A fundamental rethinking and radical redesign of business processes to achieve dramatic improvements

Business process reengineering (BPR) has dominated the thinking of corporate executives for much of the 1990s. In 1993, Michael Hammer and James Champy published Reengineering the Corporation. According to Hammer and Champy, reengineering was "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." A 1994 survey by CSC Index (State of Reengineering Report 1994) found that 69 percent of U.S. companies had some reengineering initiative in place. By 1996, a survey conducted by Louis Harris & Associates revealed that 60 percent of the companies surveyed had undertaken a formal reengineering project in the past two years and that cutting costs was the main reason. However, we believe that BPR is unlikely to be remembered in the new millennium as the panacea for corporate ills. When Bain & Company, a consulting group, asked executives at 1,000 companies to rate different management tools in 1996, BPR did not score very high. Even the gurus who formalized the ideas of BPR acknowledged the difficulty of its implementation.

Book

Bala Balachandran

1999

Balachandran, Bala. 1999. Business Process Reengineering - Its History, Promises, and Problems. Morristown, NJ: Financial Executive Research Foundation, Inc..

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Abstract

This paper reviews the terminology of “Business Process Reengineering (BPR).” It first introduces BPR with its concept, history, and influence, and then discusses four key points and seven principles of utilizing BPR. Further, it describes five steps to implement BPR and its applications in the business world. In the end, several criticism regarding BPR are presented. Overall, this paper intends to give a broader view of BPR -- the radical method for determining system requirement.

1.      Introduction: Why BPR

A business process is an activity or set of activities that will accomplish a specific organizational goal.[1] It can be divided into to three types: management processes, operational processes and supporting processes.[2] These processes connect with each other, either parallel, crossly, or sequent. Together, they form the company. But as companies grow, they tend to be ossified and become bureaucratic. Just like a fishing net, when it ages, the net tends to be stiff and weak. People, who serve as the organization’s blood, will sometimes slow down the organization’s metabolism because of its properties. For example, they will stop to question and re-examine the routine practices of the organization because they are too busy doing their routine jobs and have no time or already lose their ability to rethink. This would greatly reduce the efficiency of the company’s operation, quality of employee performance and degree of customer satisfaction.

In order to maintain competitive advantage, companies have to optimize those processes constantly. “Systems analysis is the process of examining a business situation for the purpose of developing a system solution to a problem or devising improvements to such a situation.” [3] Companies use systems analysis to determinate the system requirements and design a new system to fulfill stakeholders’ needs. However, current practices usually have a huge influence on new systems, as authors point out in Modern Systems Analysis and Design.[4] To solve this issue, Business Process Reengineering (BPR) was introduced during early 1990s and soon became management fad. Study done by Yasin Ozcelikshows that the firms perform better after successfully implementing their BPR projects. [5]According to the AI Magazine, in the mid-1990s, about 60% of the Fortune 500 companies stated that they have started or planned to do reengineering.[6]

2.      Overview of BPR

2.1  Definition

Hammer and Champy, founders of the theory of Business Process Reengineering (BPR), define BPR as: “the fundamental rethinking and radical redesign of the business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed."[7] As Kliem points out in his paper “Risk Management for Business Process Reengineering projects”, because of the drastic impact that BPR may bring, BPR projects often end in failure.[8]Ambitious companies who are willing to take risks and desiring big payoff are in favor of BPR.[9]

2.2  Key Points

According to the above definition, BPR has the following characters: fundamental rethinking, radical redesign, dramatic improvements and business processes.

2.3  Principles for BPR

Seven principles have been identified by Michael Hammer to better utilize BPR:

2.4  Steps to implement BPR

Five Steps in BPR were summarized by Thomas H. Davenport and James E. Short as following: [12]

Instead of first looking for key business processes, which is suggested by Modern Systems Analysis and Design, Thomas H. Davenport and James E. Short’s first step is developing business vision and process objectives. After prioritizing objectives and setting the goals, the second step will then be looking for key business that should be reengineered. In the third step, they suggest to understand existing processes and find out current problems. The fourth step is brainstorming new process approaches. And the last step is designing and building a prototype of the new process, which is repeatable step to assure the quality of new process.

2.5  Applications and Results

BPR can be used to improve single existing processes or revolutionize the way in which company operates.[13] It results in increasing efficiency for company and improvement of customer service.[14] According to CSC index’s survey in 1994, 69% of surveyed North America companies and 75% of surveyed European companies have conducted at least one BPR project.[15]

Take Ford as an example: Its North America division had more than 500 employees in account payable department. For big companies like Ford, it is considered normal size for such department. MAZDA, a slightly smaller company, however, only had 100 account payable employees at that time. 100:500, the huge difference shocked Ford and force Ford senior management putting BPR on their agenda. After implementing BPR, the size of account payable department was reduced to 125 employees, which is about 25% of the original size.[16]

Caterpillar Corp, produced the same level of output in 1994 as did in 1979, but with 40000 fewer employees by implementing BPR[17]; Kodak, shortened 35mm single-use camera product lifecycle from 70 weeks down to 38 weeks, which is about 46% less, by implementing BPR[18]; Reynolds & Reynolds Co. slashed the number of steps to produce business forms from 90 separate steps down to 20, and cut the required time to fill an order from three weeks to one week by implementing BPR.[19] The same dramatic improvements can be found in a lot of companies who implement BPR at that time.

3.      Criticism

BPR, with its tremendous success in reducing business cost, was in the world’s spotlight in 1990’s. However, opponents still find problems with the following aspects of BPR: its assumption, its procedure, and its negative impact.

First, they argue that since BPR cannot prove ineffectiveness of business processes to be the major reason of the poor performance of the company, it has a wrong or imperfect assumption.

Further, they believe that BPR sometimes may lead to more cost. The way BPR solves problems is by starting things all over from the start. Since it is possible to sovle problems without such a radical change, it is thus sometime less costly to use the alternative way than BPR.

At last, since BPR can boost the companies’ efficiency and help them achieve further goal with less employees, it is criticized for workforce reductions.[21]Even Thomas Davenport, an early BPR proponent, stated that:

"When I wrote about "business process redesign" in 1990, I explicitly said that using it for cost reduction alone was not a sensible goal. And consultants Michael Hammer and James Champy, the two names most closely associated with reengineering, have insisted all along that layoffs shouldn't be the point. But the fact is, once out of the bottle, the reengineering genie quickly turned ugly."[22]

Conclusion

In this paper, I have given an overview of the concept of BPR and also criticism against it. Despite the possible problem BPR may have, it is still a very useful system analysis and design technique. It helps company to reduce costs and cycle time and improve quality and performance. It works especially well for organizations with the problems of ineffectiveness of its process. For those organizations, BPR will be the best-off solution.

What is the rethinking and redesign of the business process to achieve dramatic improvement in critical measures of performance?

Is a fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance?

Is defined as the fundamental rethinking and radical redesign of business processes to?

What is fundamental rethinking?