Summary - Article \"\" - Hammer 1990: Reengineering Work: Don’t Automate, ObliterateHammer & Stanton 1993: How Process Enterprises Really WorkHall Et Al 1993: How To Make Reengineering Really WorkHammer 2007: The Process Audit, Article: Harvard Business Review PDF

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Hammer 1990: Reengineering Work: Don’t Automate, Obliterate
Hammer & Stanton 1993: How Process Enterprises Really Work
Hall et al 1993: How to make Reengineering really work
Hammer 2007: The Process Audit, Article: Harvard Business Review...

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Business Process Exam Review

Things to remember: (for brownie points) - emphasize teamwork and working as a team, as opposed to a group - emphasize the importance of IT and its role in an organization Expected Midterm Questions: - What is a business process? - What are business rules? -

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A business process is a set of activities that deliver an outcome with some value to a customer (whether its internal or external) A business rule is the idea that business processes are built with a business rules in mind

Briefly explain concepts in Hammer’s papers. (~3 questions) - Texas Instrument example What are Champy’s rules?

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Hammer 1990: Reengineering Work: Don’t Automate, Obliterate Definition of business process. - A business process is a collection of linked tasks which find their end in the delivery of a service or product (value) to a client. A business process has also been defined as a set of activities and tasks that, once completed, will accomplish an organizational goal.

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Examples of Reengineering (Restructuring) - Ford and MBL Insurance - Ford wanted to have better A/P department and had the option to use computing systems to cut the jobs (20%) from 500 to 400, but opted to use new “invoiceless processing” which eliminated the need for the purchasing department to send a purchase order to anyone. Once goods arrive, the receiving clerk checks for an outstanding purchase order and accepts if found, or simply returns the goods if not found in the system. Ended up cutting jobs by 75%. - Mutual Benefit Life reengineered its processing of insurance applications. Originally, 5 departments and turnaround of ~5-25 days. MBL took away existing job definitions & dept boundaries and create a new position called “case manager” who would have responsibility for an application from when it’s received until the policy was issued. No handoffs or shuffling of customer inquiries. Powerful PC-based system which connected a range of automated systems for efficiency. For tough cases, the case managers get assistance from or

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consult senior underwriter or physician, but always has control. Individuals were empowered to process entire applications. Now, avg. turnaround is ~2-5 days and case managers can handle 2 times more volume than before. Essence of Reengineering - Improving the business processes by taking into consideration the evolution of technology and education in recent decades - The efficiency can be increased by creating an organization

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Drivers for Change - Senior management is key for the implementation and success of changing the business process to create a more efficient company

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Principles of Reengineering - Organize around outcomes, not tasks - One person perform all steps in a process, design the person’s job around an objective or an outcome - Have those who use the output of the process perform the process - Computer-based data and expertise are more readily available so depts, units, and individuals can do more for themselves. When the people closest to the process perform it, there is little need for the overhead associated with managing it - Subsume information-processing work into the real work that produces the information - Those who produce information should access it - Link parallel activities instead of integrating their results - Forge links between parallel functions to coordinate them while their activities are in process rather than after they are completed. - Put the decision point where the work is performed, and build control into the process - It suggests that people who do the work should make decisions that the process itself can have built-in controls. Accountants, auditors, & supervisors check, record, and monitor work. Managers handle any exceptions. Less pyramidal mgmt, becomes flattened organization. - Capture information once and at the source - When we collect a piece of information, we can store it in an online database for all who need it. Bar coding, relational databases, and electronic data interchange (EDI) make it easy to collect, store, and transmit information. - Treat geographically dispersed resources as though they were centralized Hammer & Stanton 1993: How Process Enterprises Really Work

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Challenges of Implementing Processes and Building a Process Enterprise - Many people fear losing position of power and control over resources/people/etc which means they prefer the traditional vertical organizational structure. Even if a more efficient structure is implemented, the depts. will interfere if the power remains in their hands. Process Owners & New Management Style - Process owner created to oversee product development. For success, the process owner must have real responsibility and authority over the process. It must be a permanent position because (1) the process should constantly be evolving, and (2) otherwise the old structure will eventually be put back into place. - New mgmt style helped by (1) budgeting done by process rather than dept, (2) office space reconfigured, and (3) senior managers’ push/encouragement. - At Duke Power, all the managers got together once the new process was implemented to develop a document that clearly states who makes what decisions and who must be informed, this avoided the battle between the vertical/horizontal structures. The 5 process owners of Duke regularly meet to discuss and coordinate upcoming plans/budgets/etc. - Managers must not command & control, but negotiate & collaborate. Influence instead of use authority. Process Transition Strategy - Distractions must be kept to a minimum and the plan should be as simple as possible. - Some companies like John Deere opted to chose to implement the process in one or two part(s)/unit(s) of the company and allow them to be an example for the other units, so that they could learn from the first units before doing the same. - Appointing a highly respected executive for the task of implementation highlights the importance, shows the commitment, and ensures that the process owners will be taken seriously. A process manager should be put into place immediately, but the entire transition will take a long time to complete. - A company should produce some visible benefits/changes quickly so that people do not resist and be realistic about the sacrifices/disruptions that will be entailed. Frontline workers are generally first to get on board when they see their job will become broader/more interesting, senior mgmt often feel resentful. - Hammer sees that ¼ to ½ of top mgmt leave during the transition because of being dismissed or otherwise. Some ... Hall et al 1993: How to make Reengineering really work Dimensions of Reengineering (breadth, depth, etc.) - Breadth - Range of activities included in the process or reengineering effort - Contribution of process/activities to business performance

