Magazine article Business Credit

Not for Incrementalists

Magazine article Business Credit

Not for Incrementalists

Article excerpt

Reengineering the Corporation: A Manifesto for Business Revolution By Michael Hammer and James Champy

If you are interested in learning about "reengineering"--what it is, and how it differs from "total quality management"--this is the book for you. If you are interested in undertaking reengineering within your own company, however, you had better be the owner or have the owners and top management in your court, because as the subtitle indicates, this book calls for nothing less than business revolution.

Reengineering is defined as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvement in critical, contemporary measures of performance, such as cost, quality, service, and speed." In a nutshell, reengineering calls for a fundamental, radical, and dramatic redesign of processes.

Unlike total quality management, the authors contend that reengineering re. quires radical, rather than incremental, change. While quality programs and reengineering both recognize the importance of processes and start with customer needs and work backwards:

Quality programs work within the framework of a company existing processes and seek to enhance them by means of what the Japanese call 'kaizen,' or continuous incremental improvement...Quality improvement seeks steady incremental improvement of process performance. Reengineering...seeks breakthroughs, not by enhancing existing processes, but by discarding them and replacing them with entirely new ones.

Reengineering isn't about making marginal or incremental improvements in performance, but about achieving quantum leaps. If a company falls short of a goal or performance standard, the authors say, that company does not need reengineering because more conventional methods, from exhorting the troops to establishing quality programs, will work.

"Reengineering should be brought in only when a need exists for heavy blasting. Marginal improvement requires fine-tuning; dramatic improvement demands blowing up the old and replacing it with something new."

Companies in deep trouble, like Ford Motor Company in the early 1980s; companies on the brink of disaster, like Aetna Life & Casualty in the last half of the 1980s; or companies in peak condition, like Hallmark and Wal-Mart, which wish to abandon old processes to either come up with better ones or to roadblock the competition, represent the three different types of companies which Hammer and Champy found ventured into reengineering.

While the reader will enjoy each of the case studies presented here, one should be of particular interest to Business Credit readers. A reengineering effort at IBM Credit slashed a seven-day turnaround for financing requests to four hours, while increasing the number of deals handled one-hundred fold. Key here was process redesignend to enable a few generalists with more sophisticated computer systems to handle larger work loads formerly handled by many specialists in different departments.

At Ford Motor Company, a redesign of the procurement process eliminated invoices and put authorization for vendor payment at the receiving dock.

While the actual efforts undertaken at each company vary widely, they do share common characteristics: several jobs are combined into one; workers make decisions; the steps in the process are combined in a natural order; processes have multiple versions; work is performed where it makes the most sense; checks and controls are reduced; reconciliation is minimized; case managers provide single point contact points; and hybrid centralized/decentralized operations are prevalent. …

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