Managing a reengineering initiative
Reengineering isn't a one-size-fits-all concept, although it sometimes is used to describe everything from rearranging a desk drawer to altering the fundamental structure of an organization. Make sure you understand what you are getting into before you begin.
LIKE MANY NEW TRENDS in the business world, reengineering has gone through a cycle of novelty, wild enthusiasm, disillusionment and confusion. Project managers involved in reengineering initiatives have had to ride this cycle. The jury is still out on whether reengineering will continue to be one of the major business trends—some would say fads—of the ’90s. However, the purpose of reengineering—the fundamental analysis and radical redesign of business processes in order to achieve dramatic improvements in critical measures of performance—will certainly continue. Change in the business world isn't slowing down, and the pressures of competition and customer expectations seem to be increasing. The pace of technological innovation is also accelerating. This combination of increasing business pressures (competition and customer expectations) and rapidly evolving enabling technologies provides the environment to sustain reengineering initiatives.
In the banking and finance area in which we are involved, the requirements for fundamental change and dramatic improvements seem to be ever-increasing: new access points such as the telephone and the home computer are becoming available; many banking functions have become available around the clock; many functions previously handled in the back offices of branches are now handled centrally or are outsourced; and previously staid financial institutions are becoming aggressive marketers of their products. New technologies such as the Internet, data warehousing and mining, and their associated tools, and old technologies such as the telephone rediscovered, are providing the enabling tools for these initiatives.
Amidst this rapid change there is confusion between process streamlining and true reengineering—-radical redesign to achieve dramatic improvement. Reengineering has become the catchall term for all types of process and systems improvements. This confusion has serious implications for both clients and project managers.
Streamlining or Reengineering?
Almost any change to a business process is being called reengineering. Projects involving continuous improvement, costs cutting, automating activities, or even downsizing have been referred to as reengineering projects. In many cases, these are not reengineering initiatives, but just streamlining. However, there are similarities between these types of projects. Both set out to improve how business processes perform in an organization. The key difference is in the intensity and depth of change. A streamlining effort plans for incremental change, with typical improvements of less than 10 percent in a few measures of performance. A reengineering effort plans for dramatic improvements—typically 50 percent or more in multiple critical measures. Exhibit 1 shows some significant differences between streamlining and reengineering along key project management dimensions.
Although Exhibit 1 represents streamlining and reengineering as two distinct approaches, some projects have characteristics somewhere between the two. In our experience, the differences between a true reengineering project and a process-streamlining project are more quantum than a question of degree. It is probably more accurate to say there are reengineering projects and there are different types of streamlining projects.
An important responsibility of a project manager is to recognize and define the scope of a project. This is particularly critical for projects meant to improve business processes. Identifying whether a project is process streamlining or reengineering has significant implications for its management. This difference may not always be obvious and may even change during the course of a project. Failure to recognize the nature of a business process improvement initiative or to respond to a change from streamlining to reengineering almost certainly will lead to confusion and impede the successful implementation of an initiative.
Planning Scope, Time and Cost. Planning these key elements varies significantly between the two types of projects. In a process improvement project these elements can be defined with some certainty, although, as for most projects, they are subject to refinement over time. Initial estimates for many projects range from minus 25 percent to plus 75 percent. However, for a reengineering project there is even less certainty at the commencement of an initiative. Very little is known about the type of solution that may be decided upon. Any estimates may well be out by orders of magnitude. As a reengineering project proceeds through the initial analysis and design phases, scope, time and cost become more predictable and can be set with some precision. Accordingly, a project manager would be wise to assess these only after some of the pre-work has allowed an initial sizing of these parameters.
Another difference between a streamlining project and a reengineering project is that scope, time, and cost will generally be wider, longer and higher for a reengineering project because of its broad organizational impact. However, these elements are not the defining elements of a reengineering project. There are many examples of extensive process streamlining projects that had wide scope, long duration, and high cost. This is another source of confusion that a project manager must recognize and manage.
