loanservicingteam

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Information Technology & BPR

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Benefits From IT

• Assists the Implementation of Business Processes– Enables Product & Service Innovations– Improve Operational Efficiency– Coordinate Vendors & Customers in the Process

Chain

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Computer Aided BPR (CABPR)

• Focus– Business Processes– Process Redesign– Process Implementation

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BPR Process

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BPR Process

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BPR Process

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BPR Comparison

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BPR Case studies

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BPR Examples

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BPR Challenges

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Common Problems

• Process Simplification is Common - True BPR is Not

• Desire to Change Not Strong Enough

• Start Point the Existing Process Not a Blank Slate

• Commitment to Existing Processes Too Strong– REMEMBER - “If it ain’t broke …”

• Quick Fix Approach

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Common Problems with BPR

• Process under review too big or too small• Reliance on existing process too strong• The Costs of the Change Seem Too Large• BPR Isolated Activity not Aligned to the Business

Objectives• Allocation of Resources• Poor Timing and Planning• Keeping the Team and Organization on Target

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Summary

• Reengineering is a fundamental rethinking and redesign of business processes to achieve dramatic improvements

• BPR has emerged from key management traditions such as scientific management and systems thinking

• Rules and symbols play an integral part of all BPR initiatives

• Don’t assume anything - remember BPR is fundamental rethinking of business processes