Chapter 17 Business Process Re-engineering (BPR)

1. Chapter 17 Business Process Re-engineering (BPR) INTRODUCTION • Michael Hammer defines re-engineering as ‘the fundamental rethinking and radical redesign of business process to achieve dramatic improvements in the critical contemporary measures of performance such as cost, quality, service and speed.’ • Re-engineering requires one to take a different view of the business – the view based on the process and not on the tasks or functions. • The fundamental rethinking calls for questioning everything that is being followed, practiced and found acceptable for centuries. It rejects old legacies and ‘proven’ practices. • It requires questioning on the basic principles of management and administration which are used for decades. • The old principles like when it is a money matter it is for finance and accounts to handle, when it is a matter of quality it is the responsibility of the quality assurance department, etc. are to be rejected. • The fundamental rethinking calls for starting all over again rejecting the past. It requires a vision, an innovation and an imagination. • Radical redesign is the second important concept used in the definition of re-engineering. • For example, the business is conducted in a certain manner, I.e., you buy raw material, process it, pack the finished goods, sell and distribute the goods to the customer. There are standard procedures and designs for these activities.

2. The radical redesign calls for trimming and chopping of these designs so that the cost is reduced, service is improved and the customer gets higher value at a higher speed. • The redesign calls for a change in the technology, tools and techniques. • It begins with the objective of activity elimination, then improvisation and finally outsourcing. • Any re-engineering exercise, if it produces only marginal improvements is then not a result of fundamental rethinking and a radical redesign. • Re-engineering may replace the cost, quality, service and the speed at which it delivers. • When the re-engineering exercise is complete, the organization will have fewer people, less space, a product or service of excellence and highest customer satisfaction. • It will further generate and frame new rules of the business to manage the multiple processes, resulting into the value in which the customer is interested. • The organization chart of the business will not be shown with the hierarchical structure of people bound by functions but it will be described in the hierarchical structure of processes, I.e., the main process and the sub processes which contribute to the result of the main process.

3. BUSINESS PROCESS • The business process is defined as ‘a set of activities performed across the organization creating an output of value to the customer’ • Every process has a customer who may be internal or external to the organization. • The scope of the process runs across the departments and functions and ends up in substantial value addition which can be measured against the value expectation of a customer. • For example, the order processing scope in the traditional sense is within the marketing department. But when it comes to re-engineering, the scope expands to manufacturing, storing and delivering and recovering the money. • Basic elements of Business Process are: • Motivation to perform certain activities. • Data gathering, processing and storing • Information Processing • Checking, validating and control • Decision making • Communication • A business process in any area of the business organization performs through basic steps, such as receive input, measure, analyze, document, perform, process, record / store, access, produce and communicate.

4. These steps are performed a number of times across the execution process. When the process is performed, it consumes resources and time. • The re-engineering approach attempts to eliminate or shorten the steps so that resourceconsumption is reduced and time of process execution is shortened. • It eliminates redundancy by eliminating the steps which do not contribute to the value customer is looking for. • In organization there are critical processes and not so critical processes. The critical business processes are those which contribute to the value significantly. While the non-critical processes do not contribute much to the value the customer is looking for. • For example, the process of receiving a visitor in the organization could be considered as non-critical. But the process of new product development from the concept to the prototype is critical as it is expected to contribute high value to the customer. • If the external customer focus is taken as as criterion for process selection, then all the processes which generate and add value to the customer are called the value stream processes. • The value stream processes are critical and become the immediate candidates for re-engineering. The other processes in the organization contribute to the overheads of performing the business function. • Every process is made of a series of activities. In each activity some ‘work is done’ which produces some result for processing into the next activity. • If the work done under any activity is analyzed, it will be seen that the people are moving papers and products to achieve some result.

5. In the process they collect the information for decision making and then carry out a physical activity of pushing the product or the output using the paper for record, document and communication. • The following figure shows this work model comprising six elements: ACTIVITY INFOR- MATION PEOPLE PAPER PRODUCTS DECISION Work Model • When such work modules are viewed together as a single entity, it is a business process. • In such process, participating people are considered as a team working with the sole objective of achieving the customer expectation on value. • In re-engineering exercise all the six entities, viz., people, paper, activity, information, decision and product stand to scrutiny through a fundamental rethinking for radical redesign to produce dramatic results.

