BPR CH II

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Business process Reengineering:

Business process Reengineering Chapter II Business Process in the context of Reengineering

The Reengineered Organisation :

The Reengineered Organisation Before we start with processes & how to bring about change lets first understand how different reengineered organization looks like from non-reengineered one

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When a process is reengineered Jobs evolve from task orientation to process orientation. People who once did as they were instructed now make choices and decisions on their own. “Assembly-line” work (in linear sequence) disappears. Functional departments virtually dissolve and are split into “teams”.

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Managers stop acting like supervisors and must take on a mentoring role. Work focuses more on customer needs (both internal and external customer) and less on the bosses. Attitudes and values change in response to new initiatives. Practically every aspect of the organisation changes – often beyond recognition.

Let us see in summary how a reengineered organisation would look like.:

Let us see in summary how a reengineered organisation would look like. 1.Work units change – from being functional departments to process teams Companies that reengineer are, in effect, putting back and re-integrating the work that Adam Smith and Henry Ford broke into tiny pieces years ago. Once it is restructured, process teams are the logical way to organise the people who do the work.

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This is an important point: - The process is the focus of attention, and people are organised around processes. - Process teams do not mean having representatives from the functional departments involved; rather, process teams replace the old departmental structure.

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If one considered the progress of an order through a company - or a new product idea, or an insurance claim – each item in these processes get handled by many different people; but these people are not organisationally integrated. This fractionation creates numerous problems; in particular, it promotes incongruent goals among the different people involved. Each is more concerned with how he will answer his boss, or whether he will meet the productivity yardsticks within the small task that he is entrusted with.

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In creating process teams, we don’t necessarily change what people do; rather, we are making it possible for them to do it together instead of separately, scattered all over the organisation departmentally or even geographically.

2. Jobs change – from being simple tasks to becoming multi-dimensional:

2. Jobs change – from being simple tasks to becoming multi-dimensional People working in process teams find their work quite different from what they were accustomed to doing. They share joint responsibility with their team members for performing the whole process and not just a small part of it. They not only use a broader range of skills with very passing day, but must constantly have the larger picture in front of them. (This larger picture is the value that the process as a whole is expected to deliver).

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-Work becomes more multi-dimensional, -It becomes more substantive . -Reengineering eliminates not just waste but non-value-adding work, as well : -People spend more time doing real work. -After reengineering, work becomes more satisfying, since workers achieve a greater sense of completion, closure and accomplishment from their jobs.

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They actually perform a whole process; this, by definition, produces a result that somebody cares about. That is to say, It creates value. Work becomes rewarding , since people’s jobs have a greater component of learning and growth.

3. People’s roles change – from being controlled to becoming empowered:

3. People’s roles change – from being controlled to becoming empowered People working in a reengineered process are, by necessity, empowered. Empowerment is an unavoidable consequence of reengineering. Consequently, companies that reengineer must create additional (or different) criteria in the job profiles of the people they will hire. It is no longer sufficient to look at prospective employees’ education, training and skills; their character becomes an issue, as well.

4. Job preparation changes – from “training” to “education” :

4. Job preparation changes – from “training” to “education” Reengineered processes not only require people to follow rules, but also require that they exercise their judgement in order to do things right. Traditional training is insufficient to achieve this goal; the emphasis must shift to education . Training increases skills and competence and teaches people “how” to do things; but education increases their insight and understanding and teaches them “why”.

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In an environment of flexibility and change, it is clearly impossible to hire people who already know everything that they are ever going to need to know; therefore, continuing education over the lifetime of a job becomes the norm in a reengineered company.

5. Focus of performance measure and compensation changes – form activities to results :

5. Focus of performance measure and compensation changes – form activities to results When work is fragmented into simple tasks, companies have no choice but to measure people on the efficiency with which they perform the narrowly-defined work. For instance, what is the monetary value attached to design a crankshaft? Or to fit it onto the chassis of a vehicle? Or the assessment of an insurance application? Only the finished vehicle or the newly-issued insurance policy has value to the company.

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Reengineering shifts the focus of performance measures and compensation to the ultimate value that process teams are expected to create. Other compensation assumptions also fall away after reengineering – paying people based on rank or seniority; paying people for just showing up to work; or giving people a raise just because another year has passed.

6. Criteria for advancement change – from performance to ability:

6. Criteria for advancement change – from performance to ability A bonus or a raise is the appropriate reward for a job well done; however, advancement to a new job is not. Advancement to another job within the organisation is a function of ability, not performance . It is a change , not a reward. Reengineering firmly draws the distinction between advancement and performance.

