Page 69 - DCAP302_ENTERPRISE_RESOURCE_PLANNING

Unit 3: Business Process Re-engineering

In their study, the cycle times of 86 printed circuit board assembling departments at electronic notes
companies were analyzed. These departments performed the same manufacturing processes at
large and small electronics companies. They labeled 31 of the 86 departments as process-complete,
meaning these departments perform manufacturing processes, support tasks, and customer
interfacing. The rest are traditional functional departments that do not perform most activities
outside of the manufacturing processes. To the authors’ surprise, they discovered process-
complete departments did not have faster cycle times than functional departments. After more
analysis, they found process-complete departments had faster cycle times when management
practices were put in place to foster collective responsibility. These practices include jobs with
overlapping tasks, group-based rewards, open workspaces, and collaborative work procedures.
Analysis of the data, after taking into account these management practices, revealed that process
complete departments that implemented these practices achieve cycle times as much as 7.4
times faster than process-complete departments that have not implemented these practices.
Furthermore, process-complete departments that operated on traditional functional mindsets
have cycle times as much as 3.5 times longer than functional departments. Organizational
restructuring alone does not inherently bring about forecasted improvements. Structural change
has to be accompanied by changes in managerial practices and mindsets to reach the desired
objectives. In fact, as we will discuss a little later, the lack of focus on the human side of change is
one of the biggest drawbacks of traditional BPR practices.
What are the effects of BPR on corporate performance? Several success stories have been
widely publicized. Ford was able to reduce 75 percent of its staff in its accounting department,
Mutual Benefit Life achieved 60 percent productivity improvement in its insurance applications
department, Hewlett-Packard improved on-time delivery performance by 150 percent in its
purchasing department, and American Express was able to reduce average time for transaction
processing by 25 percent. However, by Hammer’s own admission, 50 percent to 70 percent of
business process re-engineering projects failed. In addition to Hammer’s own assessment of the
failure rate, one study indicated that only 16 percent of corporate executives were fully satisfied
with their BPR implementations.

The radical nature of BPR implementation has often been associated with its failure. Instead of
building on what already existed, BPR implementations approached business process changes
as blank slates. In the ideal world, this approach should bestow competitive advantage from
innovative business process designs. The reality often turned out to be quite different. There
was usually inadequate representation of the business users and decision makers on the project
implementation teams. IT and outside consultants often comprised the majority of project team
members. This resulted in solutions heavily influenced by best practices suggested by ERP
systems being implemented. These best practice business processes are generic and usually do not
represent innovative, differentiating processes. BPR has often been used to disguise restructuring.
Thus, it often engendered resentment from the employees. Initial BPR prescriptions did not
include recommendations on how to cope with organizational change and human resource
issues. Change management on many BPR projects often served only training and communication
roles. The combination of a top-down implementation approach and an inadequate change
management function in BPR project methodologies resulted in strong resistance from front-line
workers and middle managers. Furthermore, early BPR implementations were heavily technical
and process focused. Often, these changes were undertaken without corresponding changes in
the organizational setup. This resulted in halfway measures of re-engineering with redesigned
cross-functional processes that were partly owned by various functional departments. The lack
of identifiable process ownership often led to chaos. These various factors led to unsatisfactory
opinions of BPR in the corporate world.

Do these explanations of failure and the high failure rate mean the fundamental approach of BPR
is faulty? Studies that profile successful BPR projects do not come to this conclusion. A McKinsey
study conducted in 1993, at the height of the BPR fad, discovered BPR projects that are broad
based and in-depth generate the highest business unit benefits. This study analyzed the BPR

LoveLy professionaL university 63