Reengineering an Organization
This paper deals with the effects of Business Process Reengineering (BPR) into an organization. The paper defines the meaning of BPR and states the basic objectives that BPR has. It also refers to the strong relationship between BPR and IT and the most popular BPR methodologies that are used by the organizations. The paper also deals with the restructuring that BPR causes to the organization and the way that BPR affects the employees of the organization.
Moreover, the paper investigates the alignment of BPR with the strategic dimension of the organization and explores the possible effects that BPR will cause to the future plans of the organization. Due to the fact that BPR is based in the reduction of costs, in the paper there is an extended reference on possible ways of reducing the costs into the organization. Finally the paper describes the future recommendations for BPR and compares BPR with another approved management technique – TQM. Reengineering an Organization Information Technology (IT) plays nowadays a very important role in our lives.
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Whether we discuss about our private or professional lives, IT has changed permanently the way we live. We use cell phones, computers, and TV gaming systems in every day use. Most companies now could not due without their cell phones nor their computers. IT is one of most common tools that used for the better performance of the organizations. Business Process Reengineering (B. P. R. ) is a subset technology of IT that is based on the redesign of workflows and processes within and between organizations, according to Davenport and Short , who were the persons that published first the basic concepts of BPR. Since then great number of publications have explored the fields of BPR and the benefits that BPR offers to the organizations BPR has become quite popular during the last decade. The fundamental concept of BPR is the introduction of IT into an organization, followed by the re-optimization of the organizational processes and structures into the organization.
There is not a standard methodology about the application of BPR into an organization. Davenport and Short, propose a five phases approach to BPR. The BPR effects the creditors, customers, employees, owners (shareholders), suppliers, and the community from which the business draws its resources. st Phase: Develop the Business Vision and the Process Objectives. The basic purpose of BPR is to focus on various organizational objectives like restructuring, cost cutting, redundancy, quality improvement and empowerment. The place that consumers recommend that is worth the money. 2nd Phase: Identify the Processes that should be Re-designed. The organization should identify the processes that conflict with the business vision and then sort these processes according to their importance in the business. 3rd Phase: Understand and Measure the Existing Processes.
The organization should identify the basic processes that are required for the better performance of the organization and try to eliminate the old mistakes, in order to develop a solid foundation for better future. 4th Phase: Identify the IT Levers. The organization should be aware of the basic IT capabilities in order to develop the best possible way to design new powerful processes. 5th Phase: Design and develop a new model for the new Process. The organization should design and develop a new model that will be used as a foundation for the future development of the new processes.
This new model aligns the BPR approach with quick and successful results. BPR is characterized by the following five key objectives. If organizations achieve these objectives, then their future will be more successful. Reduce the Cost of Doing Business. Nowadays cost – cutting is maybe the most important issue for an organization. It is evident that the first objective of BPR should be to reduce the cost of doing business by eliminating the old – fashioned processes and regulations into the organization. Unit – cost Management.
The organization should lower the cost of production and at the same time should improve quality and customer support. Fee for Service. The organization should provide valuable and qualitative products and services. Customers are always willing to pay for quality. The goal is to apply business practices to the management of the organization. The basic business practice that should be applied is to determine the common customer’s requirements and meet them by providing more value and quality at a lower cost. Continuous Process Improvement.
The Process Managers of the organizations should continuously respond to the customer needs, search for new quality materials, and improve the efficiency and effectiveness of the processes. The combination of BPR with new improvements will increase the capabilities of the organization. Leadership. The Managers should be empowered with advanced leading capabilities in order to succeed in their efforts. At this point it would be useful to explore the relation of BPR with IT. First of all, we should examine the basic principles of Re-engineering.
According to Hammer, who was one of the persons that developed the theory of Re-engineering, Re-engineering is based on the following principles: Organize around outcome, not tasks, The users that should use the output of the process, should perform the process, Include the information process phase, into the production of the information, Eliminate the distances between remote resources, Link parallel activities, Build control inside the process, Capture information from the source. It is evident that IT plays a special role in BPR. Hammer believes that IT is the key enabler of BPR.
Davenport and Short have a different approach in the relationship of BPR with IT. They believe that BPR and IT have a recursive relationship. IT capabilities should support the business processes, and business processes should be developed in a way that meets the IT requirements. IT should be viewed as the force that reshapes the way that the organization operates. The basic aim of BPR is to increase the effectiveness of the organization. This can be done with various ways. One of these ways is to change the current structure of the organization.
