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Reengineering Work: Don't Automate, Obliterate

Michael Hammer
Harvard Business Review, July-August, 1990, pp. 104-112

2010/10/18

: : : 99756011

Outline
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Introduction Background Two successful reengineering The essence of reengineering Seven principles of reengineering Conclusions

Introduction
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Hammer said, It is time to stop paving the cow paths. Instead of embedding outdated processes in silicon and software, we should obliterate them and start over. We should use the power of modern information technology to radically redesign our business processes in order to achieve dramatic improvements in their performance.

Background
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Method for boosting performance

- Process rationalization and automation haven't yield the dramatic improvements company needs

Information technology
- Heavy investments in IT have delivered disappointing results - Leave exist processes intact and use computers simply to speed them up

The watchwords of the new decade are

- Innovation, speed, service and quality

Two successful reengineering

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Ford Motor Company

- Accounts payable processes

Mutual Benefit Life (MBL) Insurance

- Processing of insurance applications

Ford - accounts payable processes

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Search for ways to cut costs

- Fords North American accounts payable department employed more than 500 people - Rationalizing processes and installing new computer systems could reduce the head count by 20%

Look at Mazda New goal

- Only 5 people

- 80% reduction in head count (100 people)

Ford's old processes

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Accounts pay

Purchasing department

Purchase order

Purchase order

Material control department

goods Vender

receiving document Accounts payable department

invoice payment

Ford Motor Company Old rule We paid when we received invoice

Ford's new processes

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Purchasing Department
info.

Purchase order

check
accept transaction if okay

Material conrol Department

goods
return order if not okay

Database

Vender

Accounts payable Department Ford Motor Company

payment

New rule We pay when we receive the goods

Ford's dramatic improvement

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75% reduction in head count (to 125 clerks) No discrepancies between the financial record and the physical record, material control is simpler and financial information is more accurate.

MBL - insurance application

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Decision situation
- The long, multi step process involved - Applications go through 30 discrete steps, 5 departments, involved 19 people - Turnaround time: 24hrs(best), 5~25days(typical) - Actual work done: 17 mins

Goal
- Improve customer service - Demand a 60% improvement in productivity

MBL's old processes

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people
department

Customers

Old rule sequential processes

MBL's new processes

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Case manager

Customers

Case manager + Workstations

Databases

Computer network

Case manager

Case managers

Mainframe & shared databases

Case managers with powerful PC-based workstations

MBL's dramatic improvement

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Complete an application in 4 hrs Average turnaround time : 2~5 days Eliminate 100 field office positions Handle 2 times volume of new applications

The essence of reengineering

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Strive for dramatic levels of improvement Break away from conventional wisdom and the constraints of organizational boundaries Be broad and cross-functional Use information technology not to automate an existing process but to enable a new one

Seven principles of reengineering-1

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Organize around outcomes, not tasks

Product/ Service Product/ Service

Reengineer

people task An example of reengineering principle 1

Seven principles of reengineering-2

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Have those who use the output of the process perform the process
Vender Vender

Reengineer

computerbased data & expertise

Databases

An example of reengineering principle 2

Seven principles of reengineering-3

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Subsume information-processing work into the real work that produces the information
Purchasing Dep. check Purchase order

Database

Material conrol Dep.

goods Vender return order if not okay

accept transaction
Accounts payable Dep.

payment

An example of reengineering principle 3 - Ford

Seven principles of reengineering-4

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Treat geographically dispersed resources as though they were centralized

Vender dispersed resources Vender

Reengineer

centralized resources
Dep. Unit
Databases

An example of reengineering principle 4

Seven principles of reengineering-5

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Link parallel activities instead of integrating their result

Product/ Service parallel activities Product/ Service

Reengineer
integrated result
Databases

An example of reengineering principle 4

Seven principles of reengineering-6

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Put the decision point where the work is performed, and build control into the process
Expert systems

Manager

Supervisor

Reengineer

Databases

Worker

An example of reengineering principle 6

Seven principles of reengineering-7

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Capture information once and at the source

Info.

Reengineer

DB

An example of reengineering principle 7

Conclusions
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Think big Many area of the organization Executive leadership with real vision Commitment, consistency Information technology offers many options If managers have the vision, reengineering will provide a way

Reengineering Formally Defined

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Reengineering, properly, is the fundamental rethinking and radical redesign of business processes to archive dramatic improvements in critical, contemporary measure of performance, such as cost, quality, service, and speed.
Michael Hammer & James Champy, Reengineering the Corporation: A Manifesto for Business Revolution

(UK: Harper Collins, 2004), 35

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Thank You!