8.6: Process Re-engineering
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Business Process Re-engineering
As organizations look to manage their processes to gain a competitive advantage, they also need to understand that their existing ways of doing things may not be the most effective or efficient. A process developed in the 1950s is not going to be better just because it is now supported by technology.
In 1990, Michael Hammer published an article in the Harvard Business Review entitled “Reengineering Work: Don’t Automate, Obliterate.” This article put forward the thought that simply automating a bad process does not make it better. Instead, companies should “blow up” their existing processes and develop new processes that take advantage of the new technologies and concepts. He states in the introduction to the article:
Many of our job designs, work flows, control mechanisms, and organizational structures came of age in a different competitive environment and before the advent of the computer. They are geared towards greater efficiency and control. Yet the watchwords of the new decade are innovation and speed, service, and quality.
It is time to stop paving the cow paths. Instead of embedding outdated processes in silicon and software, we should obliterate them and start over. We should “reengineer” our businesses: use the power of modern information technology to radically redesign our business processes in order to achieve dramatic improvements in their performance.
Business process reengineering is not just taking an existing process and automating it. BPR is fully understanding the goals of a process and then dramatically redesigning it from the ground up to achieve dramatic improvements in productivity and quality. But this is easier said than done. Most of us think in terms of how to do small, local improvements to a process; complete redesign requires thinking on a larger scale. Hammer provides some guidelines for how to go about doing business process reengineering:
- Organize around outcomes, not tasks. This simply means to design the process so that, if possible, one person performs all the steps. Instead of repeating one step in the process over and over, the person stays involved in the process from start to finish.
- Have those who use the outcomes of the process perform the process. Using information technology, many simple tasks are now automated, so we can empower the person who needs the outcome of the process to perform it. The example Hammer gives here is purchasing: instead of having every department in the company use a purchasing department to order supplies, have the supplies ordered directly by those who need the supplies using an information system.
- Subsume information-processing work into the real work that produces the information. When one part of the company creates information (like sales information, or payment information), it should be processed by that same department. There is no need for one part of the company to process information created in another part of the company.
- Treat geographically dispersed resources as though they were centralized. With the communications technologies in place today, it becomes easier than ever to not worry about physical location. A multinational organization does not need separate support departments (such as IT, purchasing, etc.) for each location anymore.
- Link parallel activities instead of integrating their results. Departments that work in parallel should be sharing data and communicating with each other during their activities instead of waiting until each group is done and then comparing notes.
- Put the decision points where the work is performed, and build controls into the process. The people who do the work should have decision-making authority and the process itself should have built-in controls using information technology.
- Capture information once, at the source. Requiring information to be entered more than once causes delays and errors. With information technology, an organization can capture it once and then make it available whenever needed.
These principles may seem like common sense today, but in 1990 they took the business world by storm. Hammer gives example after example of how organizations improved their business processes by many orders of magnitude without adding any new employees, simply by changing how they did things (see sidebar).
Unfortunately, business process reengineering got a bad name in many organizations. This was because it was used as an excuse for cost cutting that really had nothing to do with BPR. For example, many companies simply used it as an excuse for laying off part of their workforce. Today, however, many of the principles of BPR have been integrated into businesses and are considered part of good business-process management.