Seven BPR Principles

Michael Hammer, co-author of Reengineering the Corporation: A Manifesto for Business Revolution and the father of reengineering, established seven principles that have guided many successful reengineering efforts: Organize around processes and outcomes, not tasks. Companies often divide business processes into individual tasks and assign them to different people !he documents used in the business process often "ait for hours or days at each desktop as they are passed bet"een the people involved in the process #elphi Consulting $roup estimates that up to %& percent of the time needed to complete typical office tasks is a result of gathering and transferring paper documents 'hen a system is reengineered, the responsibility for an entire process is assigned to a single individual "henever possible (n reengineered systems each )ob is designed around an ob)ective or an outcome, such as a completed process, rather than one of the tasks necessary to complete the process (nterdisciplinary teams that concentrate on completing a particular business process and adding value to customers often replace functional departments, such as accounting, manufacturing, and engineering (n the past, "hen salespersons at (BM Credit Corporation called "ith a re*uest for financing, they reached one of fourteen employees "ho recorded the re*uest !he re*uest "as for"arded through five different individuals "ho checked the customer+s credit, determined the interest rate, and handled other procedures (t took si, days to t"o "eeks to complete all five steps -ince there "as no "ay to track re*uests as they moved from desk to desk, sales representatives "ere unable to get an ans"er "hen they called to determine the status of a re*uest 'hen a re*uest "as "alked through the five steps, the company discovered that the actual "ork took only an hour and a half (BM Credit reengineered the process and eliminated the five steps Most applications are straightfor"ard and one individual, called a deal structurer, uses a computer system to process an application from beginning to end 'hen comple,ities arise, the deal structurer can call on a small group of specialists (BM Credit increased the number of applications it processes by .&&-fold "hile reducing its head count slightly Centralize and disperse data. -ome companies centrali/e operations to achieve economies of scale 0thers decentrali/e operations to be more responsive to their customers and to provide better service 'ith current technology, companies can have the advantages of both approaches: corporate-"ide data bases centrali/e data, and telecommunications technology disburses it 1ach of He"lett-2ackard+s 3& manufacturing units had its o"n decentrali/ed purchasing system Although the systems served the needs of the individual units very "ell, H2 "as unable to negotiate *uantity discounts based on its purchasing po"er As part of its reengineering efforts, H2 organi/ed a corporate purchasing department that created a data base of approved vendors H2 no" has the best elements of centrali/ation and

decentrali/ation: each plant meets its needs by purchasing from the approved vendors, and the corporate office tracks purchases and negotiates *uantity discounts4 "ins other concessions from vendors4 and resolves problems "ith vendors !he result "as a 53 percent reduction in failure rates, a .3& percent improvement in ontime deliveries, a significantly lo"er cost of goods purchased, and a 3& percent reduction in lead times Capture data once, at its source. Many organi/ations have a number of separate information systems, such as an accounting system, a management information system, a marketing system, a production system, and so on 1ach of these systems collects, enters, and processes some of the same information 6ot only is this inefficient and e,pensive, but redundant data e,ists that all too often contains discrepancies !hese problems can be solved by capturing data once, at its source, storing it in data bases, and making the data accessible to all authori/ed users 7or e,ample, data can be captured electronically at its source using bar codes and scanners Alternatively, data can be entered directly into a system using electronic data interchange (1#(8 !his approach reduces errors and costs and eliminates data processing delays A fe" years ago management at -un Micro systems became alarmed that its information systems could not easily communicate "ith each other -ome data had to be entered as many as ten times into different incompatible systems !he system "as reengineered, and no" data that is entered into any system any"here in the "orld is entered only once and becomes available to "hoever needs it Information producers process information. Most organi/ations process their ac*uisition9payment information like 7ord Motor used to do 7ord prepared multicopy purchase orders and receiving reports 7ourteen different data items on these t"o documents had to be matched to a vendor+s invoice before a payment could be made Accounts payable had more than 3&& people "ho spent most of their time trying to reconcile all the mismatches !he process "as time consuming and frustrating, and vendors "ere unhappy because payments "ere delayed 7ord+s system "as reengineered so that the people "ho produce the information also process it (n the ne" system, vendors do not send invoices 2urchasing agents enter purchase orders directly into the company data base !he part number, supplier code, and unit of measure are entered by the receiving clerk "hen goods arrive !he computer matches these data items "ith outstanding purchase order data (f they do not match, the goods are returned (f they do match, the goods are accepted4 and the computer prepares and sends the check to the vendor Output users perform the processes. Most organi/ations are split into separate departments and each speciali/es in a specific task 1ach department completes its particular task and passes its :product: off to another department !his principle states that the people "ho use information from the system should be those "ho perform the process that produces that information Before reengineering, 2hoeni, #esigns (nc had its salespersons call on customers to determine "hat they desired in the "ay of furniture !he salesmen submitted the ideas to a team that produced a design that the salesperson took back to the customer Customers made

changes and the salesperson took the changes back to the designers 'hen the salesman took the ne" design back to the customers, they "ould again evaluate the design and re*uest more changes (t took up to si, "eeks to satisfy customers and present them "ith a final design 2hoeni, replaced the old system "ith one in "hich salespersons, using a 2C and a special soft"are package, designed the furniture themselves in less than a "eek !his system "as later improved so that a salesperson could use a portable computer to design the furniture right in the customer+s office !he system, "hich cost 2hoeni, ;. million, has increased dealer sales by up to .,&&& percent and has boosted after-ta, income by <5 percent Empo er orkers. Most organi/ations have a hierarchical structure "ith one or more levels of management to supervise, direct, and control those belo" them Many organi/ations have found that empo"ering "orkers "ith decision-making responsibilities leads to a higher *uality product and service, faster responses to problems, and fe"er levels of management 1,pert systems and other ne"ly developed information technology helps "orkers make correct decisions and avoid mistakes Mutual Benefit =ife reengineered a thirty-step insurance approval process performed by .% people in five different departments Approvals took from five to <3 days A case manager no" has the po"er to grant approval and performs the entire approval process MB= eliminated several layers of supervision and control, and the supervisors "ho remain are responsible for facilitating the "ork of case managers Case managers are also supported by an e,pert system and by specialists "ho help them "ith particularly difficult applications !urnaround time improved dramatically since there is no need to pass applications from one person to another !here are fe"er errors, and costs decreased substantially Case managers handle t"ice the volume of ne" applications, allo"ing the company to eliminate one hundred field positions Integrate parallel activities. Many business processes are so comple, that they are divided up and assigned to independent teams !hese teams "ork in parallel "ith each other and then integrate their tasks "hen they are done 7or e,ample, "hen Chrysler designed a ne" car, they had different teams designing the body, the interior, the engine, the transmission and other elements 'hen they began assembling the cars, they often found that the components did not fit together properly and had to be redesigned !he product development process "as reengineered, and Chrysler organi/ed its teams differently A ne" team "as created for each ne" car and people from each design area "ere placed on the team Chrysler not only reduced the number of costly redesigns but "as also able to reduce its product development time significantly