Methodologies for Business Process Design

Introduction and History of BPRBusiness 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. Abusiness processis 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 cross-functional 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. keepitsimple,stupid.

HallmarkUsing 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 ManagementBefore 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!8History of Quality ManagementStatistical 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. 9History of Quality ManagementNext 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.)10History of Quality ManagementManagers 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 Ritz-Carton Hotel Company were the quality leaders.

11History of BPR The business world has been evolving:

in the 60s industry concentrated on how toproduce 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 PhilosophiesHistory of BPR Most agree that Michael Hammer laid the foundation to the reengineering approachBut many factors influenced the birth and hype around BPRThe origins can be traced back to a number of successful projects undertaken by management consulting firms like McKinsey in the 80sTQM had brought the notion of process improvement onto the management agendaThe recession and globalization in late 1980s and early 1990s stimulated companies to seek new ways to improve business performancePrograms often aimed at increasing flexibility and responsivenessMiddle management under particular pressure

History of BPR Articles and books by Hammer, Davenport, Short, Champy etc. legitimized and defined the reengineering approachEarly success stories were heavily published in the popular pressMany consultants/vendors launched their own versions of BPRAll types of change programs were labeled reengineering Gave BPR a bad nameBut many factors influenced the birth and hype around BPRThe 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 productivityOrganizations were not able to utilize the capabilities of the new technology Automating inefficient processes has limited impact on productivity

16Introduction to ReengineeringMichael 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 ReengineeringBusiness Process Reengineering (BPR) The analysis and design of workflow and processes within and between organizations. Davenport and ShortThe 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 ChampyThe use of information technology to radically redesign the business processes in order to achieve dramatic improvements in their performance. Hammer

17Introduction to ReengineeringKey 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.

Goals of BPRIncrease service level Reduce total process cycle time Increase throughput Reduce waiting time Reduce activity cost Reduce inventory costs

18Typically a BPR project begins with an end goal of achieving one or all of the following objectives: Business Process SimulationMatching Processes with Modeling Characteristics

By Kerim Tumay

ELEMENTS OF BPROrganization Related ElementsOrganization StructureRole AssignmentRegulation and CultureIncentiveEducation/TrainingProcess Related ElementsBusiness Procedure SimplificationBusiness Process StandardizationWork FlowTechnology Related ElementsITBusiness TechnologyProject Management TechnologyFour Revolutions Affecting Business Today

NewCompetitorsNew Rules ofCompetitionNewTechnologiesNewWork ForceThree forces are driving companies towards redesign (The three Cs, Hammer & Champy, 1993)Customers are becoming increasingly more demandingCompetitionhas intensified and is harder to predictChangein technology constant pressure to improve; design new products fasterflexibility and ability to change fast are requirements for survivalWhen Should a Process be Reengineered? (I)

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?When Should a Process be Reengineered? (II)

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 becauseTypically 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? (I)

Screening criteria

DysfunctionWhich processes are in deepest trouble (most broken or inefficient)?2.ImportanceWhich processes have the greatest impact on the companys customers?3.FeasibilityWhich processes are currently most likely to be successfully reengineered?What Should be Reengineered? (II)

Symptoms and diseases of broken processesDysfunctional or Broken ProcessesSymptomDisease

1Extensive information Arbitrary fragmentation exchange, data redundancyof a natural processand re-keying

2Inventory, buffers and System slack to cope with other assets uncertainty

3High ratio of checking andFragmentationcontrol to value-adding

4Rework and (re)iterationInadequate feedback along chains

5Complexity, exceptions Accretion onto a simple baseand special cases

Assessed by determining issues the customers feel strongly about and identifying which processes most influence these issuesImportanceCustomer IssuesProduct CostOn-time DeliveryProduct FeaturesAfter-sales serviceMarketProcessesProduct DesignOrder ProcessingProcurementCRMCompany

Determined by: Process Scope, Project Cost, Owner Commitment and the Strength of the Redesign TeamLarger projects offer potentially higher payoffs but lesser likelihood of successFeasibilityProcessFeasibilityProcess ScopeProject CostTeam StrengthOwner/Corp.Commitment

