UNIVERSITY OF MUMBAI

BUSINESS PROCESS
REENGINEERING
INTRODUCTION TO INDUSTRIAL
RELATIONS
Simeen Akbar Khalfay
MMS, Sem 3. HR - 01

Alkesh Dinesh Mody Institute for Financial & Management Studies

 BUSINESS PROCESS
REENGINEERING

Effects on the Working Class

Introduction:

Business Process Re-engineering (BPR) can be defined as:

... a radical scrutiny, questioning, redefinition and redesign of business processes with the
aim of eliminating all activities not central to the process goals … and automating all
activities not requiring human judgmental input, or facilitating that judgment at reduced cost
(Thomas 1994, p.28).

BPR was championed by Michael Hammer and James Champy (1994) in the book
‘Reengineering the Corporation’ in which they advocated that old systems be discarded and
replaced with new, more innovative and effective processes. BPR demands lateral thinking
that extends beyond the current boundaries in order to achieve a more effective organisation.

Re-engineering is about rethinking and redesigning organisational processes in order to

achieve dramatic improvements in performance, including cost, quality, service and speed
(Hammer & Champy 1994). However, this can be impeded if those implementing BPR feel
that they are constricted by the existing framework within which the organisation is
operating. For the employees, the work is often more challenging and difficult yet, at the
same time, more rewarding. Staffs are required to perform many different tasks and to have
an understanding of the entire business. They may enjoy more autonomy and more
empowerment, but are also more accountable for their actions. Further, they are required to
collaborate, often with people who have very different skills to themselves. Increased levels
of interdependence facilitate team-based work and create a need for effective interpersonal
skills.

From the work of Abolo (1997) and Thomas (1996) cited by Ezigbo (2003), the essential
element or principles of reengineering include the following:

• Rethinking the theory of the business.

• Challenging old assumptions and discharging old rules that are no longer applicable.

• Breaking away from conventional wisdom and the constraints of organizational boundaries.

• Using information technology not to automatic outdated process but to redesign new ones.

• Externally focus on customers and the generation of greater value for customers.

• Internally focus on harnessing more of the potentials of people and applying it to those
activities that identify and deliver values to customers.

• Encourages training and development by building creative work environment.

• Think and execute as much activity as possible horizontally, concentrating on flows and
processes through the organization.

Due to the evolution of the field of “industrial relations” in to personnel management and
then in to “Human Resources Management” this study would focus on reengineering of the
human resources along with the processes and effects of business process reengineering on
the working class in general.

Reengineering and Information Technology:

According to executives with extensive BPR experience, although information technology

plays a central role in reengineering, "the IS organization in many companies is unable to
play." This ineffectualness may be due to the historic inability of IS to do "anything big
quickly", the "breeding out" of risk-taking, or the lack of advanced technology groups.
Another danger is that, since the IT group is not perceived as being part of the business
process, they are excluded from the reengineering team.

Hammer (1990) considers Information Technology (IT) as the key factor in BPR for
organisation that wants to witness a “radical change” in its operation. He prescribes the use of
IT to challenge the assumption inherent in the work processes that have existed since long
before the advent of modern computer and communications technology. He argues that at the
heart of reengineering is the notion of discontinuous thinking or recognizing and breaking
away from the outdated rules and fundamental assumptions underlying operations. These
rules of work design are based on assumptions about technology, people and organizational
goals that no longer hold. Aremu and Saka (2006) argued that Information technology (IT) is
a strategic resource that facilitates major changes in competitive behaviour, marketing and
customer service. In essence, IT enables a firm to achieve competitive advantages.

Davenport and Short (1990) further posted that Business Process Reengineering requires
taking a broader view of both Information Technology (IT) and business activity and of the
relationships between them. IT should be viewed as more than an automating or mechanizing
force; to fundamentally reshape the way business is done.

Information technology (IT) and Business Process Reengineering (BPR) have recursive
relationship. IT capabilities should support business processes and business should be in
terms of the capabilities IT can provide. Davenport and Short (1990) refer to this broadened,
recursive view of IT and BPR as the new industrial engineering business process represent a
new approach to coordination across the firm, IT promises and its ultimate impact is to be the
most powerful tool for reducing cost of coordination (Davenport and Short, 1990).

