Business Process Reengineering
Describe each of the four kinds of organizational change that can be promoted with information technology. What is business process reengineering? What steps are required to make it effective? How does it differ from business process management? Explain with example. In an organization, there are major risks and uncertainties in systems development that need to be addressed by the management. Determining when new systems and business processes can have the greatest impact is involved in these challenges.
This may be the reasons why organizational change and development is becoming a common scenario to talk about involving management, organizations, business, and leadership. With the fast-changing environment, business conditions bring consequences in management both in inner and outer factors. That is why in most cases, most of the managerial activities revolve around decision – making.
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Knowledge plays a major role in organizational development.
Organizational changes are also usually described, including management and employee training requirements, recruiting efforts, changes in business processes and changes in authority, structure or management practices. Information technology can promote various degrees of organizational change, ranging from incremental to far-reaching. There are actually four types of organizational change enabled by information technology: automation, rationalization, reengineering, and paradigm shifts. [pic] This figure shows the four degrees of organizational change.
Automation is the easiest and the most common form of change. Being the most common form of IT-enabled change, the using of computer to speed up the performance of existing tasks is an example of automation. This involves assisting employees perform their tasks more efficiently and effectively. AUTOMATION Automation is the use of control systems and information technologies to reduce the need for human work in the production of goods and services. In the scope of industrialization, automation is a step beyond mechanization.
Although automation speeds up performance of tasks, it does not guarantee a very high effectivity in business success. It is just the same as repeating the old manual way of disorders but in a faster way. However, this type of change, although common, is slow – moving, thus producing slow returns. Organizations using automation produce the same products and services as before but changes the way the organization functions. Example of automation in business are calculating paychecks and payroll registers, automated checkout and inventory system employed by many supermarkets. nd giving bank tellers instant access to customers deposit records. RATIONALIZATION Rationalization of procedures causes the organization to examine its standard operating procedures, eliminate those no longer needed, and make the organization more efficient. It is the streamlining of existing operating procedures, eliminating obvious bottlenecks so that automation makes operating procedures more efficient. Rationalization follows quickly from automation. Both types of change cause some disruption, but it’s usually manageable and relatively accepted by the people.
BUSINESS PROCESS REENGINEERING A more powerful type of organizational change is business process reengineering, in which business processes are analyzed, simplified and redesigned. Using information technology, organizations can rethink and streamline their business processes to improve speed, service and quality. Business reengineering reorganizes work flows, combining steps to cut waste and eliminating repetitive, paper intensive tasks. It is usually much more ambitious than rationalization of procedures, requiring a new vision of how the process is to be organized.
Business process reengineering in simpler words is Radical redesign of processes to improve cost, quality, and service, to maximize the benefits of technology. Process reengineering have been used by many companies to deal with a wide variety of problem. For example, the EMI Records Group was having difficulty filling orders for its most popular CDs. Retailers and recording stars were rebelling–it took the company as much as 20 days to deliver a big order for a hit CD, and then nearly 20% of the order would be missing. Small, incremental improvements would not have been adequate, so the company reengineered its entire istribution process with dramatic effects on on-time delivery and order fill rates. In business process reengineering, the organization can develop the business vision and process objective. It can identify the processes to be redesigned (core and highest payback) and understand and measure the performance of existing processes. It can also identify the opportunities for applying information technology and build a prototype of the new process. PARADIGM SHIFT It is about changing the very nature of the business and the structure of the organization itself, whole new products or services that didn’t even exist before.
In other words, paradigm shifts deals with major disruption and extreme change. Paradigm is a complete mental model of how a complex system works or functions. In other words, a paradigm shift involves rethinking the nature of the business and the organization. It is a complete re-conception of how the systems should function. For example, higher education is undergoing a major paradigm shift in the online delivery of education. Classes are now offered through the Internet so that students don’t even go to classrooms. Many tried-and-true teaching methodologies are being radically altered to accommodate this shift in how education is offered.
Paradigm shift is a radical re-conceptualization of the nature of the business and the nature of the organization. Deciding which business process to get right is half the challenge to the management. It is said that seventy percent of time programmatic reengineering efforts fail. But still organizations change. The reason is because the rewards are high. Paradigm shift involves great risks, but great returns too. The Internet is causing all kinds of industries and businesses to alter their products, their services, and their processes in radical ways.
Entire organizations are being created to handle the paradigm shifts involved in e-commerce. Look at the automobile industry as an example of this type of change: Traditional dealerships are being disrupted by auto malls and online buying opportunities. BUSINESS PROCESS REENGINEERING In today’s ever-changing world, the only thing that doesn’t change is ‘change’ itself. In a world increasingly driven by the three Cs: Customer, Competition and Change, companies are on the lookout for new solutions for their business problems.
