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The Theory of Business Process Re-engineering

Contents

1.0 Introduction 1
1.1 Structure Domain 3
1.2 Task (Process) Domain 3
1.3 Technology Domain 3
1.4 People Domain 3
2.0 Structure 4
2.1 The Traditional View 4
2.2 The Introduction of Process Working 6
2.3 The Process View of the Enterprise 7
2.3.1 The Network Enterprise 7
2.3.2 The Process Oriented Enterprise 7
2.3.3 The Hybrid Enterprise 8
2.4 Problems with Cross Functional Barriers 9
3.0 Process 10
3.1 Defining Processes 10
3.2 Earl’s Topology of Processes 11
3.3 Edwards and Peppard - The Process Triangle 13
4.0 Technology 14
4.1 The Value Adding Capabilities of Information Technology 17
5.0 People 19
5.1 Greater Empowerment 19
5.2 Cross Functional Process Teams 20
6.0 Conclusion 22

Tables

Table 1: Comparing Continuous Process Improvement and BPR 2


Table 2: Differences between Functional and Network Enterprises 9
Table 3: Typical Processes within Manufacturing Firms 11
Table 4: Breaking Business Rules Using Technology 15
Table 5: IT Opportunities in Business Process Re-engineering 16

Figures

Figure 1: Leavitt’s View of the Organisation 2


Figure 2: The Traditional View of the Enterprise 4
Figure 3: Changing Business Goals 6
Figure 4: Cross Functional Process Working 6
Figure 5: The Network Enterprise 7
Figure 6: A Predominately Process Oriented Enterprise 7
Figure 7: The Hybrid Enterprise 8
Figure 8: Earl’s Topology of Processes 12
Figure 9: Classifying Business Processes: The Process Triangle 13
Figure 10: The Recursive Relationship Between IT Capabilities and BPR 16
Figure 11: The Value Chain 17
Figure 12: The Value System 17

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The Theory of Business Process Re-engineering

The Theory of
Business Process Re-engineering
R.F. Pearman

1.0 Introduction

The advent of Business Process Re-engineering (BPR) has been hailed as a


management revolution. It has been termed a management recipe for the survival of western
businesses and is now the subject of best selling books. Other names for these phenomena
include Process Innovation, Business Process Improvement, Business Process Re-design, and
various combinations of these key words.

1
Davenport, T., Short, J., (1990), Davenport and Short (1990)1 define BPR as:
‘The New Industrial
Engineering: Information


Technology and Business
Process Redesign’, Sloan The analysis and design of workflows and processes within
Management Review. and between organisations.

2
Hammer, M., Champy, J.,
(1993), ‘Re-engineering the
Whereas Hammer and Champy (1993) 2 define re-engineering as:

Corporation: A Manifesto for
Business Revolution’, Nicholas
Brealey Publishing.
“ The fundamental rethinking and radical re-design of business
processes to achieve dramatic improvements in critical, contemporary
measures of performance, such as cost, quality,
service and speed.


These definitions imply that BPR can provide immense leaps in business performance in terms
of cost, quality, speed and productivity. It also implies that these goals are only attainable if
the enterprise embarks on re-engineering. One example of this dramatic improvement in
performance is the reduction of the product to market cycle from a two week order-fulfilling
process to just two days.

3
Earl, M., Khan, B., (1994), First, we aim to prevent the confusion that is commonly associated with radical re-design. We
‘How new is Business Process
argue that BPR is about revolutionary rather than evolutionary change, i.e. step rather than
Redesign?,’ European
Management Journal. incremental change. In the debate, Earl and Khan (1994)3 offer a spirit of revolution more than
evolution and it is not unusual to contrast BPR with continuous improvement. Davenport (1993)4
4
Davenport T. H., (1993), provides a useful comparison (Table 1).
‘Process Innovation:
Re-engineering Work through
InformationTechnology’,
Harvard Business School Press.

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The Theory of Business Process Re-engineering

Davenport (1993) ‘Process Innovation: Re-engineering Work through Information Technology’


Table 1: Comparing Continuous Process Improvement and BPR

5
Edwards, C., Peppard, J.W., Edwards and Peppard (1994) 5 agree, pointing out that the aim of BPR is to seek radical
(1994) , ‘Business Process process improvement. They recognise that some enterprises are not able to achieve the
Redesign: Hype, Hope or required goals incrementally, but must transform themselves completely. This has been the most
Hypocrisy?’, Journal of
common type, at least in the reported instances of BPR. For these companies, BPR will involve
Information Technology.
momentous change both in structural and organisational aspects. The extent of change will
relate to where the enterprise is coming from, i.e. its existing structure, its culture, management
style, reward systems, as well as the driving forces for change. Some enterprises will need to
make bigger leaps than others.

Having defined BPR and what it represents, we are now in a better position to conduct a
review of BPR's main components.

