Application 2 – Annotated Bibliography

R E E N G I N E E R I N G

In their quest for dramatic change, organizations often fail to lay the appropriate ground- work for ensuring long-term quantifiable improvement. As this article shows, successful reenglneering requires the careful development of a strategic context for change effort^ that taps the power of an organization's unique culture, vision, mission, and leaders.

by Richard C. Smith

In planning and implementing reengineering initiatives, how do you ensure that business process redesign efforts actu- ally achieve their intended outcomes? How do you guaran- tee that changes you make to core business processes as the result of painstaking work and analysis by business process reengineering (BPR) teams actually become institutional- ized so that they can drive new ways of working?

In the rush to reengineer—specifically, to get to such hands-on tasks as chartering project teams and conducting process mapping—organizations often fail to create the criti- cal large-scale framework in which their BPR initiatives must fit to make strategic business sense and to be of last- ing benefit. Instead, they get down into the guts and gears of their organizations and begin "fixing" things without having an overall game plan in mind. For example:

Company A decides that technology is cea for all its problems. So, it spends nfiillions on a new inventory control and tracking system (with- out getting buy-in from employees or providing them with training), only to fmd out later that em- ployees can't or won't use it because it is user- unfriendly. Company B decides to improve productivity by shedding staff, only to realize that the survivors of the downsizing are traumatized by the experience

and do not understand the new vision of the orga- nization. So, productivity and employee morale plummet for months after downsizing efforts have ceased.

Such approaches to reengineering and organizational restructuring fail to appreciate the multidimensional nature of organizational dynamics—the ways in which different parts of an organization relate to one another during times of organizational change. If Company A had thought about the "people" ramifications of introducing new technology into the workplace, it would have taken pains to involve the employees using the technology in its design and imple- mentation. It also would have assessed the likely impact of the technology on how people approach their jobs, provided training, and perhaps redesigned jobs as well as reward, incentive, and performance appraisal systems. If Company B had considered how downsizing would affect the morale and workload of retained workers, it would have striven to communicate effectively with all affected employees, while ensuring that retained individuals felt supported and able to take on new roles. Thus, it would not have found itself blindsided when survivors failed to immediately achieve the productivity and profitability gains that a reduction in headcount alone was intended to achieve.

In today's tough business climate, where strategic in-

Riciiard C Smfth is director of Coopers & Lybrand's Center of Exceiience for Change Management in Arlington,Virginia, and a senior consuHant for tiie fin-n's business process reengineenng and change management practice. He focuses his efforts on assisting executives in both government and commerciai accounts with business strategy development organizationai analysis and planning, and process imprcyvement.

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tent is critically important to business success, critical mass is essential, and human and fmancial resources are often limited, companies cannot afford to take a "ready, fire, aim" approach to BPR. It simply does not make sense to tackle business process redesign piecemeal. Instead, it must fit into a larger strategic context. As John Kotter, a Harvard Busi- ness School professor and consultant, notes, "Without a sen- sible vision, a transformation effort can easily dissolve into a list of confusing and incompatible projects that can take the organization in the wrong direction or nowhere at all."

DEVELOPING A STRATEGIC CONTEXT FOR UNDERTAKING BPR INITIATIVES

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Few organizations can reframe or reengineer their busi- ness strategy or vision without assistance. Fewer yet can effectively reengineer themselves at a process level without outside expertise, because of the myriad factors that poten- tially affect such efforts. For this reason, companies often turn to outside perspective and counsel,

Consultants usually begin by working with an organi- zation's top leadership to help it clarify its mission and vi- sion, define stretch goals, and build sponsorship for change efforts to come. Once that is done, work at the transactional level—to redesign specific work processes, revamp train- ing, overhaul performance appraisal and reward and recog- nition systems, etc.—can proceed. {Besides providing ex- ecutives and managers a context in which to vigorously debate approaches and perspectives, consultants help fur- nish a systemic perspective of what is actually involved in planning and implementing organizational change initia- tives and what is required to achieve long-temi business objectives.

To ensure optimum results when undertaking a BPR initiative, here are four main points to keep in mind.

1. Make sure that business process redesign efforts are not driven by organizational politics or by the desire to apply short-cut solutions to business problems, but by the organization *s compelling needs.

Consultants can play a valuable role in this regard, help- ing clients—who, in many cases, have trouble seeing the mote in their own organizational eye—develop a new aware- ness of the challenges they face.

By facilitating difficult discussions and acting as me- diators of competing organizational interests, a competent consultant can help organizations form consensus at the high- est levels about the compelling needs they have, and how they can best address them.

2. Once an organization comes to a realization of its compelling needs, its top leaders must forge and frame an overarching vision and strategy to address those needs.

