MB 10-01 : BUSINESS PROCESS RE-ENGINEERING 1.3

3. Explain the five step systematic approach to reengineering.

Stage 1 : Prepration

Company executives must recognize the need to re-engineer and develop a consensus. Goal need to be established by using "breakthrough thinking" related to revenue enhancement,profit or margins, market share or costs. Breakthrough thinking requires looking beyond established goals and procedures to achieve those goals using quantitative measurements.

Executatives also need to identify existing barriers that could thwart re-engineering efforts. Some can relate to cost, but that usually is not concern among executatives since many expect a return on the investment in the future. Other obstacles can relate to time,but installing deadlines does not necessarily guarantee success. Any risks to customers,employees and vendors and potential organizational barriers must identified during the first stage.

Executive then must develop a five to six-page change plan document that will serve as acontract to make sure that the re-engineering team knows what executives want to achieve. The team, in turn,should be trained on re-engineering methodlogy to achieve those goals.

Stage 2 : Identification

This is when team members identify important processes for the organization that,in turn will lead to identify processes that are strategic and of value to its customers.

In any re-engineering project, management should start with the shareholders needs. Generally, the organization's return on investment or dividends per share is established (in some situations,financial results are less important than their company's image and reputation). Management should look for trends ratther than absolute figures,because the latter could point out that a company is the best in its field yet failto indicate that its performance is on rapid downtrend. Trends must be compared with industry averages and with the results of the company's main competitors.

The financial diagnosis should then be complemented with a study of customer satisfaction. The following model is very useful in assessing customer satisfaction. It contains seven main characteristics that influences customer's decision.

Quality (Q)

Volume (V)

Administrative Procedures (A)

Location (L)

Image and Interrelations (I)

Time Factor (T)

Yield (Y)

The preceding factors spell "QVALITY". The totalquality diagnosis is a survey of present and potential customers that systematically examines these seven factors to find out what satisfies or dissatisfies customers and to what degree they value each factor.

When this two-part diagnosis of financial results and customer satisfaction is performed, the satisfaction of employees, managers and non managers is evaluated. The business process.which includes the mainstream process and many supporting processes,is also mapped out. The mainstream process includes:

1. All operations that are undertaken,from perceiving customers needs fullfilling these needs,receiving the final payment,servicing the product until the guarantee expires and replacing the product when the current one wears out,which starts the process again.
2. Management activities that ensure operations are carried out effectively,on time and minimum cost,including planning,organizing,directing and controlling.
3. Information systems that ensure operations and management activities are carried out completed effectively.

The support processes are those that allow the mainstream process to function effectively by supplying it with necessary information,personnel or training or capital and expenditures.

By mapping the mainstream and support processes, those that need correction,improvement or re-engineering can be more easily identified. Examination of seven "Qvality" factors identifies

1. The most frequent and/or most critical problems.
2. Late deliveries,which are classified by type of product,customer,area and period of the year.
3. Administrative problems, such as errors in billing,order entry and customer credit evalution or delays.

Next ,identified problems must be prioritized. The most critical and recurrent problem should be traced backed to specific activities or operations in the mainstream business process. At this point, this part of the process is thoroughly analyzed using problem-solving techniques.

Before scrapping the existing process entirely, management should study the possibility of improving it by eliminating unnecessary operations, combining or modifying other operations, having someone else perform an operation or having the operation performed elsewhere, at a different time or in a different sequences. If this preliminary investigation cost,it should be re-engineered. The re-engineering effort and its eventual direct impact are always closely linked with the end problem solved. This direct impact must translate into increased profitability for the organization and enhancement of whatever "QVALITY" factors.

Stage 3 : Vision

This involves understanding the process structure and how it flows within sthe organization. After identifying value-added activites, one needs to beanch mark performance,determine performance drivers and estimate the opportunity to achieve and integrate both the ideal internal and external vision.

Stage 4 : Solution

This stage is divided into two areas process design and social design. During the technical phaase, process linkage are re-examined, interfaces and information are consolidated,alternatives are redefined and controls are relocated and retimed prior to applying technology.