Many frameworks to analyse businesses and define change programmes have been devised,
mostly by authors of management theory. One such framework is that proposed by Leavitt
6 (1965)6.
Leavitt, H.J., (1965) ‘Applied
Organisational Change in
Industry: Structural,
Technological and Humanistic
Approaches’. In Handbook of
Organisations, edited by James
G. March, Chicago,
Rand Mcnally.

Leavitt (1995) “Applied Organisational Change in Industry


Figure 1: Leavitt’s View of the Organisation

In order for BPR to be successful, attention must be given to all four domains. For example, the
introduction of a major information system would require a mutual adjustment of all four key
principle domains.

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The Theory of Business Process Re-engineering

1.1 Structure Domain


The structure of the enterprise must be aligned with the system that will support the re-
engineered business. Presently most enterprises operate on a functional hierarchical basis.
The objective is to adopt a process view of the enterprise and flatten the organisational
structure.

1.2 Task (Process) Domain


The specific tasks, and even the entire jobs, of the people who will work with the system will
need to be reviewed. A new way of work will now be the premise. Business re-engineering
focuses on process as opposed to tasks.

1.3 Technology Domain


The technology employed in an information system must be consistent with the level of the
company’s sophistication in using its information systems. Information Technology has been the
most significant factor in the development of the BPR philosophy. These technologies permit
us to do things in different ways.

1.4 People Domain


The informed commitment of people, the stakeholders of the system that will be affected by it,
must be sought. For example, the new business will support collaboration and empowerment.

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The Theory of Business Process Re-engineering

2.0 Structure

Significant changes in corporate structure accompany most change programmes. To satisfy


our requirements for this analysis, we must firstly discuss the structure and management of the
enterprise. This will complement the discussion on the powerful role that Information
Technology commands in adding value in a process oriented enterprise.

4 Davenport (1993)4 observes that managers have recently become more familiar with
Davenport T. H., (1993),
‘Process Innovation:
organisational structures, rather than technological elements, as change tools, because they
Re-engineering Work through have been part of the enterprise for a much longer period of time.
Information Technology’,
Harvard Business School Press.
In the following section, we discuss the traditional view of the enterprise, i.e. what BPR strives
to break away from. This is followed by a discussion on process working and the process view
of the enterprise.

2.1 The Traditional View


Most enterprises, at least those that have not yet embarked on re-engineering, break down
work into a sequence of separate, narrowly defined tasks. The people who perform these
tasks do so through a function, e.g. manufacturing or sales, and are usually under the authority
of a manager.

The traditional management structure forms a hierarchy, often with many layers
separating the top of the hierarchy from the bottom. This view is commonly known as the
traditional view of the enterprise, (Figure 2). Notice the elongated boxes, which are commonly
known as silos. They are the predefined organisational boundaries, i.e. the functions of the
enterprise, and for many years have represented the way work has been conducted.

Figure 2: The Traditional View of the Enterprise

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The Theory of Business Process Re-engineering

The primary purpose of these functions was to provide the most effective way to support the
classic business goals of cost, efficiency, and control. This view is derived from the concept of
7
Butler Cox, (1991), ‘The Role scientific management as described by Butler Cox (1991)7, which advocated the systematic
of Information Technology in investigation of work methods, the separation of routine tasks from planning and control, and
Transforming the Business’,
the substitution of machine power for man power.
Research Report 79.

Scientific management has many goals, two of which are: to improve productivity without
impairing quality and to meet customers needs by providing standardised product that is
produced more efficiently through economies of scale. A functional formation is the result.

This traditional functional structure of the enterprise gives top management three core
responsibilities. To act as the company’s chief strategist, it’s structural architect, and the
developer and manager of its information and control systems. However, with the emergence
of the BPR school of thought, it has become clear that the enterprise model based on
hierarchical structure supported by highly sophisticated information systems no longer delivers
competitive results.

These findings can be traced back to two sources. The first is because of the inefficiency
associated with the traditional view and the second is because business goals are changing.
8
Rummler, G.A., Brache, A.P.,
The former exposition was uncovered through work from Rummler and Brache (1991) 8. They
(1991), ‘Improving detected some negative aspects with the traditional view:
Performance: How to Manage
the White Space on the
• Supporting managers perceive other functions as enemies, as opposed to co-operatives,
Organisation Chart’, Jossey-
Bass Management Series. when engaging the battle to fight competition. Observation has revealed that function
heads; e.g. marketing and manufacturing are so at odds that cross-functional issues do not
get addressed. Things tend to fall between the cracks.

• Building silos around departments prevents interdepartmental issues being resolved by


peers at lower and middle levels. The silo culture forces management to resolve lower
level issues, taking their time away from higher priority customer and competitor concerns.
Lower level employees, who could be resolving these issues take less responsibility for the
results and perceive themselves as mere implementers and information providers.