Recently, some of the more successful business corporations in the world seem to have hit upon an incredible solution: BUSINESS PROCESS REENGINEERING (BPR). Business Process Reengineering (BPR) involves the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service and speed. A reengineered organization is process oriented, where: 1) Processes are identified and named, 2) Everyone is aware of the processes they are involved in, 3) Process measurement, i. e. onitoring and control, is performed BPR advocates that enterprises go back to the basics and reexamine their very roots. It doesn’t believe in small improvements. Rather it aims at total reinvention. As for results: BPR is clearly not for companies who want a 10% improvement. It is for the ones that need a ten-fold increase. BPR focuses on processes and not on tasks, jobs or people. It endeavors to redesign the strategic and value added processes that transcend organizational boundaries. According to many in the BPR field reengineering should focus on processes and not be limited to thinking about the organizations.
After all the organization is only as effective as its processes. Processes are currently invisible and unnamed because people think about the individual departments more often than the process with which all of them are involved. So companies that are currently used to talking in terms of departments such as marketing and manufacturing must switch to giving names to the processes that they do such that they express the beginning and end states. These names should imply all the work that gets done between the start and finish. For example, order fulfillment can be called order to payment process. Steps to an effective BPR are as follows – . Prepare for reengineering – Planning and Preparation are vital factors for any activity or event to be successful, and reengineering is no exception. Before attempting reengineering, the question ‘Is BPR necessary? ’ should be asked. There should be a significant need for the process to be reengineered. Preparation activity begins with the development of executive consensus on the importance of reengineering and the link between breakthrough business goals and reengineering projects. A mandate for change is produced and a cross-functional team is established with a game plan for the process of reengineering.
While forming the cross functional team, steps should be taken to ensure that the organization continues to function in the absence of several key players. As typical BPR projects involve cross-functional cooperation and significant changes to the status quo, the planning for organizational changes is difficult to conduct without strategic direction from the top. The impact of the environmental changes that serve as the impetus for the reengineering effort must also be considered in establishing guidelines for the reengineering project.
Another important factor to be considered while establishing the strategic goals for the reengineering effort, is to make it your first priority to understand the expectations of your customers and where your existing process falls short of meeting those requirements. Having identified the customer driven objectives, the mission or vision statement is formulated. The vision is what a company believes it wants to achieve when it is done, and a well-defined vision will sustain a company’s resolve through the stress of the reengineering process. 2.
Map and Analyze As-Is Process – Before the reengineering team can proceed to redesign the process, they should understand the existing process. Although some BPR proponents argue against analyzing the current enterprise, saying that it inhibits the creative process, that might not always hold true. It varies from case to case. While some organizations which are in dire straits might attempt a new process design while totally ignoring the existing processes, most organizations need to map the existing processes first, analyze and improve on it to design new processes.
The important aspect of BPR is that the improvement should provide dramatic results. Many people do not understand the value of an As-Is analysis and rather prefer to spend a larger chunk of their valuable time on designing the To-Be model directly. The main objective of this phase is to identify disconnects (anything that prevents the process from achieving desired results and in particular information transfer between organizations or people) and value adding processes. This is initiated by first creation and documentation of Activity and Process models making use of the various modeling methods available.
Then, the amount of time that each activity takes and the cost that each activity requires in terms of resources is calculated through simulation and activity based costing (ABC). All the groundwork required having been completed, the processes that need to be reengineered are identified. 3. Design To-Be process – The objective of this phase is to produce one or more alternatives to the current situation, which satisfy the strategic goals of the enterprise. The first step in this phase is benchmarking.
The peer organizations need not be competitors or even from the same industry. Innovative practices can be adopted from anywhere, no matter what their source. Having identified the potential improvements to the existing processes, the development of the To-Be models is done using the various modeling methods available, bearing in mind the principles of process design. Then, similar to the As-Is model, we perform simulation and ABC to analyze factors like the time and cost involved. It should be noted that this activity is an iterative process and cannot be done overnight.
The several To-Be models that are finally arrived at are validated. By performing Trade off Analysis the best possible To-Be scenarios are selected for implementation. 4. Implement Reengineered Process- The implementation stage is where reengineering efforts meet the most resistance and hence it is by far the most difficult one. When so much time and effort is spent on analyzing the current processes, redesigning them and planning the migration, it would indeed be prudent to run a culture change program simultaneously with all the planning and preparation.
