The balance of power has shifted to favor the customer and businesses must re-engineer themselves to prove adequate to the shift or die. By Vic Zbar
Until now, most businesses have been constructed on the basis of specialisation: the division of work into a series of discrete tasks. Today, however, the focus has shifted to the business processes that reunite those disaggregated tasks. “Business Re-engineering” describes the range of techniques that enable companies to bring about this shift.
Re-engineering is underpinned not only by an analysis of how things might be done better, but also by a fundamental questioning of to what purpose the business does what it does in the first place. The answer to this question provides the basis for thinking about processes and whether they serve the organisation’s core purpose.
All companies will raise their hands in favor of such concepts as flexibility, leanness, customer service and quality products. They often operate, however, from a different perspective. In particular many large corporations in the West are characterised by a diversity of departments that operate if not in competition, at least without co-operation required to ensure both a speedy turn around and responsiveness to customer needs.
The cause of this is neither management incompetence nor an unmotivated workforce. Michael Hammer and James Champy – co-developers of the re-engineering concept – suggest it is due to a continued reliance on work patterns that are no longer appropriate in a high-tech, global market place where customers expect quality products and wide choice. The challenge is to learn new ways of working rather than merely speeding up or intensifying the old ones.
The US approach to production has developed in a direct line of succession from Adam Smith to Henry Ford and is based on dividing work into tiny repeatable tasks. The role of management in this context is to co-ordinate the array of separate activities to yield a finished product; and this was achieved by establishing discrete operating departments and clear hierarchies of control.
For a long time this approach worked well. It delivered efficient and predictable outcomes, especially in the years when customers were more concerned with getting goods than with choice.
But that approach is no longer viable in a changed world. Modern corporations have to contend with what Hammer and Champy call the three Cs: customers, competition and change.
In today’s world customers rather than suppliers call the tune; and standardised products no longer meet their needs. Global competition has led to a situation where customers can demand products and services tailored to meet their specific needs. This trend is enhanced by technology that enables customers to have more information than ever before.
Competition is growing markedly throughout the world. What is more, competitiveness derives from a whole range of factors and not just price: factors such as quality and after sales service. With the gradual elimination of trade-barriers, the modern business must be able to compete with the best the world has to offer; and many are being forced to seek out entirely new ways of operating to enhance their competitiveness.
The environment in which a business operates – its competitors, the products available, the prevailing technology – is constantly changing and each business must be able to adapt rapidly.
To cope with the effect of the three Cs, companies will need to do more than merely promote the importance of quality and responsiveness. Doing so will contribute little if the business’s processes are based on the old approach of disaggregating work so that every task passes through many hands and no one person has full responsibility for it.
Companies need to adopt a more comprehensive approach whereby they examine their processes and then redesign the way they carry out their work. It is, therefore, an approach based on organising work around process rather than a division of labor. Employees are engaged in the whole process, whether it be filling an order or developing a product, rather than fragmenting the process into a series of tasks for separate, functional departments.
From Zbar’s book Key Management Concepts, Macmillan Education Australia, 1996
How not to
How not to use consultants
The management of an Australian bank hired a large consulting firm to help redirect its strategy. The results were at best ambiguous. The consultants collected a hefty cheque and many became so familiar with the bank’s workings, they were given jobs with the bank when the project was over.
So impressed was senior management with the outcome, they later hired another management consultancy to go into the bank, identify the employees who had formerly been consultants, and sack them all.
How not to name a financial institution
The “best misnomer” award goes to the US hedge fund Long Term Capital Management, the fund at the eye of the global financial-market storm last September.
Established in 1994, in three years the fund turned $US5 billion into $US120 billion. Its talent for misnaming became apparent when two markets LTCM had invested in failed. The fund lost heavily when Russia defaulted on its short-term bonds in August. LTCM had also invested in high-yielding and higher-risk debt securities. The strategy required US Treasury bond prices to remain stable or drop. (Also known as: “betting the house and kids on a sure thing”.)
The US stockmarket plunged in July and bond prices moved up. LTCM’s capital base shrunk by nearly half and its leverage yield was greater than 50 to one. The technical term for this is “insane”. LTCM faced liquidation with losses totalling $US3.5 billion. This is referred to in financial circles as a “total mess”. A consortium of 14 major US banks agreed to a last-minute rescue of LTCM.
How not to provide a service
The greatest exponents of the art of not getting close to the customer was the Hanley to Bagness bus-route in Staffordshire. The bus company reported that buses “no longer stop for passengers”. One would-be passenger reported that empty buses regularly sailed by queues of twenty people or more. A local councillor went down in time-and-motion history by explaining that, if buses stopped to pick up passengers, it would disrupt the timetable.
How not to be tactful
The following are actual quotes from employee performance evaluations:
1. Since my last report, this employee has reached rock bottom and has started to dig.
2. His men would follow him anywhere, but only out of morbid curiosity.
3. I would not allow this employee to breed.
4. This employee is really not so much of a has-been, but more of a definite won’t-be.
5. Works well when under constant supervision and cornered like a rat in a trap.
6. Whenever she opens her mouth, it is only to change whichever foot was previously in there.
7. He would be out of his depth in a parking-lot puddle.
8. This young lady has delusions of adequacy.
9. She sets low personal standards and then consistently fails to achieve them.
10. This employee should go far – and the sooner and further, the better.
11. This employee is depriving a village somewhere of an idiot.
12. Not the sharpest knife in the drawer.
13. Got into the gene pool while the lifeguard wasn’t watching.
14. A room-temperature IQ.
15. Got a full six-pack, but lacks the plastic thing to hold it all together.
16. A gross ignoramus – 144 times worse than an ordinary ignoramus.
17. A photographic memory but with the lens cover glued on.
18. A prime candidate for natural deselection.
19. Bright as Alaska in December.
20. One-celled organisms out score him in IQ tests.
21. Donated his brain to science before he was done using it.
22. Fell out of the family tree.
23. Gates are down, the lights are flashing, but the train isn’t coming.
24. Has two brains; one is lost and the other is out looking for it.
25. He’s so dense, light bends around him.
26. If brains were taxed, he’d get a rebate.
27. Several times we have had to stop the plant contractors from watering him. On one occasion we did not and there was no sign of a response.
28. If you give him a penny for his thoughts, you’d get change.
29. If you stand close enough to him, you can hear the ocean.
30. It’s hard to believe that he beat out one billion other sperm.
31. One neuron short of a synapse.
32. Some drink from the fountain of knowledge; he only gargled.