LOVE

Business process reengineering guide: Tools and examples

Business process reengineering (BPR) is a method of change management that began in the 1980s when the tech revolution was just beginning to reshape business procedures.

Two university professors, Michael Hammer of MIT and Thomas Davenport of Babson College, are generally credited with coining the term “business process reengineering” through their joint research process called PRISM (Partnership for Research in Information Systems Management).

Some of the largest corporations of the time funded their research. The goal was to develop a systematic approach to incorporating the new technology — exemplified by the personal computer and the rapidly growing internet — into daily business processes. As prices for business-adaptable technologies became more reasonable, the professors’ research gained more attention.

Hammer described BPR in detail in an article in the Harvard Business Review published in 1990 under the title “Reengineering Work: Don’t Automate, Obliterate.” He scolded corporate managers for using technology “to mechanize old ways of doing business” and claimed, “They leave the existing processes intact and use computers simply to speed them up.”

Though Davenport and Hammer eventually parted ways, the world of business enthusiastically embraced their advocacy for radically altering business processes to take advantage of cost savings. By the early 1990s, BPR was widely considered smart management.

The key to understanding BPR: Learning its history

While the term “business process reengineering” has been in the management lexicon since the mid 1980s, the idea is actually much older. Technological changes have long driven BPR.

The first well-documented example of BPR is Eli Whitney’s revolutionary introduction of standardized parts for gunmaking at the beginning of the 19th century. Whitney, at the time already famous for his invention of the cotton gin that removed seeds from raw cotton, won a federal government contract to manufacture 10,000 muskets for the U.S. Army.

He completed the contract (years late, as it turned out, which even then was fairly typical for government contractors) by using premade parts assembled by relatively unskilled workers. Before then, highly skilled gunsmiths built each gun by hand, so each gun was unique — and very expensive.

A century later, Henry Ford’s introduction of the assembly line revolutionized car making and manufacturing in general. Ford lowered the cost of each car by drastically increasing production. Of course, nobody referred to what Whitney and Ford did as business process reengineering, but both examples illustrate what BPR can accomplish when the technology becomes available.

Undertaking BPR is a major move. When Hammer and Davenport outlined the strategy in the late 1980s, what they had in mind was a radical redesign of core business processes, incorporating then-new technologies like personal computers to dramatically improve productivity, shorten cycle times, and improve the overall quality of products and services.

BPR is a way for companies to thoroughly rethink existing processes when they incorporate new technology. Think of the new technology as a flying car. You could use the flying car to simply fly above your old routes and be satisfied with cutting travel time by traveling above the world governed by speed limits and red lights. Or, following the BPR approach, you could use the flying car to chart new routes that were impossible before the invention of the flying car.

One of the earliest phases of the office tech revolution was the shift from typewriters to word processors and from ledger books to bookkeeping software and shared spreadsheets on PCs. Those first-stage technologies triggered a fundamental reorganization of back office operations, such as clerical processes, bookkeeping, payroll, accounts payable and receivable, and all other basic daily business functions. The new technologies greatly improved efficiency but very often resulted in layoffs.

Failing companies are seldom positioned to successfully execute BPR. The managers of a company in serious jeopardy of shutting its doors are more likely to be looking for new jobs than initiating the deep examination required to execute a worthwhile BPR initiative.

A thorough and successful revamp of operations is more likely at a failed company that another organization has purchased. In other words, it often only happens at companies with new owners or at successful companies with strong leaders.

The classic BPR case study

Hammer and fellow professor James Champy highlighted the most famous (and to workers, infamous) example of BPR in their 1993 book, Reengineering the Organization. They examined in detail Ford Motor Company’s reengineering of its accounts payable department.

The department employed around 500 people to laboriously match paper purchase orders with invoices. The reengineering reduced staff by 75 percent by switching to an online spreadsheet.

Ford was solvent (to say the least) when it reorganized the accounts payable operation and reduced its staff. The company didn’t conduct the BPR because it was in trouble. Leadership did it to determine how to maximize the benefit of new technology that made it possible to do the same work with fewer staff. Accounts payable was the lowest hanging fruit, so Ford invested in the technology, revamped processes, and cut positions.

Almost as soon as Hammer and Davenport coined the term “business process reengineering,” it became synonymous with layoffs. Beginning in the mid-1980s, technology and software as rudimentary as first-generation computers capable of word processing and spreadsheet calculating were very disruptive.

The legacy recordkeeping, bookkeeping, accounting, and filing systems reliant on paper records that technology replaced were vastly slower, less efficient, and much more expensive because of the staffing they required. So it makes sense that many perceived BPR simply as a euphemism for replacing people with technology.

But even if that was true then (which it wasn’t), it’s certainly not true now. With the maturation of business technology and the tech-savvy contemporary workforce, there are no companies as overstaffed as the pre-computer accounts payable department at Ford headquarters. Every company with 500 employees capable of shrinking the staff to 125 by adopting basic information processing technology and software, which was the singular example of BPR circa 1990, made those changes long ago.

