CORPORATION REENGINEERING IN CONSTRUCTION-INFORMATION TECHNOLOGY ROLE

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1 UDK CORPORATION REENGINEERING IN CONSTRUCTION-INFORMATION TECHNOLOGY ROLE M. BandiC, M. OreikoviC Abstract Corporation reengineering concept is relatively new one, but it is widely applied in the process of restructuring many known corporations. Actual market competition and market pressures, as well possibilities of implementation of new developed technologies, especially application of information and communication technology in the business processes, enforces corporations to undertake corporation reengineering projects. Since Croatian construction companies, are passing dramatically changes by privatisation and restructuring according to the society needs today, to be ready for future huge reconstruction and development tasks of Croatian (as well Bosnian and Hercegovina, B&H) economy, it could be very interesting opportunity for realisation of Business process reengineeing concept in Croatian construction companies. We believe that similar conditions are existing by corporations in Bosnia and Hercegovina (B&H). The paper describes basics of the Corporation reengineering concept and the role of information technology (IT) in the reengineering process. It suggests stronger involvement of conlpany's top management and more intensive application of IT in construction company. Ths should improve company's competitiveness in the market. Keywords: Information technology, Business process reengineering, post-war reconstruction and development Uloga gradevinsko - informatieke tehnologije u restrukturiranju tvrtke M. BandiC, Hrvatske ceste, Zagreb, Croatia M. OreikoviC, Investinienjering, Zagreb, Croatia

2 Koncept "corporation reengineering" (moida najbliii hrvatski prijevod bio bi: restrukturiranje ili rekonstrukcija tvrtke) relativno je nov, ali vec je Siroko primijenjen u postupku restrukturiranja rnnogih poznatih tvrtki. TriiSna konkurencija i pritisci triista, kao i mogucnosti uvodenja novih razvijenih tehnologija, posebno primjena informatieke i komunikacijske tehnologije u poslovnim procesima, utjecu da tvrtke poduzimaju projekte temeljitih preoblikovanja svojih poslovnih procesa. Buduci da hrvatske gradevinske tvrtke prolaze kroz dramatihe promjene u procesu privatizacije koji je u skladu s sadasnjim potrebama drustva, kako bi bile spremnije za buduce velike zadatke obnove i razvoja Hrvatske (kao i bosanskohercegovacke (BIH)) ekonomije, ovaj koncept mok predstavljati vrlo zanimljivu moguknost za uspjesnu primjenu prilikom restrukturiranja poslovnih procesa u hrvatskim gradevinskim tvrtkama. Vjerujemo da slieni uvjet postoje i na prostoru Bosne i Hercegovine (BIH). Referat prikazuje osnove Koncepta restrukturiranje tvrtki i ulogu informatieke tehnologije (IT) u procesu restrukturiranja poslovnih procesa unutar tvrtke. Ukazuje se na potrebu jaeeg ukljueenja upravljatkog vrha gradevinske tvrtke i intenzivniju primjenu IT.Time se postiie unapredenje konkurentske sposobnosti tvrtke na triistu. KljuEne rijeei: InformatiEka tehnologija, rekonstruiranje poslovnih procesa, posljeratna obnova i razvoj eering "We solved the great problem of the buyi computers, now we have to solve the problem what to do with them." PER0 cartoon by Otto Reisinger, Vjesnik, 21. March '96. Zagreb, Croatia, (reengineered-adapted for PC.)

