The business world today differs dramatically from the one that existed just a few years ago. For example, we see a rising global competitiveness and a demographically transformed workforce. Further, customer demands have become more intense, for example, customers require an ever-shorter time framefordelivery. Organizational re-engineering, business process re-engineering, and total quality management are among the strategies some corporations are using to deal with those changes.
Most changes processes, such as total quality management, are focused on enhancing products and services to both customers and suppliers. Total quality management requires incremental changes over several years. Those changes are usually small and take place within the current corporate culture. However, some companies have recognised the need for more extensive, almost radical, changes in operations. Organizational and business process re-engineering are the processes used to design those radical changes, and they have generated many huge successes.
When a re-engineering effort succeeds, companies reap big benefits. For example, a major automobile company re-engineered invoice processing and reduced the number of employees in that department by 75 percent with major cost savings. Similarly, a major telecommunications company re-engineered part of its service department and cut costs by almost 33 percent.
Exactly how re-engineering started is a contentious subject among the industry's professionals. Some claim that the re-engineering process started a few years ago as a blending of several methodologies. Others claim that re-engineering started in 1980s, when the American auto industry, battered by Japanese rivals, began to integrate car design with assembly-line automation. At that time, American automobile manufacturers embraced the ideas of just-in-time (JIT), or delivering supplies just when the factory needs them rather than warehousing inventories, and total quality management, continuously improving the quality of operations and customer service.
Indeed Organizational re-engineering is several products rolled into one. Organizational re-engineering can be compared to a multi-symptom cold medication. Just like the various brands of cold medicines, consulting firms that offer re-engineering services combine their own ingredients in different formulations. Further, in their marketing strategies, they work to differentiate themselves from each other. However, whatever the mixture of services, re-engineering efforts usually have four major components:
Organizational re-engineering requires that tasks be compressed and integrated rather than fragmented into specialised and repetitive tasks. Thus, our working definition of Organizational re-engineering is this:
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.
In other words, Organizational re-engineering is a process by which a company may redesign the way it does business to maximise its core competencies. In turn, this redesign results in dramatically or significantly higher profits, greater customer satisfaction, lower expense, consolidated activities, and increased productivity. Organisational re-engineering redesigns the way work flows through an Organization, which often leads to system and infrastructure changes.
An Organization’s core competencies are its collective knowledge, including the processes by which it co-ordinates and integrates diverse production skills and multiple streams of technology. In essence, core competencies are the systems that enable an Organization to identify and use - to the best competitive advantage - the knowledge embedded within its Organization.
Organisational re-engineering involves reorganising work flows, cutting waste, combining process steps and eliminating repetitive tasks. It will not work within the typical corporate culture because it changes the corporate culture itself. The process sets aside the traditional culture and, in its place, presents a new set of Organizational principles by which leaders can rebuild their business. re-engineering strives to break away from the old rules about how Organizations are structured and the way they conduct business. re-engineering involves recognising and rejecting old methods and finding imaginative new ways to accomplish work. New rules will emerge from the redesigned processes to govern the Organization. The redesigned processes and the new rules produce a quantum leap in the performance of an Organization.
Organisational re-engineering does not lead to incremental improvements, which are usually associated with traditional quality improvement programs. Instead, it produces breakthrough improvements in operational and financial performance. re-engineering goes to the heart of the ways in which Organizations work. It is not just automating or re-automating existing business processes. It is discarding conventional ways of working and replacing those ways with entirely new ones.
As stated earlier, Organizational re-engineering centres on the radical redesign of business processes to better meet customer needs through a focus on core competencies and cultural change. It focuses on processes that create something of value for customers, whether they are internal or external. re-engineering can be applied, for example, to new product development processes, which turn an idea into a manufacturable and marketable prototype, or to order fulfilment processes, which begin with the receipt of an order and end when the customer has received and paid for the product. Thus, re-engineering examines processes that are cross functional. Target processes transcend the boundaries between sales, marketing, manufacturing, finance , and research and development. Processes are the neglected orphans of traditional structures. Most companies focus on functions, while processes fall between the cracks.
Organisational re-engineering may focus on process redesign, but it doesn’t end with process redesign. A radical change in the structure of a process inevitably entails dramatic change in all other aspects of the Organization, which include the content and definition of jobs, the shape of Organizational structure, and the values and beliefs the people have about what is important to the Organization.
In summary, Organizational re-engineering rethinks the way work is done inside an Organization; it does not simply try to improve existing processes. Organisational re-engineering changes processes completely, so that they are logical and efficient and driven by an Organization’s core competencies.
The re-engineering process or model presented , provides a holistic approach to the redesign and rebuilding of an Organization. it is broader than the model for re-engineering business process, which is only a component of the model presented. This model provides action steps for strategic, cultural, and technical aspects of re-engineering an Organization.
The re-engineering process is not a substitute for strategic direction. For example, re-engineering will not help to perfect a process that is flawed. However, when an Organization that has a clear strategic direction with a focus on core competencies is reengineered, that Organization can better achieve its goals by creatively strengthening and combing customer opportunities.
Note, however, that any changes of processes, will be met with resistance inside an Organization unless cultural factors such as employee buy in and job satisfaction are considered as part of the change process. Internal resistance may cause great internal pain and could potentially result in failure of the re-engineering effort. Thus, the model strongly emphasises the preparation of employees for change.