This type of enterprise has its roots in the early Twentieth Century. The challenge in today’s
business environment places a premium on responsiveness and flexibility. Business goals have
changed. There has been a shift of emphasis from a seller's market to enterprises competing
in a buyers market. We need a different way to look at, think about, and manage enterprises.
2 For instance, Hammer and Champy (1993)2 commented that most, if not all, management
Hammer, M., Champy, J.,
(1993), ‘Re-engineering the would like to have an enterprise that is flexible enough to adjust quickly to changing market
Corporation: A Manifesto for conditions, lean enough to beat any competitors' price, innovative enough to keep products
Business Revolution’, Nicholas and services technologically fresh, and dedicated enough to deliver maximum quality and
Brealey Publishing.
customer service. They further explain that the 'three Cs' - Customers, Competition, and
Change - have created a New World of business.

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The Theory of Business Process Re-engineering

Traditional functional management appears no longer adequate for a post-industrial age in


which quality, innovation, and service are assuming more and more importance. This is
illustrated in Figure 3, which shows that business goals are changing.

KEYPERFORMANCE CRITICAL FORFUTURE


MEASURES COMPETITIVENESS
1. Profit growth 1. Level of customer service
2. Revenue growth 2. Time required to get a product to market
3. Return on capital investment 3. Customer response rate
4. Asset/turnover ratio 4. Mean time between failures
5. Profit as a proportion of revenue 5. Fault-reporting frequency
6. Profit per employee 6. Customer retention
7. Earning per share

Butler Cox, (1991), ‘The Role of Information Technology in Transforming the Business’
Figure 3: Changing Business Goals

2.2 The Introduction of Process Working

Instead of envisaging functions, where work is carried out in narrowly defined tasks;
enterprises should perceive their activities as a set of processes that cut across the
conventional, functional organisation structure. The aim is to re-design the business so that it
is process orientated and not function orientated. For example, in a conventional hierarchical
organisation, taking and fulfilling a customer order typically, involves multiple functions – sales,
production, accounts, distribution, marketing etc... The order proceeds step by step as it
passes between functions. Queries and exceptions are handled at higher levels in the
hierarchy and for a significant amount of the time the order waits in a queue. Viewed as a
business process, taking and fulfilling a customer order involves the same set of work activities,
but all these activities are managed as a single, co-ordinated operation either by an individual
or by a team.

A further example of this type of work lies with the product development cycle. This major
process includes activities that draw on multiple functional skills. New product designs are
generated by research and development, tested for market acceptance by marketing and
evaluated for production by manufacturing. This is illustrated in Figure 4.

Figure 4: Cross Functional Process Working

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The Theory of Business Process Re-engineering

2.3 The Process View of the Enterprise


It has been suggested that three types of structure may emerge as a result of the re-engineering
effort. They are:

• The Network Enterprise


• The Process Oriented Enterprise
• The Hybrid Enterprise

2.3.1 The Network Enterprise


The network enterprise adopts the view that the traditional, functional hierarchical organisation
7 structure will give way to small entrepreneurial teams of specialist workers tied together in a
Butler Cox, (1991), ‘The Role
of Information Technology in so called network (or organic) enterprise7. This is illustrated in Figure 5 below.
Transforming the Business’,
Research Report 79.


• •
• •
• •

PROCESSWORKFLOW

• TEAM

Figure 5: The Network Enterprise

This peer network structure may emerge in some enterprises, but for the most it is a long way
off. Indeed it may never be realised.

2.3.2 The Process Oriented Enterprise


A more probable result is an arrangement of teams co-ordinated by a simplified hierarchy. This
is illustrated in Figure 6.

• •

PROCESSWORKFLOW

• TEAM

Figure 6: A Predominately Process Oriented Enterprise

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The Theory of Business Process Re-engineering

2.3.3 The Hybrid Enterprise


The Butler Cox foundation articles believe that rather than any of the aforementioned structures,
a hybrid structure will prevail. They conclude that the process oriented structure is unlikely to
be realised in more than a few large businesses, although it may become a feature of a
growing number of small ones.

The hybrid structure, a combination of functional and network elements will be the aim of most
enterprises, enabling them to get the best of both worlds. This is shown below.


• •

PROCESSWORKFLOW

• TEAM

Figure 7: The Hybrid Enterprise

In this scenario, cross-functional, process oriented teams provide the responsiveness and
feeling of smallness that large companies have frequently aimed to achieve. The functional
hierarchy then complements these teams by providing the mechanism through which team
goals are set and team performance measured, as well as the means of co-ordinating team
activities and setting the strategic direction of the business as a whole. The hierarchy defines
authority and responsibilities, instils discipline, sets objectives, and conveys cultural values.

Companies who adopt this structure retain their existing functional management structure, but
only in a modified form. Process teams, report to process owners, who in turn are equivalent
to the functional heads affected by the process. Reporting links need to exist between the
process owner and equivalent functional heads.

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The Theory of Business Process Re-engineering

The table below details the main differences between the functional and network enterprise,
as described above.

