Introduction and History of BPR

Business Process Re-engineering or BPR is

the analysis and redesign of

workflow and processes

within and between

Organizations

 Business process reengineering (BPR) involves

the examination and redesign of business
processes and workflows in your organization.
A business process is a set of related work
activities that are performed by employees to
achieve business goals. Basically, a business
process is the way we perform our work and
business process reengineering is the process of
changing the way we do our work so we do it
better to accomplish the goals of our business.

Why Engage in BPR?

The idea behind business process reengineering is to make your company more flexible,
responsive, efficient and effective for all stakeholders including customers, employees and
owners. In order for BPR to work, your business must be willing to make the following
changes:
Change the focus from a management focus to a customer focus - the boss is not the boss,
the customer is the boss.
Empower your workers that are involved in each process to have decision-making and
ownership in the process.
Change your focus from managing activities to focusing on results.
Get away from 'score keeping' and focus on leading and teaching so employees can measure
their own results.
Change the company's orientation from a functional orientation to a process or crossfunctional orientation. This allows for an increase in organizational knowledge among its
members and a greater degree of flexibility in accomplishing tasks.
Move from serial operations to concurrent operations - in other words, multitask instead
of just doing one thing at a time.
Get rid of overly complex and convoluted processes in favor of simple, streamlined
processes. keep it simple, stupid.

Hallmark

Using reengineering, Hallmark, redesigned the process they used to

bring new card concepts to market. Their product cycle time was
approximately 3 years. The growing trend of more and more niche
markets convinced Hallmark executives that the product development
process needed changing. The company's goal was to get new
products to market within one year. Hallmark has always assumed
that the product development was comprised mostly of printing and
production rework time. Much to their surprise two-thirds of the time
was spent in developing the plan and concept for the card. They also
found that from the time a concept was given to the creative staff,
numerous hand-offs were completed. The concept spent 90% of the
time within the creative staff sitting in someone's in/out slot. In
developing a new line of cards in 1991 Hallmark used BPR to create a
crossfunctional team approach to product development bring the new
card to market 8 months ahead of schedule. (Hammer and Champy
1993, p 166-167).

Prior to bpr HR was not a key element of

strategy formulation

A Definition of BPR
BPR is the
Fundamental rethinking and
Radical redesign of
Business Processes
to achieve Dramatic improvements in
critical measures of performance
.. such as Cost, Quality, Service and Speed.

History of Quality Management

Before Industrial Revolution, skilled craftsmen served both
as manufacturers and inspectors, building quality into their
products through their considerable pride in their
workmanship.
Industrial Revolution changed this basic concept to
interchangeable parts. Likes of Thomas Jefferson and F. W.
Taylor (Scientific Management fame) emphasized on
production efficiency and decomposed jobs into smaller
work tasks. Holistic nature of manufacturing rejected!

History of Quality Management

Statistical approaches to quality control started at Western Electric
with the separation of inspection division. Pioneers like Walter
Shewhart, George Edwards, W. Edwards Deming and Joseph M. Juran
were all employees of Western Electric.
After World War II, under General MacArthur's Japan rebuilding plan,
Deming and Juran went to Japan.
Deming and Juran introduced statistical quality control theory to
Japanese industry.
The difference between approaches to quality in USA and Japan:
Deming and Juran were able to convince the top managers the
importance of quality.

History of Quality Management

Next 20 odd years, when top managers in USA focused on
marketing, production quantity and financial performance,
Japanese managers improved quality at an unprecedented rate.
Market started preferring Japanese products and American
companies suffered immensely.
America woke up to the quality revolution in early 1980s. Ford
Motor Company consulted Dr. Deming to help transform its
operations.
(By then, 80-year-old Deming was virtually unknown in USA.
Whereas Japanese government had instituted The Deming
Prize for Quality in 1950.)

History of Quality Management

Managers started to realize that quality of
management is more important than management of
quality. Birth of the term Total Quality Management
(TQM).
TQM Integration of quality principles into
organizations management systems.
Early 1990s: Quality management principles started
finding their way in service industry. FedEx, The RitzCarton Hotel Company were the quality leaders.

History of BPR
The business world has been evolving:

in the 60s industry concentrated on how to

produce more (quantity),
in the 70s how to produce it cheaper (cost)
in the 80s how to produce it better (quality)
in the 90s how to produce it quicker (lead
time)
in the 21st century how to offer more
(service)

Change Management Philosophies

1920

1960

History of BPR

Most agree that Michael Hammer laid the foundation to the

reengineering approach
But many factors influenced the birth and hype around BPR
The origins can be traced back to a number of successful projects
undertaken by management consulting firms like McKinsey in the 80s
TQM had brought the notion of process improvement onto the
management agenda
The recession and globalization in late 1980s and early 1990s
stimulated companies to seek new ways to improve business
performance
Programs often aimed at increasing flexibility and
responsiveness
Middle management under particular pressure

History of BPR
But many factors influenced the birth and hype around BPR
The Productivity Paradox (Stephen Roach)
Despite powerful market and service innovations related to IT and
increased computer power in the 1980s there was little evidence that
IT investments improved overall productivity
Organizations were not able to utilize the capabilities of the new
technology Automating inefficient processes has limited impact on
productivity

