Reengineering Work: Don't Automate, Obliterate Michael Hammer Harvard Business Review, July-August, 1990, pp. 104-112

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Reengineering WorkDon't Automate,
ObliterateMichael HammerHarvard Business
Review, July-August, 1990, pp. 104-112
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2010/10/18
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Outline

• Introduction
• Background
• Two successful reengineering
• The essence of reengineering
• Seven principles of reengineering
• Conclusions

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Introduction
Hammer said, 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 Instead of embedding outdated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 use the
power of modern information technology to
radically redesign our business processes in
order to achieve dramatic improvements in their
performance.
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Background

• Method for boosting performance
• - Process rationalization and automation
  haven't
• yield the dramatic improvements company
  needs
• Information technology
• - Heavy investments in IT have delivered
• disappointing results
• - Leave exist processes intact and use
  computers simply
• to speed them up
• The watchwords of the new decade are
• - Innovation, speed, service and quality

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Two successful reengineering

• Ford Motor Company
• - Accounts payable processes
• Mutual Benefit Life (MBL) Insurance
• - Processing of insurance applications

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Ford - accounts payable processes

• Search for ways to cut costs
• - Fords North American accounts payable
  department employed more than 500 people
• - Rationalizing processes and installing new
  computer systems could reduce the head count by
  20
• Look at Mazda
• - Only 5 people
• New goal
• - 80 reduction in head count (100 people)

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Ford's old processes
Accounts pay
Ford Motor Company

Purchasing department
Vender
Purchase order
Material control department
goods
Purchase order
receiving document
invoice
Accounts payable department
payment
Old rule We paid when we received invoice
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Ford's new processes
Ford Motor Company

Purchasing Department
Vender
Purchase order
info.
Material conrol Department
goods
check
Database
return order if not okay
accept transaction if okay
Accounts payable Department
payment
New rule We pay when we receive the goods
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Ford's dramatic improvement

• 75 reduction in head count (to 125 clerks)
• No discrepancies between the financial record and
  the physical record, material control is simpler
  and financial information is more accurate.

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MBL - insurance application

• Decision situation
• - The long, multi step process involved
• - Applications go through 30 discrete steps,
  5
• departments, involved 19 people
• - Turnaround time 24hrs(best),
  525days(typical)
• - Actual work done 17 mins
• Goal
• - Improve customer service
• - Demand a 60 improvement in productivity

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MBL's old processes

people
department
Customers
Old rule sequential processes
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MBL's new processes


Case manager
Databases
Case manager Workstations
Computer network
Customers
Case manager
Mainframe shared databases
Case managers
Case managers with powerful PC-based workstations
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MBL's dramatic improvement

• Complete an application in 4 hrs
• Average turnaround time 25 days
• Eliminate 100 field office positions
• Handle 2 times volume of new applications

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The essence of reengineering

• Strive for dramatic levels of improvement
• Break away from conventional wisdom and the
  constraints of organizational boundaries
• Be broad and cross-functional
• Use information technology not to automate an
  existing process but to enable a new one

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Seven principles of reengineering-1

• Organize around outcomes, not tasks

Product/ Service
Product/ Service


people
task
An example of reengineering principle 1
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Seven principles of reengineering-2

• Have those who use the output of the process
  perform the process

Vender
Vender


computer-based data expertise
An example of reengineering principle 2
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Seven principles of reengineering-3

• Subsume information-processing work into the real
  work that produces the information

Purchasing Dep.
Vender
Purchase order
goods
Material conrol Dep.
check
Database
return order if not okay
accept transaction
Accounts payable Dep.
payment
An example of reengineering principle 3 - Ford
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Seven principles of reengineering-4

• Treat geographically dispersed resources as
  though they were centralized

Vender
Vender
dispersed resources


centralized resources
Dep.
Unit
An example of reengineering principle 4
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Seven principles of reengineering-5

• Link parallel activities instead of integrating
  their result

Product/ Service
Product/ Service
parallel activities


integrated result
An example of reengineering principle 4
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Seven principles of reengineering-6

• Put the decision point where the work is
  performed, and build control into the process

Manager
Expert systems
Supervisor
Worker
An example of reengineering principle 6
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Seven principles of reengineering-7

• Capture information once and at the source

Info.
An example of reengineering principle 7
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Conclusions

• Think big
• Many area of the organization
• Executive leadership with real vision
• Commitment, consistency
• Information technology offers many options
• If managers have the vision, reengineering will
  provide a way

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Reengineering Formally Defined
Reengineering, properly, is the fundamental
rethinking and radical redesign of business
processes to archive dramatic improvements in
critical, contemporary measure of performance,
such as cost, quality, service, and speed.
Michael Hammer James Champy, Reengineering
the Corporation A Manifesto for Business
Revolution (UK Harper Collins, 2004), 35

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Thank You!