7. Values change – from being protective to becoming productive :

7. Values change – from being protective to becoming productive Reengineering entails as great a shift in the culture of an organisation as in its structural configuration. Reengineering demands employees to believe that they work for their customers and not their bosses! Of course, they will only believe this to the extent that the company’s practices of reward reinforce it.

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An organisation’s management systems – the way in which people are paid, the measures by which their performance is evaluated, and so forth – are the primary factors that shape the employees’ values and beliefs. Creating a corporate value statement alone is useless and just another fad. Without supporting management systems, most corporate value statements are merely empty platitudes that only increase cynicism in the organisation.

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A value statement must be reinforced by the company’s management systems. The statement articulates values; the management systems give life and reality to those statements.

8. Managers change – from being supervisors to becoming mentors:

8. Managers change – from being supervisors to becoming mentors Process teams do not need bosses; they need mentors . Teams ask mentors for advice; mentors help teams solve problems. Mentors are not in the action, but are close enough to it so that they can assist the team in its work.

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Traditional managers have to switch from supervisory roles to acting as facilitators and enablers and as people whose jobs are the development of other people and their skills, so that those other people will be able to perform value-adding processes themselves. Managers must develop people who can think for themselves, decide for themselves and appreciate the essential reason why work is done!

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Managing itself is a particular skill, just like sales or engineering, and there is little correlation between excelling in a work skill and being a good manager. Managers in a reengineered company need strong interpersonal skills and have to take pride in the accomplishments of others – a fact that is so sorely lacking in India that one might even say it is completely lacking!

9. Organisational structures change – from hierarchical to flat:

9. Organisational structures change – from hierarchical to flat When an entire process now becomes the objective, managing the process becomes part of the team’s job. Decisions and inter-departmental issues that used to require meetings of managers and managers’ managers now get made and resolved by teams during the course of their normal work. The old manager’s traditional role is diminished. With fewer managers, there are fewer managerial layers.

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In the traditional organisation, the basic unit is the functional department – a collection of people performing similar tasks. The organisation as a whole consists of these functional departments arranged in various ways. However, in companies that have reengineered, organisational structure is not such a weighty issue. Work is organised around processes and it is the teams that perform them. People communicate with whomever they need and control is vested in the people performing the work. Consequently, whatever organisation structure remains after reengineering tends to be flat.

10. Executives change – from being score-keepers to becoming leaders :

10. Executives change – from being score-keepers to becoming leaders There is necessarily a shift in the role of a company’s senior executives. Flatter organisations move senior executives closer to customers and to the people performing the company’s value-adding work. In a reengineered environment, the successful accomplishment of work depends far more on the attitudes and efforts of the empowered workers than on the actions of the task-oriented functional managers.

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Therefore, executives must be leaders who can influence and reinforce employees’ values and beliefs by their words and deeds. In traditional companies, executives are divorced form operations. Their perspective on the companies they manage and run is primarily a financial one: Did the company achieve its numbers this quarter?

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In a reengineered company, they move closer to the real work. In shaping processes and providing workers with motivation, they are intimately concerned with how the work is done. They must now increasingly take on the role of mentors rather than being controllers . Mentors or coaches may not actually play the game; but they are closely involved in creating the game plan and in the players’ performance. They are more than just score-keepers.

The Corporate Crisis :

The Corporate Crisis Managements say, at least for public consumption , that they want an organisation that is Flexible enough to adjust quickly to changing market conditions, Lean enough to beat any competitor’s price, innovative enough to keep its products and services technologically fresh, and

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Dedicated enough to deliver maximum quality and customer service. Why, then, are so many companies bloated, clumsy, rigid, sluggish, uncompetitive, uncreative, inefficient, disdainful of customer needs, and losing money?

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The answer lies in how these companies do their work and why they do it that way. Some examples might serve to illustrate this point. A certain manufacturer has a goal of filling customer orders quickly; but this goal is proving to be elusive. Like most companies in the industry, this company uses a multi-tiered distribution system. That is, factories send finished goods to a central warehouse – the Central Distribution Centre (CDC). In turn, the CDC ships the products to Regional Distribution Centres (RDCs) that are smaller warehouses that receive and fill out delivery orders.

