Mobile Edition
Print
Get the Mag
Weekly UpdatesReengineering is one of the prevailing business themes that has been used to attempt dramatic levels of business improvement. Reengineering is a huge job that has a high failure rate. We undertook a study of 500 organizations in the United States to assess the effectiveness of business reengineering techniques. A major implication of the study is that the introduction of business reengineering into an organization involves fundamental rethinking and radical redesign of business processes to achieve significant improvements in performance.
Business process reengineering has been heralded as a major innovation in management and has become an essential element in many companies' attempts to improve their competitive position in the marketplace. Business reengineering refers to a total revamping of a business process. But its label is being slapped on everything from requests for new chairs to across-the-board layoffs. True reengineering is the radical redesign of business processes to achieve major gains in cost, service, or time. (1) Michael Hammer and James Champy, founders of the business reengineering concept, believe that reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performances, such as: cost, quality, service, and speed. (2)
Reengineering success stories have received considerable coverage as companies report the benefits gained from a fundamental review of their business processes. Although the details of reengineering and quality efforts vary by industry and company, the shared goal underlying all such endeavors should be the establishment of an organizational structure that contains fewer elements--and is easier to explain and understand. Business reengineering is a management philosophy that emphasizes managing the entire organization so that it excels in all dimensions of its operation. Implementation of reengineering requires the creation of an organization-wide structural system that allows all members of the organization to participate in redesigning and reworking business processes to maximize the attainment of business goals. There are five vital core processes of management that provide guidelines for managers who are heading into the uncharted waters of reengineering. The core process includes mobilizing employees, en abling the workforce, defining objectives, measuring performance, and communicating with employees throughout the entire process. (3)
Past Studies
A number of studies have dealt with various aspects of business reengineering. One study argued that the first point to remember about reengineering is getting the strategy straight. By setting the strategy first the operations that a company needs to implement are easier to define. Reengineering without strategy leads to "market-blind" cost cutting. In addition, reengineering must be led by people with the authority to oversee a process from end to end or from top to bottom. Reengineering also emphasizes strong leadership, technology, and radical change. (4) Another study suggested that success in reengineering requires top mangers to be visionaries, communicators, motivators, and leg breakers. According to Jane Saseen, a consultant in the field of reengineering, although a company involved in the reengineering process might need someone to "hold its hand, the impetus and most of the hard work have to come from its own senior managers." Reengineering will simply not deliver without top management's commitmen t. (5)
One of the major criticisms of reengineering is that many departments have suffered morale setbacks that result in key personnel departures once the business cycle turns. This criticism merely substantiates the theory that top management's acceptance and support of the reengineering process are critical for success. Even James Champy, one of the world's renowned management gurus admitted that, "Reengineering is in trouble." He conceded that, "The revolution we started has gone, at best, only halfway." He further explained, "That the key problem is management itself. Operational work can't be reengineered without changing the way mangers do their jobs." Champy also commented that "Radical change is impossible unless managers know how to ... organize, inspire, deploy, enable, measure, and reward the value-adding operational work." (6) Inability to perform many of these critical tasks could mean failure for a company's reengineering effort.
Managers must realize that reengineering is not a fail safe idea. The process takes a tremendous amount of work and the dedication of time and resources. One study points out that reengineering fails to achieve significant results about seven out of ten times. (7) Hammer and Champy estimate that as many as 50 percent to 70 percent of companies fail to achieve the dramatic results that were intended. (8) With such a high failure rate, one could ask why does reengineering receive so much interest from the business world? The reason, according to several studies, is that reengineering can increase performance far beyond 10 or even 20 percent gains. Hallmark is an example of a company that has successfully implemented reengineering. Another example of successful reengineering is Taco Bell. Hammer and Champy stated that reengineering efforts for Taco Bell have made sales more profitable and have increased customer satisfaction. Many other well known companies have experienced successful reengineering, such as IBM Credit, Ford Motor Company, Kodak, Texas Instruments, WalMart, Dell Computers, AT&T, Union Carbide, and even Merrill Lynch. (9)
On the other hand, one research team argued that reengineering is best when used for new processes, such as new product development or customer service, but should not be used only for cost or quality control problems. (10) At the same time, other studies indicate that business reengineering programs helped many firms reduce cost, improve employee productivity, performance, and responsiveness to customers' needs, and increase sales and profits. (11)
On the basis of our review of past studies and examples, as well as typical lines of inquiry found in organization theory and design research, the following research questions were posed concerning the impact of business reengineering programs on organizational effectiveness:
* Does business reengineering philosophy really achieve its stated objectives of influencing and enhancing organizational effectiveness?
* What are the perceived factors that may facilitate or impede business reengineering effort across a variety of settings?
Our study investigates these research questions and evaluates the impact of implementing Business Reengineering efforts on organizational effectiveness.
Our Methodology
A survey was used to assess the status and effectiveness of business reengineering techniques across a variety of settings throughout the United States. A questionnaire was designed to assess business process reengineering familiarity, duration of the program, and the effectiveness of business reengineering technique(s) among several types of industries across a variety of settings. The Likert and Mott instruments were used to gather data. (12) To measure organizational effectiveness, we used Likert's Profile of Organizational Characteristics. The Likert instrument has been shown to have acceptable levels of reliability and validity across a variety of settings. The Mott's instrument was used to measure organizational productivity. Both instruments were based on a scale of 1.5, with 5 as the most effective and productive and 1 as the least effective productive level.
The questionnaire was mailed to 500 organizations throughout the United States. These organizations were randomly selected among 1,000 organizations spread among several types of industries and across a variety of settings. Survey respondents were presidents, vice presidents, general managers, project managers (in charge of reengineering activities), functional managers, and supervisors. A total of 146 questionnaires were returned for a response rate of 29 percent. Twenty questionnaires were not acceptably completed, thus reducing the response rate to 25 percent. The remaining 126 were usable questionnaires and these responses were analyzed in this study. The demographic characteristics of respondents are shown in Table One.
Survey Results
About 60 percent of the respondents (76 organizations) reported that they did not have an existing business reengineering program. Of the remaining 50 organizations (40 percent), 20 organizations indicated that they did have a business reengineering program for less than one year, 24 organizations have had a business reengineering program for less than two years and only six organizations have had business reengineering programs for more than two years. About 64 percent of the organizations surveyed reported that they were familiar with business reengineering philosophy. Less than 36 percent of the respondents reported that they were not at all familiar with business reengineering techniques. About 40 organizations that indicated that they did have business reengineering programs have targeted the inclusion of business reengineering in the area of new product development or customer service. The remaining ten organizations that have a business reengineering program reported the target was the entire organizat ion.
Reasons for Business Reengineering
Several reasons for implementing Business Reengineering were noted by the survey respondents. About 31 percent of the respondents (23 organizations) reported that one of the reasons for its implementation was the pressure of the global economic competition--which means the business practices of the past were increasingly inadequate. Twenty-two percent of respondents were disappointed in the ability of Total Quality Management to transform their companies to become competitive. At the same time, about 20 percent of the respondents indicated that one of the reasons for implementing reengineering was the fact that it has been advocated by very articulate and entertaining spokespersons who credited it with helping to reduce cost, improve employee productivity, performance, and responsiveness to customers' needs, and increase sales and profits. See Table Two for the major reasons expressed for implementing business reengineering.
FEED