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Business Process Reengineering.
According to Hammer the major steps the company should embark on to redesign its process are
(i) Develop business vision and process objectives.
(ii) Identify processes to be redesigned.
(iii) Understand and measure existing processes
(iv) Identify information technology levels and
(v) Design and build a prototype of the process.
THE REENGINEERING PROCESS:
Process engineering is an innovate process for which a disciplined approach to the effort is essential. It involves a six-step plan. These steps are:
Step 1: State a case of action.
Step 2: Identify the process for reengineering.
Step 3: Evaluate enablers for reengineering.
Step 4: Understand the current process.
Step 5: Create a new process design and
Step 6: Implement the reengineered process.
These steps are explained below:
(i) State a case of action:
The need for change should be effectively communicated to the employees of the organization through educational and communication campaigns. Two key messages to be articulated are
(a) need for action and
(b) A vision statement.
The objectives of reengineering must be in the form of a qualitative and quantitative vision statement. These objectives include goals forces reduction, time-to-market, quality and customer satisfaction levels and financial indicators. The CEO of the company is responsible for the communicating the vision statement first to the senior management and then to the rest of the firm. A senior management steering committee that includes the CEO typically champions the change process, sets goals, assigns resources and expedites progress.
(ii) Identify the process for reengineering:
All the major processes in the firm should be initially identified and a few processes should be selected for reengineering. The following questions define the criteria for selecting processes for reengineering:
• Which processes are currently more problematic?
• Which processes are critical to accomplishing company strategy and have the greatest impact on the company’s customer?
• Which processes are most likely to be successfully redesigned?
• What is the scope of the reengineering project and what are the costs involved?
• What is the strength of the reengineering team and the commitment of process owners and sponsors?
• Can continuous improvement deliver the required improvements?
• Is the process antiquated or is the technology used outdated?
Response to these questions can be weighted in accordance with the company’s need for improvement. The selected process should have a manageable reengineering project scope with well defined process boundaries.
(iii) Evaluate enablers:
Information technology and human/organizational issues act as enablers for the reengineering process. Technology evaluation has now become a core competency required of all companies. Companies should develop the ability to evaluate current and emerging information technology and identify creative application to redesign their existing processes.
The current organizational culture should also be evaluated in light of the impending change to be brought about by reengineering. Participative and customer – oriented cultures that evolved from the quality revolution provide a suitable environment for further change. But the magnitude of change created by process redesign makes the management of change a necessity. Issues of measurement and compensation, career paths, work enrichment and new skills training should be addressed.
(iv) Understanding the current process:
The current process must be understood by making use of process evaluation techniques such as flow charts, fishbone diagrams process. The purpose is to create a new, radically better process. The current process must be studied to understand the activities which are essential to completion. All activities can be classified into three types:
(a) Value-adding work – work for which customer is willing to pay.
(b) Non-value adding work – work which creates no value for the customer but is required in order to get the value adding work done.
© Waste – work neither adds nor enables value.
Value adding work consists of all the activities that create the goods and services that customers want.
Waste work is work whose absence would not be noticed by the customer. Waste work needs to be eliminated.
Non value adding work is the glue that binds the value-adding work in conventional processes. It is mainly the administrative overhead – the reporting, checking, supervising, controlling, reviewing and coordinating. Michael Hammer argues that it is necessary to design non-value adding work by reorganizing the value adding tasks into a new and more efficient process.
(v) Create a new process design:
Process redesign requires beginning with a clean slate. Reengineers should suspend current rules, procedures and values so as to create new process design. They also need to utilize the principles of reengineering.
The first emphasis in reengineering a process is to eliminate all waste work. Next, the focus is on the elimination of non-value-adding work. Hammer has found that less than 10% of the activities in a process are value-adding activities.
(vi) Implement the reengineered process:
Leadership is critical to the implementation process as well as to the entire reengineering effort. Process engineering teams are typically responsible for implementing the new designs. However, support and buy-in from line managers are crucial to success. Training employees in additional skills needed to perform in the new environment is also essential.
APPLICATION OF REENGINEERING:
Reengineering as applied to any business process
Hammer states that business process may be defined as a set of logically related tasks to achieve a defined business outcome. A set of processes forms a business system – the way in which a business unit or a collection of units carries out its business.
Assuming that a company has decided that its processes are ineffective and inefficient, the following are the major steps the company should embark on to redesign its process, according to Hammer:
(i) Develop business vision and process objectives: This step involves prioritizing objectives and setting targets for the future. A BPR vision statement describes the ideal state of a process.
(ii) Identify process to be redesigned: This involves identifying critical or bottleneck processes and envisioning the steps to avert shortcomings in them.
(iii) Understand and measure existing processes: This involves identifying current problems and setting a base line.
(iv) Identifying information technology levels: This involves bringing those involved in the process to a brain-storming session to identify new approaches.
(v) Design and build a prototype of the process: This includes implementing organizational and technical aspects.
Process reengineering in a manufacturing organisation
A process is a group of activities that takes an input, adds value to it and provides an output to an internal or external customer. Processes enable the organization to focus on the customer. Viewing the material transformation process in terms of those activities tied to transforming material into something of value to the customer is a process view. Such a view examines inventory in terms of customer value, not internal economies. Such a view can be basis of reengineering processes.
REENGINEERING IN A MAJOR INSURANCE COMPANY:
Considering a problem in a major insurance company: When the customer called the home office about an insurance problem, the incoming calls department took the call. The problem was entered into the computer and passed electronically to one of the several departments: underwriting, policy service and accounting. The problem was waited in line, often for several days until a clerk had time to check it out. In some cases, the customer’s problem had been routed to the wrong department and had to be routed to another department to answer the question, the process of waiting was repeated.
Finally, some one in customer service would get back to the customer after several weeks. In many cases, the original question was not completely answered or answered wrongly.
The process was reengineered by completely reorganizing the entire insurance operation around customer services representative who would attempt to handle the customer’s request on the phone, if possible, using detailed computer protocols and standard scripts. If more detailed work was required, the customer service representative checked with other specialists and got back to the customer in one week or less with an answer. This greatly improved the speed and accuracy of the service while saving many millions of dollars. It also provided a single point of contact and fewer hassles for the customer.