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One of the RDCs covers the geographical area in which the CDC is located; in fact, the two occupy the same building.Often and inevitably, RDCs do not have the goods they need to fill out delivery orders. However, this particular RDC ought to be able to get missing products quickly from the CDC located in the same building; but it does not seem to work out that way. That is because even on a priority order, the process takes eleven days: one day for the RDC to notify the CDC that it needs goods; five days for the CDC to check, isolate and dispatch the order and five days for the RDC to officially receive and shelve the goods and pack the customer’s order.

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One reason that the process takes so long is that RDCs are rated by the amount of time they take to respond to customer orders, but CDCs are not. The CDCs’ performance is judged on other factors: inventory costs, inventory turnover and labour costs. Hurrying to fill the priority request from an RDC will only hurt the CDC’s own performance rating! Consequently, the RDC does not even attempt to obtain priority goods from the CDC located across the hall. Instead, it has them shipped by air overnight from another RDC. The costs? Air freight bills alone run into millions of dollars annually.

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Each RDC has a unit that does nothing but work with other RDCs looking for goods; and the same goods are moved or handled more times than are necessary. The RDCs and the CDCs are all doing their jobs; but the overall system just doe not work! It leads to the crises as stated below

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In the case of a consumer goods manufacturer whose working methods were studied, when retailers return unsold goods for credit, thirteen separate departments were involved. “Inward” receives and accepts the goods, warehouse returns them to stock inventory management updates records to reflect the returns, sales promotions determines determine at what price the goods were actually sold, sales accounting adjusts commissions, general accounting updates the financial records, and so on. Yet, no single department is in charge of handling sales returns! For each department, sales returns are a low-priority distraction!

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Not surprisingly, mistakes occur. Returned goods end up “lost” in the warehouse. The company pays sales commissions on unsold goods. Worse, retailers do not get the credit they expect and become angry, which effectively counters all the efforts of Sales and Marketing. Unhappy retailers spread bad word-of-mouth. They also delay paying their bills to the company, or often pay only what they think they owe to the company after deducting the value of the returns. This throws the company’s accounts receivable department into turmoil, since the retailer’s cheque does not match the company’s invoice amount.

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Eventually, the manufacturer simply gives up, unable to trace what really happened. Its own estimate of the annual costs and lost revenues from returns and related problems runs into nine figures. From time to time, the company’s management has attempted to tighten up the disjointed process; but, no sooner does it get some departments working well than new problems crop up in others.

THE PROBLEM:

THE PROBLEM The companies like these are not exceptions; they are the rule. This is not how corporate executives say they want their companies to behave; yet, this behaviour persists . Companies do not necessarily perform badly because they are lazy or because people do not do their work. In fact, most companies perform Adam Smith and Henry Ford’s principles “division of labour” and “specialisation” perfectly. Ironically, the more they adhere to these principles, the more they lose!

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The truth is: companies do not manage “processes”; they only manage portions of a process. Companies do not even recognise “processes”; they only recognise portions of processes and then “specialise” in doing their little tasks within these processes. They are not accountable to the process; they are only accountable to their internal preoccupations within the process.

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The development of corporations as we know them today came about in the United States between the end of World War II and the 1960s, a period of enormous economic expansion. The regimes of Robert McNamara at Ford and Reginald Jones at General Electric epitomised the management of that era. Through elaborate planning exercises, senior managers determined the businesses in which they wanted to be, how much capital they should allocate to each and what returns they would expect the operating managers of these businesses to deliver to the company.

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A large staff of corporate controllers, planners and auditors acted as the executives’ eyes and ears, abstracting data about divisional performance and intervening (“supervision”) to adjust the plans and activities of operating managers.

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This organisational model spread rapidly to Europe and then to Japan after World War II. Designed for a period of heavy and growing demand - and, therefore, accelerated growth – this form of corporate organisation suited the circumstances of the post-war times perfectly. The standard pyramidal model organisational structure of most organisations was well-suited to a high-growth environment because it was scalable. When a company needed to grow, it simply added workers as needed at the bottom of the chart and then fill in the management (“supervisory”) layers above.

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This kind of organisational structure was also ideally suited for control and planning. By breaking down work into pieces (Adam Smith, again?), supervisors could ensure consistent and accurate worker performance and the supervisors’ supervisors could do the same! Budgets were easily approved and monitored department by department and plans were pursued on the same basis.

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This organisational form also made for short training periods, since few productions tasks were complicated or difficult. Moreover, as new office technology became available in the 1960s, companies were encouraged to break down even more of their white-collar work into small, repeatable tasks, which could also be automated or mechanised.