3 Introduction Conditions of construction market in the Republics Croatia and B&H are for now: characterised by scarcity of financial means, scarcity of personal educated and trained in modern managenzeizt methods, scarcity of some profiles of slulled people in construction, very strong competition of foreign companies. Croatian (and B&H) market is now open for foreign companies. The specific after war conditions include also new legal and business structure (completely new legislative based on the practice of developed western democratic states) new financial structure and institutioizs (also based on the financial structure of the developed countries). Such conditions should motivate construction company's management to undertake Corporation reengineering in company, which intent to survive and expand in the future. Since one of tlie basic Corporation Reengineering starting points is by "blank sheet of paper", in the real circumstances it is very actual to apply this concept to Croatian and B&H construction and other companies, that are now restarting their activities in the postwar conditions. The application of the corporation reengineering concept in the construction companies, as well other companies, under proper management leadership can represent very effective tool of corporation development and by this very effective tool in the complete economy and the society reconstruction and development of the Croatia and Bosnia and Hercegovina (B&H). Basic trends by recent corporations The basic trends that are recognised by management scientists can be summarised as: + Organisations are becoming knowledge based + Knowledge in many disciplines has a shelf life + Globalization will drive technology adoption + Workgroups are changing + Virtual corporation are forming (Currid & Company, 1994.) Peter Drucker in his Harvard Business Review article "The New Society of Organisations", Hl3R , wrote: "In this society, knowledge is the primary resource for individuals and for the ecoizomy overall. Land, labour and capital - the econon~ist's traditional factors of production - do not disappear, but hey becoine secondary. They can be obtained, and obtained easily, provided there is specialised knowledge." While the product itself is important, information about the product is equally important. This means that wise application of the information technology enforces competition capability of the firm.

4 Corporation reengineering concept Corporation reengineering has been defined as "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, Champy 1993.). Reengineering is about business reinvention, not business improvement, business enhancement or busiiless modification. Very often business people think that automation is the answer to business problems. Computers can speed work up and in the past thirty years businesses have spent billions of dollars to automate tasks that people once did by hand. Automating does get some jobs are being done faster. But fundamentally the same jobs are being done, and that means no significantly improven~ents in performance. Sometimes automation provides more efficient ways of doing the wrong things. We automated the old way of doing business. Many information systems were originally put in place to automate a manual process. Those days, it's almost impossible to separate a company work processes from its applied computer technology. When an company reengineer its work processes, it will surely need to update the corporate information system. Reengineering seeks breakthroughs, not by enhancing existing processes, but by discarding them and replacing them with entirely new ones. Reengineering is about beginning again with a "clean sheet of paper", rejecting the conventional wisdom and received assumptions of the past (Hammer, Champy 1993.). Reengineering rejects the classical division of labour, economies of scale, hierarchical control, it searches for new models of work organisation. Reengineering is based on business process analysis and design (instead of classical work task design). Business process has been defined as a collection of activities that takes one or more kinds of input and creates an output that is of the value to the customer (Hammer, Champy 1993.). This definition is somehow broader definition than the IBM Business systems planning definition: Business process is a group of logically related decisions and activities required to manage resources of the business. (IBM BSP, 1981.). The agent that enabled companies to break their old rules and create new process models was modern information technology. Information technology acts as an enabler that allows organisations to do work in radically different ways (Hammer, Champy 1993.) The typical goals of the corporation reengineering project are 4 reducing the workparts simplifying the control and checkpoints reducing the internal and external communication costs 4 concentration of decision process 4 transition from sequential processes to simultaneous (parallel) processes through implementation of flexible information systems ( Hainmer, Champy 1993.)

5 Some common characteristics of the Reengineering process are: Several (former) jobs are combined into one Workers make decisions carrying out their work The steps in the business process are performed in a natural order Processes have multiple versions Work is performed where it makes the most sense Checks and controls are reduced Reconciliation is minimised A case manager provides a single point of contact Hybrid centralised / decentralised operations are prevalent Champy 1993.). (Hammer, When a business process is reengineered, jobs evolve from narrow and task oriented to multidimensional. People who once did as they were instructed, now make choices and decisions on their own instead. Assembly - line workers disappears. Functional departments lose their reasons for being. Managers stop acting like supervisors and behave more like coaches. Workers focus more on the customer's needs and less on their bosses' needs. Practically every aspect of the organisation is transformed, often beyond recognition. Changes that occur when company reengineer its business processes can be summarised as follows: Work units change - from functional departments to process teams Jobs change - from simple tasks to multi - dimensional work People's role changes - from controlled to empowered Job preparation changes - from training to education Focus of performance measures and compensation shifts - from activity to results Advancement criteria change - from performance to ability Values change - from protective to productive Managers change - from supervisory to coaches Organisational structure change - from hierarchical to flat Executives change - from scorekeepers to leaders (Hammer, Champy 1993.). All aspects of the company - people, jobs, managers and values are ~ected by BPR. These four aspects are interlinked, in the way represented in the following Figure 1.

