Business Process Reengineering

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Business Process Reengineering

• The history of radical management

Presentation by Bhininder Kaur and Timothy
ODonnell MGMT390 -004 March 22, 2006
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BPR Basics

• BPR is defined as "the analysis and design of
  workflows and processes within organizations1
• BPR has also been described as the critical
  analysis and radical redesign of existing
  business processes to achieve breakthrough
  improvements in performance measures.2

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Who invented BPR?
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Michael Hammer

• Michael Hammer, besides being one of the founders
  of BPR, he is also the president of Hammer and
  Co., a management education company. Hammer
  started out as a engineer and was a professor at
  MIT in the computer science department. Both TIME
  (1996) and Business Week (2002) listed Hammer as
  one of the Top 25 most influential businessmen of
  all time.

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James Champy

• James Champy is the co-author of Reengineering
  the Corporation with Michael Hammer. He started
  his career as a civil engineer at MIT. He also
  passed the bar at Boston College Law School and
  taught at MIT for some time. He was the CEO for
  CSC Index and is now the Chairman of Perot
  Systems consulting practice.

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The third wheel?
Thomas H. Davenport is sometimes credited as a
co-creator of BPR. His articles in the Sloan
Management Review were coming out around the same
time as Hammers articles. Davenport was not
involved in Reengineering the Corporation
although many cite his definition of BPR.
Davenports thoughts on BPR are similar to
Hammerism (BPR as defined by Michael Hammer)
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The Evolution of BPR
Hammer and Champy name Business Process
Reengineering and the craze begins. (1990s)
Adam Smiths Wealth of Nations (1776)
Scientific Management (1911)
1945
1900
2006
Total Quality Management in Japan (post-WWII)
Gilbreths Motion Studies (1910s)
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The BPR of Nations?

• In the introductory chapter of Reengineering the
  Corporation, the authors liken their book to Adam
  Smiths Wealth of Nations in terms of importance
  and continuing influence.

Hammer and Champy noted that Smith developed the
concept of work specialization during the
Industrial Revolution and his involvement in
early management techniques lead to Taylorism
and eventually to BPR. Even Smiths ideas needed
a reformation to fit into the 20th century.
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Frederick Taylors influence

• Business Process Reengineering was influenced by
  Taylors Scientific Management. However, the
  dehumanization of the workers under Taylorism
  created problems. Workers slaved for hours under
  difficult labor conditions and became little more
  than the machines they worked on. Taylors ideas
  provided a backbone for BPR, but drastic changes
  were necessary.

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The Gilbreths Influence

• BPR was also influenced by the Gilbreths Time
  and Motion Studies. Similar to Taylors ideas,
  the Gilbrethian efficiency studies increased both
  the workforce productivity and the dehumanization
  of the workplace. Changes needed to be made in
  order to make way for a new century of business.

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Total Quality Management

• Scientific Management lead William Deming to
  develop Total Quality Management, yet another
  efficiency strategy that helped Japanese business
  reform after WWII.

William Deming
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Management for the future
Americas business problem is that it is
entering the twenty-first century with companies
designed during the nineteenth century - Hammer
and Champy (1993).
Even though nineteenth century management theory
is cited as an influence to BPR, it is still a
modern theory hoping to reform twenty-first
century business by rewriting the dogmatic
business procedures of the last hundred years.
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In the beginning
BPR began when Hammer and Champy noticed some
corporations dramatically improving their
performance in one or more areas of business
using techniques that were radically different
then those found in management at the time. This
observation heralded Hammer and Champy to
reevaluate popular management theories. Both
authors noticed that it wasnt gradual changes,
but radical reformation of businesses that led to
the greatest change.
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Algorithm for programming real life

• Hammer created reengineering as a logical
  extension of his computer science background. In
  an interview with Wired magazine, Hammer agreed
  to an interviewers analogy that a
  reengineering plan is an organizational hack
  an algorithm for programming real life. The bits
  are people. The routines are business processes.
  (Wired, 1995)
• Hammer himself was a one of the famous Cambridge
  hackers during the 60s and 70s and parlayed
  his computer expertise into management with the
  Index Group, a management-consulting firm in
  Cambridge. There he met with James Champy,
  co-founder of Index, and from there the two
  co-authored their best-selling business bible

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Reengineering the Corporation

• First published in 1993, Reengineering the
  Corporation became the handbook for businesses in
  the 90s.
• It was subtitled A Manifesto for Business
  Revolution.
• The tag line states Forget what you know about
  how business should work. Most of it is wrong!

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The Reengineering Revolution

• Michael Hammer also co-authored The Reengineering
  Revolution in 1995. When Hammer noticed companies
  succeeding when they implemented BPR, he wanted
  to document what techniques individual companies
  used to achieve their goal.
• He also noticed companies doing badly after
  implementing BPR and wanted to know why they were
  failing.