9
Slevin, D.P., Colvin, J.G.,
‘Juggling entrepreneurial style
and organisational structure:
How to get your act together’, Slevin and Colvin, (1990), ‘Juggling entrepreneurial style and organisational structure’
Sloan Management Review, 9
Table 2: Differences between Functional and Network Enterprises
Vol.31, no.2, Winter 1990.

2.4 Problems with Crossing Functional Barriers


Most of the significant gains in performance tend to occur through the use of IT to support
processes that cross functional boundaries; it also increases structural risk. Structural risk
represents risks associated with altering existing organisational structures. Studies conducted
10
Fiedler, K.D., Grover, V., Teng, by Fiedler et al (1994)10, discovered the following:
T.C., (1994) ‘Information
Technology-Enabled change:
The Risks and Rewards of • Structural change increases the risks associated with distributing the institutionalised
Business Process Redesign and corporate structures. Cross-functional boundaries may destroy a desired feature of the
Automation’ Journal of
enterprise.
Information Technology.

• Structural complexity increases as you involve more than one functional area in the project;
this in turn increases the risk of project failure. Higher levels of complexity require
increased organisational commitment and co-ordination and make change more difficult.

• Parochial ownership of parts of the system increases with the risk associated with political
and functional power struggles. This is because crossing functional boundaries leads to
changes in the organisational power structure.

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The Theory of Business Process Re-engineering

3.0 Process

Identifying and improving processes is pervasive through all companies that embark on re-
engineering. We described earlier that business processes must be redefined and streamlined
in order to implement strategic vision. However, the scope and maturity of the businesses
process architecture and the nature of changes within processes varies within enterprises.
Therefore, to understand the concepts of BPR, it is essential that we understand what processes
are and how to identify them. To accomplish the enterprise's strategic vision and redefine these
processes, we must understand what they represent.

3.1 Defining Processes


The process oriented, cross-functional view of the enterprise is what BPR sets out to achieve.
The emphasis, therefore, is on processes rather than just tasks.

1
Davenport, T., Short, J., (1990),
Davenport and Short (1990)1 define business processes as:
‘The New Industrial


Engineering: Information
Technology and Business
A set of logically related tasks performed to achieve
Process Redesign’, Sloan
a defined business outcome.


Management Review.

11
Pall. G.A., (1991) ‘Quality
Whilst Pall (1991) 11 defines them as:
Process Management’,
Englewood Cliffs, New Jersey,


Prentice Hall, 187.
The logical organisation of people, materials, energy,
equipment and procedures into work activities
designed to produce a specified end result.


Processes are generally recognised to have two important characteristics. Firstly, processes
have customers. This means that they have defined business outcomes with identifiable
recipients of these outcomes. Secondly, processes cross organisational boundaries, which
means they normally occur across or between organisational sub units and are independent
of formal organisation structure.

Examples of sub-processes in the Ford Motor Company's Accounts Payable


12
Hammer, M., (1990), department, originally described by Hammer (1990)12, are ‘Order Material’ and ‘Match
‘Re-engineering: Obliterate Documents’, with the payment to suppliers being the objective of the process. Ordering goods
Donít Automate’, Harvard
from a supplier typically involves multiple departments and functions. For example, the end
Business Review.
user, purchasing, receiving, accounts payable, and the supplier’s organisation are all
participants. Here, the end user is viewed as the customer and the process outcome could
either be the creation of the order or perhaps the actual receipt of the goods by the end user.

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The Theory of Business Process Re-engineering

4 Davenport (1993) 4 provides a list of typical processes within a manufacturing firm (Table 3).
Davenport T. H., (1993),
‘Process Innovation: Enterprises may consist of more or even fewer processes. It is an elementary view
Re-engineering Work through characterising only management and operational dimensions. In order to be effective, process
Information Technology’, definition needs more explanation.
Harvard Business School Press.

Davenport (1993) ‘Process Innovation: Re-engineering Work through Information Technology’


Table 3: Typical Processes within Manufacturing Firms

13 3.2 Earl’s Topology of Processes


Earl. M.J., (1993), ‘The Old
Earl (1993) 13 describes four types of business processes that are now emerging.
and the New of BPR: Some
implications of IT’, Centre for
Research in IM, London Core Processes
Business School. Are those central to how the business functions and relate directly to external customers.
They are commonly the primary activities of the value chain.

Support Processes
Are those that have internal customers and backup core processes. They are commonly
the administrative secondary activities of the value chain.

Business Network Processes


Are those that exist beyond the boundaries of the enterprise and include suppliers,
customers, and business partners.

Management Processes
Are those by which firms plan, organise, and control resources.

Figure 8 shows Earl's (1993) analysis framework. The belief here is that one can more easily
analyse and model processes and their re-design if they are relatively structured.

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The Theory of Business Process Re-engineering

Earl (1993), ‘The Old and the New of BPR: Some implications of IT’.
Figure 8: Earl’s Topology of Processes

On the horizontal axis, we distinguish between primary value chain activities and
secondary value chain activities.