To facilitate process redesign, a set of process design rules keyed to cycle-time reduction should be developed. Activites that lengthen cycle time-rework,nonvalue-adding activites,poor or untimely performance feedback,handoffs of responsibility and overall complexity-are bad processes. It is estimated that cutting cycle times by 50% results in productivity increases of 20% to 70%.

Since fast-cycle companies have an easier time reaching to changes in the marketplace, they also greatly reduce their risks by relying on fast reactions rather than shaky,long term forecasts.

Process Design

Process design rules fall into one of two categories-golden rules and principles.

The Golden Rules are

1. Organize by product. Specialize in products rather than functions. Organizing processes by product allows a structure in which groups can work on product or service from start to finish,thereby reducing fragmentation and inflexibility.

2. Minimize the number of groups and individuals required to complete a product or service. This reduces the number of responsibility handoffs in the process and considerably the performance feedback loops.

3. Redesign the process flow,work-group structure and individual suties at the same time. All three factors must work together. Redesigning one or two is not desirable.

The Basic Principle are

1. Design around core activites.

2. Design for continuous flow of work.

3. Avoid required or formalized activites.

4. Combine steps.Integrate low-value steps into direct value steps.

5. Avoid intra-organizational dependencies and shared responsibilities.

6. Design activites to run in parallel paths.

7. Don't mix process types.

8. Locate individuals within a unit in close physical proximity.

9. Design work groups to be temporary.

10. Create more multi-skilled workers. Increase the scope of each job.

11. Give employees access to all the information they need to complete a product.

12. Enpower workers.

Social Design

Social design,the second aspect,is where human resources play a critical role in re- engineering . This involves the following tasks that focus on the human aspects of re- engineering ,that is, the employees who will affect corporate change :

1. Empower customer contact personnel.

2. Define jobs,teams and specify job changes.

3. Define skills and staffing needs.

4. Redraw organizational boundaries.

5. Design career paths.

6. Design and define incentives.

7. Plan,design implementation and change management program.

Stage 5 : Transformation

After completing the business system design,performing the process design and developing test and rollout plans,personnel must be evaluated before the new system is constructed. Training follows the new processes and piloted as part of the transition process. Continuous improvement follows but Manganelli cautions against thinking of re-engineering in term of continous improvements.

MB 10-01 : BUSINESS PROCESS RE-ENGINEERING 1.2

2A. What are the characteristics of the re-engineered process? Explain.

Ans The characteristics of re-engineered Process are following

Several jobs are combined into one

The most basic and common feature of re-engineered processes is the absence of an assembly line, that is, many formerly distinct jobs or tasks are integrated and compressed into one.

In the re-engineered process, the company compressed responsibility for the various steps and assigned it to one person, the "customer service representative". That person performs the entire process and also serves as single point of contact for the customer. Such an individual responsible for an end-to end process is known as a case worker.

It is not always possible to compress all of the steps in a lengthy process into one integrated job performed by a single person. In some situations, the various steps must be performed in different locations. In those instances, a company needs several people, each managing parts of the process. In other cases, it may not prove practical to teach one person all the skills he or she would need to perform the entire process.

To eliminate the hand-offs, the company organized a case team, a group of people who have among them all the skills that are needed to handle an installation order.

Case team members- who previously were located in different departments at several geographic locations were brought together into a single unit and given total responsibility for installing the equipment. While handoffs between team members may still create some delays and errors, they are insignificant compared to the problems thta the cross -organisational handoffs caused. Perhaps most important, everyone now knows who has responsibility for geting an order processed quickly and accurately. The payoff of integrated processes, case workers and case teams can be enormous. Eliminating handoffs means doing away with errors,delay and rework that they engender. Typically, a case worker-based process operates ten times faster than the assembly line version that it replaces.

Integrated processes have also reduced process administration overheads. Because employees involved in the process assume responsibility for making sure that customers requirements are met on time, and with no defects, they need less supervision. Instead, the comopany encourages these empowered employees to find innovative and creative ways to reduce cycle time and cost continually while producing a defect-free product or service.

