Transcript BUSINESS PROCESS REENGINEERING CONCEPTS

BUSINESS PROCESS
REENGINEERING CONCEPTS
“Know Where You Are”
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Learning Objectives
At the end of the course, you will be able to:
• Define business process redesign
• Describe the nine dimensions of BPR
• Discuss the benefits of BPR
• Identify and describe the situations in which BPR becomes
necessary
• Describe the warning signs of trouble that indicate the need for
reengineering
• Identify and describe the critical success factors for BPR projects
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What is Business Process Reengineering or Redesign?
• Reengineering business processes means tossing
aside existing process and starting over.
***Business process re-engineering is also known as business process redesign,
business transformation, or business process change management.
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Definition of BPR:
“the fundamental rethinking and radical redesign of business processes
to achieve dramatic improvements in critical contemporary measures of
performance such as costs, quality and speed”.
(Hammer and Champy, 1993)
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This definition contains four key words:
• Fundamental
Fundamental implies that everything – every assumption,
every reason, every activity – is challenged by asking why it
should be continued. The implication is nothing should be
accepted as scared. Over time, practices that were once
required become obsolete and need to be removed.
• Radical
Do not try to improve the existing situation,
invent(create/design) completely new ways of
accomplishing(complete/achieve) work.
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This definition contains four key words:
• Dramatic
Do not use business process redesign to obtain marginal
(small slight) improvements, aim at order-of-magnitude
improvements (ten times). If the marginal gains – 5 to 10
percent – are the goal, then continuous improvement is a
more appropriate path than reengineering.
• Process
Focus on the business processes instead of organizational
structures.
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Other definition of Business Process
A business process may be defined as
“a set of logically related tasks performed to achieve a
defined business outcome”
(Davenport, 1990)
OR
“activities that takes one or more kinds of input and
create an output that is of value to customer”
(Hammer and Champy, 1993)
OR
“a set of business events that together enable the
creation and delivery of an organization’s products or
services to its customers”
(Gelinas et. al, 2004)
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Dimensions of Business Reengineering
Physical Technical Layer
More concrete
easiest to change
Process
Structure
Technology
Structure
Organization
Structure
Measurement
Systems
Management
Methods
Infrastructure Layer
Reward
Structure
Value Layer
More difficult to
change less
concrete
Organizational
Culture
Political
Power
Individual Belief
Systems
Figure 1.2: The Dimensions of Business Reengineering
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Dimensions of Business Reengineering
1.0
The Physical /Technical Dimensions are what people can easily see
and do. This include:
a.
Process structure consists of the business processes,
outcomes, policies, practices and procedures that support the
processes. (process structure is what, when and how work is performed)
Process can be triggered by internal events, timing cycles, or external stimuli.
Some processes originate by designs, others may emerge informally to meet real or perceived
organizational needs (that is why we need business process reengineering).
There are undocumented, inconsistently applied and personality dependent processes.
No single organization has the same processes
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Dimensions of Business Reengineering
b.
Technology structure which consists of the automated communications,
networking, and computer systems used to support the process structure.
The sensible (rational/reasonable) application of technology depends on
the competent integration of technology with work processes.
c.
Organization structure defines who performs, manages, and is
accountable for each business process.
When process and organization structures are out of alignments, there
are gaps in accountability.
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Dimensions of Business Reengineering
2.0
The Infrastructure Dimensions refers to interpretation of policies
and procedures which heavily influences how the physical/technical
dimensions on a day-to-day basis.
If the physical/technical dimensions change, the infrastructure must
also change because they reinforce desired performance operational
behavior.
a.
Reward structure regulates behavior. Rewards
may
be formal or informal, financial or recognition
based. Ideally,
well-designed jobs provide a work environment that is rewarding in
and of itself.
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Dimensions of Business Reengineering
b.
Measurement systems define the feedback that provide
information on process performance.
- enables people to improve process performance;
- must deliver appropriate information;
- should uncover the need for change;
- should be made available directly and simultaneously (at once)
to process performers and managers
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Dimensions of Business Reengineering
c.
Management methods consist of the practices and techniques
used to supervise, develop, and support the people who perform
the business processes.
It is one of the most neglected (ignored) in reengineering because
it is seen as outside the project scope.
