Business Process Reengineering (BPR) is a change management tool that organizations all over the world are now implementing in order to get competitive advantage over their rivals. The organization initiates and controls most of the process changes. Business process reengineering involves changes in business processes, management systems, hierarchies, workflows, job definitions and even organizational beliefs and attitudes. According to Ezigbo (2003), business process reengineering involves rethinking the current theories of the business. Remarkable improvements are made by breaking away from following the old methods and adopting the newer ones.
Technology is an essential aspect because few changes in today’s world can be made to improve processes without using technology. According to Lowell Greenberg (1996), it is most appropriate to appoint a senior partner or executive as the leader in the business process reengineering process. He convinces people that something is wrong in the current processes and why making certain changes would help the organization overcome those problems. This would also help the organization regarding feedback on the business process reengineering (Greenberg 1996).
In this paper, we will review how Chase National Bank (now JP Morgan Chase and Co.) implemented business process reengineering in many of its business processes. We will also identify the pros and cons of BPR that were experienced by Chase Manhattan Bank. Chase Manhattan Bank was created when Chase National Bank merged with The Manhattan Company in 1955. It was in 1996 that the companies Chase Manhattan Corporation and Chemical Banking Corporation merged together to become United States’ largest bank holding company. Later in 2000, Chase Manhattan Corp merged with J.P. Morgan & Co. to form J.P. Morgan Chase & Co.
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Chase National Bank’s approach to business process reengineering was very similar to the five steps suggested by Davenport and Short (1990). Firstly, establish your vision and objectives at all levels. Secondly, recognize the process that would benefit the organization. Most companies choose processes that are conflicting with the vision or goals of the business.
Others choose the most critical processes whose reengineering would benefit the organization the most. Thirdly, evaluate the current process. This would help in avoiding the mistakes that were previously being made. Fourthly, identify the level of technology that you can bring into the process and how much would it effect the entire process and eventually the organization. Lastly, design and build a sample of the new process and evaluate its performance. See if you can further improve it and then build your actual process.
Business process reengineering helped Chase Manhattan Bank to reengineer its name and address process to live up to their pledge of “one and done”. The team worked together with the Credit Card, Auto Finance and Mortgage to get a grasp of the present processes of Chase Manhattan Bank. The team then reinvented and restructured the model using newer technologies. This new model enabled Chase Manhattan Bank to accept client requests through any means of contact, at any time.
It got rid of errors in entering the data, duplicated entries and updated customer accounts regularly. The clients now did not need to call several times hence the “one and done” policy was being portrayed. Upgrade in technology also included launch of E-funds disbursement cards. This allowed a variety of cards such as payroll and gift cards to be customized. Funding and reporting became much suppler. Use of multimedia helped in enabling clients to open mass accounts.
Another component of business process reengineering was the new Branch Cash management. There was previously no computerized way, at Chase Manhattan Bank’s branch and ATMs, of forecasting how much cash would the customers demand. Chase Manhattan Bank needed to maintain adequate cash reserves so that the clients were never refused cash by the ATM machines. Through business process reengineering, Chase Manhattan Bank developed a cash tracking process which would aid the bank in keeping just the right amount of cash on a given day. This meant more happy customers and also lesser opportunity cost of too much idle cash. This development contributed in increasing revenue by $2.4 million (Shin & Jemmella 2002).
Previously service charges that were refunded were recorded and documented manually in the branch and were faxed to the back office for further processing. The business process reengineering team conducted two lengthy focus group sessions with the staffs of the branch and the call center. The result was Service Charge Reengineering. The existing processes were improved and made computerized.
Customers’ requests were now credited to their accounts on the same day and branches were able to process requests the contact point. Due to this the bank saved around $500 million annually. A new redesigned model was also developed that enabled automated decision making concerning approval or declination on customer requests (Shin & Jemmella 2002).
The business process reengineering also included Retail funds transfer reengineering. The entire retail fund transfer process was first evaluated. Then, some changes were brought to make the process better and more efficient. The previous manual method of transferring funds in the back office area was replaced by real time processors. This considerably improved the service of the bank and reduced operating costs worth $1.4 million.
The bank’s legal compliance, levies processing and other money decision documents are handled and dealt with the Centralized Holds and Levies department. Through business process reengineering, the processing of legal documents was reengineered. It was now much speedier due to automation. This improved the service quality of Chase Manhattan Bank and also boosted relations with attorneys and law agencies. Hence loss was minimized. Workshops with government agencies and officers were held and this led to getting of the New York State Congress sponsorship to change the law regarding bank handling of levies and judgments. This further reduced expenses by $790 million and increased income by $995 due to the new legal processing fees (Shin and Jemmellav 2002).
The two most important pillars that make up the foundation of an organization are people and processes. Both of them have to be efficient and effective. If, for example, you have a very motivated workforce but inefficient, obsolete and burdensome business processes then the organization would undoubtedly suffer. That is why business process reengineering is so important. It changes the way people carry out the procedures. It makes existing processes efficient and hence contributes in benefitting the entire organization. Many companies have done business process reengineering with dramatic results to show for it.
While implementing business process reengineering, the human resource should be managed very effectively. The new vision and all planned changes should be conveyed to the middle managers and the low level employees. This promotes a sense of direction among the personnel of the organization. Everyone feels motivated contributing to the change in the organization. The improved processes and latest technology helps employees become more productive.
The increase in productivity benefits the business and also boosts the motivation of the employees. Many employees enjoy the transition from the previous slow, outdated and laborious processes to new, innovative and more efficient ones. The reengineering also gives workers and managers something new to look forward too. The people in the organization also take pride in the fact that their department or function is going through a massive change to get more proficient (Johansson, 1994).
However, there exist a few drawbacks of business process reengineering regarding human resource. Some employees are hesitant to change. They might be technology averse or they just might like the older way of doing things. Some employees are reluctant to adapt to the new processes because the planned changes were not communicated to them. Also, often it is the case that some employees are asked to leave the organization because the new processes are more technological and can be managed without those employees. This creates a very discouraging environment because everyone feels insecure about his or her job (Jeston & Nelis, 2008).
Every organization is different. Hence, even though there are some general guidelines or steps to implement business process reengineering, each organization is distinctive and needs customized reengineering to cater to its unique conditions. The way Chase Manhattan Bank implemented its reengineering is just an example for some financial institutes to take heed and apply it to its benefits.
As Davidson (1993) pointed out that successful reengineering eventually leads to business transformation. Business process reengineering not only modifies previous processes, it also comes up with newer automated processes and even newer products and services. The dramatic results obtained by reengineering helps the business get competitive edge over its rivals. An organization should however not forget the massive impact business process reengineering has on human resource and thus manage it effectively.
Davenport T H and Short J.E (1990) The New Industrial Engineering: Information Technology and Business Process Redesign, Slogan Management Review, Viewed may 5, 2010 pp. 11 – 27.
Davidson, W.H.,1993, ``Beyond re-engineering: the three phases of business transformation’’ IBMSystems Journal
Ezigbo, C.A.,2003,Advanced Management Theory Immaculate Pub, Enugu.
Greenberg, L.,1996, Business Process Reengineering: constantly adapting to change. Online. Available at: http://earthrenewal.org/bpr.htm [viewed May 5, 2010]
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http://earthrenewal.org/bprmist.htm [viewed May 5, 2010 ]
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Johansson, H.J.,1994, Business Process Reengineering: Breakpoint Strategies for Market Dominance. Wiley
Shin & Jemmella.,2002, Business Process Reengineering and performance improvement: A case of Chase Manhattan Bank. Business Process Management Journal, volume 8- 4. [viewed May 5, 2010 ]
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