Business Process Integration -
September 5th, 2009
Business Process Reengineering (Def.)
• Business process reengineering (often referred to by the acronym BPR) is the main way in which organizations become more efficient and modernize. Business process reengineering transforms an organization in ways that directly affect performance.
• BPR is the fundamental reconsideration and radical redesign of organizational processes in order to achieve drastic improvements of current performances in costs, services and speed.
The impact of BPR on organizational performance
• The two cornerstones of any organization are the people and the processes. If individuals are motivated and working hard, yet the business processes are cumbersome and non-essential activities remain, organizational performance will be poor. Business Process Reengineering is the key to transforming how people work. What appear to be minor changes in processes can have dramatic effects on cash flow, service delivery and customer satisfaction. Even the act of documenting business processes alone will typically improve organizational efficiency by 10%.
• Rather than organizing a firm into functional specialties (like production, accounting, marketing, etc.) and to look at the tasks that each function performs, BPR recommends that the complete processes be looked at, From materials acquisition, towards production, towards marketing and distribution.
• One should rebuild the firm into a series of processes.
• Value creation for the customer is the leading factor for BPR and information technology often plays an important enabling role. Far too much time is wasted, passing on tasks from one department to another. It is far more efficient to appoint a team who perform all the tasks in the process.
A five step approach to Business Process Reengineering (Davenport, 1992)
• Develop the business vision and process objectives: The BPR method is driven by a business vision which implies specific business objectives such as cost reduction, time reduction, output quality improvement.
• Identify the business processes to be redesigned: most firms use the 'high-impact' approach which focuses on the most important processes or those that conflict most with the business vision. A lesser number of firms use the 'exhaustive approach' that attempts to identify all the processes within an organization and then prioritize them in order of redesign urgency.
• Understand and measure the existing processes: to avoid the repeating of old mistakes and to provide a baseline for future improvements.
• Identify IT levers: awareness of IT capabilities can and should influence BPR.
• Design and build a prototype of the new process: the actual design should not be viewed as the end of the BPR process. Rather, it should be viewed as a prototype, with successive iterations. The metaphor of prototype aligns the Business Process Reengineering approach with quick delivery of results, and the involvement and satisfaction of customers.
• As an additional 6th step of the BPR method, sometimes you find: to adapt the organizational structure, and the governance model, towards the newly designed primary process.
Circumstances that tells us whether BPR is advisable or not
• Does the competition clearly outperform the company?
• Are there many conflicts in the organization?
• Is there an extremely high frequency of meetings?
• Excessive use of non-structured communication? (memos, emails, etc)
• Is it possible to consider a more continuous approach of gradual, incremental improvements? .
Critics of BPR Approach
• Reengineering has earned a bad reputation because such projects have often resulted in massive layoffs.
• In spite of the hype that surrounded the introduction of Business Process Reengineering, the method has not entirely lived up to its expectations.
The main reasons seem to be that:
1. BPR assumes that the factor that limits organization's performance is the ineffectiveness of its processes. This may or may not always be true. Also BPR offers no means to validate this assumption.
2. BPR assumes the need to start the process of performance improvement with a "clean slate", i.e. totally disregard the status quo.
3. BPR does not provide an effective way to focus the improvement efforts on the organization's constraints. (As done by Goldratt in the Theory of Constraints).
4. Sometimes, or maybe quite often, a gradual and incremental change (such as Kaizen) may be a better approach.
5. BPR is culturally biased towards the US way of thinking.
BPR compared to Kaizen
BPR approach is harder
It enables radical change
But it requires considerable change management skills.
More easy to implement
Provides only a small pace of change.
But requires long-term discipline