Reengineering, as defined by Hammer and Champy, “is 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.”
The first key word in this definition is “fundamental”. The most fundamental questions a company asks itself is “why do we do what we do?” Reengineering begins with no assumptions. It first determines what a company must do and then how to do it. It concentrates on what “should be” rather than what is.
The second key word is radical. Radical redesign means disregarding all existing structures and procedures and developing completely new ways of doing work and not simply improving on old methodology.
The third key word is dramatic. Reengineering is not about making incremental and conservative changes. It is about drastic and complete overhaul of the system. Marginal improvements require simply fine-tuning; dramatic improvements demand replacements of old with the new.
Finally, the fourth key word is processes. Most businesses are task oriented. The task oriented thinking is based upon division of labour where the work is fragmented into its simplest components which are then assigned to specialist workers.
The business process is a collection of activities that transform input into an output that is of value to the customer. Accordingly, instead of focusing on individual tasks in the process, the management should focus on the process for the sole purpose of delivering goods to the customer as needed.
In general, Hammer and Champy outline seven principles of reengineering.
1. Organize around outcomes, not tasks. The workers would be responsible for the process rather than elements of a given task.
2. The work teams who are responsible for the output of the process should also perform the entire process. For example, a production department may do its own purchasing and even its own cost accounting. This way, other departments will not be blamed for any mistakes committed.
3. Use the modern computer technology to process various types of information simultaneously thus securing the accuracy of various interdependent tasks. For example, scanners at checkout counters in grocery stores or department stores process customer purchases and update inventory and accounting records at the same time.
4. Centralize some of the tasks that are separately done by various branches of the same company, so that better cost control can be achieved. For example, if a company has 50 manufacturing plants in the country with each plant having its own separate purchasing department, then centralized purchasing would result in scale discounts thus reducing costs. It would also ensure that the quality of input materials is centralized for the purpose of consistency.
5. Link parallel activities instead of integrating their results. Products require several processes separately before the end result is produced at the final assembly point. A problem at one of these processes would delay the final product. Hence, it is better to link and coordinate the various processes so that such problems are avoided.
6. Let the people doing the work make decisions regarding their work. Traditionally, decision authority and control lies with people other than those involved directly with work. This causes delay. For example, a sales person should be given the authority and responsibility for credit approval on customer applications. This process would be more responsive to customer needs.
7. Collect information from the source and fast. Computer technology has made it easier to collect information from the sources at the same time as it originates. This information can be stored, sorted out and sent to the decision makers simultaneously.