Maintaining Organizational Commitment. Organizational support and commitment are critical to the success of any project. However, the required level of this commitment is significantly higher for a reengineering project. In particular, successful reengineering projects require both organizational appetite and senior executive commitment to succeed. The massive changes that usually accompany reengineering initiatives often cause these efforts to be opposed or even sabotaged by organization members comfortable with the old ways. Sustained senior management commitment is required to avoid such roadblocks. Many authors have pointed to the lack of this commitment as a key factor in explaining the failure of reengineering projects. A project manager for a reengineering initiative must ensure that there is a high level of commitment and that it is maintained.
Managing Expectations. Expectation is another factor that a project manager must manage. Because reengineering has become a catchall term for almost any initiative changing business processes or systems, this widespread use often carries with it the expectation of dramatic improvements promoted by the consultants and literature in the field. This expectation often leads to disappointment and probably contributes to some of the bad press that reengineering has received. Unless a project scope includes the dramatic improvement targets, timing and budget of a reengineering project and the senior-level commitment of management, it will probably not achieve the high expectations that are often set. A project manager must widely communicate these expectations within the project team to ensure that everyone is working toward the same end. A typical process-streamlining project is unlikely to achieve the dramatic improvements associated with reengineering. A project manager, recognizing the nature of a project, must manage expectations accordingly.
Managing the Work Breakdown of a Project. Another confusion that exists for a project manager is what work to include in the project plan. A reengineering project, by its nature, will have a broad or transformational impact on an organization, requiring considerable focus on managing this transformation. Thus the plan for a reengineering project must include the effort required to manage the change. This typically includes the introduction of new technologies and appropriate support functions; extensive communication at all levels of an organization and usually with customers; extensive human resources involvement that may include changes in job definitions, changes in organizational structures, new training, and changes to reward and compensation structures; and even changes to organizational culture. Although a process-streamlining project may include some of these features, the focus is narrower and the plan should be correspondingly simpler.
Selecting the Appropriate Tools and Techniques. A reengineering project involves fundamental analysis, radical redesign and search for dramatic improvements. This requires matching tools. In particular it requires considerable focus on the upfront design phases of a project compared to process streamlining projects.
Two techniques that have been found particularly useful in reengineering are benchmarking and analysis of enabling technologies. These two techniques are often related. Frequently the “best of breed” organizations identified in benchmarking are at the forefront in the use of new enabling technologies. Reengineering typically also uses an exhaustive analysis of process metrics and customer inputs.
Compared to reengineering tools, a process-streamlining project focuses on improvements to existing processes. Typical techniques include analyzing existing problems; identifying and removing duplicated effort; avoiding hand-offs; searching for improvement alternatives from existing operational staff; removing non-value-added work; and other types of streamlining effort. Many of these techniques may also be useful in process improvement. Although there are overlaps between the tools and techniques used in these two types of project, in a reengineering project there is usually greater intensity in the effort expended and a wider search for innovative solutions.
A project manager needs to pay careful attention to the tools and techniques to be used in a project in order to ensure that they are appropriate to the type of project being undertaken. Failure to use tools that facilitate fundamental and radical redesign will likely make it difficult for a reengineering project to achieve the dramatic improvements sought. On the other hand, expending too much effort on a process-streamlining effort may not be required and may extend a project beyond its scope.
A PROJECT MANAGER MUST establish whether a project is process streamlining or reengineering. Based on this decision, the project manager must plan and structure the project accordingly. Compared to a process-streamlining project, a reengineering project requires:
■ Wide flexibility in the initial definition of scope, time and cost. Typically these will be high, and difficult to set with any precision early in the project;
■ Sustained senior-level commitment to the project and the likely organizational impact and transformation it will have;
■ Wide communication of the usually high expectations of a reengineering project in order to ensure that the team is working to a common and aggressive goal;
■ Selection and use of tools that will enable the fundamental analysis and radical redesign of processes; and
■ Inclusion of extensive change management components such as wide communication and human resource changes into the work breakdown for successful implementation. ■
Leigh Hardy heads the Project Management Office at Newcourt Credit Group, one of the largest international asset finance companies in Canada. Tom Chaudhuri, PMP, is a senior consultant with a diversified Canadian financial services institution. Both have helped develop process engineering methodologies and have been involved in many strategic reengineering projects. They have worked extensively in project management and consulting in North America and internationally.
Reader Service Number 5093
PM Network • January 1998