How Process Enterprises
Really Work
by Michael Hammer and Steven Stanton
Harvard Business Review, November-December 1999
Presented by Jeff Schott
CS457 Fall 2005
Process Enterprises
• What is a Process Enterprise?
– “Flexible groupings of intertwined work
and information flows that cut
horizontally across the business, ending
at points of contact with customers.”
– Replaces traditional organizations
• Sets of discrete units
• Well-defined boundaries
Business Process Reengineering
• Benefits
– Operate faster and more efficiently
– Use information technology more
productively
– Employees have more authority and a
better view of the big picture
– Higher-quality products and service
– Dividends to shareholders through
reduced costs, increased revenues, and
higher stock values
Impediments to BPR
• Many companies have reorganized
core processes, but not the entire
organization
• Power still resides in vertical units
• Integrated processes and fragmented
organizations create cognitive
dissonance
Successful BPR Implementation
• Appoint best managers to be process
owners
• Give process owners authority over work
and budgets
• Shift focus to process goals
• Base pay and advancement on process
performance
• Focus training on whole process
• Cultural focus on teamwork and customers
Case Study – Texas Instruments
• Calculator development teams
– Drawn from various departments
– Responsibility from inception to launch
• Initial results not encouraging
– Teams barely functioned
– Sabotaged by existing organization
– Unwilling to cede people, space,
responsibility
– Conflicting orders from team,
department
Case Study – Texas Instruments
• Organization changed
–
–
–
–
–
Teams became primary business units
Old departments refocused on training
Process owner management role created
Budgeting by process
Office space reconfigured
• Improvements
– Time to launch reduced by 50%
– Break-even points reduced by 80%
Case Study – IBM
• Standardize Global Operations
• Processes assigned to members of
the Executive Committee
• Units expected to follow processes
• Improvements
–
–
–
–
75% reduction in time to market
Increased on-time deliveries
Increased customer satisfaction
$9 billion savings
Case Study – Owens Corning
• Enterprise Resource Planning System
• Managers were rejecting or
modifying ERP
• Companywide process teams created
• Improvements
– 50% increase in inventory turns
– 20% reduction in administrative costs
– Millions in logistics savings
Process Owners
• Senior managers with end-to-end
responsibility for processes
• Must have authority over design,
measurement, and training
• Process ownership is permanent
– Process designs evolve with business
– Old organizational structures will
reassert themselves
• Separates control of work from
management of workers
Case Study – Duke Power
• Improve customer service in the face of
deregulation
• Identified 5 core processes
– Each assigned an owner
• Owners given authority over
– Designing process
– Setting performance targets
• Improvements
– More installations per day
– Meets 98% of construction commitments (up
from 30 - 50%)
New Style of Management
• Cooperation is unavoidable
– With other managers
– With process workers
• Duke Power developed a “decision
rights matrix”
– Which managers make certain decisions
– Who is consulted beforehand
– Who is consulted afterward
Process Standardization
• Benefits
– Lowers overhead costs
– Presents one face to customers
– Increase organizational flexibility
• Disadvantages
– Different customers cannot be served differently
• Some companies do both
– Standardize as much as possible while still
meeting diverse customer needs
– Harder to impose standard than allow diversity
Making the Transition
• Determine relevant changes
• Connect to overall strategy
• Appoint high-profile executives as
process owners
• Set realistic expectations
• Don’t try to do everything at once
• Choose one unit as a prototype
• Gain commitment of senior
employees to avoid resistance
New Process Infrastructure
•
•
•
•
•
Measurement
Compensation
Facilities
Training and Development
Career Paths
Is It Worth It?
• Capitalize on new opportunities
• Process is as important as
presentation
• Dynamic processes for changing
markets
Does it Work?
•
•
•
•
•
70% failure rate
Excuse for job cuts
Ignores human dimension
Is actually time sensitive
New processes means new problems
– Untested solutions
– Security issues
• Is being phased into ERP, BPM, Six Sigma
Source: Wikipedia [Business Process Reengineering]
http://en.wikipedia.org/wiki/Business_process_reengineering