Managers and supervisors must understand and learn how to
support the new environment so as to gain benefits from the
reengineering process.
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Dimensions of Business Reengineering
3.0
The Value Dimensions define the organization’s culture and
drive behavior. Leadership and improvement philosophies must
emerge from these dimensions.
a.
Organizational culture consists of the unspoken,
collective rules and beliefs of the organization.
It can be discerned (perceive/see) through the
organization’s language, symbols, myths (legends) and
rituals (ceremony).
It defines what is important to the organization more
forcefully than any memo from the CEO.
Changing embedded corporate value is perhaps the
most powerful form of change.
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Dimensions of Business Reengineering
b.
Political power refers to individual who manipulate and shape
the actions and behaviors of others.
Both formal and informal leaders use power to promulgate
(broadcast) and reinforce power.
Formal authority – acquired through the position held in the
organization.
Personal power – acquired through expertise, knowledge, or
connections.
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Dimensions of Business Reengineering
c.
Individual belief systems are the attitudes and mental models
that individuals apply to themselves, those they work with, and
the work itself.
Examples of mental models: Impatience, skepticisms,
openness, control, rigidity, and flexibility
Aligning the value dimensions to support the reengineered
organization requires organization executives to demonstrate
leadership.
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BENEFIT OF REENGINEERING
1.
Increase the organization’s ability to customize products and
services while retaining mass-production economics.
2.
Increase customer satisfaction with products and services so they
prefer your products and services over those of your competitors.
3.
Make it easy and pleasant (enjoyable) for customers to do
business with your organizations.
4.
Break organizational boundaries, bringing customers into the
information channels through communication, networking, and
computer technologies.
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BENEFIT of REENGGINEERING
5.
Decrease response time to customers, eliminate errors and
complaints, and reduce product and service development and
manufacturing cycle time.
6.
Process more customer requests and higher volume from each
customer, and deliver “value-driven” prices to customers without
reducing profitability.
7.
Improve the quality of work life and individual capabilities for
contribution so that people experience ownership of their work
and of customers and see their contributions to the organizations.
8.
Improve the sharing and utilization of organization knowledge so
the organization does not become/remain dependent on the
expertise of a few people.
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THE NEED FOR REENGINEERING
WARNING SIGNS OF TROUBLE
1.
The explosion of chaos and bureaucracy: Organizations’ work
processes were not designed BUT they evolved out of the chaos of
doing business. Processes become habitualized. From veteran to
new staff without realising it was a mistake
(e.g. a team of headquarters accountants visiting a field billing office found clerks misapplying
account codes to expense vouchers. The team asked a clerk why? She replied: “Listen, I’ve
been doing this job for 20 years, and you are not going to tell me I’m doing it wrong”.)
2.
Thinking of customers: Too many companies design processes based
on the assumption that they know what’s best for customers, thus,
organization becomes inflexible, driving frustrated customers to
competitors or regulatory commissions. Employees who take the
initiatives to help customer would be penalised for bypassing official
procedures.
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THE NEED FOR REENGINEERING
3.
Automation of existing bureaucracy: computerization
reinforced bureaucracy rather that breaking through it.
(changing paper documents to electronic document, BUT company only duplicates existing
processes, thus, maintaining both paper and electronic forms of data. E.g. an insurance
company’s claims department, automation created paper printouts to replace handwritten
claim files, but paper continued to move from one desk to another as the claim was
processed).
4.
Bottlenecks and disconnects in critical cross-functional
processes. Each unit operates as if it has no relationship to the
other units.
(Each unit is part of the manufacturing stream, but they each operates in costly and
cumbersome processes preparing work for processing, resolving problems and errors, tracking
the work in progress, thru, creating duplicate and inaccurate data. E.g. large automobile
manufacturing company – each division reentered information about incoming work into its
own systems, and sent paper with the outgoing work. Each department did not check with
each other on what is going on in the manufacturing process).
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THE NEED FOR REENGINEERING
cont..WARNING SIGNS OF TROUBLE
5.
Elusiveness of accountability: Most organizations are
structured by function (eg. Sales, manufacturing, etc.) but
essential business process (eg. Customer service and support)
cut across the functions. This makes it difficult, if not impossible,
to establish accountability for a complete business process.