Primary value chain activities relate to how we do business and have external customers to the
enterprise. Their impact is likely to be strategic in the sense of competitiveness and market
positioning. They are means by which we can turn around the business.

Secondary value chain activities describe how we administer and manage the
enterprise. They are internally focused and have an affect on the enterprise’s internal
efficiency. As a consequence, they impact on business performance indirectly. They are mor e
concerned with the capability than competitive advantage.

Earl’s classification of processes neatly fit the model. Core processes are easily described and
re-design of these processes will have a meaningful impact through competitiveness and the
enterprise's competitive positioning. This is the main reason why some BPR practitioners refer
to cross-process re-design as a synonym for business process re-engineering. An example of a
core process is order fulfilment, and it is a classic area of attack for re-design.

Support processes, which back up core processes, are easily described but have an effect on
internal efficiency. Just as systems have subsystems, core processes have subsystems, which in
this case are known as support processes. An example of a support process may be human
resource management.

Business network processes are harder to describe and highly complex. However, re-design
will have a strategic impact in terms of competitiveness. An example of this was identified by
14
Short, J.E., Venkatraman, N., Short and Venkatraman (1992)14 at Baxter Healthcare: When re-designing external processes,
(1992), ‘Beyond Business the company had the potential to redefine the business scope and reposition the firm in its
Process Redesign: Redifining industry value chain.
Baxterís Business Network’,
Sloan Management Journal.

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The Theory of Business Process Re-engineering

Finally, the re-design of management processes will effect internal efficiency, but are complex
in structure. An example lies with Texas Instruments where they used expert systems to enable
speeding up of the capital budgeting process.

3.3 Edwards and Peppard - The Process Triangle


15
Edwards, C., Peppard, J.W., Edwards and Peppard (1994) 15 identify four critical types of process in enterprises, which
(1994) , ‘Forging a Link
derive from the product and market focused element and the competency element of the
Between Business Strategy and
Business Re-engineering’, business strategy. These types of process are: competitive processes, infrastructure processes,
European Management core processes, and underpinning processes. Figure 9 below illustrates the differences.
Journal.

Edwards and Peppard (1994). “Forging a Link Between Business Strategy and Business Re-engineering”.
Figure 9: Classifying Business Processes: The Process Triangle

Competitive Processes
Relate directly to the enterprise's current basis for competition. For example, if the
enterprise was focusing on how quickly new products could be brought to the market, the
competitive processes would relate to this focus. In economic terms, these processes
enable the firm to enjoy good profits.

Infrastructure Processes
Create the capability to operate effectively in the chosen industry in the future. These
processes develop the capability (people, process and technology) that will define
tomorrow’s competitive strategy.

Core Processes
Are those processes that are valued by the stakeholder. They must operate satisfactorily but
are not currently the chosen basis of competition. They are necessary in the enterprise to
avoid disadvantage in the marketplace. They may also be the minimum entry requirements
into the market or be required by government legislation. They should not be confused with
Earl’s core processes, as described earlier. Edwards and Peppard used the word
stakeholder, rather than customer, to include customers, suppliers, employees,
shareholders, i.e. all those who have a 'stake' in the company.

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The Theory of Business Process Re-engineering

Underpinning Processes
Are processes that are undertaken, but are neither recognised nor valued, by stakeholders
in the short term. These processes are found in all enterprises and are collections of closely
related activities that are grouped together for efficiency and recognised as a process. In
reality, they are not real processes in the sense that they directly support customers, but
rather, they contribute to other categories of process. The reason why management
consider these as processes lies in the benefits of functionalism, namely efficiency and
specialisation. For example, in the performance of competitive, infrastructure, and core
processes, some administrative support is necessary.

An example of which is the recruitment of staff, this may be an element in a number of


processes. However for efficiency reasons, management may decide to combine these
13
Earl. M.J., (1993), ‘The Old elements and manage them as a single process.
and the New of BPR: Some
implications of IT’, Centre for
Research in IM, London
Business School.
The classification schemes described above, namely from Earl (1993)13 and Edwards and
Peppard (1994)15, represent only two schemes from a list of many. Other schemes have been
15
Edwards, C., Peppard, J.W., proposed, such as:
(1994) , ‘Forging a Link
Between Business Strategy and
Business Re-engineering’, Operation versus Management (Davenport, 1993).
European Management
Journal. Rockhart and Short (1990) suggest that processes relate to developing new products,
delivering products to customers, and managing customer relationships.

A further classification scheme focuses on four macro activities, derived from a variant of
value chain analysis: product development and launch, supply chain and operations,
customer order fulfilment, management planning and resource allocation.