Senior management may be skeptical about the effectiveness of IT as a whole due to the
"lackluster" performance of many information systems in the past decades. In fact, it can be
argued that the huge investment in IT has had little impact on productivity. Although 85% of
IT spending in the 1980's was in the service sector, productivity in this sector increased only
1.9%, while productivity in the manufacturing sector rose 44%. Based on this record, it is not
unreasonable to view IT as a disabler, which is never used to "challenge why things are done
in a company, but instead justify the way they are done." Systems in the service sector have
been used to generate more unneeded reports, speed up superfluous work steps, generate
unnecessary information, encourage shoddy thinking and misdirect attention to spurious
details.

Most analysts view reengineering and information technology as irrevocably linked.

Walmart, for example, would not have been able to reengineer the processes used to procures
and distribute mass-market retail goods without IT. Ford was able to decrease its headcount
in the procurement department by 75% by using IT in conjunction with BPR.

People Involvement: Reengineering the Human Resource

Hammer and Champy recognize the importance of the human resource when they state
"companies are not asset portfolios, but people working together to invent, sell and provide
service." However, they fail to demonstrate how to reengineer the human resource in
conjunction with reengineering processes.

Although Hammer and Champy provide a long list of why reengineering fails, nowhere do
they include the prerequisite that no reengineering effort will succeed without first
reeducating and retraining the people who will ultimately work with the new process.
According to Meg Wheatley, "If you're going to move information and responsibility down to
the local level, then the key question is how can you be sure that people will behave
appropriately? You need to make sure that everyone is playing by the same rule book."

The two principle obstacles to BPR are fear among employees that their jobs are endangered
and that years of experience will account for nothing. To overcome these apprehensions,
managers must constantly communicate their plans and expectations.

Although companies which are seeking to reengineer may work on revamping the
performance appraisal system to support new values, this can be problematic. When bonuses
are linked to profits or even the performance of a team, this may lead to a situation where the
individual is judged on factors beyond his or her control.

A paper on the immediate effect of BPR in a University on staff and students, where both
were involved in the reengineering process, states the following observations: The impact of
the BPR activity on the staff of the organisation was significant. The introduction of other
Business Systems (such as the Finance System and the Human Resources System) did not
include such a comprehensive activity. Although the University had previously undertaken
institution-wide consultation exercises (the most recent one being in preparation for the QAA
Continuation Audit), these were largely paper-based and, where group discussions were held,
they were carried out in functional areas by the managers of those areas. The BPR activity
that is the focus of this paper actively sought out as many individuals as possible, and Project
Team members interviewed them. This inclusiveness had a valuable impact on, not only the
participants, but their close colleagues as well.

Central to the manner in which BPR is brought about is the background of industrial relations
within an organisation, and indeed the level or quality of industrial democracy in the
workplace. BPR stands or falls on the quality and manner in which the concepts are
introduced to those people most closely involved. Thus the quality of in-house
communications, the ability and willingness of employees to voice their opinions and offer a
contribution to the change management program are all vital components in any such
program.

Studies carried out in the late 1980s and early 1990s by the European Foundation for the
Improvement of Living and Working Conditions, show that there is a correlation between the
ease of implementation with which technological change is introduced and the quality of the
industrial relations and the decision-making process in the organisations concerned. One of
the salient conclusions from these studies is that the form and quality of participation in
technological change depends greatly on the way in which each Member State's industrial
relations system has been shaped by political, economic, social and historical forces.

BPR, Total Quality Management & Organization Development:

Organisations worldwide are facing increased competition and rapid advances in technology.
Stable business environments that were once characterised by incremental, emergent changes
have been replaced by dynamic environments, which often demand large-scale change
interventions. BPR, OD and TQM are three different approaches to the management of
organizational change. Each of the approaches is suitable for different situations and each
approach can lead to increases in organisational efficiencies.

Total Quality Management (TQM) is an organisational change intervention that is concerned

with quality. TQM can be defined as an approach to doing business that attempts to maximise
the competitiveness of an organisation through the continual improvement of the quality of
its products, services, people, processes and environment.

