The Reengineering Concept

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Reengineering is defined as the fundamental rethink and radical redesign of business processes to generate dramatic improvements in critical performance measures–such as cost, quality, service and speed.

Reengineering

Fundamental rethink of business processes→
Dramatic& sustainable improvements in performance
Radical redesign of business processes →

In practice, reengineering means to start over with a clean sheet of paper and rebuild the business better.

To succeed in today’s global economy, corporations must have organizational structures and business processes that:

1. Are fast
2. Deliver high quality consistently
3. Are flexible
4. Are low cost

Traditional businesses are unlikely to be able to deliver on these requirements because of the way business management has evolved. The four key stages in the evolution of business management have been:

Stage 1–1776

Adam Smith published The Wealth of Nations. In this, he suggested the specialization of labor as a way for workers to achieve greater productivity. Smith’s ideas suggested efficiency could best be achieved by breaking large jobs down into small tasks that could be performed repetitively.

Stage 2–1820s

The railroad companies introduced bureaucracies to avoid collisions on single-track lines–formal operating procedures, centralized management and a rule for every contingency. This was the forerunner of the command-and-control system still in use today–where there are workers supervisors to keep things organized.

Stage 3–Early 1990s

Henry Ford introduced the assembly line–workers performed one tiny step in a complex process where the work is brought to the worker rather than the other way around–while Alfred Sloan created small, decentralized management teams for GM so that huge, sprawling operations could be managed efficiently.

Stage 4–The 1945-1960 Era

The hierarchical or pyramid organizational structure became popular as the best way to match production capacity and demand for mass-produced consumer goods. Functional middle managers were added to provide control and management.

These principles were all appropriate for their times, but in today’s environment, they inevitably result in:

1. Delay and errors
2. Rigidity
3. High overhead costs

The reality is that corporations cannot move into new competitive environment by adapting the old management methods–a complete and sweeping redesign is called for. Reengineering delivers those changes.

The key rhetorical question of reengineering is:

“If I were re-creating this company today, given what I know and the current level of technology, what would it look like?”

Inevitable, the answer to that question will have four key elements:

1. A focus on fundamentals
Addressing the issue of precisely what it is the corporation does, why is it done the present way and what are the tacit rules and assumptions embedded in present practices. Reengineering ignores “what is” and concentrates on “what should be.”

2. A radical redesign element
Reengineering is about reinventing the business–not making superficial changes or marginal enhancements to the old ways of doing things.

3. The potential for dramatic results
Reengineering leads to quantum leaps in performance–not incremental improvements.

4. A business process orientation
Reengineering evolves around business processes–not tasks, job descriptions, people or structures. A business process takes an input or inputs and generates an output that is of value to the customer. A business process only works if it generates added value, not internal activity.

Generally speaking, three types of companies undertake intensive reengineering programs:

Companies that find themselves in deep competitive trouble–and who often require an order of magnitude improvement somewhere in their operations to be able to compete with others in their field.

Companies with managers who can see problems arising a little further down the road they are traveling on–and who want to begin reengineering before all competitive advantages they possess evaporate.

Companies with managers who are ambitious and aggressive–who see reengineering as a way to position the company to extend their lead over their competitors.

The reengineering concept:

Should not be confused with automation–since doing the wrong things more efficiently will make few, if any, improvements to a business.

Is not restructuring or downsizing–since reengineering seeks to achieve more with less rather than scaling back what’s being done.

Is different from an attempt to “flatten” an organization–since the problems facing companies are deeper, process based rather than superficial, organizational problems.

Allows fragmented processes to be brought together–thereby eliminating the need for a business bureaucracy.

Differs fundamentally from total quality management (TQM) or similar programs–since TQM seeks to enhance and improve the existing processes through ongoing, incremental improvements whereas reengineering seeks to discard existing processes entirely and replace them with break-through processes delivering leaps in performance.

There are no hard and fast rules about what a reengineered business process will look like–simply because each will be individual and process-specific. There are, in practice, some recurring general themes most reengineered processes tend to align with:

Several jobs are combined into one.
Reengineering tends to reverse the assembly line approach. Instead of having many people involved, none of whom can be held accountable, many reengineering programs combine process steps and make a team directly responsible for creating a satisfied customer. That eliminates the errors, delays and inefficiencies of hand-offs.

Decision making falls to the workers, not the managers. When a business process is reengineered, the responsibility for making decisions often becomes an integral part of the process itself rather than being separated. The advantages of this are:

1. Fewer delays
2. Lowering of overheads and fixed costs
3. Better response to customers
4. Workers are empowered to create value

Process steps are performed logically and naturally.
In many older industrial-age business processes, an artificial amount of linearity was introduced as part of the control function. Inevitably, arranging tasks that way slows work down and creates a drag on efficiency. Most reengineered processes allow multiple jobs to be completed simultaneously, and for the sequence of activities to be organized logically. The benefits:

More gets done by fewer people

The chances of obsolescence or reworking are reduced

The end of standardization–processes can have multiple versions of the same product fine-tuned for niche markets. The paradigm of the industrial age was to achieve economies of scale through mass production. In today’s business environment, those manufacturing efficiencies can still be achieved while delivering a product or service that is fine tuned to the requirements of specific markets. Most reengineered processes deliver impressive production planning flexibility and capabilities. The benefits:

Simplification of processes usually occurs

Greater added value can be delivered

The work is performed where it makes most sense.
In industrial-age organizations, the work usually had to physically travel to where each specialist was located–creating loads of overheads keeping track of things and fitting all the pieces together. When a business reengineers its processes, these functions can be shifted around the organizational boundaries to become more efficient. Inevitably, doing so simplifies management procedures and reduces drag on the company.

Checks and controls are reduced or eliminated.
When processes are reengineered, checks and controls are put in only where they make economic sense. In fact, the majority of reengineered processes tend to have controls that aggregate patterns rather than seek permission for individual circumstances. That way, problems that are developing can be identified and dealt with early.

Hand-offs and reconciliations are minimized.
A reconciliation is required whenever the data generated by one part of a business process fails to match up with the data from another part of the same process. In other words, it’s work that doesn’t add any value. Most reengineered processes end up reducing dramatically the number of points of contact between the company and its customers–eliminating the need for hand-offs from one department to another and reducing the possibility of irregularities arising for any reason whatsoever.

Single points of contact–case managers–assume responsibility for the results.
In many industrial-age companies, the customer had to interact with a number of people to deal with the company. That caused confusion and frustration–simply because bringing each new person “up to speed” on the specifics of a situation was a major exercise in and of itself. Most reengineering programs eliminate that problem altogether by creating a one-person contact point-frequently designated as the case manager–to act on behalf of the customer and follow the entire transaction from start to finish. The case manager integrates processes and simplify things for customers.

Companies enjoy the benefits of centralized purchasing power and decentralized operations.
Many companies that have reengineered their processes end up combining the benefits of both decentralization and centralization. In other words, business units tend to operate as if autonomous (giving them greater flexibility and market responsiveness) while at the same time enjoying the economies of scale (purchasing power and pooling of key information) centralization delivers.

Every reengineered business program is unique, and will require insight, creativity and sound judgment to develop. However, the general themes and patterns others have previously followed may be of value in the development of reengineered processes.

Fundamentally, reengineering is about reversing the industrial revolution. Reengineering rejects the assumptions inherent in Adam Smith’s industrial paradigm–the division of labor, economies of scale, hierarchical control and all the other appurtenances of an early-stage developing economy. Reengineering is the search for new models of organizing work. Tradition counts for nothing. Reengineering is a new beginning.

–Michael Hammer & James Champy