6 Business Processes / \ Jobs and Values and Structures \ Management and Measurement System Beliefs / Fig 1. The Business System Diamond (Hammer, Charnpy 1993.) The Business Process reengineering phases The BPR phases can be carried out in following phases: + Organisational framework Process identification Promoting the powerful leader Defining the process owners Team building + Analysis existing processes Understanding existing work tasks Understanding customers needs + New business process design + Implementation of the new business processes Carrying out new processes Clearing of resistance

7 Roles during the reengineering implementation The following roles emerge during the reengineering implementation: 4 Leader - a senior executive who authorises and motivates the overall engineering effort 4 Process owner - a manager with responsibility for a specific process and reengineering effort focused on it 4 Reengineering team - a group of individuals dedicated to the reengineering of particular process, who diagnose the existing process and oversee its (re)design and implementation 4 Steering committee - a policy making body of senior managers who develop the organisation's overall reengineering strategy and monitor its progress Reengineering czar - an individual responsible for developing reengineering techniques and tools within the company and for achieving synergy across the company's separate reengineering projects (Hammer, Champy 1993.). The relationship anlong these roles is normally the following: The leader appoints the process owner, who convenes a reengineering team to reengineer the process, with the assistance from the czar and under the auspices of the steering committee (Hammer, Champy 1993.). Modern Information technology application Our current computing era is that of network computing. Computer network connects all company, as well intercompany, computers whether they are mainframes, server stations or personal computers. Network computing enables sharing of resources on any computer database, intensive world wide communications (Internet and others). Network computing has brought as much change into organisations as all the preceding computing eras combined. Software developments are enabling user con~puting, and very easy computer using, through Graphical user interfaces (GUI-s), and user friendly computer tools (text processors, spreadsheets) and software development tools like Oracle's Designer/2000, DeveloperJ2000, Knowledgeware etc. Business people's information responsibility change dramatically as computer technology becomes a part of an organisations corporate culture. The more and more jobs will require computer literacy in using available or new management tools, like Decision support systems, expert systems, project management systems, financial modelling systems etc. To which degree Croatian and B&H construction management is using modern information technology? This is now very difficult to conclude, therefore it will be necessary to research this and other regarding situations. Before the war and before the economic transition, only 10% of all construction companies were using IT, prevalent for executing administrative or bookkeeping tasks. The big potentials of the information technology can be used only by educated and trained management.

8 As the companies generally need to make technology exploitation one of their core competencies if they are to succeed in a period of ongoing technological change. Those that are capable to recognise and realise the potentials of new technology will enjoy a continuing and growing advantage over their competitors. The role of information technology in BPR Information technology has very important role in Corporate reengineering. It represents a tool for the modelling and optimisation of the Corporate business system. There are available on the market several powerful Business process modeller tools. One of these, ORACLE'S Designer12000 consists of several toolsets - parts: 4 Process modeller, supports process modelling techniques 4 System modeller, includes three diagrammers 4 Entity relationship diagrammer 4 Function hierarchy diagrammer 4 Dataflow diagrammer 4 Repository services, includes 4 Repository object navigator 4 Matrix diagrammer 4 Repositoty management facilities 4 System designer ( for a small prototypes) 4 Data diagrammer Module structure diagrammer 4 Module logic navigator 4 Module data diagrammer 4 Preferences navigator 4 Forms and reports generators Essential tasks of the Designer12000 are Process modelling Systems modelling and Systems designing. During systems development phase project team starts by modelling of the corporation's key business processes. This could be done as a part of a systems definition study or a strategic business study. It is appropriate to start information analysis in this phase. The next phase is analysis of the business requirements in detail, database and application systems. The realisation of the above noted phases enables automatically software production for final system implementation. System development can be carried out iterative by developing smaller sub-sets of prototype applications by intensive end user participation. Classical structured development method provides framework for planning top-down system development method. The development flows down a number of successive stages.

