Business Process Reengineering

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Incremental change or radical rethink?

Stan runs a soft drinks company. His revenues, and his profits, have been steadily dropping over the past year.

He studies his biggest costs and decides to buy some new cutting-edge manufacturing equipment and downsize his staff. But a year later, Stan's profit margin is in an even worse shape. So he starts looking for other cost-saving opportunities.

The problem is that, although Stan has implemented more efficient processes, it's still achieving the same things. This means his solution is only addressing one side of the issue. He should have been looking into whether what he's doing is actually necessary, or being done in the right way.

For instance, perhaps he could have looked at different bottle designs, invested in a new product or looked at improving his supply chains. If he'd done this, instead of just focusing on the manufacturing process, he would have discovered better ways to meet his customers' needs. And he would have saved money.

This is known as Business Process Reengineering – a radical rethink of business processes to achieve dramatic improvements. In this article, we'll introduce the key concepts involved in BPR, as well as the pros and cons involved in using it.

Business Process Reengineering Definition

Business Process Reengineering was first developed by Michael Hammer, a former MIT professor, in the 1990s. [1] He argued that a "radical redesign" of business processes was needed to keep up with the fast-paced changes in markets and technology occurring during that decade.

Hammer defined BPR as, "the fundamental rethinking and radical redesign of business process to achieve dramatic improvements in critical contemporary measures of performance, such as cost, quality, service, and speed."

BPR focuses on how key business elements are connected, and how they work with or against one another, depending on the structure of relationships. For the best results, the company's structure, people, technology, strategy, and other resources have to work together to meet organizational goals. You can learn more about the relationships between various organizational structures with models like McKinsey's 7-S Framework   , Leavitt's Diamond   , and the Burke-Litwin Change Model   .

Other management experts of the time, such as Peter Drucker and Tom Peters, supported similar business transformation as a way to achieve enormous improvements across a variety of performance measures. Big consulting firms quickly began to sell this new management strategy to their clients.

By the mid-1990s, corporate managers everywhere were talking about BPR. Its customer focus was very appealing – many companies' profits were suffering from increased global competition. And soon, many people automatically connected BPR to efficiencies gained through downsizing, because many businesses were looking for ways to use their resources more effectively.

Continuous Improvement Vs. Business Process Reengineering

The key difference between business process reengineering and other business improvement strategies, like Total Quality Management   and Just in Time   , is this: BPR = process innovation.

BPR is not about slow and steady improvement – it's about radical, dramatic changes to the framework and culture of a business. Rather than improving what's already there, BPR starts from the beginning and builds an entirely new process.

Here are some key ways that Continuous Improvement   differs from BPR:

As you can see, BPR is radical in every way, and it often results in massive changes within many organizations. Often technological change instigates a desire for BPR because it offers significantly different and more efficient ways of doing things.

Business Process Reengineering Example

One of the most famous examples of BPR in action was Ford Motor Co.'s restructure of its accounts payable department. Keen to cut down on its overhead costs, Ford began to look at ways of making the organization more cost efficient. It found that it's accounts payable department had increased significantly over the years – at one point employing 500 people.

When it compared the department's headcount to that of other competitors the results were shocking. Mazda, a smaller competitor, had an accounts payable department that only consisted of five people. When Ford looked closer it found that, by implementing similar accounts technology to that used by Mazda, it could reduce its accounts payable department to 100 workers.

The new accounts technology effectively cancelled out the need for multiple departments to sign off on invoices and submit them manually – all of which had created bottlenecks and delays. So, Ford decided to introduce new computer software and databases to store and transfer its accounts information automatically. By automating this process, Ford was able to cut down on the time it took to process payments and downsize its accounts department to a more manageable size.

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Business Process Reengineering Steps

The steps for complete business process reengineering are too detailed for this article. Also, BPR's exact method is significantly influenced by the specific organization and process that's being examined.

However, some key common elements of any BPR plan include:

• Defining the project (limits and scope).
• Determining the vision for the redesign.
• Creating a plan or model for the redesign.
• Completing a cost-benefit analysis   .
• Developing a detailed plan for implementation.
• Establishing performance measures for evaluation.

Because of the radical nature of BPR, it's vital that organizations think hard about whether it's the right direction for them before implementing any plans. Here are a few questions to ask yourself before embarking on BPR:

• Is your organization willing and able to endure the pain that BPR can cause?
• Is your top management team personally involved and committed to completing the project? The costs of stopping the process in the middle are high, so make sure you know what you're starting.
• Are you prepared to lose staff who simply cannot handle the change?

The Pitfalls of BPR

Business process reengineering is still discussed today, but not as often as it once was. This is because the extreme nature of BPR initiatives can lead to many problems. And BPR has had negative results – massive layoffs, difficulty for staff adjusting to radical changes to corporate culture, and only mediocre success.

Many BPR projects have failed to produce the results expected because of unrealistic expectations, inadequate resources, loss of management commitment (because they took too long), and resistance to change   .

Softer, gentler approaches are now more popular. Instead of dramatic changes to processes, you're more likely to see gradual innovation through continuous improvement strategies.

Many executives have avoided the BPR approach for fear of causing disruption and disorder in a company. This is unfortunate, because BPR provides a great opportunity to take strong and definitive action to turn a company around. And its fundamental message is strong: don't just look for ways to do the same things better, because you may continue to do the "wrong" thing. Consider focusing instead on doing different – and better – things, too.