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Affecting the World
In only a year and a half after the publication
of Reengineering the Corporation , the book had
sold 1.7 million copies worldwide. To date, it is
estimated to have sold over 2 million copies
world wide. The book has also been translated
into nineteen (19) languages including Finnish,
Hebrew and Thai (Hammer 1995)
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Butwhy has there been so much interest
in Business Process Reengineering?
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Why organizations are interested in BPR

• 1 reason cited by corporations
• Improving efficiency

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Additional attractions for corporations

• Competitive pressure
• Desire to improve poor customer satisfaction
• Desire to improve poor quality of products and
  services

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BPR real steps for real results

• Develop the Business Vision and Process
  Objectives
• Identify the Processes to be Redesigned
• Understand and Measure the Existing Processes
• Identify IT Levers
• Design and Build a Prototype of the New Process

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Proscis Best Practices in BPR (2002)

• Third study in a series conducted over a five
  year period
• 327 organizations participated
• Companies encompassed 53 countries
• According to Prosci, The results of the 2002
  study combine the most current findings with
  those of the past two studies to provide a
  comprehensive and comparative view of business
  process reengineering projects.

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Geographic Distribution of Participants in 2002
Prosci Study
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Industry Segment of Participants in Prosci Study
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A sampling of the 327 companies that participated
in Prosci Study

• Allstate
• AutoZone
• Best Buy
• FedEx
• Gulf Air
• Hong Kong Productivity Council
• Industry Practice, Tata Consultancy Services
• Infosys Technologies Ltd - Quality (Corporate
  Services Group)
• Institute for Technology and Management
• Lockheed Martin Mission Systems
• Management Consulting
• Marriott Senior Living Services
• University of Missouri
• Vetri Software (India) Ltd

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Because of BPR

• American Express reported reducing its annual
  costs by over 1 billion through reengineering.
• ATTs Global Business Communications Systems
  unit turned a nine-figure loss into a nine-figure
  profit
• the Semiconductor Group of Texas Instruments
  reduced their cycle time of its order fulfillment
  process by more than half.

• Progressive Insurance reduced the cycle time of
  its claims process from weeks to days, and
  dramatically improved customer satisfaction while
  reducing costs. The revenue per employee
  increased by over 70 percent.

Figures based from the years 1993 1995,
(Hammer2)
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CIGNA A BPR Success Story

• Viewed BPR as a way of life
• Not radical, all-or-nothing change rather, a
  realignment of strategy and agenda
• Sustained "from the bottom up, with learning
  transferred "across.""3
• Took into consideration the differences in
  management cultures in different countries

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Things went as planned when

• Team members demonstrated strong dedication to
  the project.
• The team had strong commitment and support from
  top management.
• The team shared a clear vision of the objectives
  and goals and had a common focus and
  understanding of project success.
• The team utilized consultants as part of its
  reengineering strategy.

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On the flip side

• 70 of BPR projects fail3
• Only 47 of the companies in Proscis study met
  their project objectives to within 10
• According to one of the self-proclaimed
  creators of BPR, around 1993 the modest idea
  of BPR had become a monster.4

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Possible Causes of BPR failure

• Lack of sustained management commitment and
  leadership
• Unrealistic scope and expectations
• Resistance to change

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No more excuses

• When Hammer wrote The Reengineering Revolution,
  he said, Failure is not caused by cosmic rays,
  bad luck, or other factors outside of human
  control. Failure is caused by people who dont
  know what theyre doing and who dont pursue
  reengineering the right way.(Hammer2)
• BPR has been used as the scapegoat for any and
  all problems if something did go wrong when
  implemented. Companies misused the term to sack
  people or downsize. Anyone could invoke the term
  BPR and it could mean anything. It was a buzz
  word that not enough people understood fully, and
  was therefore utilized improperly. Many
  criticisms of BPR that arose did so because they
  did not understand the processes.

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Lessons Learned

• People, not the bottom line, are the most
  important assets of a company
• IT alone can not improve a companys financial
  status technology is only useful if it helps
  people do their work more efficiently.
• Companies should underpromise and overdeliver4
• Clarity is key

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References

• 1Davenport, T.H. Short, J.E. (1990). "The New
  Industrial Engineering Information Technology
  and Business Process Redesign," Sloan Management
  Review, pp. 11-27.
• 2Grover, V., Jeong, S.R., Kettinger, W.J. Teng,
  J.T.C. (1995). "The Implementation of Business
  Process Reengineering," Journal of Management
  Information Systems, 12(1), pp. 109-144.
• 3Malhotra, Y. (1998). Business Process Redesign
  An Overview, BRINT Institute.
  www.kmbook.com/bpr.htm
• 4Thomas, A. (1995). The Fad That Forgot People,
  Mansueto Ventures LLC. www.fastcompany.com/online/
  01/reengin.html
• Hammer, M. Champy, J. (1993) Reengineering the
  Corporation, Harper Business
• Hammer, M. Champy, J. (1995) The Reengineering
  Revolution, Harper Business
• www.prosci.com
• www.brint.com
• www.wired.com/wired/archive/3.08/reengineering_pr.
  html

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Any Questions?