4.0 Technology

Generally, the perceived benefits from IT have failed to live up to expectations, many senior
executives feel cheated, not only by IT vendors but also by their IT staff. This is usually a result
of highly placed expectations, which force companies to learn the hard way that technology
itself does not generate sustainable competitive advantage. Rather, the advantage comes from
the combination of IT, appropriate business processes, effective human behaviour, and a
strategy to implement change.

12 Hammer (1990)12, observes that the usual methods for boosting performance such as
Hammer, M., (1990),
‘Re-engineering: Obliterate ‘process rationalisation and automation’ have not yielded the dramatic improvements that
Donít Automate’, Harvard companies sought. In particular, heavy investment in IT often delivered disappointing results,
Business Review. largely because companies tend to use technology to mechanise old ways of doing business.

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The Theory of Business Process Re-engineering

3Hammer, M., Champy, J., Hammer and Champy (1993) 2 wrote:


(1993), ‘Re-engineering the
Corporation: A Manifesto for


Business Revolution’, Nicholas
Brealey Publishing.
A company that cannot change the way it thinks about
Information Technology cannot re-engineer, a company that equates
technology with automation cannot re-engineer and a company that
looks for problems first and then seeks technology
solutions for them cannot re-engineer’.


Modern Information Technology should be viewed in any re-engineering effort as an essential
enabler, one that permits the enterprise to re-engineer business processes. Hammer and
Champy say that Information Technology can be used to break long held rules that were
legitimate at some point but now inhibit the enterprise. They refer to technology that is used to
break rules as ‘disruptive’ technology. For example, a long held business constraint is that
geographically disparate people can’t meet regularly or inexpensively. New technologies such
as Video-Conferencing and Net-Meeting now make this business constraint obsolete.

The principles of re-engineering contain many references to the enabling power of Information
Technology. For example the power of databases and expert systems can allow non-
specialised workers to make decisions for their specific departments, and hence there is no
need to sacrifice the time of specialised workers. Table 4 below summarises the old business
rules that can be broken by use of disruptive technology as defined by Hammer and Champy.

Hammer and Champy (1993), ‘Re-engineering the Corporation: A Manifesto for Business Revolution’,
Table 4: Breaking Business Rules Using Technology

Hammer and Champy (1993) call on enterprises to think inductively rather than
deductively. That is, instead of using deductive reasoning to look for solutions to apparent
problems, they urge managers to learn the power of new Information Technologies and to think
of innovative ways they can be used to radically alter the way work is done.

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The Theory of Business Process Re-engineering

1 Davenport and Short (1990)1 believe that the importance of Information Technology and
Davenport, T., Short, J., (1990),
‘The New Industrial Business Process Re-engineering is well known to Industrial Engineers, albeit as largely
Engineering: Information separate tools for use in specific environments. They argue that IT is used in industrial
Technology and Business engineering as an analysis and modelling tool and have often taken the lead in applying
Process Redesign’, Sloan
Information Technology to manufacturing environments. They also stress the
Management Review.
importance of analysis and re-engineering in the service sector of western companies.
Moreover, they reinforce Hammer’s (1990) arguments by stating that Information
Technology should be viewed as more than an automating or mechanising force: it can
fundamentally reshape the way business is done. They identify a recursive relationship
between Information Technology and BPR. This relationship is illustrated in Figure 10.

Davenport and Short (1990), “The New Industrial Engineering”


Figure 10: The Recursive Relationship Between IT Capabilities and BPR

Each is the key to thinking about the other. Thinking about Information Technology should be
in terms of how it supports new or re-designed business processes, rather than business
functions or other organisational entities. Business processes and process improvements should
be considered in terms of the capabilities Information Technology can provide. So essentially
the claim that has been made is that by understanding and harnessing IT we can re-design
3
Earl, M., Khan, B., (1994),
business processes in hitherto non-feasible ways.
‘How new is Business Process
Redesign?,’ European Earl and Khan (1994)3 (summarising Davenport (1993)4 ) provide a list of opportunities under
Management Journal.
three economic contributions that IT generically offers. This is illustrated in Table 5 below.
4Davenport T. H., (1993),
‘Process Innovation:
Re-engineering Work through
Information Technology’,
Harvard Business School Press.

Earl and Khan (1994), ‘How new is Business Process Re-design?.’


Table 5: IT Opportunities in Business Process Re-engineering

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The Theory of Business Process Re-engineering

3 However, the powerful role of Information Technology in enabling the re-design of processes
Earl, M., Khan, B., (1994),
‘How new is Business is not flawless. Earl and Khan (1994)3 highlight the fact that Information Technology can also
Process Redesign?,’ be a constraint on BPR, principally because of the legacy of systems built to serve the past.
European Management Where data and systems architecture have been built to serve local functional needs, there
Journal.
may be limits on process integration. Incompatible data and non-communicating systems are
typical inhibitors.

4.1 The Value Adding Capabilities of Information Technology


Another important view relates to the theories of the highly regarded strategist, Michael Porter.
The Butler Cox research articles put forward the view that Michael Porter’s value chain concept
plays an important part in understanding the role of information, and naturally Information
Technology, in creating the product and delivering it to the market. The value chain is illustrated
in Figure 11.