Articles and books by Hammer, Davenport, Short, Champy

etc. legitimized and defined the reengineering approach
Early success stories were heavily published in the popular press

Many consultants/vendors launched their own versions of BPR

All types of change programs were labeled reengineering
Gave BPR a bad name

Introduction to Reengineering
Michael Hammer, a former MIT professor in computer science
published an article in the Harvard Business Review, emphasizing the
need for fundamental organizational change and for the first time
using the term Business Process Reengineering
Business Process Reengineering (BPR)
The analysis and design of workflow and processes within and
between organizations. Davenport and Short
The fundamental rethinking and radical redesign of business
processes to
achieve dramatic improvements in critical
contemporary measures of performance, such as cost, quality,
service and speed. Hammer and Champy
The use of information technology to radically redesign the
business processes in order to achieve dramatic improvements in
16
their performance. Hammer

Introduction to Reengineering
Key Words
Dramatic Improvement: Quantum leap in performance, achieving
breakthroughs.
Radical: Means going to the roots. Starting with a clean slate approach
and reinventing.
Process: A group of related tasks that together create value for a
customer. Ex: Order Fulfillment
Redesign: How work is done? A well designed process.
17

Goals of BPR

Increase service level

Reduce total process cycle time
Increase throughput
Reduce waiting time
Reduce activity cost
Reduce inventory costs

ELEMENTS OF BPR
Organization Related Elements
Organization Structure
Role Assignment
Regulation and Culture
Incentive
Education/Training

Process Related Elements

Business Procedure Simplification
Business Process Standardization
Work Flow

Technology Related Elements

IT
Business Technology
Project Management Technology

Four Revolutions Affecting

Business Today
New
Technologies

New
Competitors

New
Work Force

New Rules of
Competition

When Should a Process be Reengineered? (I)

Three forces are driving companies towards redesign

(The three Cs, Hammer & Champy, 1993)
Customers
are becoming increasingly more demanding
Competition
has intensified and is harder to predict
Change
in technology
constant pressure to improve; design new products faster
flexibility and ability to change fast are requirements for
survival

When Should a Process be Reengineered? (II)

Useful questions to ask (Cross et al. (1994))

Are customers demanding more for less?
Are your competitors providing more for less?
Can you hand-carry a job through the process much faster than
the normal cycle time (ex five times faster)?
Have your incremental improvement efforts been stalled?
Have technology investments been a disappointment?
Are you planning to introduce radically new products/services
or to serve new markets?
Are you in danger of becoming unprofitable?
Have cost-cutting programs failed to turn the ship around?
Are operations being merged or consolidated?
Are the core business processes fragmented?

What Should be Reengineered? (I)

Processes (not organizations) are redesigned and

reengineered.
Confusion arises because organizational units are well defined,
processes are often not.
Two types of Processes
Formal (guided by written policies and procedures) processes

are prime candidates for reengineering because

Typically involve several departments and many employees.
More likely rigid and therefore more likely to be based on
invalid assumptions.
Informal (Not Written) Processes are contained within an unit of
organizational structure (eg. A department or division). Therefore
the issues of ownership, control and information sharing tend to be
minimal.

What Should be Reengineered? (II)

Screening criteria
1. Dysfunction

Which processes are in deepest trouble

(most broken or inefficient)?

2. Importance

Which processes have the greatest

impact on the companys customers?

3. Feasibility

Which processes are currently most

likely to be successfully reengineered?

Dysfunctional or Broken Processes

Symptoms and diseases of broken processes
Symptom

Disease

Extensive information
Arbitrary fragmentation
exchange, data redundancy of a natural process
and re-keying

Inventory, buffers and

other assets

High ratio of checking and

control to value-adding

Fragmentation

Rework and (re)iteration

chains

Inadequate feedback along

Complexity, exceptions
and special cases

Accretion onto a simple base

System slack to cope with

uncertainty

Importance
Assessed by determining issues the customers feel
strongly about and identifying which processes most
influence these issues
Market

Company

Customer Issues

Processes

Product Cost
On-time Delivery
Product Features
After-sales service

Product Design
Order Processing
Procurement
CRM

Feasibility
Determined by: Process Scope, Project Cost, Owner
Commitment and the Strength of the Redesign Team

Larger projects offer potentially higher payoffs but lesser

likelihood of success

Process
ProcessScope
Scope

Project
ProjectCost
Cost

Process
Process
Feasibility
Feasibility
Owner/Corp.
Commitment

Team
Strength
Team
Strength

BPR Objectives
Streamline/Compression remove waste,
consolidate and cutting major tasks of cost and
capital through out the value chain
Lose Wait/Speed squeeze out delays
Orchestrate let the most able enterprise
execute, outsource
Mass Customize any time, any place, any way Synchronize both the physical and virtual parts
of the process, real time processing of data

BPR Objectives
Digitize and Propagate capture information
digitally at the source and propagate it through the
process
Vitrify provide glass like visibility of the process
Sensitize fit the process with sensors and feedback
loops for prompt action
Analyze and Synthesize generate added value by
enhancing the process, constant improvement and
iteration.