As Warner Burke, professor of social and organizational psychology at Teachers College, Columbia University, points out, vision and strategy are transformational factors in the life of an organization. They help shape its purpose, its busi- ness goals, and the ways it operates in the external business environment—what products it develops, what markets it enters, how it positions itself vis-^-vis competitors, and so forth. Therefore, the power of an organization's vision and strategy to drive, shape, and sustain change efforts is un- matched. That vision and strategy form a compelling con- text in which BPR efforts can achieve optimal results. If an organization does not tap into them, its BPR initiatives are likely to be anemic, shot-in-the-dark efforts without lasting value or results.

3. Once in place, an organization's new business strategy and vision should be used to determine, shape, and support implementation of specific BPR activities. But an organization should never use individual BPR efforts as the basis to create a business strategy.

Because vision and strategy are at the very heart of a business enterprise, the redesign of specific work processes, the modification of management practices, or the stream- lining of organizational systems should be done to support those things. If the redesign of a particular work process is not essential to the organization's strategy, it should not be reengineered (at least, not at the beginning of a BPR effort), for it will sap energy and resources needed elsewhere. If, on the other hand, something in an organization is essen- tial to BPR success—for example, the fme-tuning of its compensation or reward and recognition systems to sup- port new ways of working—it should be targeted for early reengineering.

Vision and strategy are transformational factors in the life of an organization.

So, how do you know which organizational factors to address—and which to ignore—in planning BPR efforts? Al- though consultants may be able to help in this regard, many of them lack a sufficient professional frame of reference with which to competently manage reengineering efforts. For ex- ample, some are insufficiently versed in what other compa- nies and oiganizations have done to implement successful BPR efforts, while others lack sufficient depth of experience or expertise in things like organizational assessment and other methods to adequately explore and evaluate an organization's change readiness and its capacity to embrace BPR initiatives. This is why the following point is critical.

4. Before undertaking any change initiative, an organization's leaders must understand the specific

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Creating a Framework for Successful Reengineering

obstacles and enablers that exist inside the organization that can either thwart or enhance success with change efforts.

Often, the best way to detennine what these factors are is by conducting a change readiness assessment. Change management practitioner Burke suggests that all organiza- tional behavior and performance can be understood and re- liably predicted, based on the analysis of specific organiza- tional variables. Some of these variables, such as organiza- tional vision, and strategy, leadership, and organizational culture, affect an organization's life and effectiveness at a transformational level. Other things—an organization's structure, management practices, and systems—influence how things get done on an everyday basis inside the organi- zation. Although both kinds of variables are important to consider in planning BPR initiatives, transformational fac- tors carry more weight in determining outcomes than do transactional factors. Indeed, transformational variables help create a climate of alignment in which other kinds of change can be instituted and sustained.

By analyzing their organization's current state—look- ing at both transformational and transactional factors— managers can get an accurate, real-time snapshot of how it works and what challenges they face in implementing change efforts. A change readiness assessment might indicate, for example, that to realize long-term benefits from reengineer- ing a key business process, a company must change its man- agement practices to more effectively empower employees. Or, it might show that to get employees on board with change initiatives, key executives need to more clearly communi- cate their company's new mission and vision to workers. Or, it might indicate that to support employees in taking on new roles, the organization must redesign its performance appraisal system and upgrade technology to support people in doing new jobs. An assessment is an excellent way to pinpoint the amount of energy and emphasis that different organizational variables need to receive for an organization to derive optimal results with change efforts.

THE USEFULNESS OF A SYSTEMIC APPROACH

Taking a s>^temic approach to change management— one that quantifiably considers the influence and interrela- tionships of different organizational variables—is a power- ful way to determine the organizational domains in which change efforts can most effectively be focused to bring about successful, enduring change. This is evident in the two case studies described below.

A large regional bank faced with rising competition. In 1993, one of the most profitable regional banks in the United States discovered that although it was making a lot of money, several of its performance indicators suggested problems down the line. For starters, market research showed

that the needs ofthe bank's customers were changing. While the bank's traditional base of customers was a sure bet to keep using the bank's network of branches to transact busi- ness, other segments of the customer base, for example, young families, singles, and professionals, were looking for other options and demanding greater speed, convenience, and variety in banking products and services.

Second, even though profits were up, the bank's effi- ciency and performance, as measured in "assets per em- ployee" and "revenue per employee," ranked near the bot- tom in the bank's market. For these reasons, the bank de- cided to redesign four of its principal business processes— consumer lending, commercial lending, new accounts, and back-office transactions—to secure and sustain long-term institutional profitability.

Taking a systemic approach to change management is a powerful way to determine the organizational domains in which change

efforts can most effectively be focused to bring about successful, enduring change.