(e.g. in a manufacturing firm, the subprocesses, each assigned to different group. If any plans
or budgets were late, inaccurate, or incomplete, customers’ programs could not be updated in
time to avoid invoicing errors and deductions. As a result, in 5-years time, the number of
changes in plans and budgets increased from 10 – 57%, and the process deteriorated from
lack of management, measurement and accountability.
6.
Chaos of downsizing: It leaves survivors demoralized, the work
environment inadequately staffed, and people with inadequate
skills performing the work, and tasks can no longer be processed
within their current configuration. (e.g. a large government organization
downsized its headquarters by 40%. 1 staff was left to take up a responsibility for 4 person, he
has to work 16 hours a day and before long, demanded to transfer to another location.
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THE NEED FOR REENGINEERING
7. The turmoil of integration and merger: This creates work
processes that often duplicate or conflict with each other.
(e.g. Purchase of 4 companies gave the new company 4 different sets of policies, procedures and
formula options for processing customer orders. In a 5-year period, over $80 million would be
wasted supporting these overlapping redundant operations. Integrating the customer’s order
management process will create massive difficulties as 3 of the 4 companies. Field work loads
tripled, errors increased 50%, and over 100 additional clerical people were hired to prepare inputs
and correct errors.
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DIAGNOSIS OF PROCESSES OF SUSPECT
PRODUCTS AND SERVICES
Possible findings
1.0
Lack of a “big picture” concept and poor
communication
2.0
Inattention to detail
3.0
Designer arrogance and customer exclusion
4.0
Focus on correction, not error prevention
5.0
Measurement problems
6.0
Focus only on external customers
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CREATING A BUSINESS CASE
Street-smart business reengineers know that it is critical to create a business case
because “it creates massive discomfort with status quo”.
The initial business case must sell executives on the VALUE OF THE CHANGE.
- must show that “the cost of NOT changing is too high”.
- Street smart business reengineers don’t ask people to put up with inconvenient and
stressful changes without good reason. They makes two points:
1. The necessity for change.
Use quantitative data that translates “what everybody already
knows” into facts and numbers
2. The alternative to change.
Use hard and soft data to paint a picture of the future if the
organization doesn’t change
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CREATING A BUSINESS CASE
3. Once the facts are on the table, reengineers advocates must
get commitments to:
- Frame the projects so it is fully defined and understood
- Create a reengineered vision of the business, its values, and
goals
- Build a detailed process redesign of the business operations
- Plan the implementation
- Conduct a proof of concept (if needed)
(**once this has been laid out, reengineer advocate can ask for the
“big bucks” for implementation)
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CRITICAL SUCCESS FACTORS FOR BR
PROJECTS
To have a successful BR, requires a strategy that incorporates these CSF:
1. A business focus – a focus on all dimensions. Success
depends on integrating all three – process, technology, and
organization, plus supporting that integration with new
infrastructure and values.
2. A methodology and project approach – requires discipline
and structure; methodology must be systematic and fact
focused; must articulate how to secure finding, manage
power struggles, and sell the new ideas.
3. Time - BR takes time. Executives must be able to stick with
the program.
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CRITICAL SUCCESS FACTORS FOR BR
PROJECTS
4. Partnership participation – BR is accomplished only as a
result of efforts by people from all over the organization.
Requires flexible and trained teams.
5. Visible, active leadership. This is the most important of all
the critical success factors. Requires long-term commitment
to BR – in terms of dollars, people and executive visibility.
(leaders must be careful not to use negative reinforcement,
positive reinforcement is much more effective).
**Executive leaders and middle managers must:
(1) enable people to step back and evaluate how the work is done, this may mean
changing work priorities,
(2) resist the temptation to silence dissident voices,
(3) simplify problem solving
(4) remove barriers and obstacles to peformance,
(5) reward and encourage ideas
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(6) allow people to have fun at work.
CRITICAL SUCCESS FACTORS FOR BR
PROJECTS
• BR begins the process of transforming a dysfunctional
organization into a learning, productive, quality-focused,
customer driven organization.
• BR must be customer driven.
• Quality is defined in terms of added value, cost
sensitivity, responsiveness, and functionality.
• BR must enable people to handle more change
successfully.
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