Workers make decision

Companies that undertake re-engineering, not only compress processes horizontally by having case workers or case teams perform multiple,sequential tasks but vertically as well. Vertical compression means that at the points in the process where had to go up the managerial hierarchy for an answer, they now make their own decisions. Instead of separating decision-making from real work,decision-making becomes part of work. Workers themselves now do that portion of the job that, formerly, managers performed.

Under the mass production paradigm, the tacit assumption is that the people actually performing work have neither the time nor the inclination to monitor and control it and they lack the depth and breadth of knowledge required to make decision about it. The industrial practice of building hierarchical management structures follows from this assumption. Accountants, auditors and supervisors check, record and monitor work. Managers supervise the worker bees and handle the exceptions. This assumption and its consequences need to be discarded.

The benefits of compressing work vertically as well as horizontally include fewer delays. lower overhead costs,better customer response and greater empowerment for workers.

The Steps in the Process are Performed in a Natural Order

Re-engineering processes are freed from tyranny of straight-line sequence,natural precedence in the work,rather than the artifical one intrduced by linearity, can be exploited. Typically, in a conventional process, person 1 must complete task 1 before passing the results to person 2 to do task 2. But what if task 2 could be performed simultaneously with task1? Linear sequencing of tasks imposes an artifical precedence that slows work down.

In the re-engineered processes, work is sequenced in terms of what needs to follow what. "Delinearizing" processes speeds them up in two ways. First, many jobs getdone simultaneously. Second, reducing the amount of time that elapses between the early and late steps of a process narrows the window for major change that might make the earlier. Organizations, thereby,encounter less rework,which is another source of delay.

Processes have Multiple Version

The fourth common characteristic of re-engineered processes is end of standardization. Traditional processes were intended to provide mass production for the mass market. All inputs were handled identically, so companies could produce uniform and consistent outputs. In a world of diverse and changing markets, that logic is obsolete. To meet the demands of today's environment,there is a need for multiple versions of the same process, each one tuned to the requirements of different markets,situation or inputs. These new processes must also have the same economies of scale that result from mass production. Processes with multiple versions or paths usually begin with a "triage"step to determine which version works best in given solution. Traditional one size-fits-all processes are usually very complex, since they must incorporate speical procedures and exceptions to handle a wide range of situations. A multi-version process, by contrast, is clean and simple, because each version needs to handle only the cases for which it is appropriate. There are no special cases and exceptions.

Work is Performed Where it Makes the Most Sense

A fifth recurring theme in re-engineered processes is the shifting of work across organizational boundaries. In traditinal organizations, work is organized around specialists-and not just on the factory floor. Accountants know how to count and purchasing clerks know how to order things .So when the accounting department needs new pencils, the purchasing department buys them. Purchasing finds vendors,negotitates price,places the order,inspects the goods and pays the invoice-and eventually the accountants get their pencils,unless the approved supplier is short on pencils and purchasing decides to substitute pens. This kind of process is expensive,since it involves a varietyof department plus the overhead that's associated with tracking all the paper and fitting all the price together.

In other words, in the aftermath of re-engineering, the correspondence between processes and organizations may look very different from how it looked beforehand. Work nis shifted across organizational boundaries to improve overall process performance. Much of the work done in organizations consists of integrating related pieces of work that independent organizational units perform. Relocating work across organizational boundaries,as exemplifies in the cases above,eliminates the need for this integration.

Checks and Controls are Reduced

Another kind of nonvalue-adding work that gets minimized in re-engineered processes is checking and control, or to put it more precisely, re-engineered processes use controls only to the extent that they make economic sense.

Conventional processes are replete with checking and control steps,which add no value but are included to ensure that people aren't abusing the process. While that objective may be laudable, many organizations fail to recognize the costs associated with stict control. It takes time and labour to do all this checking, in fact,it may take more time and effort to do the checking than to do the actual purchasing. Worse, the cost of the checking may even exceed the costs of the goods being purchased.