This would enable the organization to undergo a much more facile transition. But whatever may be the juncture in time that the culture change program may be initiated, it should be rooted in our minds that ‘winning the hearts and minds of everyone involved in the BPR effort is most vital for the success of the effort. Once this has been done, the next step is to develop a transition plan from the As-Is to the redesigned process. This plan must align the organizational structure, information systems, and the business policies and procedures with the redesigned processes. 5.
Improve Process Continously- A very vital part in the success of every reengineering effort lies in improving the reengineered process continuously. The first step in this activity is monitoring. Two things have to be monitored – the progress of action and the results. The progress of action is measured by seeing how much more informed the people feel, how much more commitment the management shows and how well the change teams are accepted in the broader perspective of the organization. This can be achieved by conducting attitude surveys and discrete ‘fireside chats’ with those initially not directly involved with the change.
Communication is strengthened throughout the organization, ongoing measurement is initiated, team reviewing of performance against clearly defined targets is done and a feedback loop is set up wherein the process is remapped, reanalyzed and redesigned. Thereby continuous improvement of performance is ensured through a performance tracking system and application of problem solving skills. An intense customer focus, superior process design and a strong and motivated leadership are vital ingredients to the recipe for the success of any business corporation.
Reengineering is the key that every organization should possess to attain these prerequisites to success. BPR doesn’t offer a miracle cure on a platter. Nor does it provide a painless quick fix. Rather it advocates strenuous hard work and instigates the people involved to not only to change what they do but targets at altering their basic way of thinking itself. BUSINESS PROCESS MANAGEMENT Business process management (BPM) is a systematic approach to improving an organization’s business processes.
BPM activities seek to make business processes more effective, more efficient, and more capable of adapting to an ever-changing environment. BPM is a subset of infrastructure management, the administrative area of concern dealing with maintenance and optimization of an organization’s equipment and core operations. BPM Vs. BPR If BPM is a system software, then BPR is a method. BPR re-evaluates the processes used by the enterprise from the very basics and thoroughly redesigns them, enabling enterprises to have significant breakthroughs in cost, service, and speed.
BPR can enable enterprises to reform from deep within, and create a new organization structure. Therefore, BPR is for the whole enterprise and may even include basic organization structures in its large modifications. BPM is a concept built internally in an enterprise that continuous to manage business processes. In an environment that stores internal and external events, BPM starts from a group of dependent processes, that describes, understands, indicates, and manages the whole process.
BPM can integrate internal resources in an enterprise, automatically linking each department, enabling the enterprise to become a single united special forces team. As well, establishing standardized business processes through a single portal, the system can automatically make decisions based on rules and processes of the enterprise to satisfy the management needs of the enterprise, creating comprehensive core competitive force. Key aspects on which BPM differs from BPR are as follows: – Marked difference between BPR and BPM | |Aspect |BPR |BPM | |Level of change |Radical, one step change |Evolutionary & continuous | |Time taken for implementation |Long |Short time and smooth takeover | |Starting point |Drawing board |
Current processes and automation levels | |Implementation |Huge effort required for the |Incremental | | |disruptive change | | |Expanse |One major process at a time |Flexible – simultaneously across one or more / | | | |small or major processes | |Methodology |Redesigning of business |Process and decision models | | |processes | | |Enabling technology |Primarily IT |Primarily process technology | |Involvement |Business and process experts |Process experts and all related people | |Risk |High |Low | |Outcome |Drastic |Incremental improvement | |Cultural issues |Major concern |Not much concern | |Implementation stress and concern|High |Low | BPM tools have taken the advantage of the BPR experience and conceptually are more flexible in terms of expanse and intensity.
Unlike BPR which targets end-to-end process by radically redesigning it, BPM tools can be applied part by part to the whole enterprise at a time, by adopting much more manageable and smaller changes in the process. This way the investments, risks and amount of change are minimized but at the same time the tangible impact is much more modest than what was a possibility with BPR. Yet BPM tools for automating processes have their basis on the fundamental concepts that were emphasized by BPR, such as: • Simple processes delivering on the metrics of quality, service, flexibility • Focus on eliminating non-value adding activities • Decisions becoming integral part of the process
BPM unifies discrete tools through extension of technologies like BPR, EAI, Workflow automation and any other business application package in such a form where the implementation and upgradation is much easily handled and underlying business process are efficiently managed. In addition to the strength inherited from BPR that BPM is built around business processes and not business applications per se, yet another promising feature of BPM is that it is based on mathematical process models. For example: – BPM helps you improve predictability and repeatability. For example, it will help you identify and recruit 10 candidates for a specified position in 8 weeks. BPR helps you study this and reduce this 8 weeks to 6 weeks or 4 weeks , depending on the context. Once this is done, we need to again use BPM to stabilize this and get back to predictability.