6. PROCESS MODEL OF THE ORGANIZATION • In the BPR, the organization will have to be viewed through the processes and not by the tasks or functions. • A process may begin in one department and run across other departments producing a business result of some value. • The processes are backed by authority, rules and powers within the scope of function of the department they are handling. • The process model of the organization considers only those processes where the ‘end’ of each process produces a result whereby the customer concern, interest, expectation and perception are affected. • For constructing the process model, the processes which are essential for the smooth working of the business such as the employee related processes, audit, budgeting and accounting, security, canteen, general administration, etc., are not considered. • Such processes contribute to substantial overheads and could be considered for cost control leading to the price reduction under the re-engineering methodology. • The need for constructing a process model of the organization is to force some fundamental thinking, and redesigning that will bring a dramatic change in the working and the end result of the organization. • The process view of the organization will preventfunctional and local sub optimization and promote process optimization, where the resources are used intelligently and the productivity is the highest.

7. Once the process view of the organization is taken, the old conventions and practices of business processing undergo a radical change. • It deviates from the command control system to a system of work group called as a team. • The following figure shows the process view of the organization imposed on traditional organization: Process View of Organization PROCESS STREAM CEO B C A A1 A1 B1 B1 C1 C1 A2 A2 B2 B2 C2 C2

8. VALUE STREAM MODEL OF THE ORGANIZATION • The organization is established to fulfill customer needs, having associated customer values. • The value is a measure, an intangible measure, which is difficult to count in terms or specifications as different customers have different value priorities, value mix and buying decision criteria. • The customer is satisfied when he believes that the price paid by him fulfills the value expectations. • The business organization has to decide which customer segment it will like to serve and then evolve various business strategies. • Depending upon the value choice of the customer, the processes of the organization become critical and relevant. • The process model, therefore, can be seen as a value stream model, relevant to the organization • For example, an organization in food business will consider those processes critical and relevant which produce food products fulfilling basic needs of appetite and taste and meets the value expectations on availability, perceived belief, packaging, price and ease of access. • Every organization must, therefore, identify value streams in the process model, consistent with the business, the goods manufactured and the nature of business and its objectives. • Once the process model and the value stream model is built, the process organization can be implemented.

9. In the process execution, people come together to form a work group as a team, executing a complete process cycle. • To improve the performance of the team, a number of measures are used. • On the technology front the team uses information technology extensively. It facilitates freeing data from ownership. • Data is put into database which is designed independent of its application or use. • The access is free to all concerned but at the same time it is secured properly to prevent unauthorized access to the information. • Due to information technology usage, data search is much faster, the analysis quicker, the decision making intelligent and purposeful and information update instantaneous. • When building the process organization, the people in the team are empowered to make decision through education, training and support. They are supported by a knowledge database and a decision support system. • When the information technology is embedded into the process, the organization becomes seamless with free information flow. • All value streams are linked through the information paths installed on LAN and the WAN. • For the effective process organization build, it is necessary to normalize the processes by segregating them on the basis of internal and external customers. • Some processes should be considered for sub-contracting or outsourcing if they fall in the area outside core competency. • The processes in which the staff is best in all respects should be retained in the organization, rest all should be commissioned outside – suppliers and customers should be made business partners so that they work for achieving common business goals.

10. How to build Process Organization? • Motivation to perform • Free Data / Information from ownership • Build seamless information flow • Provide access unlimited • Empower person(s) through support • Recast business operations into process (Client and Server) • Designate process managers • Segregate processes where customer is internal, from external • Take the process beyond the organization • Think in terms of business partners/ associates and not as buyers and sellers • Retain only those processes which contribute to the value to the customer and sub-contract others. • The re-engineered process organization will have less people using very little space. The process will be transparent and results will be visible.

11. The approach to select re-engineering opportunities. • Identify process and map them across the organization • Classify them by following norms • Cycle time • Capital intensive • Information intensive • Risk intensive • Overheads • Manpower intensive • Decision intensive • Rank them by value to the customer • Cost/Price • Product value • Quality • Delivery • Classify processes by customer • Internal (user of the process) • External (buyer) • Select processes for re-engineering • Organization needs • Market needs • Business strategy