Reengineering the Corporation: A Manifesto for Business Revolution. - book reviews

Business Horizons, Sept-Oct, 1993 by Henry H. Beam

Reengineering is a way to bring about order of magnitude improvements in the way a corporation operates. The authors define reengineering as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed" (p. 32). In effect, reengineering means tossing aside old systems and making a fresh start with a clean sheet of paper. It contrasts sharply with the popular idea that continuous incremental improvement in functional areas is sufficient to make American corporations more competitive.

The results achieved with reengineering can be impressive. The authors, both heads of management consulting firms that specialize in reengineering, give several examples of how it has resulted in significant improvement. For example, after Ford reengineered its accounts payable process, it had only 125 people involved in vendor payment rather than 500 - a 75 percent reduction in staff. Similarly, IBM Credit reduced its turnaround time for processing a credit application from seven days to four hours - a 90 percent reduction in cycle time.

The first two chapters explain why American corporations need reengineering. Most still organize on the principles set forth by Adam Smith in his Wealth of Nations, published in 1776. Smith observed that a number of specialized workers, each performing a single step in the manufacture of a pin, could make far more pins in a day than the same number of generalists. This principle of division of labor increased the productivity of pin makers more than a hundredfold. It was incorporated into U.S. production systems with great success, including Henry Ford's moving assembly line introduced in 1913.

The down side of the division of labor was that it fragmented work and made the task of coordinating workers' efforts much more difficult. As a result, by the 1960s most large corporations had developed elaborate and expensive control systems to schedule and coordinate practically every aspect of work. Reengineering is not based on the division of labor, a task orientation. Instead, it focuses on redesigning the process used to accomplish a task or a job. It recognizes that one generalist handling all aspects of a job, such as an insurance claim, may be able to handle the job more effectively than several specialists each handling only part of the job.

At the end of Chapter 2, the authors tell what reengineering is not:

People with hearsay knowledge of reengineering and those just being introduced to the concept often jump to the conclusion that it is much the same as other business improvement programs with which they are already familiar. "Oh, I get it. Reengineering," they may say, "is another name for downsizing." Or they equate it with restructuring or some other business fix of the month. Not at all. Reengineering has little or nothing in common with any of these other programs and differs in significant ways even from those with which it does share some common premises. (pp. 47-48)

Reengineering is different because it challenges corporations to rethink the entire way they do business. It is a bold approach to organizational design, one that seeks to reverse the growth of bureaucracy. In the authors' view, bureaucracy was, and still is, a solution to the problem of holding together fragmented work processes. However, it is a cumbersome and expensive solution that most corporations can no longer afford. Many firms would be better off to reengineer processes so that they are no longer fragmented. Much of the traditional bureaucracy would no longer be needed and could be dismantled.

Chapter 3, "Rethinking Business Processes," and Chapter 4, "The New World of Work," are based on the assumption that to meet contemporary demands of quality, service, flexibility, and low cost, processes must be kept simple. Examples of simplifying processes are combining several jobs into one, letting workers make decisions, performing the steps in a process in a natural order, and performing work where it makes the most sense. The net result is that work may be shifted across functional boundaries several times to expedite its accomplishment. Traditional inspection and control procedures are often eliminated or deferred until the process is complete, providing further cost savings.

The role of the manager shifts from that of the traditional boss who allocates work to that of a coach who helps solve problems. "Managers have to switch from supervisory roles to acting as facilitators, as enablers, and as people whose jobs are the development of people and their skills so that those people will be able to perform value-adding processes themselves" (p. 77).

Chapters 5 through 8 demonstrate how reengineering can be carried out in a variety of corporate settings. But although workers are the ones who need to be empowered to carry out reengineering, the authors are adamant that the process must start at the top. This is because it involves making major changes that are likely to cut across traditional organizational boundaries. Those empowered to make the changes at lower levels must know they have the support of top management, or change won't occur.