Just because companies tend to be fairly up to speed on technology, though, doesn’t mean that BPR is an irrelevant idea. It’s important to remember that BPR is a managerial process for rethinking current processes as new technology creates new opportunities to create more value for clients and customers. Fundamentally, the goal of BPR isn’t to cut costs but to improve efficiency in order to gain or maintain a competitive advantage or to become or stay competitive.

Ford didn’t just reengineer simply because the technology was available — the organization’s leaders learned that Japanese automakers were already using it, and they knew they had to implement the technology to remain competitive. And if Ford needed to catch up with Japanese automakers in its back office operations, it had to suspect the company might be falling behind on the factory floor as well.

Although large staff reductions created the lasting impression that BPR is undertaken solely to reduce costs, BPR really isn’t a way for failing companies to save themselves or to cut employees. These days, a BPR initiative will likely result in the same number of people doing more work with new tools. A common example of this is when new technology and software create new capabilities.

For example, sophisticated customer relationship management (CRM) systems sharpen marketing and sales campaigns, but they’re unlikely to replace staff in sales or marketing. In fact, using CRM technology is actually more likely to create new jobs, such as for digital marketers, commercial graphic artists, and customer service staff.

Efficiency: The reason for undertaking BPR

The example of Ford’s application of business process reengineering to its accounts payable department may be iconic, but it’s from an era when business technology wasn’t especially powerful.

In technology terms, what happened in 1993, the year Hammer and Champy published their book detailing the Ford reengineering, is ancient history. The dot com boom had barely begun. Social media and smartphones didn’t exist. The internet had only been publicly available via dial-up modems for two years.

Now all of those technologies are mainstays of contemporary business operations and to most of society overall. As additional technologies become available and more familiar, even the most ordinary businesses incorporate them to enhance efficiency.

For instance, many restaurants use QR codes to display their menus on a customer’s smartphone. Field technicians routinely use wireless technology to remotely monitor equipment, access information, file reports, and complete other tasks.

Regardless of the name given to the process — whether a company calls it digital transformation, change management, process reinvention, and so on — BPR signals that an organization’s leaders recognize a fundamental business process isn’t meeting expectations and has become a drag on overall company performance. They undertake the reengineering process, often with the addition of previously unavailable or unused technology, to create efficiencies.

Management tools for successful BPR

If you’ve ever watched an episode of the popular TV reality series Bar Rescue, you’ve witnessed a successful business process reengineering initiative. In each episode, a bar invites the host, Jon Taffer, to uncover what’s gone wrong at a bar that once was thriving but just isn’t drawing crowds or earning as much as it once did.

Taffer, with the support of the proud but worried owner, conducts a granular examination of bar operations — looking at the size of the drinks, how staff handles cash, how items are priced, and so on.

Taffer inevitably discovers that the bar has been on autopilot for a long time. The owner has gradually stopped paying close attention to daily operations and doesn’t really know the inner workings of their own business. What Taffer finds — whether they’re losing money on meals or a trusted team member is embezzling money — inevitably startles them.

Of course, Bar Rescue is a TV show meant for entertainment, but there’s a very important lesson in it for business leaders. The decline of a business is nearly always gradual and caused by factors that are in plain view but nonetheless overlooked. When the owners and managers of the bars call in Tapper, they’re more or less admitting they’re failing and don’t know why.

Strip away the reality show dramatics, and that’s basically the origin story of every business process reengineering initiative. If something important isn’t working, it will eventually demand attention.

Gartner, a leading global research firm, describes BPR as an integrated set of management policies and project management procedures that rely on the skill of managers (often working with their own Jon Taffers in the form of highly skilled consultants) to meet the following objectives:

  • Conduct an objective, granular analysis of the existing processes and systems that are chronically inefficient because of their fundamental business processes
  • Apply the results of the analysis to design alternative processes and systems that correct exactly what has caused the previous process to fail
  • Systematically prototype and test the new processes prior to implementing them
  • Gain buy-in from staff for implementation of the new process
  • Manage the transition to the new process

BPR was a brutal undertaking in the early days of replacing analog systems with new technologies. Lifelong members of staff were suddenly redundant.

However, business process reengineering initiatives are now far more likely to result in improving the human element of business processes, not eliminating members of a team. In fact, the most common result is that staff begin working on new, cross-functional teams.

Today, BPR is generally more about changing processes to improve performance from the perspective of the customer. There’s a strong impetus to shift managerial emphasis from the boss calling all the shots to giving latitude to teams to solve problems on the ground.

Business process reengineering begins with the honest realization that a key function of the company isn’t performing adequately, and it’s successful when it delivers improved results. Before, it was about taking advantage of revolutionary technology, but now it’s a fundamental practice of monitoring business processes and reengineering those found lagging — and that’s a standard for sound management.

Related Articles

Back to top button