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Reengineering The Corporation is a book which brings forth the concept of redefining the progression of firm. It involves disregarding the traditional means and assumptions through which firms have conducted business to achieve a process-centered business with an end objective of improving performance of the business. Reengineering requires that the agents involved do so from a clean slate; take what they know now and scrap it and come up with a new concept. Hammer asserts this by saying that a clean piece of paper should be taken, and with what is known now create a firm that achieves optimal consumer satisfaction. In definite terms, it is defined as the fundamental rethink and redesign of business processes to create a paradigm shift in the key areas of any business this key areas may include cost analysis, service delivery, quality of goods and the speed with which they are delivered. The following are the key characteristics of a reengineered firm:
- Business processes are made easier, which would make hiring employees easier as they require minimal training and supervision.
- Multidimensionality-people perform a broader range of tasks. This is essential for employee satisfaction, as every employee feels that his/her services are useful to the firm consequently increases motivation and performance. It also increases accountability as with few people to monitor it is easy to determine who is responsible for any activity, thus reducing errors and avoiding delays.
- Cohesiveness in the organization as team playing is a key element. This helps in ensuring that there is coordination at the workplace.
- Organizational structure becomes flatter and shifts focus from the managers to the professionals.
- The employees shift their goal from that of pleasing the boss to that of pleasing the consumer which means that performance may be measured in terms of result as opposed to activities.
- The manager ceases to be viewed as a supervisor, but as a mentor and a coach.
- Decision making falls on the workers and not the manager, which in addition to lowering overhead costs, fixed costs and reducing delays it creates empowered employees who will respond better to customers.
- It leads to the exit of standardization and the entry of product differentiation. Today’s markets are highly differentiated and with technological advancements it is possible to create products for each niche in the market without foregoing the benefits associated with mass production.
- Companies enjoy the benefits of centralized purchasing and decentralized operations. That is they enjoy the benefits associated with large-scale purchasing while at the same time the business units operate independently making them more responsive to market trends.
- Processes are arranged logically and decisively. Previously industrial processes involved some degree of linearity such that only one process could be conducted at any time nevertheless, reengineering allows for multiple processes to be conducted simultaneously. Not only does this to get more done by fewer people, but also reduces the chance of supersition.
Characteristics of businesses that need reengineering:
- Companies that need to achieve a competitive edge.
- Companies that have managers with foresight who still hold some degree of a competitive edge and want to make the most of it before that chances closes.
- Companies with managers who are ambitious enough to take the leap into reengineering the company. This type of manager cannot be risk averse.
Across the board several themes are common for firms that have reengineered themselves. A great focus on the use of information technology. From economic theory, improvement in technology shifts the P.P.F (production possibilities frontier) leading to increased production. Needless to say, there must be willingness to break through the old traditions of the business, clinging onto the old would then beat the entire process. However, these themes are not of one size that fits, all they are as different as the firms are. Each firm creates its own. Another resounding feature and perhaps one of the most crucial is the desire to create performance breakthroughs.
To compete in the global market adequately, any firm should be fast, flexible and deliver high quality at a low cost. Too many traditional businesses this might prove difficult since they were based on the following principles:
- Adam Smith’s theory of specialization – in his 1776 book The Wealth of Nations purports that specialization would lead to the increased efficiency and hence increased production.
- Command and control type organizations that were as a result of the foreword of the railroad system which was famous for centralized organization and rules for every contingency.
- In the 1800’s Henry Ford introduced the assembly line which even though it brought the work to the worker instead of the other way round it performed a small task in a series of complex processes.
- In the period between 1945 and 1960’s, hierarchical or pyramid structure in an organization was introduced which led to the creation of middle level managers to meet the growing demand of masses for consumer products.
At the time, the above principles could have worked very well but in the current highly competitive economy this principles would not serve any organization, in today’s world they are redundant. A corporation that aims to create a competitive edge needs to reengineer, overhaul the above principles and adopt the following:
a) Focus on the basics of the company.
b) Redesigning the element radically – it is not a process done marginally but on the entire organization.
c) The changes made in the organization are mammoth. Therefore, the results of this change should be equal in magnitude if not more. Do not settle for less.
d) The changes made should be business oriented not tasks or employee oriented. It must have added value.
