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Reengineering the Corporation.


Process reengineering is a growing fad that advocates dramatic change can be achieved in the way business is conducted if the processes basic to doing business are reengineered. Unfortunately this new approach, as presented by Michael Hammer and James Champy in their book, Reengineering the Corporation, may be neither new nor as impacting as the authors suggest since it is based on assumptions and premises similar to those that have caused earlier business management fads to fail.

Indeed, while process reengineering may have produced impacts in isolated circumstances, it may not be the model for "business revolution" it is proported to be. The reason for this may be found, in part, in a quote from the first chapter of the book, "It is not products but the process that creates products that brings companies long-term success."

This quote would suggest that the authors believe "the process" is the key to a company's performance, when the failure of other fads have demonstrated that the real key to long-term success is getting people to perform efficiently. The authors appear to recognize this important basic fact when one paragraph later they state, "Companies are not asset portfolios, but people working together to invent, make, sell and provide service."

Yes, history has demonstrated that the real key to reengineering the corporation is people, not processes. To paraphrase the authors, "It is neither products nor processes that bring companies long-term success, it is people." They even try to separate their work from past change management models by saying, "But none of the management fads of the last twenty years -- not management by objectives, diversification, Theory Z, zero-based budgeting, value chain analysis, decentralization, quality circles, excellence, restructuring, portfolio management, management by walking around, matrix management, intrapreneuring, or one-minute managing -- has reversed the deterioration of America's corporate competitive performance. They have only distracted managers from the real task at hand."

But a reading of their book indicates that the focus of their writing centers around reengineering the process, while giving only token attention to reengineering the human resource. Indeed, they appear to be making the same fundamental mistake that these earlier unsuccessful fads made, or do not recognize their true value by not recognizing that the key component to long-term success is not process reengineering, but reengineering the human resource.

Reengineering the Corporation gives a brief history of the evolution of business by pointing to landmark advances in business beginning with Adam Smith's division of labor, to Ford's assembly line to Sloan's beuracratizing of business into divisions specializing in specific products, to the mass marketing concepts to get products to an expanding base of consumers.

However, they fail to recognize that none of these advances would have occurred without first educating and gaining the acceptance of the people ultimately responsible for implementing these new concepts.

Process engineering may have significant impact potential, but trying to revolutionize corporations by process reengineering without first reengineering the human resource will be like trying to improve the performance of a computer by upgrading its software without training the operator in its use.

Further, the notion that process reengineering is revolutionary and to be employed as a radical strategy tends to suggest that the benefits to be derived from process reengineering will be a one time occurrence rather than produce a fundamental change in the normative and procedural structure of the corporation. Why not position process reengineering as an evolutionary management technique, that, when integrated into a more comprehensive business management strategy, will become as routine a part of business practice as the division of labor, assembly lines and mass marketing techniques became in the past once they were accepted as valuable management principles?

Clearly, the company that will gain the greatest return from the principle of process reengineering will be the company that can integrate process reengineering into its day-to-day operating procedures as a means of keeping pace with change and avoiding the need for crisis intervention and radical revolutionary strategies.

Indeed, if process reengineering is as powerful as its advocates suggest, why not make its ultimate goal the total elimination of crisis intervention management caused by outdated processes and inefficient business practices. The achievement of this goal would produce an end once and for all, to revolutionary, radical change management strategies (and the need for books like Reengineering the Corporation).

It is also curious that the authors chose to give an overview of the evolution of business without giving any mention or credit to the originators of the principles that are basic to process reengineering.

Is process reengineering a new management strategy? Although the Bible, in the book of Ecclesiastes, states, "There is no thing new under the sun," Hammer and Champy, present the principles of process reengineering as if they are new.

For example, the front jacket cover of the book includes a quote that states, "Forget what you know about how business should work -- most of it is wrong."

Clearly, any new thinking that can make corporations more efficient and make U.S. business more competitive is welcomed. But when the reader who is familiar with the history of management theory reads what Hammer and Champy introduce as new principles, he or she will quickly recognize many of the concepts not as new, and will question why the authors chose not to credit these contributors for their work.

The first sentence in the introduction to the book states that the concepts presented by the authors are a new set of revolutionary principles by which corporate America can achieve revolutionary gains. They state, "A set of principles laid down more than two centuries ago has shaped the structure, management, and performance of American business throughout the nineteenth and twentieth centuries. In this book, we say that the time has come to retire those principles and to adopt a new set. The alternative is for corporate America to close its doors and go out of business."

The authors further state, "The book you are holding describes a conceptually new business model and an associated set of techniques that American executives and managers will have to use to reinvent their companies for competition in a new world."

However, a reading of the book would suggest that the author's "conceptually new business model" may have had its origin over 100 years ago.

Indeed, a review of business theory literature documents that it was not Hammer and Champy who invented process reengineering, but Frederick Taylor, an engineer by training (as are Hammer and Champy) who in the 1880s suggested that managers use process reengineering methods to discover the best process for performing work, and that processes be reengineered to optimize productivity.