Organization Development (OD) incorporates a planned approach to change that aims to

improve the performance of organisations through the people in them. Action research and
process consultation are central to the philosophy and methodology of OD.

BPR starts with a vision or idea. However, ideas only come from three sources — they can be
copied from other companies (benchmarking), bought (from an IT company or consultant), or
they can be original ideas (Thomas 1994). Benchmarking does not allow competitive
advantage and buying the idea is expensive and often results in the purchase of a ‘solution’
which is not relevant to the business to which it is sold. While original ideas seem to be the
only way to develop unique and relevant solutions, they are often developed within existing
and constricting frameworks to maximise the chances of them being accepted. Indeed,
original ideas are criticised by Thomas who believes that the acceptance of an idea is
‘inversely related to its radicalness, especially when associated, as it is so often, with
significant downsizing’.

Perhaps it is the lack of constricting frameworks that has prompted many BPR initiatives to
be conducted in greenfield sites. Indeed, large organisations have been known to set up new
companies with new staff, new policies, and new methods to the parent company. This
‘starting again’ avoids the issue of organisational change and transformation which is
complicated in BPR due to the frame-braking nature of the changes (Thomas 1994).
However, Patching (1995) argues that is possible to gain commitment and motivation during
reengineering through the use of the vision.

Although the radicalness of BPR can create many challenges, it also appears to be able to
offer many advantages when it is implemented successfully. Furthermore, research shows
that around eighty percent of organisations that implement BPR are satisfied with the results.
An organisation that has embraced BPR and developed an original idea is likely to be the
leader in their industry rather than the follower. This can lead to a competitive advantage and
can positively and drastically affect organisational performance.

OD, TQM and BPR all aim to increase organisational efficiency, but attempt to do this
through very different means. BPR may be the most suitable approach for an organisation
that seeks dramatic changes. It is commonly used by organisations that have widespread
problems or are close to bankruptcy, but it is also suitable as a way to stimulate innovation
for improvement, rather than survival. TQM is clearly a suitable approach where the quality
of the products or services is the major concern. OD is, by contrast, a more generic approach
that is suitable for a variety of problems. It is particularly useful where the problem itself is
unknown.

Criticism for BPR:

BPR has been heavily criticised in the literature. One criticism is that BPR is focused on the
implementation of new technology, rather than the improvement of business processes.
Information technology companies are selling ‘solutions’ to business problems and are
promoting the existence of problems merely to enhance sales of their own products and
services (Thomas, 1994). BPR has also been criticised as being associated with downsizing
and cost-cutting, with little regard for quality or long-term business objectives (Mumford &
Hendricks 1996). However, Hammer has defended BPR, stating that it was not intended as a
way to simply slash labour costs, but to streamline work processes, remove bureaucratic
procedures and increase efficiency (cited in Mumford & Hendricks 1996).

Reengineering Recommendations:

• BPR must be accompanied by strategic planning, which must address leveraging IT as a

competitive tool.

• Place the customer at the center of the reengineering effort -- concentrate on reengineering
fragmented processes that lead to delays or other negative impacts on customer service.

• BPR must be "owned" throughout the organization, not driven by a group of outside
consultants.

• Case teams must be comprised of both managers as well as those will actually do the work.

• The IT group should be an integral part of the reengineering team from the start.

• BPR must be sponsored by top executives, who are not about to leave or retire.

• BPR projects must have a timetable, ideally between three to six months, so that the
organization is not in a state of "limbo".

• BPR must not ignore corporate culture and must emphasize constant communication and
feedback.

My Analysis:

A comparison on the research-based material available on BPR and its effect on

organizations give a complete overview of the BPR as a concept in practice. Although BPR
has been used repeatedly for radical changes, it has not been successful in about 70% of the
cases. In spite of this failure not enough research has been carried out on parameters that
would practically contribute to the successful reengineering of an organization, its processes
and its workforce. Most of the researchers have presented the factors contributing to the BPR
system but a thorough research on organizations that have successfully carried out BPR as a
change mechanism would produce a reference material on success parameters and mantras to
be followed to achieve the end-objectives of BPR.