Re-engineered processes exhibit a more balanced approach. Instead of tightly checking work as it is performed,re-engineered processes often have aggregate or deferred controls. These control systems,by design,tolerate modest and limited abuse,by delaying the point at which abuse is detected or by examining aggregate patterns rather than individual instances. The re-engineered control systems,however,more than compensate for any possible increase in abuse by dramatically lowering the costs and other encumbrances associated with the control itself.

Reconciliation is Minimized

Yet another form of nonvalue-adding work that re-engineered process minimize is reconciliation. They do it by cutting back the number of external contact points that a process has, thereby reducing the chances that inconsistent data requiring reconciliation will be received.

A Case Manager Provides a Single Point of Contact

The use of someone called a "case manager" is anothe recurring characteristics found in re-engineered processes. This mechanism proves useful when the steps of a process either are so complex or are dispersed in such a way that integrating them for a single person or even a small team is impossible. Acting as a buffer between the still complex process and the consumer,the case manager behaves with the customer as if he or she were responsible for performing the entire process,even though that is really not the case.

To perform this role-that is,to be able to answer the customer's questions and solve customer problems-the case manager needs access to all the information systems that the people actually performing the process use and the ability to contact those people with questions and requests for further assistance when necessary.

The case managers are sometimes called "empowered" customer service representatives(CSRs) to distinguish them from traditional CSRs,who are often people with little information and less clout. Enpowered CSRs can actually get things done. At a large public utility,case managers present customers with the useful fiction of an intergrated customer service process by handling all their problems while shielding them from the real complexities of the actual process.

Hybrid Centralized/Decentralized Operations are Prevalent

Companies that have re-engineered their processes have the ability to combine the advantages and decentralization in the same process. At a computer manufacturing company,a standard purchasing system and a shared database allow the company to combine the best of both worlds.

Information technology increasingly enables companies to operate as though their individual units were fully autonomous,while the organization still enjoys the economies of scaleh that centralization creates. Equipping field sales representatives with notebook computers connected by wireless modems to the central office or to corporate headquarters,for instance,gives sales people instant access to information that is maintained there. At the same time,controls incorporated into the software they use to write up sales prices or specifying delivery or other conditions that the organization canot meet. With this technology,companies ca re-engineer the sales process so as to eliminate the bureaucratic machinery of the regional field offices,enhance the sales representatives autonomy and empowerment and simultaneously,improve the contol the company has over selling price and condition.

2B. What is the difference between deductive thinking and inductive thinking? How does relate to re- engineering?

Ans To recognize the power inherent in modern information technology and to visualize its application requires that companies uas a form of thinking that business people usually do not learn and with which they may feel uncomfortable. Many managers think deductively. That is, they are good a defining a problem or problems, then seeking and evaluating different solutions to it. Whereas applying information technology to business process re-engineering demands inductive thinking. Inductive thinking thinking is ability to first recognize a powerful solution and then seek the problems it might solve,problems the company probably does not even know that it has.What most companies ask is "how can we use these new technological capabilities to enhance or streamline or improve what we are already doing?" But what they should be asking is ,"How can we use the technology to allow us to do things that we are not already doing?'

This makes re-engineering involve the aspect of innovation over mere automation. It is about exploiting the latest capabilities of technology to achieve entirely new goals.

MB 10-01 : BUSINESS PROCESS RE-ENGINEERING 1.1

1A. Define Business Process reengineering and identify the various important elements in the definition of business process reengineering.

Ans. "Re-engineering" 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." This definition contains four key words.