ProcessFeasibilityProcess ScopeProject CostTeam StrengthBPR ObjectivesStreamline/Compression remove waste, consolidate and cutting major tasks of cost and capital through out the value chainLose Wait/Speed squeeze out delaysOrchestrate let the most able enterprise execute, outsourceMass Customize any time, any place, any way- Synchronize both the physical and virtual parts of the process, real time processing of dataDigitize and Propagate capture information digitally at the source and propagate it through the processVitrify provide glass like visibility of the processSensitize fit the process with sensors and feedback loops for prompt actionAnalyze and Synthesize generate added value by enhancing the process, constant improvement and iteration.BPR ObjectivesCustomer Focus Eliminate Customer Complaints.Flexibility - adaptive processes and structures to changing conditions and competitionQuality- superior service and value to the customers.Innovation: Leadership through imaginative change for competitive advantage.Productivity: Improve drastically effectiveness and efficiency.BPR ObjectivesBusiness Process ReengineeringPrinciples of ReengineeringDIMENSIONSOF BPRFIVE KEY PRINCIPLES OF BPRThe Reengineering DiamondBusiness Processes & Functions Management & MeasurementSystemsJobs , Skills, & Organizational StructuresValues andBeliefsEnlightenEntailDemandFosterCultureCustomers& Info. Tech. CompetitorsMarketsCustomers &SuppliersPrinciples of ReengineeringSeven rules of doing work proposed by Hammer relating to who does the work, whereand when it is done and information gathering and integration.RulePrinciple1Organize around outcomes, not tasks2Have those who use the output of the process perform the process3Merge information processing work into the real work that produces the information -4Treat geographically dispersed resources as though they work centralized5Link parallel activities instead of integrating their results6Put the decision point where the work is performed and build control into the process7Capture information once - at the sourceBPR is used forEliminate multiple reviews & approvalCombining duplicate activitiesPut processes in parallel Implement demand pullOutsource inefficient activities Eliminate movement of workOrganize multifunctional teams

-BENEFITS OF REENGINEERING30 - 35 % REDUCTION IN COST OF SALES65 - 70 % REDUCTION IN COST OF QUALITY75 - 80 % REDUCTION IN DELIVERY TIME35 - 40 % REDUCTION IN MANPOWER60 - 80 % REDUCTION IN INVENTORY

AN UNPREDICTABLE, BUT SUBSTANTIALINCREASE IN MARKET SHARE38BPR Success Stories and FailuresSuccess StoriesFord 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 millionDetroit Edison reduces payment cycles for work orders by 80% FailuresAn estimated 50-70% of all reengineering projects have failedThose that succeed take a long time to implement and realize

Lack of support from senior managementPoor understanding of the organization and the infrastructureInability to deliver necessary technologyLack of guidance, motivation and focusFixing a process instead of changing itNeglecting peoples values and beliefsWillingness to settle for marginal resultsQuitting too earlyAllowing existing corporate cultures and management attitudes to prevent redesignNot assigning enough resourcesWorking on too many projects at the same timeTrying to change processes without making anyone unhappyPulling back when people resist changeEtcReasons for BPR Failures

BPR What Happened?Started as real people with real problemsFord Motor Co., Mutual Benefit Life, HPSynthesis of 3 conceptsTechnologyBusiness processesClean-sheet-of-paper approachCompanies did stuff, academics and consultants started to model makeDavenport, Hammer and Champy wrote bible articles and booksThe Feeding FrenzyTop managers + big-time consultants+IT vendors = $$$Early successes were trumpetedProjects labeled BPRPeople always looking for magic solutionConsultants started packaging BPR servicesBig $$$ contractsExecutives needed to justify $$$ spentLayoffs quickest way to realize savingsIT firms selling hardware, software and reengineering consultingThe Fad That Forgot People, Davenport, T.H., Fast Company, November 1995.Reality BitesMassive layoffs labeled reengineeringAlienation of good employeesTreated as interchangeable cogs in corp. machine25 yr old MBAs making $80K as BPR expertsMajor project failuresConsultants start repositioning for next waveAnd sell BPR to rest of the worldThe Fad That Forgot People, Davenport, T.H., Fast Company, November 1995.The Good StuffFocus on business processesIT only useful if it helps people do workA Lesson: The bigger the hype, the greater the chances of failure.Techniques and tools of BPR can still be usefulThe Fad That Forgot People, Davenport, T.H., Fast Company, November 1995.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 spin-off 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.