Taylor's work, as Hammer and Champy's, led to reports of dramatic increases in productivity.

Gross reported in The Managing of Organizations: The Administrative Struggle, process reengineering gains produced by Taylor's methods at the Bethlehem Steel Works as, "After three-and-a-half years, 140 men were doing the work formerly done by 400 to 600 men."

Taylor' work provided a foundation for a French organizational theorist, Henri Fayol, also an engineer, to believe, as Hammer and Champy believe, that reengineering principles could be applied generally to most organizations.

Fayol believed that management, " only a part of governance. To govern is to conduct the undertaking toward its objectives by seeking to derive optimum advantage from all available resources."

According to Gross, "Fayol was a strong advocate of the teaching of administration not only to potential 'managers' but to everyone, since he believed administration was present in all organized human activity."

If this sounds similar to the suggestions made by the authors of Reengineering the Corporation it should be noted that these principles were published by Fayol in the early 1900s.

Other early contributors to the process reengineering concept in the 1900s were Luther Gulick and Lyndall Urwick, who, like Hammer and Champy were also engineers. They expanded on the process reengineering work of Taylor and Fayol. Gross records, "While Fayol in discussing the exercise of authority emphasizes the need to promote responsibility, Urwick deals with both sides of the relationship. It is not enough to hold people accountable for certain activities, it is also essential to delegate to them the necessary authority to discharge that responsibility."

If there were shortcomings identified in the early work done by Taylor, Fayol, Gulick and Urwick, it was that their conceptualization of process reengineering focused almost entirely on the mechanical and engineering elements of the organization, and little attention was being paid to human resource reengineering, and the critical role that people play in the achievement of long-term success. This may be an error being repeated by Hammer and Champy.

However, to the extent that Hammer and Champy address the issue of involvement of the worker, it appears that they may have derived substantial benefit from the works of Marry Follett (1868-1933), Elton Mayo (1880-1949), Fritz J. Roethlisberger (1898-?), and Chester Barnard (1886-1961) without giving them credit. These business management theorists recognized the need to make the human resource, people, the central focus of management theory, and that ultimate organizational performance will depend on human resource reengineering, not process reengineering.

Indeed, it was Follett who raised the question, "How can the work of different people and units in an organization be unified?" Follett believed that, "The answer could be found in the ideas of cross-functioning, group responsibility and cumulative responsibility."

Follett continues by suggesting that functions should not be seen in isolation. Rather, they must be seen in terms of its interdependence with, and contribution to, other functions. This requires processes for intimate cross-relations, rather than too much reliance on, "always running up and down a ladder of authority." Sound familiar?

Follett draws two conclusions from her analysis of responsibility. First, lower-level employees should be regarded as responsible for helping to formulate general policy, and second, workers also have a role in management.

Although these ideas were presented by Hammer and Champy in their book, clearly these ideas are not new, but the product of earlier researchers interested in improving the performance of business organizations.

Again, it was Follett who first said, "The process of production is as important for the welfare of society as the product of production."

To further credit earlier researchers for their role in defining the principles of process reengineering presented in the book, one of the most significant contributions to organizational research was the Hawthorne studies carried out at the Western Electric Co.'s Hawthorne plant in Chicago in the 1920s.

The findings that came from this classic work further document the central importance of focusing on reengineering of the human resource to achieve performance and productivity gain, not just the reengineering the processes.

Gross writes, "One can hardly help speculating whether its (the Hawthorne studies) revolutionary character testifies more to the brilliance of the research or more to the blindness of the industrial psychologists and engineers who had been preaching the gospel of efficiency in accordance with Frederick Taylor's conceptions of motivation."

While process reengineering appears to have its merits, engineers, such as Hammer and Champy must not be blind to the primary role of people and the need to reengineer the human resource to ensure that process reengineering produces long-term lasting effects.

Roethlisberger labeled the Hawthorne studies, "The systematic exploitation of the simple and the obvious." However, it is not unusual for managers to ignore the simple and the obvious and attempt to change processes without focusing on the need to reengineer the behavior of the human resource.

Indeed, it was Chester Barnard, the president of AT&T's grandparent, New Jersey Bell Telephone Co., who warned managers about the limitations of process reengineering without first focusing on the establishment of a solid foundation of support from the human resource -- the employees.

Barnard stated that advocates of management principles have, "...just reached the edge of organization as I have experienced it, and retreated."

Again, it was Barnard who pointed out the limitations of the "formal organization" and process reengineering without first focusing on the importance of the "informal organization" made up of executives as well as workers.

Barnard also notes that informal organizations may operate against either the purposes or the processes of the formal organization. This is something AT&T and other companies have experienced first hand.

