Business Process Redesign

Transcription

1 Business Process Redesign Prof. Corrrado Cerruti General Management Course A.A. 2015/2016 Summary Approaches to Business Process Redesign The origin of Business Process Reengineering (BPR) The Ford case BPR implementation: opportunities and challenges References 2 1

2 Business Processes 2 alternative approaches for their redesign Break it down in small parts and improve them Throw everything away and start again Process Improvement (Evolutionary change) Process Reengineering (Revolutionary Change) 3 Business Processes 2 alternative approaches for their redesign v Elements of evolutionary and revolutionary change models Element Evolutionary change model Revolutionary change model Leadership Insiders Outsiders Outside resources Few, if any, consultants Consultant led initiative Physical separation No, part time team members Yes, off-campus site Crisis None Poor performance Milestones Flexible Firm Reward system Unchanged New IT/process change Process first Simultaneous process and IT change 4 The critical element in choosing between a revolutionary and evolutionary approach is time If the firm is in a reactive mode responding to a crisis a revolutionary approach may be the only option If in a proactive mode an evolutionary tactic might work 4 2

3 Basic principle Business Process Redesign: The evolutionary change model (1) People directly affected by or involved in a change process must take active part in the design and implementation of that change Real change is achieved through incremental improvement over time Change should come from within the current organization Should be carried out by current employees and leadership Should be adapted to existing resources and capabilities flexible milestones Should be based on open and broad communication New processes and procedures are implemented before introducing new IT systems 5 5 Business Process Redesign: The evolutionary change model (2) Advantages of an evolutionary change tactic compared to a revolutionary approach Less disruptive and risky Increases the organization's ability to change Disadvantages Takes a long time to see results Does not offer the same potential for order of magnitude improvements Vision must be kept alive and adjusted over time as external market conditions change 6 6 3

4 Business Process Redesign: The revolutionary change model (1) Based on the punctuated equilibrium paradigm Radical change occurring at certain instances Long periods of incremental change in between Revolutionary change Happens quickly Alters the very foundation of the business and its culture Brings disorder, uncertainty, and identity crises Needs to be top driven Requires external resources and new perspectives Involves tough decisions, cost cutting and conflict resolution The change team is small and isolated from the rest of the organization Avoid undue influence from current operations Communication with people in the process is on a need to know basis 7 7 Business Process Redesign: The revolutionary change model (2) Advantages with a revolutionary implementation approach Drastic results can be achieved quickly If successful, the ideal blueprinted design is put in place Disadvantages with a revolutionary change tactic Very strenuous for the organization High probability for failure Diverts top management attention from the external marketplace Goes against core values of many organizations ü Empowerment ü Bottom-up involvement ü Innovation Secrecy creates uncertainty about the future roles of individual employees resistance to change 8 8 4

5 Continuous vs. Radical Improvement Improvement Incremental Improvement Theoretical Capability Statistical Process Radical Control Improvement 9 Time 9 BPR: origins (1) BPR is the combination of radical restructuring of a business process with a wide-scale application of information technology (Hammer, Champy, 1993) Its origins can be traced back to a number of successful projects undertaken by management consulting firms like McKinsey in the 80 s TQM had brought the notion of process improvement onto the management agenda The recession and globalization in late 1980 s and early 1990 s stimulated companies to seek new ways to improve business performance putting middle management under pressure 10 5

6 BPR: origins (2) Business Process Reengineering (BPR) One of the buzzwords of the late 80 s and early 90 s achieves drastic improvements by completely redesigning core business processes BPR has been the subject of numerous articles and books; classical examples are: ü Reengineering Work: Don t Automate, Obliterate, Michael Hammer, Harvard Business Review, 1990 ü The New Industrial Engineering, Davenport and Short, Sloan Management Review, BPR: origins (3) Many factors influenced the birth and hype around BPR in the 90s The Productivity Paradox (Stephen Roach) Despite powerful market and service innovations related to IT and increased computer power in the 1980 s 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

7 BPR: origins (4) Hammer and Champy (1990s) felt that the design of workflow in most large companies was based on facts about technology, people, practices, and organizational goals that were no longer applicable. They suggested seven principles of re-engineering to streamline the work process and, thereby, achieve significant levels of improvement in quality, time management, and cost: 1. Organize around outcomes, not tasks. 2. Identify all the processes in an organization and prioritize them in order of redesign urgency. 3. Integrate information processing work into the real work that produces the information. 4. Treat geographically dispersed resources as though they were centralized. 5. Link parallel activities in the workflow instead of just integrating their results. 6. Put the decision point where the work is performed, and build control into the process. 7. Capture information once and at the source Ford account payable: the starting point Ford needed to review its procurement process to: Do it cheaper (cut costs) Do it faster (reduce turnaround times) Do it better (reduce error rates) Accounts payable in North America alone employed > 500 people and turnaround times for processing POs and invoices was in the order of weeks Automation would bring some improvement (20% improvement) but other companies (namely Mazda was chosen as benchmarking) was performing much better 14 7