Initially there were strong disagreements about how best to accomplish these objectives. Some executives favored continued heavy reliance on branch banking as the primary sales channel for reaching customers. Others, however, felt it important that technology become the backbone for pro- viding an increasingly sophisticated array of products and services to the bank's clientele.

A group of consultants worked extensively with bank executives to help them recast the bank's vision, mi.ssion, and strategy to be relevant in a new banking marketplace. After a series of executive workshops with the bank's top management team, a new consensus about how to integrate the use of more technology into providing bank services, without sacrificing customer service, soon emerged.

Following these high-level meetings, which also gen- erated a series of stretch goals associated with reengineering efforts, other factors inside the organization began to fall into place. To create broad-based support for change within the bank, top bank leadership worked exhaustively to com- municate the compelling need for change to all employees. As it did. the bank's culture began to change in ways that encouraged more employee empowerment in working with customers. This, in turn, fostered changes in traditional management practices and led to the redesign of people's jobs so people could work more autonomously to provide customer service. Meanwhile, the bank redesigned its per- formance appraisal and recognition systems to support and reward individual initiative. As a result, employee motiva- tion has increased, and the bank is working to sustain this

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by creating a work unit climate that fosters teamwork, the shar- ing of ideas, and individual employee accountability to newly established customer satisfaction and productivity goals.

Changes in all these areas have already led to startling improvements in bank performance. Since 1993, the bank has integrated use of more technology into its operations than ever before. Customers today enjoy an ever-expand- ing array of new products and services, due largely to the flexibility that technology has offered in providing services to customers at any time and in a variety of settings. More- over, the bank has put a real effort into providing a higher degree of responsiveness to its customers at every opportu- nity. Clearly, this experience with change has led to posi- tive results, largely because bank executives understood the importance of using the bank's business strategy to trans- form and drive BPR efforts at transactional levels through- out the organization. . --.^, .^^ , ^,_-

A large chemical manufacturer determined to cre- ate a new market niche. In 1995, one of the biggest chemi- cal manufacturers in the world decided to change its busi- ness focus. Rather than continue operating as just another chemical company selling drums of chemicals to custom- ers, the company decided to differentiate itself in its mar- ketplace. How? By negotiating deals with clients whereby it manages their water treatment facilities, a goal it hopes to achieve within five years.

Working with consultants, the company began the task of redesigning itself, using a newly crafted mission, vision, and business strategy to drive those efforts. Already it has identified several million dollars in savings that will come from eliminating non-value-added activities. It is also re- vamping corporate training programs and overhauling its performance appraisal and recognition systems to support new employee behaviors.

Here again, a large organization realized the importance of taking a systemic approach to change management. It used a bold new business strategy to drive its BPR efforts. By focusing on aligning certain key internal organizational elements to suppon new strategic directions, it has effec- tively accelerated its reengineering efforts.

CREATING A SENSE OF URGENCY AND A CLIMATE OF ALIGNMENT

As these case studies show, by focusing first on busi- ness strategy, vision, and mission development, an organi-

zation can: create legitimacy for its change efforts and lay the foundation necessary to accomplish them. Both are necessary to fashion a sense of urgency around change efforts.

So where is your organization on the change spectrum?.

Organizations must also keep in mind that the vision they create to drive their change efforts must be easily com- municated to customers, stockholders, and employees. Be- cause BPR efforts necessarily begin as a top-down effort, it is important to craft a change infrastructure to ensure that sponsorship of change cascades from one level in an orga- nization to those below it. In both ofthe case studies above, there was a high priority placed on this. The bank used its change infrastructure (consisting of change champions, sponsors, agents, and business process redesign teams) to effectively communicate the need for change throughout the organization. At the same time. BPR teams were given real power to get things done, backed up by senior management. Executives ofthe chemical company have worked in simi- lar ways to communicate the compelling need for change inside their organization, while providing powerful top-level support for the recommendations made by BPR teams deeper down in company ranks.

So where is your organization on the change spectrum? Does it undertake change and BPR efforts in a deliberate, carefully planned and orchestrated way, using the power of newly crafted visions and strategies to drive BPR efforts at the transactional level? Or is change management still more of an ad hoc effort most of the time, weakly plan- ned and without strong and consistent support from top management?

Organizations that tap the power of transformational factors—things like culture, vision, mission and leader- ship—to drive deeper level transactional change are most likely to succeed in the long term with change efforts and thrive in a context of continuous change. Only by creating a climate of alignment can organizations hope to propel change and BPR efforts. By making a concerted effort to link vi- sion and strategy development with people and process im- provements, they can create strong momentum for such ef- forts, and ensure that they succeed not only in the short- term, but enjoy long-lasting benefits as well. •

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