Barnard stated that there are three positive functions that informal organizations alone can perform for formal organizations:

* The communication of intangible facts, opinions, suggestions, decisions that cannot pass through formal channels without raising issues calling for decisions, without dissipating dignity and objective authority, and without overloading executive positions;

* Maintain cohesiveness in formal organizations through regulating the willingness to serve and the stability of objective authority; and

* Maintain the feeling of personal integrity, self respect and independence of choice as a means of maintaining the personality of the individual against certain effects of formal organizations which tend to disintegrate personality.

Barnard also asserts that, "...individuals who cannot maintain a sense of self and a sense of ability to make choices of their own are incapable of functioning effectively in a cooperative system."

These are ideas that Hammer and Champy generally write about as being important to the successful implementation of process reengineering.

Indeed, while acknowledging the need to have workers share responsibility for the process reengineering effort, Hammer and Champy offer little in the way of guidance as to how this might be accomplished. They appear to take this important element in the reengineering of the corporation for granted, when in reality it will be far more difficult to reengineer the human resource than the corporate processes.

To look at a more contemporary contributor to the principles of process reengineering is to review the work of Joseph M. Juran, who is frequently credited, along with W. Edwards Deming, as one of the two people who helped Japan capture world leadership in product quality.

In a 1993 article in the Harvard Business Review, Juran makes note of his early exposure to the same "organizational barriers" as mentioned by Hammer and Champy, as an engineer in 1924 for the Western Electric Company.

Juran noted, "...the opportunity to build a means of continually improving quality into the production structure ran into the kind of organizational barrier that I would encounter again and again in U.S. industry: production was the job of one unit, quality of another unit, and no one was in charge of process improvement."

In reflecting on the success of the Japanese in achieving world leadership in quality Juran noted that, "I talked to the Japanese about these organizational barriers to quality management, and I suggested that they try to find ways to institutionalize programs within their companies that would yield continuous quality improvement. That's exactly what they did. Around those programs, the Japanese built a quality revolution."

Juran further discusses the Japanese success by stating, "To launch their quality revolution, here's what the Japanese did: The senior executives of Japanese companies took personal charge of managing for quality. The executives trained their entire managerial hierarchies in how to manage for quality.

Japanese companies went into quality improvement at a revolutionary pace and maintained that pace year after year.

The companies provided their workforces with the means to participate in quality improvement. The method they came up with was a Japanese invention: the Quality Control Circle. The companies enlarged their business plans to include quality goals."

If this work on process reengineering was available to U.S. business leaders in the 1950s, why is it only now being recognized as valuable and why is it being introduced as new?

Juran has an answer for this too. He notes that the difference between the Japanese success with process reengineering and the lack of involvement with it by U.S. business leaders, "...was not a result of quality secrets given only to the Japanese. Our companies could have taken every (process reengineering) step the Japanese companies took. They failed to take those steps because they saw no reason to do so."

To further emphasize the importance of people, Juran notes that it was not two Americans (Juran and Deming) who were responsible for the quality revolution in Japan -- brought about by lectures introducing the value of quality processes -- but recognition on the part of the Japanese that reengineering the human resource was the critical variable if they were to implement their quality revolution.

Is there any difference between teams described by Hammer and Champy and the Quality Circles invented by the Japanese in the 1950s? If not, why not capitalize on the work done by Juran and the Japanese, and give proper credit to them for their contribution?

Further, it may be important to look at a case study that Hammer and Champy chose not to include in their book to further emphasis the importance of human resource engineering as the critical variable in the achievement of long-term corporate success.

Ironically, one of the testimonials to the value of Reengineering the Corporation that appears on the back cover jacket of the book is from Robert E. Allen, the President of AT&T, who states, "I would urge Reengineering the Corporation on leaders in every company -- if they are willing to challenge basic assumptions and embrace change."

Indeed, AT&T has applied the principles of process reengineering for several years without making reengineering the human resource a high priority, as Barnard has suggested and as the Japanese have demonstrated to be essential. As a consequence, since deregulation in 1984, AT&T has engaged in the process reengineering of almost every aspect of the formal organization without focusing on reengineering the human resource, and, for all practical purposes AT&T continues to have the same human resource culture it had in 1984.

Process reengineering may be able to make a contribution to corporate performance, but let all who would jump on the bandwagon be warned of the limitations that were identified by organizational theorists many years ago. At the same time let proper credit be given to those who have made contributions to the principles of process reengineering, so that we can gain from their knowledge, and to dispel the idea that process reengineering is a revolutionary new idea when clearly it is not.

To achieve real efficiency and effectiveness in keeping pace with change, corporations need to make reengineering the human resource their top priority.

John T. Whiting, Ph.D., is president of The Business Research Co., Parsippany, N.J.
COPYRIGHT 1994 Institute of Industrial Engineers, Inc. (IIE)
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Author:Hammer, Michael; Champy, James
Publication:Industrial Management
Article Type:Book Review
Date:Nov 1, 1994
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