8 Ford purchasing Dept. Old approach As is Purchase Order Purchasing Receiving Goods + Shipping Vendor Notice Purchase Order Copy Accounts Payable Invoice Payment Need to check 14 items on 3 documents 500 people 15 Ford purchasing Dept. New approach To be Purchase Order Purchasing Receiving Goods + Shipping Vendor Notice Accounts Payable Payment Purchasing Database 120 people 16 8

9 Ford account payable: achieved results 75% reduction in head count Material control is simpler and financial information is more accurate Purchase requisition is faster Less overdue payments Why automate something we don t need to do? First redesign the processes and then automate activities that need to be done (Hammer, 1990). 17 BPR approach and metodology BPR involves the redesign of business processes to achieve improvements in productivity, cycle time, quality and cost. BPR review starts with the description of existing business processes to deliver more value to the customers. BPR typically adopts a new value system that places emphasis on customer needs. They remove unnecessary organizational layers and eliminate unproductive activities in two key areas. BPR redesigns functional organizations into cross-functional teams. BPR uses technology to improve data dissemination and decision making process and often is driven by the vendor solution adopted for the process redesign implementation

10 BPR and its relationships with other improvement programs Downsizing Restructuring Automation TQM Reengineering Assumptions Staffing Reporting Technology Customer Fundamental questioned relationships applications needs Focus of Staffing, job Organization Systems Bottom-up Radical change responsibilities improvements changes Orientation Functional Functional Procedures Processes Processes Role of IT Often blamed Occasionally To speed up Incidental Key emphasized existing systems Improvement Usually Usually Incremental Incremental Dramatic and goals incremental incremental significant Frequency Usually one Usually Periodic Continuous Usually one time one time time BPR: When should a process be reingeneered? (1) Three forces are driving companies towards redesign (The three C s, Hammer & Champy, 1993) ü Customers are becoming increasingly more demanding ü Competition has intensified and is harder to predict ü Change in technology constant pressure to improve; design new products faster flexibility and ability to change fast are requirements for survival

11 BPR: When should a process be reingeneered? (2) 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? BPR: What should be reingeneered? (1) Processes (not organizations) are reengineered Confusion arises because organizational units are well defined, processes are often not. Procedural based processes are prime candidates for reengineering Formal processes are guided by written policies; informal processes are not. Typically involve several departments and many employees. More likely rigid and therefore more likely to be based on invalid assumptions

12 BPR: What should be reingeneered? (2) Screening criteria 1. Dysfunctionalities Which processes are in deepest trouble (most broken or inefficient)? 2. Importance Which processes have the greatest impact on the company s customers? 3. Feasibility Which processes are currently most likely to be successfully reengineered? 23 BPR: Dysfuncionalities Symptoms and diseases of broken processes Symptom Disease 1 Extensive information Arbitrary fragmentation exchange, data redundancy of a natural process and re-keying 2 Inventory, buffers and System slack to cope with other assets uncertainty 3 High ratio of checking and Fragmentation control to value-adding 4 Rework and (re)iteration Inadequate feedback along chains 24 5 Complexity, exceptions Accretion onto a simple base and special cases 24 12

13 BPR: Importance v 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 BPR: Feasibility v 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 Scope Project Cost Process Feasibility Owner/Corp. Commitment Team Strength

14 What does it take to succeed with BPR? Hammer and Champy: The role of senior management is crucial. Empirical research indicates organizations which display understanding, commitment and strong executive leadership are more likely to succeed with process reengineering projects. Common themes in successful reengineering efforts 1. Firms use BPR to grow business rather than retrench 2. Firms emphasize serving customers & compete aggressively with quantity & quality of products & services 3. Firms emphasize getting more customers, more work and more revenues instead of downsizing Reasons for BPR failure 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 people s values and beliefs Willingness to settle for marginal results Quitting too early Allowing existing corporate cultures and mgmt 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

15 BPR Implementation The reengineering movement advocates radical redesign and rapid revolutionary implementation and change: Turns the whole organization on its head Has potential to achieve order of magnitude improvements Is very costly Has a high risk of failure To reduce risks and costs of implementation many companies end up with a strategy of radical redesign and evolutionary implementation Implementing the feasible plans given current restrictions Implemented process is usually a compromise between the original process and the ideal blueprinted process design Implemented processes are often very much shaped according the the ERP chosen! Successful IT-enabled business redesign IT enables a successful redesign where the new processes: cover a wide span of activities. produce results immediately. are precise, rather than general guidelines. are consistent executed the same way everywhere, every time. make monitoring easy. build in enforceability. Source: McAfee and Brynjolfsson, Investing in IT that makes a competitive difference 15

16 References Chapter 8 of textbook: Dumas, M., La Rosa, M., Mendling, J., Reijers, H.A. (2012), Fundamentals of Business Process Management, Springer: New York. Hammer M. & Champy J., (1990). Don Automate, Obliterate, Harvard Business Review, July/ August MacAfee A. & Brynjolfsson E., (2008), Investing in the IT that makes a competitive difference,, Harvard Business Review, July-August. Optional readings Davenport T.H., (1993), Process Innovation: Reengineering Work Through Information Technology, Harvard Business School Press. Hammer M. & Champy J., (1993). Reengineering the Corporation: A Manifesto for Business Revolution, HarperCollins. 31 Univesity of Rome Tor Vergata 16