FUNDAMENTAL
The first key word is "fundamental". In doing re-engineering, business people must ask the most basic questions about their companies and how they operate. Why do we do what we do? And why do we do it the way we do? Asking theses fundamental questions forces people to look at the tacit rule and assumptions the underline the way they conduct their business. Often,these rules turn out to be obsolete, erroneous or inappropriate.
Re-engineering begins with no assumptions and no givens. Infact, companies that undertake re-engineering must guard against the assumptions that most processes already have embedded in them. Re-engineering first determines what a company must do, then how to do it. Re-engineering takes nothing for granted. It ignores what is and concentrates on what it should be.
RADICAL
The second keyword in the definition is radical, which is derived from the Latin word "radix”, meaning root. Radical redesign means getting to the roo of things, not making superficial changes or fiddling with what is already in place, but throwing away the old. In re-engineering, radical redesign means disregarding all existing structures and procedures and inventing completely new ways of accomplishing work. Re-engineering is about business reinvention-not businesss improvement, business enhancement or business modification.
DRAMATIC
The third key word is dramatic. Re-engineering is n't about making marginal or incremental improvements but about achieving quantum leaps in performance. Re-engineering should be brought in only when a need exists for heavy blasting. Marginal improvements requires fine tuning, dramatic improvement demands blowing up the old and replacing it with something new.
Three kinds of companies that undertake re-engineering have been identified. First are companies that find themselves in deep trouble. They have no choice. If a company's costs are an order of magnitude higher than competition's or than its business model will allow,if its product rate is twice,three times or five times great as the competition's, if , in other words, it needs order-of-magnitude improvement, that company clearly needs business re-engineering.
Second are companies that are not yet in trouble but whose management has the foresight to see trouble coming. These companies have the vision to begin re-engineering in advance of running into adversity.
The third types of companies undertaking re-engineering are those that are at peak condition. They have no discernible difficulties, either now or on the horizon, but their managemens are ambitious and aggressive. Companies in this category see re-engineering as an opportunity to further their lead over their competitors.
PROCESSES
The fourth key word is processes. Although this word is the most important in the definition, it is also the one that gives most corporate managers the greatest difficulty. Most business people are not "process-oriented:, they are focused on tasks, on jobs, on people, on structures but not on processes.
Definition of business process is "a collection of activities that takes one or more kinds of input and creates an out put that is of value to the customer". Under the influence of Adam Smith's notion of breaking work into its simplest tasks and assiging each of these to a specialist, modern companies and their managers focus on the individual tasks in this process-receiving the order form, picking the goods from yhe warehouse, ans so fourth-and tend to lose sight of the larger objective, which is to get the goods into the hands of the customer who ordered them.

1B. Explain what re-engineering is and what it is not.
First, despite the prominent role played by information technology in business re-engineering, it is not the same as automation. Automating the existing processes with information technology provides more efficient wayas of doing the wrong kinds of things. Nor is re-engineering involves only software re-engineering, which means rebuilding obsolete information system with more modern technology. Software re-engineering often produces nothing more than sophisticated computerized system that auto mate obsolete processes.
Re-engineering is not restructuring or downsizing. Downsizing and restructuting mean doing less with less whereas re-engineering means doing more with less. Re-engineering is also not same as reorganizing,delayering,or flattening an organization,although re-engineering may, in fact produce a flatter organization. The problems facing companies do not result from their organizational structure but their process structure. The way to eliminate bureaucracy and flatten the organization is by re-engineering the processs so that they are no longer fragmented.
Re-engineering is not the same as quality improvement, total quality movement. But they share a number of common themes. They both recognize the importance of process, and they both start with the needs of the process customer and work backwards from there. However, the two programs also differ fundamentally. Quality programs work with in the frame work of the company's existing processes and seek to enhance them by means of continuous improvement. Whereas re-engineering, seeks breakthroughs, not by enhancing the existing processes, but by discarding them and replacing them with entirely new ones. Business re-engineering is synonymous with innovation because it is more than just automating or computerizing existing operations or processes. Also re-engineering involves a different approach to change management from that needed by quality programs. It can also be said that business process re-engineering is a powerful tool to accomplish total quality.
The conventional way of describing the organization will be replaced by a new description, using processes running across the departments and functions. The process thinking and multiple processes integration make the organization seamless. The flow of information will be free from barriers, Re-engineering exercise will measure process efficiency and its effectiveness, and bring in a dramatic improvement in all the performance criteria of the business such as cost,quality,service and speed od delivery
Re-engineering is about beginning all over again. It is about rejecting the conventional wisdom and received assumptions of the past. Re-engineering is about inventing new approaches to process structure that bear little or no resemblance to the previous structures. Re-engineering is the search for new models of organizing work.