Business Process Reengineering
Chao-Hsien Chu, Ph.D.
School of Information Sciences and Technology
The Pennsylvania State University
University Park, PA 16802
BPR Theory Vs. Practice
BPR
Promise
Fundamental change
Reality
75% Failure rate
Misunderstanding
- What BPR is.
- How to go about doing it.
BPR Definition (1)
Reengineering is the fundamental rethinking
and radical redesign of business processes to
achieve dramatic improvements in critical,
contemporary measures of performance, such
as cost, quality, service, and speed.
Hammer and Champy 1993
BPR Definition (2)
The fundamental rethinking and redesign of
operating processes and organizational
structure, focused on the organization’s core
competencies, to achieve dramatic
improvements in organizational performance.
Lowenthal 1994
BPR Definition (3)
Reengineering is the rapid and radical
redesign of strategic, value-added business
processes — and the systems, policies and
organizational structures that support them —
to optimize the work flows and productivity in
an organization.
Manganelli and Klein 1994
Processes
A process is an interrelated series of activities
That converts inputs into outputs.
Activity
Activities
 Value-adding Activities
 Important
to the customer
 A customer is willing to pay for them
 Hand-off Activities
 Move
work across functional or departmental
boundaries
 Control Activities
 They
control hand-off activities
Process Flow
CEO
Marketing
Customer
request
Operations
Finance
Order
fulfillment
Features of Business Processes
 Greater
margin for improvement
 Hands-off and lost control
 Waste and inefficiency are difficult to detect
 Cross-functional problems
 Low percentage of value-adding activities
 Customers are very sensitive to poor
business processes
Some Business Processes
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Order Processing
Billing
Purchasing
Shipping
Receiving
Auditing
Business Planning
Warranty and claims
processing
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Budget planning
Accounts payable
Accounts receivable
Performance appraisal
Proposal development
Credit approval
Vendor certification
New employee
processing
Attributes of a BPR Methodology
 It
should develop a clear statement of
corporate goals.
 It should be process-oriented.
 It should facilitate the classification of
activities.
 It should lead to fundamental change.
 It should develop a plan to deliver final
results within a year.
Reasons for Reengineering

Your continuous improvement activities have hit
a dead end.

The competition has grabbed your customers.

You are approaching the top of the “S Curve.”

Your customer’s requirements have changed.

Technological advances expand the possibilities.

Fundamental shifts in industry.
Motivation for Redesigning
BPR
Improved
Customer Focus
Improved
Cycle Time
Improved
Process Efficiency
Building Blocks
Current
process
review
Design
options
Baseline
analysis
Design
specifications
Customer
requirement
analysis
Analysis
Phase
Implementation
Phase
Transform
the business
High-level
design
Design
principles
Design
Phase
Detailed
design
Build in
CI feedback
Model and
validate the
new design
Pilot the
new design
Process Selection
 Broken
Processes: Which processes are in
the deepest trouble?
 Important
Processes: Which processes
have the greatest impact on the company’s
customers?
 Feasible
Processes: Which processes are at
the moment most susceptible to successful
redesign?
Broken Processes - Symptom
 Extensive
information exchange, data
redundancy, and rekeying
 Inventory, buffers, and other assets
 High ratio of checking and control to valueadding
 Rework and iteration
 Inadequate feedback along chains
 Complexity,
exceptions, and special cases
Important Processes
Market
Company
Customer Issues
Processes
Product Cost
On-time Delivery
Product Features
Product Design
Order Processing
Procurement
Feasible Processes
Process Scope
Project Cost
Reengineering
Effort
Owner
Commitment
Team Strength
Common Themes
 Use
reengineering to grow the business.
 Service
the customer: Competing with
quality of products and services.
 Increase
revenue instead of simply cutting
back through cost reduction and
downsizing.
Reengineering Cast Members
Executive Sponsor
Project Team
Analysis
(2-4 months)
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Operations
research teams
Benchmarking
teams
Voice of the
client data
collection teams
Design
(3-6 months)
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Workflow
design teams
Application
design teams
Pilot teams
Implementation
(12-24 months)

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Implementation
teams
Transition teams
Understanding and Rethinking
Business Processes
Understand the
Customer
Understand the
Process
Benchmarking
Understanding The Customer

What are the customers’ real requirements?

What do they say they want and what do
they really need?

What problems do they have?

What processes do they perform with the
output?
Understanding Processes
Why does this particular process need to
exist versus some alternative solution or no
process at all?
 Why does the process require this much
time to achieve certain results?
 Why is the process organized this way?
 What aspects of the process are truly
important to the customer?

Revisiting Process Activities
Process
No Value
Added
Real Value
Added
Business Value
Added
Process Evaluation and Analysis
Existing Process
Measures of
Performance
Activity-Based
Costing
The Technology
Trap
“Do not automate something
that should not have been
done manually.”
Some Characteristics of
Reengineered Processes

Several jobs are combined into one

Case worker
 Case team
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Workers make decisions
The steps in the process are performed in a
natural order
Processes have multiple versions
Some Characteristics of
Reengineered Processes
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Work is performed where it makes more
sense
Checks and controls are reduced
Reconciliation is minimized
A case manager provides a single point of
contact
Hybrid centralized/decentralized operations
are prevalent
Ways to Structure the Organization
 Flattening
Organizational Structures
 Team
Design: Baseball, Football, and
Tennis Doubles
 Job
Design: Generalists Vs. Specialists
 Compensation
Schemes: Paying for
performance and/or business results.
Primary Roadblocks

Failure to develop the necessary leadership.

Not helping people to think in terms of
business processes.

Neglecting to align measures and rewards
with the new business process thinking.
Most Common Errors (1)
Trying to fix the process instead of
changing it
 Don’t focus on business processes
 Ignore everything except process redesign
 Neglect people’s values and beliefs
 Be willing to settle for minor results
 Quit too early

Most Common Errors (2)
Assign someone who does not understand
reengineering to lead the effort.
 Skimp on the resources devoted to
reengineering.
 Bury reengineering in the middle of the
corporate agenda.
 Dissipate energy across a great many
reengineering projects.

Most Common Errors (3)
Attempt to reengineer when the CEO is two
years from retirement.
 Fail to distinguish reengineering from other
business improvement programs.
 Concentrate exclusively on design.
 Try to make reengineering happen without
making anybody unhappy.

Most Common Errors (4)
Pull back when people resist making
reengineering changes.
 Drag the effort out.
 Try to make reengineering happen from the
bottom up.
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