BPR Objectives
Customer Focus Eliminate Customer Complaints.
Flexibility - adaptive processes and structures to
changing conditions and competition
Quality- superior service and value to the customers.
Innovation: Leadership through imaginative change
for competitive advantage.
Productivity: Improve drastically effectiveness and
efficiency.

Business Process
Reengineering
Principles of Reengineering

DIMENSIONS
OF BPR

FIVE KEY
PRINCIPLES
OF BPR

The Reengineering Diamond

Customers &
Suppliers

Foster

Enlighten

Business
Business
Processes
Processes&&
Functions
Functions

Customers
&
Info. Tech.

Entail

Culture

Competitors

Values
Valuesand
and
Beliefs
Beliefs

Management
Management&&
Measurement
Measurement
Systems
Systems

Demand
Jobs
Jobs, ,Skills,
Skills,&&
Organizational
Organizational
Structures
Structures

Markets

Principles of Reengineering
Seven rules of doing work proposed by Hammer relating to who does the work, where
and when it is done and information gathering and integration.
Rule

Principle

Organize around outcomes, not tasks

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

Merge information processing work into the real work that

produces the information -

Treat geographically dispersed resources as though they work

centralized

Link parallel activities instead of integrating their results

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

Capture information once - at the source

BPR is used for

Eliminate multiple
- reviews & approval
Combining duplicate activities
Put processes in parallel
Implement demand pull
Outsource inefficient activities
Eliminate movement of work
Organize multifunctional teams

BENEFITS OF REENGINEERING

30 - 35 % REDUCTION IN COST OF SALES

65 - 70 % REDUCTION IN COST OF QUALITY
75 - 80 % REDUCTION IN DELIVERY TIME
35 - 40 % REDUCTION IN MANPOWER
60 - 80 % REDUCTION IN INVENTORY

AN UNPREDICTABLE, BUT SUBSTANTIAL

INCREASE IN MARKET SHARE

BPR Success Stories and Failures

Success Stories
Ford cuts payable headcount by 75%
Mutual Benefit Life improves underwriting efficiency by 40%
Xerox redesigns its order fulfillment process and improves service
levels by 75-97% and cycle times by 70% with inventory savings
of $500 million
Detroit Edison reduces payment cycles for work orders by 80%

Failures
An estimated 50-70% of all reengineering projects have
failed
Those that succeed take a long time to implement and
38
realize

Reasons for BPR Failures

Lack of support from senior management

Poor understanding of the organization and the infrastructure
Inability to deliver necessary technology
Lack of guidance, motivation and focus
Fixing a process instead of changing it
Neglecting peoples values and beliefs
Willingness to settle for marginal results
Quitting too early
Allowing existing corporate cultures and management attitudes to prevent
redesign
Not assigning enough resources
Working on too many projects at the same time
Trying to change processes without making anyone unhappy
Pulling back when people resist change
Etc

BPR What Happened?

Started as real people with real problems
Ford Motor Co., Mutual Benefit Life, HP

Synthesis of 3 concepts
Technology
Business processes
Clean-sheet-of-paper approach

Companies did stuff, academics and consultants

started to model make
Davenport, Hammer and Champy wrote bible
articles and books

The Fad That Forgot People, Davenport, T.H., Fast Company, November 1995.

The Feeding Frenzy

Top managers + big-time consultants+IT vendors = $$$

Early successes were trumpeted

Projects labeled BPR
People always looking for magic solution

Consultants started packaging BPR services

Big $$$ contracts
Executives needed to justify $$$ spent
Layoffs quickest way to realize savings

IT firms selling hardware, software and reengineering

consulting

The Fad That Forgot People, Davenport, T.H., Fast Company, November 1995.

Reality Bites
Massive layoffs labeled reengineering
Alienation of good employees
Treated as interchangeable cogs in corp. machine
25 yr old MBAs making $80K as BPR experts

Major project failures

Consultants start repositioning for next wave
And sell BPR to rest of the world

The Fad That Forgot People, Davenport, T.H., Fast Company, November 1995.

The Good Stuff

Focus on business processes
IT only useful if it helps people do work
A Lesson: The bigger the hype, the greater the
chances of failure.
Techniques and tools of BPR can still be
useful

BPR Is NOT TQM

BPR is Not?
BPR may sometimes be mistaken for the following four tools:
1. Automation is an automatic, as opposed to human, operation or
control of a process, equipment or a system; or the techniques and
equipment used to achieve this. Automation is most often applied to
computer (or at least electronic) control of a manufacturing process.
2. Downsizing is the reduction of expenditures in order to become
financial stable. Those expenditures could include but are not limited
to: the total number of employees at a company, retirements, or spinoff companies.

BPR is Not?
3. Outsourcing involves paying another company to
provide the services a company might otherwise have
employed its own staff to perform. Outsourcing is readily
seen in the software development sector.
4. Continuous improvement emphasizes small and
measurable refinements to an organization's current
processes and systems. Continuous improvements origins
were derived from total quality management (TQM) and Six
Sigma.