Figure 11: The Value Chain

In order to achieve competitive advantage the enterprise must perform its business activities at
a lower price or in such a way that the ability to command premium price is reached, i.e.
differentiation. Furthermore, the activities illustrated above are interdependent and connected
by linkages; information facilitates these activities and their linkages, and so is an important
source of value.

The value chain, which identifies nine discrete activities that an enterprise performs in doing
its business, is embedded in a larger stream of activities known as the value system. This is
illustrated in Figure 12. The value system connects primary suppliers and intermediate suppliers
to the final customer. Linkages connect the value activities of an enterprise in the value system
to those of its upstream suppliers and downstream customers.

Upstream Company Downstream

Company End-User
Supplier Channel
Value Value
Value Value
Chains Chains
Chains Chains

Figure 12: The Value System

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The Theory of Business Process Re-engineering

Competitive advantage arises as a result of these linkages being optimised, with Information
Technology acting as a source of added value. Even though Information Technology can
provide a source of added value in a functional organisation it is constrained by the limitation
inherent in the structure. Hence, one definition of BPR that is often quoted is: ‘Analysis and re-
design of business and manufacturing processes to eliminate that which adds no value,’ See
16
Ascari, A., Rock, M., Dutta, S., Ascari et al (1995) 16.
(1995) ‘Re-engineering and
Organisational Change: Value is normally added by automating functional activities. Hammer (1990), Davenport and
Lessons from a Comparative
Analysis of Company
Short (1990) reveal two ways in which Information Technology aids the functional
Experiences’, European organisation. Firstly, by stripping out excess layers of middle management (de-layering), the
Management Journal. organisation has been flattened, which widens managers' span of control. This has been
facilitated by the introduction of management information and decision support systems.
Secondly, Information Technology can also add value in a functional organisation by
improving inter-functional workflow.

However, the point remains that Information Technology helps to improve the flow of
information through specific functions but does little to improve linkages between them.

Functional divisions usually fail to align themselves with the value activities in the value chain
because they focus on internal efficiency and control rather than the areas of design, quality,
and customer service where added value is most needed.

Information Technology, coupled with the re-design of business processes, gives the enterprise
the potential to increase radically the added value of information. This, in turn, increases the
ability for enterprise’s to take advantage of Information Technology in those areas such as cost
cutting and differentiation.

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The Theory of Business Process Re-engineering

5.0 People

Human resource management, like information, has only recently been seen as a strategic
resource. To emphasise this shift, its name has been altered from personnel management. This
highlights the human dimension and its critical importance to the enterprise rather than the
personnel management focus on people as merely a factor in production.

The new processes proposed from the re-engineering effort usually involves some new skills.
Re-engineering often involves greater worker empowerment and a broader set of work tasks;
the requisite new skills may involve both increased depth of job knowledge and greater
breadth of task expertise.

5.1 Greater Empowerment


The most recent shifts in enterprise culture have been in the direction of greater worker
empowerment, increased participation in decision making and more open, less
hierarchical communications. Basically, the decision point is put where the work is performed.
The result is an enterprise that has a structurally flatter organisational hierarchy with a broader
span of control. It has been widely documented that this leads to greater productivity,
increased quality, and greater employee satisfaction.

The cultural changes that result from a flatter, less hierarchical organisation are intended to
empower process participants to make decisions about process operations. A culture of
participation may even lead to the self-design of smaller, restricted processes by employee
teams. Customer oriented processes, which emphasise this worker empowerment, can yield
radical improvements. For example, British Airways has eliminated the office functions
required to process customer claims for Dry Cleaning, which result from in-flight accidents, by
empowering cabin crew to issue cleaning vouchers. The procedure has not only saved
money; it has also had a positive impact on customer satisfaction. According to Davenport
4
Davenport T. H., (1993), (1993)4, worker empowerment can also provide the impetus for general innovation.
‘Process Innovation:
Re-engineering Work through
Information Technology’, Although re-engineering is not normally a bottom-up activity, a culture that is receptive to
Harvard Business School Press. innovation at all levels is likely to both identify and implement business re-engineering at
relatively high levels. Furthermore, even after broad process designs have been implemented,
an innovative culture can inspire minor improvements that benefit day to day process
performance.

Information Technology also plays a role by supporting culture, control or even


empowerment. It does this by supplying employees with information enabling them to make
their own process decisions or with instructions that dictate precisely how to perform each task.

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The Theory of Business Process Re-engineering

5.2 Cross Functional Process Teams


4
Davenport T. H., (1993), Davenport (1993) 4 points out that in order to facilitate a new process oriented structure that
‘Process Innovation: develops as a result of re-engineering, the use of teams is commonly made. Experimental
Re-engineering Work through observations have revealed that individual based work designs combined with new
Information Technology’,
technologies were less productive than work teams with no technology. The rationale for this
Harvard Business School Press.
finding was partly process oriented. The teams tended to work better because they combined
multiple functions into one unit.

