History of Business Process Reengineering (BPR) Concept
In 1990, Michael Hammer, a former professor of computer science at the Massachusetts Institute of Technology (MIT), published an article in the Harvard Business Review, in which he claimed that the major challenge for managers is to obliterate non-value adding work, rather than using technology for automating it. This statement implicitly accused managers of having focused on the wrong issues, namely that technology in general, and more specifically information technology, has been used primarily for automating existing work rather than using it as an enabler for making non-value adding work obsolete.
Hammer’s claim was simple: Most of the work being done does not add any value for customers, and this work should be removed, not accelerated through automation. Instead, companies should reconsider their processes in order to maximize customer value, while minimizing the consumption of resources required for delivering their product or service. This idea, to unbiasedly review a company’s business processes, was rapidly adopted by a huge number of firms, which were striving for renewed competitiveness, which they had lost due to the market entrance of foreign competitors, their inability to satisfy customer needs, and their insufficient cost structure.
Even well established management thinkers, such as Peter Drucker and Tom Peters, were accepting and advocating Business Process Reengineering (BPR) as a new tool for (re)achieving success in a dynamic world. During the following years, a fast growing number of publications, books as well as journal articles, was dedicated to Business Process Reengineering (BPR), and many consulting firms embarked on this trend and developed BPR methods. Business Process Reengineering (BPR) was adopted at an accelerating pace and by 1993, as many as 65% of the Fortune 500 companies claimed to either have initiated reengineering efforts, or to have plans to do so.
Meaning of Business Process Reengineering (BPR)
“Reengineering is 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” – Micheal Hammer
Business Process Reengineering (BPR) refers to the analysis and redesign of workflows and processes both within and between organizations. The orientation of the redesign effort is radical, i.e., it is a total deconstruction and rethinking of a business process in its entirety, unconstrained by its existing structure and pattern. Its objective is to obtain quantum gains in the performance of the process in terms of time, cost, output, quality, and responsiveness to customers. The redesign effort aims at simplifying and streamlining a process by eliminating all redundant and non-value adding steps, activities and transactions, reducing drastically the number of stages or transfer points of work, and speeding up the work-flow through the use of it systems.
Business Process Reengineering (BPR) is an approach to unusual improvement in operating effectiveness through the redesigning of critical business processes and supporting business systems. It is revolutionary redesign of key business processes that involves examination of the basic process itself. It looks at the minute details of the process, such as why the work is done, who does it, where is it done and when it is done. Business Process Reengineering (BPR) focuses on the process of producing the output and output of an organization is the result of its process.
“Business process reengineering means starting all over, starting from scratch“.
Reengineering, in other words, means pulling aside much of the age-old practices and procedures of doing a thing developed over hundred years of management experience. It implies forgetting how work has been done so far, and deciding how it can best be done now. Reengineering begins with a fundamental rethinking. In doing reengineering people must ask some most basic questions about their organizations and about their operations. They try to find out answers to such questions like “why do we do what we do? Any why do we do it the way we do?” An attempt to find out answers to such questions may startlingly reveal certain rules, assumptions and operational processes as obsolete and redundant. Reengineering does not begin with anything given or with any assumptions. The thinking process in reengineering begins with a totally free state of mind without having any preconceived notion. Reengineering first determines what a company must do. And then it decides on how to do it. Reengineering ignores what the existing process is and concentrates on what it should be. If something is not required to be done it is outright discarded.
Another key element in the reengineering involves radical redesigning of process. Radical redesigning means going to the root of the problem areas and not attempting to make any superficial changes. Radical redesign involves completely discarding all existing structures and procedures and evolving completely new ways of doing the work. “Reengineering is about business reinvention – not business improvement, business enhancement, or business modification.”
The next key concept that lies behind reengineering is that it aims at achieving dramatic improvement in performance. In an organization feels the need for marginal improvement in any area of operation at any point of time, the same can be achieved by conventional methods of adjustments in operating processes and reengineering is not the answer. Reengineering is meant for replacement of the old process by altogether new one to achieve dramatic improvement in the performance.
Business Process Reengineering (BPR) derives its existence from different disciplines, and four major areas can be identified as being subjected to change in BPR – organization, technology, strategy, and people – where a process view is used as common framework for considering these dimensions. The approach can be graphically depicted by a modification of “Leavitt’s diamond”. Business strategy is the primary driver of BPR initiatives and the other dimensions are governed by strategy’s encompassing role. The organization dimension reflects the structural elements of the company, such as hierarchical levels, the composition of organizational units, and the distribution of work between them. Technology is concerned with the use of computer systems and other forms of communication technology in the business. In Business Process Reengineering (BPR), information technology is generally considered as playing a role as enabler of new forms of organizing and collaborating, rather than supporting existing business functions. The people / human resources dimension deals with aspects such as education, training, motivation and reward systems. The concept of business processes – interrelated activities aiming at creating a value added output to a customer – is the basic underlying idea of Business Process Reengineering (BPR). These processes are characterized by a number of attributes: Process ownership, customer focus, value-adding, and cross-functionality.
Implementing Business Process Reengineering (BPR) in Organizations
In a crude sense, companies began business process improvement with a continuous improvement model. This model attempts to understand and measure the current processes, and make performance improvements. However, some companies make reengineering efforts under the assumption that the current processes are wrong and irrelevant. Under such perspectives designers of business process disassociate themselves from existing processes. This helps in looking at the problem with a clean mind, free of any biases.
The approach to Business Process Reengineering (BPR) begins with defining the scope and objectives of the reengineering project. Persons entrusted with the tasks of BPR have to undertake research in the light of scope and objectives. They have to go through a learning process. They have to research customers, employees, competitors, new technology, etc. With the help of this research base BPR designers are in a position to create a vision for the future and design new business processes. They also create a plan of action based on the gap between the current and proposed processes, technologies and structure.
Steps in Business Process Reengineering (BPR) are as follows:
- Determining Objectives and Framework: Objectives are the desired end results of the redesign process which the management and organization attempts to realize. This will provide the required focus, direction, and motivation for the redesign process. It helps in building a comprehensive foundation for the reengineering process.
- Identify Customers and Determine their needs: The designers have to understand customers- their profile, their steps in acquiring, using and disposing a product. The purpose is to redesign business process that clearly provides added value to the customer.
- Study the Existing Process: The existing processes will provide an important base for the redesigners. The purpose is to gain an understanding of the ‘what’, and ‘why’ of the targeted process. However, as discussed earlier, some companies go through the reengineering process with clean perspective without laying emphasis on the past processes.
- Formulate a Redesign Process Plan: The information gained through the earlier steps is translated into an ideal redesign process. Formulation of redesign plan is to real crux of the reengineering efforts. Customer focused redesign concepts are identified and formulated. In this step alternative processes are considered and the best is selected.
- Implement the Redesign: it is easier to formulate new process than to implement them. Implementation of the redesigned process and application of other knowledge gained from the previous steps is key to achieve dramatic improvements. It is the joint responsibility of the designers and management to operationalzed the new process.
Problems in Business Process Reengineering (BPR)
Reengineering is a major and radical improvement in the business process. Only a limited number of companies are able to have enough courage for having BPR because of the challenges posed. It disturbs established hierarchies and functional structures and creates serious repercussions and involves resistance among the work-force. Reengineering takes time and expenditure, at least in the short run that many companies are reluctant to go through the exercise. Even there can be loss in revenue during the transition period. Setting of targets is tricky and difficult. If the targets are not properly set or the whole transformation not properly carried out, reengineering efforts may turn-out as a failure.
- Reengineering Work: Don’t Automate, Obliterate (Harvard Business Review)