The re-engineering model is divided into four phases, which consists of 13 major steps. The first phase, preparing for change, sets the foundation for future activity. This phase takes a two pronged approach to change. The first prong involves building understanding and support in management and increasing management awareness of the need for change. These activities provide direction for the re-engineering effort and build an internal review and approval process. The second prong prepares for a cultural shift and buy in by the Organization’s employees by informing the employees of their role in the upcoming change process.
The second phase, planning for change, operates under the assumption that Organizations need to plan their future because of the constantly changing marketplace. Any Organization that assumes economic conditions, consumer needs and expectations, and competition in the marketplace will be the same two, three or five years from now is foolhardy and unrealistic. Thus, the planning phase provides a process by which management can envision the future and develop actions needed to operate effectively in that future by building on the Organization’s core competencies. Planning for change also provides direction and guidelines for the next phase - designing change.
From an operational viewpoint, a process is a bound set of interrelated work activities, each having prescribed inputs and outputs. It has a well defined beginning and end. A process is essentially a method for doing things. The main purpose of a productive process is to crate from a set of inputs one or more outputs of greater added value than the inputs.
The third phase designing change provides a method to identify, assess, map, and ultimately, redesign business processes. It offers the necessary framework for translating insights about the process being explored into quantum leaps of change. What differentiates the approach presented here from other process improvement or business process re-engineering methods are two complementary mapping approaches - flowcharting and integrated flow diagramming - and cultural considerations.
The final phase, evaluating change, provides a means to evaluate the improvement during a predetermined time frame , usually a year, and to develop priorities for the coming years. Specifically, this phase helps determine whether the re-engineering effort has been successful and where future efforts should be concentrated.
Phase I Preparing for change
Top management explores the re-engineering process
Prepare workforce for involvement and change.
Create a vision, mission, and guiding principles
Develop a three to five year strategic plan
Phase II - Planning for Change
Develop yearly operational or breakthrough plans
Phase III - Designing Change
Identify current business process
Establish the scope of the process - mapping project
Map and analyse the process
Create the ideal process
Test the new process
Implement the new process
Phase IV - Evaluating change
Review and evaluate progress
The re-engineering effort is often initiated because major challenges, such as lost market share, unhappy customers, declining revenues, and low employee morale, face an organization. However, a re-engineering effort may also be initiated due to a leader's vision and understanding of what re-engineering can offer. As noted earlier, the first phase of organizational re-engineering, the preparation phase, sets the foundation for future activity in two ways.
1. It prepares management to accept and embrace change
2. It prepares the organization’s employees for involvement and change.
Top Management Explores The re-engineering Process
The organization’s top management must set the stage for the entire re-engineering process. Thus, if top management does not buy into the change process, the effort is bound for failure. Management should follow three sub steps to explore the re-engineering process.
Educate Management On The re-engineering Process And The Need To Change.
Most organizations require significant changes in management philosophy and behaviour to survive the fluid and dynamic business environment that exists today Senior management must become aware of the various phases of re-engineering and the potential impact it could have on the organizational structure, culture, and resources. Further, this awareness must occur before any re-engineering application is attempted.
Senior management must recognise the need for change. The driving forces can come from feedback generated by a variety of sources. These sources include the following.
Create A Re-engineering Steering Committee
This creation of re-engineering steering committee (RSC) establishes a high level management group whose charter and focus is to guide the use and ongoing direction of the re-engineering process. This committee ensures that the re-engineering effort will receive the attention, focused support, and participation of the highest management levels in an organization. The RSC concentrates on the following issues:
Development and maintenance of RSC organization / charter
Identification of key opportunities (identified in phase II Planning for Change)
Adaptation of re-engineering results into on going planning (Phase II - Planning for change)
While the RSC concentrates on these issues, it must fulfil the following responsibilities:
Develop An Initial Action Plan
The RSC must plan for a re-engineering effort under clear executive direction and with the shared awareness and understanding of the executive staff. An initial plan is general in scope and context, versus being detailed and very specific. The plan should be general and broad in scope especially when the organization lacks experience in the re-engineering process, and provides general guidelines for all future re-engineering efforts.
Prepare Workforce For Involvement And Change.
This step involves preparing the entire workforce for the potential changes and informing employees of their role in the effort. More specifically, the RSC educates the workforce about the re-engineering process and the need for change
The workforce preparation rests on four foundation blocks.
Peer consensus; Most people resist change because it disrupts the ritual and order of their lives. However, one's personal ties with others exert a strong influence. Sharing is a sign of belonging, and few individuals will stand alone. As a result, consensus building processes based on this natural peer bonding relationship induce change in organizations.
Two way trust
Individuals and groups communicate best in high trust situations. When communications break down but individuals trust one another, they are more likely to work though difference that develop and attempt to re-establish communication. Openness about the change process and trust in it influence whether and how change occurs.
Training
Even if the workforce understands and accepts the upcoming change, it may not have the required skills or the ability to carry out the change. Thus, the work force must be trained in the skills necessary for change.
Adaptability
The most successful change is that which the work force can easily adapt to the unique circumstances that always develop. Therefore, leaders should only articulate a change idea, or general sense of where the change is headed, and give the employees significant opportunities to adapt the ideas and the resulting processes as they see fit.