Business Process ReengineeringBusiness Process ReengineeringBusiness Process ReengineeringBusiness Process Reengineering

Chao-Hsien Chu, Ph.D.School of Information Sciences and Technology

The Pennsylvania State UniversityUniversity Park, PA 16802

BPR Theory Vs. PracticeBPR Theory Vs. PracticeBPR Theory Vs. PracticeBPR Theory Vs. Practice

BPR

PromiseFundamental change

Reality75% Failure rate

Misunderstanding- What BPR is.- How to go about doing it.

BPR Definition (1)BPR Definition (1)BPR Definition (1)BPR Definition (1)

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.

Hammer and Champy 1993

BPR Definition (2)BPR Definition (2)BPR Definition (2)BPR Definition (2)

The fundamental rethinking and redesign of operating processes and organizational

structure, focused on the organization’s core competencies, to achieve dramatic

improvements in organizational performance.

Lowenthal 1994

BPR Definition (3)BPR Definition (3)BPR Definition (3)BPR Definition (3)

Reengineering is the rapid and radical redesign of strategic, value-added business processes — and the systems, policies and

organizational structures that support them — to optimize the work flows and productivity

in an organization.

Manganelli and Klein 1994

ProcessesProcessesProcessesProcesses

A process is an interrelated series of activitiesThat converts inputs into outputs.

Activity

ActivitiesActivitiesActivitiesActivities

Value-adding Activities Important to the customer A customer is willing to pay for them

Hand-off Activities Move work across functional or departmental

boundaries Control Activities

They control hand-off activities

Process FlowProcess FlowProcess FlowProcess Flow

Marketing Operations Finance

CEO

Customerrequest

Orderfulfillment

Features of Business ProcessesFeatures of Business ProcessesFeatures of Business ProcessesFeatures of Business Processes

Greater margin for improvementHands-off and lost controlWaste and inefficiency are difficult to

detectCross-functional problemsLow percentage of value-adding activitiesCustomers are very sensitive to poor

business processes

Some Business ProcessesSome Business ProcessesSome Business ProcessesSome Business Processes

Order Processing Billing Purchasing Shipping Receiving Auditing Business Planning Warranty and claims

processing

Budget planning Accounts payable Accounts receivable Performance appraisal Proposal development Credit approval Vendor certification New employee

processing

Attributes of a BPR MethodologyAttributes of a BPR MethodologyAttributes of a BPR MethodologyAttributes of a BPR Methodology

It should develop a clear statement of corporate goals.

It should be process-oriented. It should facilitate the classification of

activities. It should lead to fundamental change. It should develop a plan to deliver final

results within a year.

Reasons for ReengineeringReasons for ReengineeringReasons for ReengineeringReasons for Reengineering

Your continuous improvement activities have hit a dead end.

The competition has grabbed your customers.

You are approaching the top of the “S Curve.”

Your customer’s requirements have changed.

Technological advances expand the possibilities.

Fundamental shifts in industry.

Motivation for RedesigningMotivation for RedesigningMotivation for RedesigningMotivation for Redesigning

BPR

ImprovedCustomer Focus

ImprovedCycle Time

ImprovedProcess Efficiency

Building BlocksBuilding BlocksBuilding BlocksBuilding Blocks

CurrentCurrentprocessprocessreviewreview

Transformthe business

BaselineBaselineanalysisanalysis

CustomerCustomerrequirementrequirement

analysisanalysis

Designspecifications

Designoptions High-levelHigh-level

designdesign

Detaileddesign

Model andModel andvalidate thevalidate thenew designnew design

Build inBuild inCI feedbackCI feedback

Pilot thenew design

Designprinciples

AnalysisAnalysisPhasePhase

DesignDesignPhasePhase

ImplementationImplementationPhasePhase

Process SelectionProcess SelectionProcess SelectionProcess Selection

Broken Processes: Broken Processes: Which processes are in Which processes are in the deepest trouble?the deepest trouble?

Important Processes: Important Processes: Which processes Which processes have the greatest impact on the company’s have the greatest impact on the company’s customers?customers?

Feasible Processes: Feasible Processes: Which processes are at Which processes are at the moment most susceptible to successful the moment most susceptible to successful redesign?redesign?

Broken Processes - SymptomBroken Processes - SymptomBroken Processes - SymptomBroken Processes - Symptom

Extensive information exchange, data Extensive information exchange, data redundancy, and rekeyingredundancy, and rekeying

Inventory, buffers, and other assetsInventory, buffers, and other assets High ratio of checking and control to value-High ratio of checking and control to value-

addingadding Rework and iterationRework and iteration Inadequate feedback along chainsInadequate feedback along chains Complexity, exceptions, and special casesComplexity, exceptions, and special cases

Important ProcessesImportant ProcessesImportant ProcessesImportant Processes

Customer Issues

Product CostOn-time DeliveryProduct Features

Market

Processes

Product DesignOrder Processing

Procurement

Company

Feasible ProcessesFeasible ProcessesFeasible ProcessesFeasible Processes

ReengineeringEffort

Process Scope Project Cost

Team StrengthOwnerCommitment

Common ThemesCommon ThemesCommon ThemesCommon Themes

Use reengineering to grow the business.

