As companies grow and their operations become more complex, certain inefficiencies are inevitable. These tend to start as imperfect, improvised solutions that made sense in an earlier situation, but become obsolete & inefficient at scale. What makes these inefficiencies so dangerous is that they can be extremely difficult to detect. This is because they arise out of earlier processes that may have helped make the company successful, or operations that may have once been necessary even if they no longer are. Business process reengineering is specifically designed to help businesses identify and root out unreasonable inefficiencies, and to replace them with more functional operations. Unreasonable, in this context, means systematic and deeply rooted.
The term business process reengineering may seem like management-speak. But implemented correctly, this tool can work miracles for struggling companies. Business process reengineering can offer companies a radically fresh perspective on the ways in which operations can be improved. See below for business process reengineering examples and steps.
What Is Business Process Reengineering?
So, by now you’re probably wondering, what is business process reengineering exactly? Like a lot of management jargon, the term reads as both powerful and vague. But there is a specific lineage to this idea. Business process reengineering was first introduced as a business management strategy by Michael Hammer in a Harvard Business Review article titled, “Reengineering Work: Don’t Automate, Obliterate.” The basic insight driving this idea was that companies often struggle because they keep seeking to optimize fundamentally ineffective processes instead of building something categorically superior with new technologies. A commonly cited example is a shipping company that goes to great lengths to improve the quality of its horses’ horseshoes, instead of simply switching to automobiles.
Business process reengineering is offered as an alternative to business process management, which would generally be characterized by the horseshoe-style thinking above. Business process management can be effective for making consistent improvements to sound operations, but if there is a fundamental flaw in the nature of those operations, an alternative is needed to identify the flaw and enforce adaptation.
The major aims of business process reengineering are reducing costs and improving quality. Reducing costs by eliminating inefficiency can include restructuring departments, redesigning processes, laying off redundant employees, and eliminating unnecessary organizational layers. Oftentimes the “reimagining” characteristic of business process reengineering also entails a transformation in company values.
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Business Process Reengineering Steps
Since being introduced by Hammer in the early 1990s, the concept of business process reengineering has taken off. Many people have changed and adapted the idea to meet their own needs or reflect their own expertise. Therefore, there is no perfect consensus on the exact business process reengineering steps to take to implement business process reengineering. But most of the different versions of how to conduct business process reengineering are broadly similar. We’ll offer a synthesized version here.
Make a Map
Make a map of the current state of your overall operation. This should be as in-depth as possible in offering a cohesive view of all the various interconnected processes that keep your business running.
Analyze the Interconnected Processes
Analyze the interconnected processes and look for any gaps or contradictions (the MECE framework can be helpful here). Look also for obstacles, slowdowns, and redundancies. Because business process reengineering emphasizes its utility in decision-making, you should pay close attention to whether the relevant stakeholders at each stage of the process have the information necessary to make quick decisions.
Identify Opportunities for Improvement
Identify opportunities for improvement. If there are any ways to eliminate inefficiencies, extra steps, or obstacles, take note of them.
Design Your Future Business Process Map
Design your future business process map. This should represent the cutting edge of what’s possible for your business’s exact needs. Try to resolve every problem or inefficiency you can identify. This is a space where you can even sketch out ideas for entirely new processes or departments. But you’ll have to stay at least slightly grounded and be sure to carve out Key Performance Indicators (KPIs) so you’ll know whether your redesign is succeeding.
Build Your Future Process Map
Build your future process map. In order to implement all of the changes you’ve envisioned, ensure your workforce is informed and on board. You’ll also need to be sure you monitor KPIs as you proceed, so you can adapt your new design as necessary.
Business Process Reengineering Examples
The ascendant popularity of business process reengineering since the 1990s means there are many business process reengineering examples. The most illustrative and frequently cited model is that of Ford Motor Company.
In the 1990s, Ford began to use business process reengineering to make itself more competitive against global competitors such as Toyota, Honda, and Mazda. In comparing operations to their more efficient Japanese competitors, Ford noticed they were employing a hugely outsized number of people in their Accounts Payable division: 500 in comparison to Mazda’s 100. Ford used business process reengineering to understand and solve the problem of this overstaffing.
Ford found that every time their purchasing department wrote an order for a purchase, a series of processes was triggered that required accounts payable to do not one but three things,: process the order from the purchasing department, process the copy of the order sent by the material control department, and process the copy of the receipt sent by the vendor. All of this took place before the accounts payable clerk could match the three orders and finally issue a payment. As part of the business process reengineering, Ford used digital technology to totally redesign the process and eliminate the inefficiency.
Oftentimes, prudent and diligent management will do everything possible to optimize every facet of an operation, and yet they still won’t be able to root out inefficiency. This is the case when something fundamental to the operations is dysfunctional. No amount of improvement will resolve this dysfunction until the relevant systems are repaired or redesigned. Business process reengineering is an alternative to business process management, and their relationship is analogous to the one between political revolution and mere reform. Reform is great when it’s possible, but some systems reach such a state of dysfunction that they need to be reengineered from the ground up.