Companies that have gone through the process have some key roles that the leader needs to fill, process owner, reengineering team, reengineering czar and the steering committee. The leader in this case will appoint the process owner who will work closely with the reengineering team under the guidance of the reengineering czar and the steering committee. The leader will need to be firm and persuasive as he is faced with the task of convincing the people on the need for reengineering the firm without second guessing himself. The process owner is likely to be a senior manager who is familiar with the intimate details of the processes.
Reengineering Team – This consists of a mix of people, insiders and the outsiders they are concerned with the actual reengineering. They make a step by step process of exactly how the reengineering process is going to take place.
The steering committee is composed of senior managers who are responsible for allocation of resources, conflict resolution as well as monitoring and evaluation.
The reengineering czar is somewhat of a coordinator and ensures the smooth running of the operation.
In this book, hammer goes to show that reengineering is not a process in theory but has actually been put to test by various well-known firms. For example:
IBM Credit Corporation that finances IBM, realized that finance applications spent most of the processing time in a desk waiting to be looked by a specialist, and it, therefore, took 6-14days to process. With this in mind the company reengineered the entire process by bringing in a deal structure who dealt with the whole application from start to finish and only consulted with a specialist when there was an anomaly with the application which was rare. The company did this by introduction of a new computer system that provided all the data and tools the specialist used. (Note the use of technology which is the key in any reengineering process). This reduced the application process time from six days to four hours.
Ford Motor Company also undertook a reengineering process for it procurement process when it realized that most of its employees spent time sifting through paperwork trying to sort out discrepancies between purchase orders, shipping receipts and invoices. It, therefore, created an online database that ensured a shipment matched a purchase order. It was updated every time a shipment was received and a check was generated and issued to the vendor in a timely manner. It increased the headcount of Ford Motors from 500 to 125 and increased efficiency.
However, the concept of reengineering should not be confused with automation or downsizing. It largely differs from Total Quality Management in that in the TQM it aims at improving the existing processes through ongoing value addition activities but reengineering involves a complete revamp of the system.
Reengineering is developing rules through which corporations will use in future instead of the same old rules devised by others and imposed on the corporations. It is held together by four main pillars:
- Be consumer oriented – Creating consumer satisfaction is an objective found in any company’s mission statement. But the question is how to get the employees to deliver that? To that, Hammer asserts that all one needs is a challenge. Set ambitious but realizable company goals. Employees will not be motivated by goals that do not challenge them but once a mission is created that challenges the employees then they focus on attaining the mission which consequently leads to consumer satisfaction.
- Swiftness – Reengineering should be done fat and decisively lest it falls prey to the “we normally don’t do things like that around here” bug, preferably in a 12 month window. Human naturally fear the unknown and so resist change on every opportunity they can get.
- Taking risks – Change comes with risk. The best way to avert this is to show that the status quo is more risky than the expected change.
- Learning from mistakes – Reengineering is not a definite process, therefore, hitches are expected along the way. The key is not to avoid mistakes as they are unforeseeable but to learn from them and not repeat them again.
- Persistence and perseverance – Corporates quit with the first sign of success or failure. Be patient with the process and do not be afraid to try again until you get it right.
Michael Hammer and James Champy affirm that for an organization to succeed at reengineering it must have a strong executive leadership, understanding and commitment to the cause. The rewards are enjoyed by not only the employees and the individual but by the entire economy. Hammer and Champy both agree that it is a relatively new idea but it is inevitable in a world that is on its way to become a global economy characterized by tremendous improvements in technology and relentless change. They also concur that it is not a miracle to fix for the problems currently being faced by the majority of American companies but involves strenuous work, which cannot be achieved behind closed door boardrooms or motivational talks. This only means that the book plays an essential role in the decisions made by companies that intend to reengineer.