Organisational management and information systems: business process re-engineering is so last decade. Bob Scarlett charts the rise and fall of the movement, and the emergence of a complementary approach.

The restructuring wave that swept across the business world in the early nineties has abated. The business process re-engineering (BPR) movement was a conspicuous part of this wave. It may have served a purpose as a survival response by businesses to the economic recession that was occurring at the time, but it has also had its day.

Inspired by the seminal text Re-engineering the Corporation, by Michael Hammer and James Champy (Harper Business, 1993), organisations downsized, rightsized, delayered, divested and outsourced. Whatever the merits of the term, BPR became a buzzword to describe almost any organisation-related project. It also spawned a large body of management writing and consulting.

BPR's particular strength was its focus on identifying core processes in a business and examining ways in which these processes could be honed in order to achieve corporate goals more effectively. The idea was that a process could be made cheaper and more responsive to customer needs by stripping away peripheral activities and bureaucratic layers.

Management literature contains many cases of how BPR projects have achieved results. For example, in 1997 the FT Mastering Management Review reported the case of US firm Scott Paper. Its chief executive downsized the organisation, outsourced its peripheral activities, divested the company of all non-core businesses and then sold what was left to Kimberly-Clark. The enterprise was effectively eliminated, but this proved very much to the financial advantage of its shareholders--a case of "value-based management" at its most extreme.

BPR was not about entering new markets or introducing new products. It was about rearranging existing processes with the help of new technology. The rise of BPR coincided with the widespread adoption of new IT systems based on PCs, networks and the internet. They permitted more decentralisation by improving communications, which allowed firms to strip out layers of middle management and cut more costs as the recession took hold. It was very much a creature of its time.

The advocates of BPR said that it required the following four basic actions:

* Assess fundamental organisational objectives.

* Identify core processes.

* Clarify objectives and identify associated goals.

* Achieve reform through reorganisation and the incorporation of new IT.

That may have been an eminently reasonable basis for organisational restructuring at the time. But the approach incorporated critical weaknesses that make BPR ill-suited to life in the mid-noughties. There are two main conceptual difficulties with BPR. First, it has an inherently high level of disregard for the impact it may have in social and behavioural terms. BPR's cost savings were usually achieved through staff reductions, so the movement became associated with waves of job cuts that were often implemented by consultancy firms brought in for the purpose. Organisations that survived re-engineering were often drastically slimmed-down versions of their former selves. They often found that their remaining employees were overworked, demoralised and burned out. The advocates of BPR have often argued that the problem here was that re-engineering had been done insensitively or where the organisations concerned weren't good candidates for re-engineering.

The second flaw of BPR is its tendency to lack "contextual analysis". The practice of re-engineering took on a rather mechanistic, macho quality over the years, with the idea that a given set of practices could be applied in any situation with no regard for an organisation's particular circumstances. This failed to recognise the full value that employees and their accumulated knowledge brought to a business. For example, organisations trading in a turbulent and changeable environment may be far less amenable to re-engineering than those doing business in more predictable markets. Operating in the former may necessitate a big investment in flexibility in the form of well-developed in-house R&D, marketing and customer-support capabilities. Such departments are highly vulnerable to re-engineering exercises, since they may appear outwardly to be performing peripheral, non-core business activities.

In practice, BPR often produced a quick fix to perceived problems, but at a long-term cost that may not have been immediately apparent. It caused specific practical problems including the following:

* A decline in morale. Many service functions in an organisation--eg, marketing--rely heavily on trust, motivation and enthusiasm. A re-engineering exercise may well erode these and lead to a deterioration in performance. This may be a critical loss in some types of business.

* A loss of communication and co-ordination. Re-engineering typically involves stripping out layers of middle management in order to produce a flatter and, hopefully, cheaper organisational structure. But middle management often plays a subtle role in ensuring that different parts of an organisation know what each other are doing.

* A loss of quality and control. Farming out both business processes and elements of production can achieve immediate cost savings, but with adverse consequences for flexibility and quality. Outsourcing your firm's customer-service function to a call-centre company overseas results in a loss of control over what happens, while the contracting involved makes it difficult to change any arrangements.

* "Dumbsizing". There are cases where organisations have reduced their headcount only to have to hire back the same employees whom they had released.

It's now widely accepted that BPR is in essence a backward-looking approach. It takes what has happened in the past and seeks to improve on it, but with limited regard for what's going to happen in future. The concept of revitalisation, on the other hand, is in essence forward-looking. It requires a business to evolve its operation by developing its products and markets using a portfolio of options.

The classic approach to the consideration of these options is the Ansoff matrix, first presented in 1957. An adapted version is shown in the panel, above. The central concern of revitalisation is not cost engineering. Market penetration is normally a relatively low-investment, low-risk strategy. It involves taking existing products or services and trying to increase your business's market share by meeting customers' evolving needs. At the other extreme, diversification (through either organic growth or acquisition) is likely to be a high-investment, high-risk strategy.

BPR and revitalisation are not best considered as alternatives. Rather, they complement one another. The first seeks to perform existing activities better and the second seeks to evolve the activities being performed. They are different dimensions of business strategy and cannot be considered in isolation. Hammer's then influential but now infamous 1990 Harvard Business Review article, "Re-engineering work: don't automate, obliterate", should be viewed in that context.

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Bob Scarlett is an accountant and consultant.