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- Neither too narrow, nor too broad [Discuss] - Requires business analysis and diagnosis - Focus on overall business unit performance Depth - Roles and responsibilities - Measurement and incentives - Organizational structure - Information technology - Shared values (organizational culture) - Skills In order to turn short-term improvements into long-term profits and gains for a company the process to be (1) redesigned must be broadly and (2) based on cost or customer value

Leadership Role - A reengineering project can produce lasting results only if senior executives invest their time and energy - Only broad and deep projects produce widespread and long-lasting bottom-line results - Many reengineering efforts fail because of insufficient process breadth. Consider one European commercial bank’s reengineering effort. By redesigning some of its back-office processes, the bank expected to reduce process costs by as much as 23 percent. However, the actual cost reduction, when measured in terms of total business-unit costs, was only 5%; EBIT improved by a scant 3%. The reason for such modest results: the bank overlooked many back-office processes in planning the redesign; in addition, back-office costs in general represented only 40% of the bank’s total costs. The process, in short, had been too narrowly defined to have any significant impact on business-unit performance as a whole. Still other reengineering efforts fail because of a too broad, indiscriminate approach. - A diagnostic phase is critical to a company’s ability to deliver value - Even with sufficient breadth and depth, a reengineering project will fail without the full commitment of senior executives - Banca di America e di Italia example: - To reach its goal, the bank had to redesign all retail-branch transactions from scratch - The technology team worked independently of the organization team so that current system limitations did not influence the redesign - frontline employees are usually insensitive to profit due to not being informed Five common things in successful Reengineering

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Set an aggressive reengineering performance target. The target must span the entire business unit to ensure sufficient breadth. For example, aim for a $250 million pre-tax profit increase to result from a 15 percent cost reduction and a 5 percent revenue increase measured across the business unit as a whole. Commit 20 percent to 50 percent of the chief executive’s time to the project. The time commitment may begin at 20 percent and grow to 50 percent during implementation stage. For example, schedule weekly meetings that inform the top manager of the project’s status. Conduct a comprehensive review of customer needs, economic leverage points, and market trends. For example, customer interviews and visits, competitor benchmarking, analysis of best practices in other industries, and economic modeling of the business. Assign an additional senior executive to be responsible for implementation. The manager should spend at least 50% of his or her time on the project during the critical implementation stage. Conduct a comprehensive pilot of the new design. The pilot should test the design’s overall impact as well as the implementation process, while at the same time building enthusiasm for full implementation. Activity Diagrams - Show the work flow through an organization.

Champy 2006: Processes and People (or smthg like that) Rules An executive must be involved, not just supportive. At least one company executive must be informed and constantly present to make decisions. Put the best people on the process redesign teams and keep the teams small. This is hard work, requiring great intellect, as well as good behavior skills. Yet companies still resist taking their best people out of their day-to-day jobs to do process work, because the best performers usually seem critical to keeping the business going. Most companies have a lot more talent depth than is visible. Putting people in new jobs can leverage that talent. By putting the best people on the work of process change, the company is in the best position to redesign its future. Small teams of highly knowledgeable people get the job done faster, achieving results with more limited resources. Change the work as quickly as you can. The more quickly you can change work, the more quickly people start to think differently about how work gets done. Go further with the change than you are inclined, and leave no paper behind. If you do not change all or most of people’s jobs, they can be left doing the old work, as well as the new. A simple rule is to get rid of all paper as you redesign processes. This,of course, also requires good IT systems Tell everything that you know. Every person who will be affected by a process change wants to know what the change will mean. important to tell everyone what you expect