Service the customer: Competing with quality of products and services.

Increase revenue instead of simply cutting back through cost reduction and downsizing.

Reengineering Cast MembersReengineering Cast MembersReengineering Cast MembersReengineering Cast Members

Operations Operations research teamsresearch teams

Benchmarking Benchmarking teamsteams

Voice of the Voice of the client data client data collection teamscollection teams

Workflow Workflow design teamsdesign teams

Application Application design teamsdesign teams

Pilot teamsPilot teams

Implementation Implementation teamsteams

Transition Transition teamsteams

Executive SponsorExecutive Sponsor

Project TeamProject Team

DesignDesign(3-6 months)(3-6 months)

AnalysisAnalysis(2-4 months)(2-4 months)

ImplementationImplementation(12-24 months)(12-24 months)

Understanding and Rethinking Understanding and Rethinking Business ProcessesBusiness Processes

Understanding and Rethinking Understanding and Rethinking Business ProcessesBusiness Processes

Understand theCustomer

Understand theProcess

Benchmarking

Understanding The CustomerUnderstanding The CustomerUnderstanding The CustomerUnderstanding The Customer

What are the customers’ real requirements?

What do they say they want and what do they really need?

What problems do they have?

What processes do they perform with the output?

Understanding ProcessesUnderstanding ProcessesUnderstanding ProcessesUnderstanding Processes

Why does this particular process need to exist versus some alternative solution or no process at all?

Why does the process require this much time to achieve certain results?

Why is the process organized this way? What aspects of the process are truly

important to the customer?

Revisiting Process ActivitiesRevisiting Process ActivitiesRevisiting Process ActivitiesRevisiting Process Activities

Process

Real ValueAdded

Business ValueAdded

No ValueAdded

Process Evaluation and AnalysisProcess Evaluation and AnalysisProcess Evaluation and AnalysisProcess Evaluation and Analysis

Existing Process

Measures ofPerformance

The TechnologyTrap

Activity-BasedCosting

“Do not automate somethingthat should not have beendone manually.”

Some Characteristics of Some Characteristics of Reengineered ProcessesReengineered Processes

Some Characteristics of Some Characteristics of Reengineered ProcessesReengineered Processes

Several jobs are combined into one Case worker Case team

Workers make decisions The steps in the process are performed in a

natural order Processes have multiple versions

Some Characteristics ofSome Characteristics ofReengineered ProcessesReengineered ProcessesSome Characteristics ofSome Characteristics ofReengineered ProcessesReengineered Processes

Work is performed where it makes more sense

Checks and controls are reduced Reconciliation is minimized A case manager provides a single point of

contact Hybrid centralized/decentralized

operations are prevalent

Ways to Structure the OrganizationWays to Structure the OrganizationWays to Structure the OrganizationWays to Structure the Organization

Flattening Organizational StructuresFlattening Organizational Structures

Team Design: Baseball, Football, and Team Design: Baseball, Football, and Tennis DoublesTennis Doubles

Job Design: Generalists Vs. SpecialistsJob Design: Generalists Vs. Specialists

Compensation Schemes: Paying for Compensation Schemes: Paying for performance and/or business results.performance and/or business results.

Primary RoadblocksPrimary RoadblocksPrimary RoadblocksPrimary Roadblocks

Failure to develop the necessary leadership.

Not helping people to think in terms of business processes.

Neglecting to align measures and rewards with the new business process thinking.

Most Common Errors (1)Most Common Errors (1)Most Common Errors (1)Most Common Errors (1)

Trying to fix the process instead of Trying to fix the process instead of changing itchanging it

Don’t focus on business processesDon’t focus on business processes Ignore everything except process redesignIgnore everything except process redesign Neglect people’s values and beliefsNeglect people’s values and beliefs Be willing to settle for minor resultsBe willing to settle for minor results Quit too earlyQuit too early

Most Common Errors (2)Most Common Errors (2)Most Common Errors (2)Most Common Errors (2)

Assign someone who does not understand Assign someone who does not understand reengineering to lead the effort.reengineering to lead the effort.

Skimp on the resources devoted to Skimp on the resources devoted to reengineering.reengineering.

Bury reengineering in the middle of the Bury reengineering in the middle of the corporate agenda.corporate agenda.

Dissipate energy across a great many Dissipate energy across a great many reengineering projects.reengineering projects.

Most Common Errors (3)Most Common Errors (3)Most Common Errors (3)Most Common Errors (3)

Attempt to reengineer when the CEO is two Attempt to reengineer when the CEO is two years from retirement.years from retirement.

Fail to distinguish reengineering from other Fail to distinguish reengineering from other business improvement programs.business improvement programs.

Concentrate exclusively on design.Concentrate exclusively on design. Try to make reengineering happen without Try to make reengineering happen without

making anybody unhappy.making anybody unhappy.

Most Common Errors (4)Most Common Errors (4)Most Common Errors (4)Most Common Errors (4)

Pull back when people resist making Pull back when people resist making reengineering changes.reengineering changes.

Drag the effort out.Drag the effort out. Try to make reengineering happen from the Try to make reengineering happen from the

bottom up.bottom up.