The team approach has been favoured by many, and has many benefits:

• Cross-functional skills facilitate interfaces and parallel design activities. Furthermore the
fact that the team possesses a broad number of skills and perspectives increases the
chances that the output will meet multi-functional requirements.

• Team structures improve the quality of work life, since people tend to prefer jobs that
include social interaction. Additionally, it is true that alienated, unhappy individual
workers are no more productive than overly socialised teams. This socialisation benefit is
particularly important when the primary content of the work is informational. Hence, an
important point to heed when considering a team to shoulder a cross-functional process is
to pay careful attention to cultural compatibility measures.

The types of team that exist in today’s organisations are multiple; however, not all are
organised to execute work in the style of a process. Assuming that the hybrid structure is in
place, as it is in most organisations that have been studied, one of the most difficult issues
facing these cross-functional teams is the relationship between team members and the
functional structure of the organisation. How, and by whom, will team members be evaluated?
In one instance, sources of conflict occurred because teams were established whose members
had both process team and functional responsibilities, but were evaluated by their functional
superiors.

Davenport (1993)4 recommends a solution to this problem. He says that a process based
organisation should be created, whether stand-alone or one that works in conjunction with the
4
Davenport T. H., (1993), functional organisation, and give process representatives a role equal to that of functional
‘Process Innovation:
managers in evaluating and compensating team managers. In order to function effectively as
Re-engineering Work through
Information Technology’, a cross-functional team, a senior management group must be willing and able to look beyond
Harvard Business School Press. functional allegiances, and even beyond what may benefit their careers.

Davenport (1993) 4 provides his view of criteria for process team success:

• A clear relationship to the functional structure is essential. Consideration in terms not only
of reporting relationship and performance reward evaluation, but the relative emphasis on
process versus functional activities is important.

• Logically, issues, such as those incorporating the location of team members, also affect
team success. Frequent meetings permit the efficient performance of these teams.

• Self-managing teams i.e. those that direct their own work and have no formal leader, have
recently become a popular theme. This encourages motivation but there is a possibility of
ambiguity as to who really manages the set of activities. This facilitates the need for

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The Theory of Business Process Re-engineering

boundary management. A focus on intragroup effectiveness and dynamics must be


combined with attention to a team’s relationship with the larger organisation. At the same
time, the larger organisation must support the team with adequate resources, including
management attention when needed.

Basically a need for clarity - in mission, process boundaries, decision-making authority and
internal and external roles - is essential. Clarity is facilitated when team-work is viewed in
process terms; the process orientation supplies a clear purpose and the process performance
objectives become the performance objectives of the team. The process team must be carefully
designed, and alternatives to teams considered. Creating a team oriented approach to
process execution should not be undertaken without assistance from experts and usually calls
for personnel training. Furthermore teams are a means of building social interaction and cross-
functional perspectives into a work process. If these objectives can be accomplished through
some other means, or are for some reason unnecessary, team structures are not required.

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The Theory of Business Process Re-engineering

6.0 Conclusion

Business Process Re-engineering is way of organising the business so that it can break free from
the traditional functional approach that has developed over many decades. By cutting across
functional divisions, re-engineering promises to make businesses more responsive, improve
service and increase quality.

This white paper has focused on four organisational components, which can be seen as
domains of change. The components are Structure, Process, Technology and People, and are
essential elements in a re-engineered process or enterprise and must be aligned in order to
support re-engineering.

Firstly, as the principles of re-engineering suggest, there is a significant structural change in the
enterprise. The enterprise progresses from the traditional hierarchical view of the organisation
towards a process view of the organisation. Work is now carried out as a set of processes
rather than tasks limited to the functional boundaries in which they exist. Reasons for this shift
have been attributed to changing business goals. However, a degree of risk also accompanies
these changes. For instance, a process oriented view involves crossing functional barriers,
which can increase structural risk.

This white paper has also endeavoured to define processes. Classification schemes that clearly
represent the differences between types of business processes were explored.

In addition to structure and process, the power of Information Technology also plays an
essential role in re-engineering, primarily as an enabler of re-design. IT can actually create new
process re-design opportunities, rather than merely support the processes that already exist.
Business processes should be considered in terms of the capabilities that IT can provide, rather
than seeing IT as solving existing problems. IT, along with the re-design of business processes,
has the potential to increase the added value of information radically. Moreover, this is not
confined to the enterprise but also the value system beyond it.

Finally, BPR redefines jobs. Employees are required to work as part of a team and some are
empowered to make decisions. Process working requires the use of teams, since it is unlikely
that one employee will be able to meet all of the multi-functional requirements. Moreover, the
team approach improves team members' work satisfaction through social interaction, which in
turn increases productivity and employee loyalty.

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