Page 250 - DMGT505_MANAGEMENT_INFORMATION_SYSTEM

Unit 13: Redesigning the Organization with Information Systems

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 reengineering 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 frontline 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
reengineering 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

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