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However, as the number of tasks grew, the overall processes of producing a product or delivering a service inevitably became more complicated, and managing such process became increasingly difficult. The growing number of people at the supervisory levels in the middle of the company’s organisation chart – the middle managers – was one of the prices that companies paid for the benefits of fragmenting their work into simple, repetitive steps and organising themselves hierarchically.

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Departmental structures had to become taller to accommodate them. Another cost was the increasing distance that separated senior management from their products or services. Customers and their responses to the company’s strategy became a set of faceless numbers that came up through the organisation’s layers!

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Today’s reality that organisations have to confront is that the old ways of doing business – the “division of labour” principle – simply do not work any more. Suddenly, the world is a different place. In today’s environment, nothing is constant or predictable – market growth, customer demand, product life cycles, the rate of technological growth, or the nature of competition. Adam Smith belongs to yesterday!

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To bring about Reengineering we need to change, & this change has to be brought about properly & also managed properly. In other words we are talking about CHANGE MANAGEMENT. What is change management?

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Today, the term “change management” takes on a variety of meanings. The most practical and useful definition is: Change management is the process, tools and techniques to manage the people-side of business change to achieve the required business outcome, and to realize that business change effectively within the social infrastructure of the workplace. Change management is the process, tools and techniques to effectively manage people and the associated human resource issues that surface when implementing business changes. OR

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Some people integrate change management techniques with business improvement methodologies. This integrated approach is neither right or wrong. What is important is that you can recognize the difference between the two and understand the relationships between business improvement techniques and change management.

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Change management occurs on two levels: the organizational level and the individual level. This framework of viewing change management from the management view and the employee view is critical for understanding. To understand change management, we need to consider two converging and predominant fields of thought: An engineer's approach to improving business performance and A psychologist's approach to managing the human-side of change.

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The mechanical system perspective focuses on observable, measurable business elements that can be changed or improved, including business strategy, processes, systems, organizational structures and job roles. From this perspective, a business is like a clock where each of the mechanical pieces can be changed or altered to produce a predictable and desirable solution. The change can be gradual as seen in continuous process improvement methods such as TQM, or radical, as advocated in business process reengineering

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The other side of the story begins with psychologists. Concerned with how humans react to their environment, the field of psychology has often focused on how an individual thinks and behaves in a particular situation. Humans are often exposed to change, hence psychologists study how humans react to change. The net result of this evolution is that two schools of thought have emerged. The table below summaries the key differences and contrasts the two approaches in terms of focus, business practice, measures of success and perspective on change.

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Engineer Psychologist Focus Processes, systems, structure People Business practices BPR, TQM, ISO 9000, Quality Human resources, OD Starting point Business issues or opportunities Personal change, employee resistance (or potential for resistance) Measure of success Business performance, financial and statistical metrics Job satisfaction, turnover, productivity loss Perspective on change “Shoot the stragglers, carry the wounded.” Help individuals make sense of what the change means to them.

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Organization needs to change i.e. there has to be organizational change. What is organizational Change? Typically, the concept of organizational change is in regard to organization-wide change, as opposed to smaller changes such as adding a new person, modifying a program, etc.

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Examples of organization-wide change might include a change in mission, restructuring operations (e.g., restructuring to self-managed teams, layoffs, etc.), new technologies, mergers, major collaborations, "rightsizing", new programs such as Total Quality Management, re-engineering, etc. Some experts refer to organizational transformation. Often this term designates a fundamental and radical reorientation in the way the organization operates.

What Provokes Organizational Change? :

What Provokes Organizational Change? Change should not be done for the sake of change -- it's a strategy to accomplish some overall goal. Usually organizational change is provoked by some major outside driving force, e.g., substantial cuts in funding, address major new markets/clients, need for dramatic increases in productivity/services, etc.

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Typically, organizations must undertake organization-wide change to evolve to a different level in their life cycle, e.g., going from a highly reactive, entrepreneurial organization to more stable and planned development. Transition to a new chief executive can provoke organization-wide change when his or her new and unique personality pervades the entire organization.

Key conditions required for change:

Key conditions required for change A clear understanding of vision of what has to be done. A strong awareness of current reality. The conviction that you can shape the future. After considering the above points, the change has to be implemented.

The critical success factor for effective implementation are::

The critical success factor for effective implementation are: Create a shared vision for change Manage the change process Plan top-down but implement bottom-up, empowering line managers & workers.

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Build an effective partnership between technical & business specialists. Phase the implementation. Train & support innovative procedures. Institutionalize & reinforce results.

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