This process is called restructuring and aims to develop a new more sufficient and effective structure for the organization. It is evident that restructuring is not an easy and short process, but a time-consuming process that requires a lot of effort and preparation. In large organizations like governments, restructuring often requires a lot of years. In fact organizational restructuring is a strategic business initiative that focus on the improvement of the processes within an organization. Moreover restructuring is also a process that needs to be well designed, following some specific steps, in order to be successful.
First of all, the critical phase of the planning of restructuring should be done at the top level of the organization. Only the persons that belong to the Administration Board of the organization should be present in the planning of restructuring. Restructuring succeeds only when it is done as a process that takes into consideration the progress and the performance of the organization. It is obvious that people that work into the organization are always confused and skeptical towards restructuring. They are concerned about their future in the organization and they want to participate in the process.
At the most cases they want to know the effects that restructuring will have on them and what to expect from the future of the organization. They feel that their position is insecure and sometimes they resist having restructuring on them. The insecurity that the employees feel becomes greater due to the spread of the rumors into the organization about the results of the restructuring. However restructuring does not always have negative outcomes for the employees. The main objective of restructuring is to address the needs of the people into an organization and then to develop a plan that will transform the organization to new form.
At this point BPR enters in the game of transition of the organization. Efficient planning and communication with the people – members of the organization, are the most effective tools that used to manage the successful restructuring. Restructuring as a phase of BPR should not be considered as downsizing. Downsizing aims to reduce the members of the organization in order to avoid high cost. On the other side, restructuring aims to eliminate the amount of work that is not necessary, and to find new more effective ways of working into the organization.
Another critical issue of restructuring and BPR is the impact that they have on the human resources of the organization. First of all, BPR prepares the employees for the changes that will take place into the organization. The employees should be more trained and specialized in order to be more productive for the organization. BPR offers the opportunity to the employees to obtain new skills that will help them in the new status of the organization. However, BPR projects fail most of the times. This failure happens due to the following reasons: Employees resist to the changes that BPR will bring to the structure f the organization, The plan and the expectations that have been derived in terms of BPR of the organization are out of reality, The organization follows a cost cutting strategy and the effect is that the investments of the organization are in low level, The managers of the organization do not have the appropriate knowledge and qualifications to succeed in the development of BPR processes into the organization. The most common reason that BPR projects fail is the fact that organizations pay more attention in the tactical dimension and they neglect the strategic part.
Organizations should take into consideration the following important strategic dimensions in order to exploit the capabilities of BPR: Organizations should develop a strategic plan that clearly states their primary objectives, Organizations should investigate the current market situation and the opportunities that are popping up every day, Organizations should develop a human resources strategy. The success of BPR depends exclusively on the people that perform the processes, the way they perform these processes and the knowledge they have on the BPR principles.
The managers of the organizations should take into account the fact that employees are people and they need extra training and knowledge in order to be more effective in their jobs. Especially in organizations that plan changes that affect the personal lives of the employees, the human factor should be considered. Individuals are always motivated when the managers reward their efforts. From the above it is obvious that the success of BPR projects is strongly related to the strategy of the organization.
The link between BPR and the organizational strategy is the vision of the organization and how this vision will be accomplished as times goes by. There are several steps that should be followed the vision with the BPR. First of all, define the exact mission and vision of the company. This step is the cornerstone of the future of the organization. The managers should clearly identify the core competencies and the target of the organization in order to develop the best possible strategy that fits to the nature of the organization.
The second step is to design a business plan for the next three (3) to five (5) years. During this period of time the organization should gain a lot of powerful experience and knowledge that will be very helpful for the future. The first years of the organization that referred at this point are very critical and will be the basis for the next steps of the organization. At this period the administration of the organization will realize the real situation and will test the capabilities of the organization into the tough competition.
The third step should be the implementation of the business plans. This step is very difficult to be done due to the external factors that were not taken into consideration in the initial plans. As it derives from the above the transition that BPR causes to the employees of the organization is maybe the most critical factor of the future success of the organization. There are three phases that should be accomplished for the normal transition of the employees. The first phase should stop the old style of working into the organization. This phase is very difficult.
The majorities of the employees are used to work in a standard way and are always suspicious towards changes. In that case the employees should be motivated from the managers in order to accept the new reality and the changes that it will bring into the organization. On the other hand, the managers should inform, by providing a lot of details, the employees about the changes and the new opportunities that will evolve in the future situation. The second phase is the phase of the transition of the old phase to the new one. At this phase the organization is facing serious problems.
