A quick look at Business Process Reengineering
Once dismissed as an “old economy” thought process, Business Process Reengineering (BPR) today, can transform business operations. It is definitely a significant development in the history of business. Proponent Michael Hammer defines this form or technique as:
“The fundamental rethinking and radical redesign of the business process to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.”
There are various companies who have implemented BPR in order to reinvent their working relationship with their suppliers and consumers. Let’s delve deeper into BPR.
A concrete description
Business Process Reengineering can be termed a ‘clean-slate’ initiative as it involves starting from scratch, with an entire gamut of changes in the human, technological, and organisational dimensions of an organisation. The organisation ideally scraps its existing process for a more dynamic and profitable business process. Information technology (IT) plays a major role in this radical change as it supports office automation, provides manufacturing flexibility, permits a business to be piloted in different locations, and enhances the speed of delivery to the customers while supporting quick, paperless transactions. As a whole, IT ensures a well-organised and effective transformation in the way in which business is conducted.
Globalisation of the economy has resulted in intensive competition and instability in the market. There is competition in terms of quality, price, process, services, and much more. Innovation, international cooperation, and technological progression, triggers a race that calls for an organisational overhaul; a drastic change that enables an orthodox organisation to compete in the market.
This is when BPR steps in. It is characterised by three elements:
- The inputs: inputs are data gathered from materials or customer queries
- The processing: this involves processing of the inputs/data
- The outcome: the delivery of the expected result
Let’s understand the basic steps of reengineering.
Business Process Reengineering Basic Steps
The four basic steps of business process reengineering are:
- Defining objectives
- Analysing existing process
- Inventing new ways to work, and
- Implementing the new process
The key to BPR, according to Hammer and Champy, is the ability to use imagination, insight and the willingness to challenge the assumptions, and change the existing processes through invention.
A brief example
The country units of CIGNA International, a worldwide health insurance business, were small, and the first reengineering took place in the UK. Due to a major regulatory change, the corporation had to redefine the business strategy of their UK unit. After a concrete six-months of analytical study, and the implications of a new strategy on the operations, the structure, and cost drivers, almost 40% of the business was divested. Financial accounting, claims and customer services units were moved from London to Greenock, Scotland.
The objective was to build a fresh business strategy in tandem with the regulatory changes. A team comprising of eight members worked full-time towards reengineering the business. Three members were involved from CIGNA, another three external consultants, and two from the relevant business units. Steadily, within two years, the corporation brought about vital changes in the structure of the organisation, the job roles, work flows, culture and information technology. In all, six functions were successfully consolidated into two business processes. This was accomplished by the use of cross-functional teams while promoting flexibility, accountability, skill distribution and decreased redundancy.
Such radical alterations resulted in excellent quality, immaculate customer service, cheaper operational costs and growth.
Reengineering usually falls under three categories:
– Streamlining: This approach requires a basic clean-up rather than radical changes.
For example, while maintaining the existing practice, an organisation can implement a software that enables the movement of documents electronically through the organisation. It is an addition to the existing process rather than an overhaul. Streamlining does not support major organisational changes. It treats a symptom but it cannot cure what has actually gone wrong. It simply improves a process without challenging its existence.
– Integrating: This is a more popular approach wherein an organisation discretely unifies processes while cutting across department responsibilities and functions.
For example the American car manufacturer, Ford, integrated its accounts payable process. Tasks previously executed by the purchasing department, warehousing clerks, and accountants were reordered to the accounts payable department. Hence, instead of several functional departments, Ford brought multiple jobs under one process. The company further invested in computer systems to eliminate redundant paperwork. This integration had a significant impact on the jobs involved in the receiving process.
– Transformation: There are organisations that sign up for ‘enterprise transformation’. Such companies challenge and re-evaluate their own existence. The approach is to reengineer the entire organisation. This approach needs the top management to cooperate, step back from the day-to-day activities and consider a radical change to the organisational goals, capabilities and skills.
A brief introduction to Business Process Reengineering at INSCO
Located in Scotland, Insco is a subsidiary of an American insurance firm. The company had a turnover of £100 million with 250 employees in the UK and more than 60,000 across the world. Dealing in corporate healthcare, the company initiated reengineering in 2011 and the success was attributed to the ‘whole’ approach rather than tinkering with business activities.
BPR at Insco considered how the company was organised, the way it functioned and the existing systems of operations. IT, however, was only a part of BPR for Insco. During the analysis it was revealed that while focusing on the sale of the product and claims processing, the after-sales and requirements of the customers were ignored completely. Feedback from customers indicated that the quality of service were undermined by errors and delays. In view of this situation, the company was reorganised around output and the focus was shifted towards external measures of performance.
Insco adopted the ‘clean slate’ approach and integrated the job roles logically. Starting from the top most level, cross-functional teams were formed in order to focus on value-added services. Sales, sales support, underwriting, quotes, and typing were merged into one team. Such merged teams were responsible for logically grouping customers and dealing with their requirements under one single process.
The computer systems were altered to control through a central database system. The manual and paper work were linked to a network of operations with a back office system. A customer information system (CIS) was developed offering client information, competitor and future prospects. A program with the CIS tracked the quotes. While incorporating such user-friendly approach and flexibility, Insco built a database and integrated their entire system in a very short period of time. During the change, IT (instead of being a part of the process) emerged successfully as the most dominant ingredient of the BPR.
Performance after considerable BPR was evaluated based on the erroneous and delayed services which had lead to consumer dissatisfaction. Taking into consideration the external measures of performance the results stood like this:
- Claims processed each day increased from 35-40 to 75-90
- Days required to offer a quote came down from 17 to 2
- Efficiency levels amplified by 30%
In order to make the necessary changes and achieve success, BPR team did not handle the critical processes all at once. The team worked on priority while focusing on:
- Those with the most severe issues
- Those with highest customer impact
- Those cases which were more likely to be successful
Reengineering remained a continuous process at Insco to achieve success, and continually focus on process improvements.
It can be difficult to decide whether an organisation requires BPR. However, if you use your insight, and assess the issues accurately, you can achieve success and transform the organisation for the benefit of all.
Michael Hammer, M.H., James Champy, J.C., 1993, Reengineering the Corporation-A Manifesto for Business Revolution, HarperBusiness Essentials, Harper Collins, United States of America, Paperback Edition 2005
Cheryl Currid & Company, 1994, Reengineering Toolkit: 15 Tools and Technologies For Reengineering Your Organization, Synergy Books International, S.Abdul Majeed & Co., Malaysia.
Graham R. Sturdy, G.S., 2010, Business Process Reengineering: Strategies for Occupational Health and Safety, Cambridge Scholars Publishing, United Kingdom.
David Knights, D.K., Hugh Willmott, H.W., 2000, The Reengineering Revolution: Critical Studies of Corporate Change, SAGE, United States of America.
Targett, D.T., David Grimshaw, D.G., Philip Powell, P.P., 2013, IT in Business: A Business Manager’s Casebook, Routledge, United Kingdom.