will happen, even if the news is troubling. In the absence of information, people make up stuff. 6. Empathize. Always be empathetic and supportive of personal transitions. It’s important to know what they are going through. Jobs will change, and some jobs will go away. 7. Know the corporate values that you want to preserve. values can be strengthened if you are clear about what they are . Process change should improve quality, operational excellence, and service, and well-designed processes should improve the work lives of people. 8. Know the corporate values of your business partners. Process change will increasingly cross-corporate boundaries. These changes will reach customers, suppliers, and across oceans, as more collaborative business models are implemented and more business processes become integrated. People in different organizations must know, like, and respect each other. You need to know that the people of your business partners will do the right thing at the moment of truth 9. Regularly inspect the workplaces of your global operations. Even if you trust the values of your company and your partners, you must still walk the “factory floor,” no matter where it is in the world. 10. Anticipate the new worker. Education will be critical, especially in the early stages of learning and development. the current worker must become the new worker. There is no choice. Our challenge is to manage the transition. 11. Recognize that process change never ends. Once a company experiences the benefits of real process change, it generally develops an appetite for continuous process change. ● Considering people through/during process engineering ○ Process change requires getting the pacing right. When design debates occur, you must listen to all the arguments. When all arguments have been heard, however, decisions must be made and change quickly implemented. Knowing when to end the debate and move to action is an art form. ○ Can people adapt to all this, while at the same time learning new skills? Education will be critical, especially in the early stages of learning and development. Our children are comfortable with digitized processes, but while we are waiting for them to enter the workforce, the current worker must become the new worker. There is no choice. Our challenge is to manage the transition. Every process redesign effort must chart the course for changing skills and human sensibilities. ○ The most common expression of concern about process change is that “the company will not be what it used to be.” People begin to express a sense of loss even before anything happens. The change, however, is often more in managerial style than values. Process change brings about an emphasis on performance— both corporate and individual. As explicit performance measures are put in place, managers are seen as having a harder edge.

○ Every person who will be affected by a process change wants to know what the change will mean. The challenge for managers is that, at the beginning of a redesign, no one knows the full impact on people—certainly not on a person-byperson basis—but it’s important to tell everyone what you expect will happen, even if the news is troubling. ○ At the same time that you are being forthright with people, it’s important to know what they are going through. Jobs will change, and some jobs will go away. People will be concerned with their ability to do the new work. Always be empathetic and supportive of personal transitions ○ Make sure all roles change, don't leave people doing new and old tasks. ○ Have the best people for the tasks, perform those tasks ○ Quicker changes allow the workforce to adopt quicker ● Process exercise (efficiency vs. effectiveness) ○ Today, managing business process redesign is made even more difficult because it’s not just how work is done that’s changing, but issues of where work is done and by whom (outsourcing and offshoring) are also on the corporate agenda. These changes are driven and enabled by the “flat world,” one in which work readily moves to the country or company where it can best be performed—and at the lowest cost. The redistribution of work means that people will be more physically dispersed, corporate cultures will become more fragile, and behaviors more difficult to observe. It also means that you must be concerned about both your people and those of your business partners—whether they are on- or offshore. ○ Small teams of highly knowledgeable people get the job done faster, achieving results with more limited resources. ○ If you do not change all or most of people’s jobs, they can be left doing the old work, as well as the new. I recently saw a group of nurses who bitterly complained that new administrative processes had simply been added on top of their old work. Nothing had gone away. The result was that they were spending more time in front of flat screens entering data, while at the same time filling out paper forms. And they were spending less time doing what had brought them to their profession: caring for patients. ○ Know how much study and preparation (mostly planning and training) are required before you execute an operational change. At some point, you will learn no more by study and analysis. There will always be errors in execution, but what’s required is a quick response to breakdowns, not endless planning. Again, the faster people experience physical change in work, the faster they will learn and adapt.

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Hammer 2007: The Process Audit PEMM Framework (Process and Enterprise Maturity Manual) - created by Hammer in conjunction with the Phoenix Consortium (a group of leading companies) - Hammer presented the first version in 2004, but later a revised edition was released in 2006 - PEMM removes the mystery, and allows companies to measure, evaluate, improve, and replicate the task of process transformation Process Enablers - Design: The comprehensiveness of the specification of how the process is to be executed. - Performers: The people who execute the process, particularly in terms of their skills and knowledge. - Owner: A senior executive who has responsibility for the process and its results. - Infrastructure: Information and mgmt systems that support the process. - Metrics: The process the company uses to track the process’s performance. - These factors are all very interdependent and each one is needed to support the other. Enterprise Enablers/Capabilities - Leadership: Senior executives who support the creation of processes. - Culture: The values of customer focus, teamwork, personal accountability, and a willingness to change. - Expertise: Skills in, and methodology for, process design. - Governance: Mechanisms for managing complex projects and change initiatives. XML & Web Services - value of XML & web sessions to enable reengineering - A language which is easy to use and to store information - Easy to transfer data and information between systems - Great for automatic communication that is often used for when restaurants/stores need more soft drinks/inventory

After Mid-Term: 6. Miers 2006: - Business Process Management (BPM) cycle - a systematic approach to making an organization's workflow more effective, more efficient, and more capable of adapting to an ever-changing environment. A business process is an activity or set of activities that will accomplish a specific organizational goal. - Business Process Centre of Excellence - a group of committed individuals focus on the processes of the company as they drive bottom-line profitability and performance. The team can support a number

of BPM projects across the business, keeping momentum going across a broad front. They are usually responsible for developing common principles, language, frameworks, and methodologies for process development and process architecture management. 7. DeJong 2007: - Definition of and Merging of Virtual and Real World - The real world contains the organizations structure, physical goods, employees and other organizations - The virtual world contains the organizations computerized infrastructure, including its...