Employees are overloaded with tasks as they already have the running tasks and they are obliged to attend extra training in order to be more effective in their future tasks. The only way to come up against this crisis of the organization is to develop temporary solutions that will deal with the problems that will evolve during this period of transition. The final phase is the phase where the new situation is reality. At this phase the organization starts to operate in the new model, using new rules, new behaviors and new processes.
To sum up BPR has a high potential in restructuring an organization and in developing new strategic plans. It is evident that BPR changes the whole culture of the organization. However, the managers of the organizations do not always realize the effective capabilities of BPR, and this is the main reason for the common failure of BPR projects. As it is already said in the introduction, the basic objectives of BPR are related to financial resources. The most common objective of BPR for an organization is to reduce the costs of doing business. In other words, to cut the costs of the organization by introducing new rocesses and eliminating the old – fashioned. It is obvious that if an organization applies BPR successfully, the costs will be reduced significantly. There are various ways in BPR that can lead to the cost – cutting into an organization. First of all, the organizations should reduce the costs of doing business. This can be done by decreasing, or even eliminating the age long processes than do not offer any benefits to the customers of the organization. New powerful processes that will add much value to the services of the organization should substitute these invaluable processes.
Secondly, the managers of the organization should calculate, using the Activity Based Costing technique, the costs of the production of their primary products and services. This technique is very easily applied and gives reliable and correct results for the organization. In addition to that, BPR uses extensively the Economic analysis in order to estimate real costs and benefits that are associated with alternative ways of investment. By applying the Economic Analysis into an organization the managers have the opportunity to explore alternative choices for improving the business processes that run into the organization.
According to BPR there are several ways to cut the costs into an organization. First of all, the administration of the organization may reduce the working hours of the employees. This can be done by the technique of job sharing. The organizations divide the tasks into smaller separate parts and employees are dealing only with their specific task. Another way that is commonly used among organizations in terms of reducing costs is to reduce the salaries of the employees. In that way, organizations save great amounts of money that can be used in future investments.
All the above are parts of the theory of Risk Management and Cost Analysis. Both these techniques split the projects of the organization into smaller parts and set the schedule and the budget for them. For this purpose the managers create the project team that consists of the following members of the organization: Project Manager, who is responsible for the whole process of the project, Development Manager, who is responsible for the progress of the development team, Marketing Manager, who investigates the market value of the product r the service of the organization, Information Systems (IS) Manager who has analyzed and designed the information system that was used in the project, and finally the, Financial Manager, who is responsible for the financial status of the project. The Risk Management is used in order to estimate the strategic benefits of each project that an organization is currently planning. To evaluate the strategic dimension of the project, the managers of the organization investigate in great detail the following risks of the project and then decide whether to approve the implementation of the project or not.
Size of investment, Technical risks, Impact of the project in the organization, Current and possible future Customer needs, Return on Investment. After discussing the current status of BPR into organizations it would be useful to analyze the future trends of BPR. This phase seems to be a critical factor for the successful future of the organization. First of all, the managers of the organization should clearly develop the vision of the organization. It is true that during the next years the organization should face various difficult situations and new unexpected challenges.
However, the managers should have an idea of their future state from the beginning of the redesign of the organization. At this phase it is necessary to mention that organizations should have the appropriate skills and qualifications that they need in order to meet their initial plans. This can be done inside the organization by examining its core competencies and their relationship to its vision. Another critical factor of success for BPR projects into an organization is the smooth transition from the current state to the future vision. As it was said in the previous sections, the state of transition is an important factor for the uture success. At the same time the organization should balance the short-term benefits and the long-term benefits in order to develop a successful strategy for the organization. It is obvious that the phase of applying BPR into an organization is very significant for the future of the organization. The managers should take into consideration the major benefits, as well as the major risks and financial costs, before they take the decision of using BPR into the organization. At this point it is necessary to compare BPR with other approved management techniques like TQM (Total Quality Management).
According to Davenport  TQM focuses on incremental change and improvement of the processes of the organization, while BPR focuses on the redesign of the processes and the introduction of new more effective and efficient processes. Moreover TQM deals with the existing processes while BPR creates new processes. Another critical difference between TQM and BPR is that BPR takes a long time in order to be integrated and of course affects the structure of the organization, while TQM requires a short period of time and does not affect the structure of the organization.
To sum up, BPR seems to be a powerful management technique with many revolutionary features that can change in a dramatic way the current status of an organization. BPR is strongly related with IT and the continuous and rapid development of IT has been a great ally for the spread of BPR. However the majority of BPR projects fail due to the lack of skills and qualifications, and the resistance to change from the employees into the organizations. If the managers of the organizations overcome these obstacles then BPR will transform the organization into the state that the managers visualize.