Of the 83 percent of Fortune 500 firms that have introduced reengineering initiatives, 70 percent experienced an increase in employee productivity and 60 percent believed employees felt empowered as a result of reengineering. Nonetheless, the largest plurality (38 percent) stated that the single biggest challenge was motivating and encouraging employees to change, and a majority (68 percent) reported experiencing negative outcomes to the workforce, according to a new survey of Fortune 500 firms, commissioned by Pitney Bowes Management Services (PBMS).
The survey queried, via telephone, 100 companies from the Fortune listing of the 500 largest publicly held American industrial companies. Respondents were selected on the basis of function rather than title. Each respondent held the decision-making responsibility with respect to reengineering activities. The study was conducted by the independent New York-based research firm of Kane, Parsons & Associates, during a four-week period in July 1994.
Overall, these findings indicate that the human element is one of the most critical factors in implementing reengineering initiatives. Among the survey's most significant findings:
- Companies that have reengineered report increases in cost efficiency (61 percent) and profitability (42 percent) as well as improved customer service (40 percent). An overwhelming 85 percent believe reengineering to be a long-term initiative that will continue to be used by major corporations in the future.
- Nonetheless, 68 percent of companies that have reengineered report experiencing negative outcomes to the workforce. Most of these companies stated that employees felt an increase in fear of job loss (75 percent) and felt overburdened by their added responsibilities (55 percent). Over two-thirds (69 percent) reported that employees perceive reengineering to be an excuse for downsizing.
- However, a large majority of the respondents (77 percent) do not believe that senior management has eroded its credibility with employees, indicating that management has effectively dealt with the morale problems posed by reengineering.
- The majority of respondents (72 percent) do not believe there is a need for further downsizing and most expect hiring of senior and middle managers to remain the same (82 percent and 62 percent per respective group). However, 45 percent foresee downsizing their administrative staff.
“We have found that both 74 percent of the largest law firms and 83 percent of Fortune 500 companies have undertaken reengineering efforts,” commented Ethel Scully, vice president of marketing at PBMS, referring to the company's study published earlier this year examining reengineering efforts at the nation's largest law firms. “The two results taken in conjunction testify to the sweeping changes that continue to be found in all areas of American business.”
“The findings of this study indicate that the human element is of tantamount importance to reengineering,” stresses Scully. “Companies and process designers must ask simple questions: including, How will employees’ jobs change? Will they require technology training? Will they require training to work on a team or make front-line decisions? Working with companies to implement outsourcing changes, we know that the success of any change depends on the workforce.”
The survey revealed that more than eight out of ten (83 percent) of the companies polled have introduced reengineering initiatives. This percentage is far greater among larger companies with more than 10,000 employees (91 percent) than in those with up to 10,000 employees (71 percent). Of the 17 companies polled that have not reengineered, the majority (65 percent) said the primary reason was management's perception that it wasn't necessary.
Most reengineering initiatives were implemented in the areas of manufacturing (82 percent), information systems (61 percent), and customer service (60 percent). The most widespread initiatives were simplifying processes (87 percent), having work stages performed in a logical order and in corresponding geographic locations (83 percent), combining several jobs into one (80 percent), and outsourcing ancillary processes (77 percent).
The most important company benefits of reengineering include greater cost efficiency in delivering products or services to market (61 percent), increased profitability (42 percent), and improved customer service (40 percent). Sixty-eight percent of respondents believe reengineering is just as effective when it targets a certain process as when taking a companywide, radical change approach.
Nearly three-quarters (71 percent) of the respondents believe reengineering is necessary to maintain a competitive edge and an overwhelming majority (85 percent) believe reengineering is a long-term initiative that will continue to be used by major corporations. Only 15 percent labeled reengineering as a “fad.”
Future Employment Trends
Regarding staffing, the majority of the respondents (72 percent) do not believe there is a need for further downsizing and most expect hiring of senior and middle managers to remain the same. Forty-five percent reported that the only area believed to be downsized is that of the administrative staff.
Respondents also predict the near future will bring a more horizontal corporate structure (63 percent) to American industry, greater access to and use of computers by management (58 percent), and greater emphasis on employee training (50 percent).
Business Support Services and Outsourcing
As part of the reengineering process, Fortune 500 firms are beginning to outsource business support services. Responses regarding future outsourcing activities indicate it to be a growing trend.
The services most often outsourced (either partially or totally) include electronic printing (40 percent), electronic imaging (39 percent), copy-reprographic operations (38 percent), and information systems/data center services (25 percent).