9 These are typically: 4 System analysis 4 System design 4 System build and test 4 Systems implementation 4 Maintenance of production-status system. During the business process analysis it is important to identifjr key business processes. These are the processes that an corporations requires in order to survive, the processes that distinguish some organisation form its competitors. Process models use multimedia, animation and critical path techniques to visualise business processes. This is especially useful in communicating a vision of how processes could operate in a reengineered environment. A key part of reengineering processes is measuring how some organisation carries them out. The measures are in terms of time, costs, and quality of the processes. Through IT application in the reengineering process it is easier to: 4 Identifjr critical informations needed for the business process 4 Rethink organisational issues by bringing to light low value organisational boundary interfaces 4 Facilitate process improvement steps by organising all organisational information in one common data source (data repository) 4 Enable new creative thinking, which could lead to dramatic improvements. Through the introducing of the modern information technologies, the business processes should be improved, in the way that process should have possibly less work parts. Common errors by reengineering process Michael Hammer and James Champy are reporting that many companies that begin reengineering don't succeed at it. They could not make significant changes, they did not achieved their performance improvement. Hammer and Champy's estimated that 50% - 70 % of organisations that undertake reengineering effort, did not achieved dramatic results they intended. Therefore they analysed the most common errors in reengineering process. These errors should be avoided, than success is very certain. These common errors are: 4 Try to fix a process instead of changing it 4 Don't focus on business processes 4 Ignore everything except process redesign 4 Neglect people's values and beliefs 4 Be willing got settle for minor results 4 Quit to early, etc. Authors argue that payoffs of successful reengineering are spectacular - for the company, its employees and the economy as a whole.

10 According to some authors there is enough room for skepsis regarding Corporation Reengineering concept application (Nippa, 1995., or Osterloh, Frost, 1994.) Key business processes in typical construction company According to the basic prii~ciples Business process reengineering, can be identified key business processes of the typical construction company. The processes are figured in the next figure. R&D Suppliers lwarkting st'aey L Investors Builw design Figure 2. Key business processes in typical construction conlpany Conclusions Application of the Corporate reengineering concept brought improvements of service and benefits higher in order of magnitude to some of 30%-50% companies that take this undertaking. This will be carried out through fundamental rethinking of the actual business processes and building them newly "from the ground". Despite some doubts on the Corporate reengineering process results ( Osterloh, Frost, Nippa), there is a lot of positive results in the reengineering process. For the inost Croatian and Bosnia and Hercegovina construction firms there are now fullfilled necessary conditions for systematic and intelligent business process reengineering, that should initiate dramatically improvements in these construction companies, all for better realisation of huge tasks of post-war reconstruction and development both young independent republics.

11 References 1. Michael Hammer & James Champy: "Reengineering the Corporation", A manifesto for business revolution, Harper Collins Publishers, New York, IBM Business Systems Planning: Information Systems Planning Guide, IBM Corp Currid, Cheryl & Company: "Computing Strategies for Reengineering Your Organisation", Prima Publishing, Rocklin, California USA, Osterloh Dr. Margit, Frost Jetta: "Business Reengineering: Modeerscheinung oder 'Business Revolution' Zeitschrift Fuehrung + Organisation, 6/ "Reengineering - Top oder Flop?" Interview with Dr. Michael Nippa, Muenchen, Zeitschrift Fuehrung + Organisation, 3 / ORACLE Corp. Oracle Designer /2000, 1995.

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