Process Benchmarking and Process Reengineering

Introduction

Both process benchmarking and process reengineering are the popular methods for developing requirements and setting goals. Both these methods were developed to bring about changes for the improvements in operations of the organisations. Benchmarking involves comparison of one firm’s processes with that of other firm while reengineering is concerned with redesign of operational processes, Feldmann Clarence.G, (1998). Benchmarking involves thorough research into the best practices followed by other organisations in the industry where the company operates and it helps in breaking down the organisations’ activities down to process operations and modifies them to the best-in-class for a particular operation.

For those who are not expert these process benchmarking and process reengineering are completely different things but for experts they have something in common. Even benchmarking is used in one of the steps of process reengineering.

Process reengineering Benchmarking is a popular method for developing requirements and setting goals. In general, Benchmarking can be considered as measuring one firm’s performance against that of firms which are leaders in their respective industries, it helps in knowing how the industry leader firms achieve excellence in their processes, and then using that information as a reference for processes in one’s own company’s mission, long term and short term strategies, and implementation. Benchmarking involves thorough research into the best practices followed by the organisations in the industry where the fir operates. It helps in breaking down the organisation’s activities down to process operations and modifies them to the best-in-class for a particular operation.

Business process reengineering is mostly used by the firms which are on the brink of disaster, mainly to cut costs and to move back onto the track of profitability.

Reengineering and Benchmarking projects are like any other major project. They need to have applied flexibly and should accommodate new technologies and methods to obtain necessary information. Reengineering and Benchmarking are based on iterations, it is almost impossible to apply these processes in one shot.

The driving force behind all the changes which are taking place in the all the firm of the world are two Cs: customers, competition. The demands of the customers are changing day by day and this change in demand of customers pose new sets of challenges to the firms every now and then and hence firms have to change or modify their offering to customers accordingly. Firms who are able to do it in less time and less cost turn out to be the industry leaders.

Firms set their mission and vision statements on the basis of their short term and long term strategy and to attain those goals firms need to adjust themselves with the constantly changing environment. We have seen dominance of Japanese firms in automobile and electronic components, the reason for this dominance of Japanese firms over other firms round the world is their techniques. They change things fast and their people accept the changes fast.

Some people consider these techniques are useless but there are companies who have successfully implemented these techniques and have shown to the world that these techniques are valid and are implementable.

History

The concept of reengineering started in nineteen nineties when the Massachusetts Institute of Technology (MIT) conducted research entitled “Management in 1990”. The sole purpose of that research was to know the role played by information technology organisations during that time. Since that time a lot of research has been done on reengineering and different authors have different views on reengineering because of which it has raised a lot of controversy and disagreement among authors. There are some like Druker who believed that inputs from new and innovative concepts should be used to optimise the productivity of all the operations while there are some who believed that reengineering is a misconception and will soon disappear.

In the 1880’s Frederick Taylor suggested that process reengineering is used by managers to discover the best process (way) to perform the work thereby increasing the productivity of whole operation. In the early 1900’s Henri Fayol originated the concept of reengineering and explained it as a concept to derive optimum advantage from all the available resources by finding the best process to perform the work.

During the time of Taylor and Fayol, technology was a bit of constraint and it was really difficult for the large companies to design the process in cross-functional or cross-departmental manner.

The word benchmarking has been derived from the set of activities used by cobblers to mark the size of the foot of their customers. For measuring the size of the foot they used to ask the customer to put their foot on the “bench” so that they can “mark” the foot using a pen. In Benchmarking processes of one company are compared with the processes of the industry leader to see the practices and the ways in which these industry leaders operate and to modify their own processes.

Although the technology has made a huge success in our era but the concepts given by experts like Taylor and Fayol still holds and are used by all the big organisations for optimising the productivity of operations.

Definitions:

Both Benchmarking and Reengineering are widely popular and are practised around the world. For people who are not expert, these two terms sounds different but actually the two techniques have much in common, and reengineering can greatly benefit from integration with benchmarking.

Different authors define reengineering and benchmarking differently because of the different views on the process and organisational change and competition. They included their idea of process change in their definitions and included terms like rethinking, restructuring and streamlining of processes to obtain maximum productivity by reducing the time for processes, costs thereby increasing the quality and customer satisfaction.

Benchmarking is the process of comparing business processes of one company to the best business processes of the industry leader. Benchmarking generally includes comparing processes on time, costs and quality to do things better, faster and cheaper.

The most popular of these definitions of reengineering is” the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed,” Hammer,M., Champy.J., (1993)

Both the processes i.e. benchmarking and reengineering have a lot in common. The benefits of using these methodologies come mainly in two areas:

1. Selecting processes which needs to be reengineered is done by benchmarking studies rather than by arbitrarily looking for domain experts.

2. Reengineering is always done in such a fashion so that the overall process should be customer centred. Inputs from internal and external factors are taken for this. Benchmarking can enhance this process by bringing in the experiences of the leading firms.

This definition of reengineering includes four essential points which can be summarised as follows:

Fundamental Rethinking:

While doing reengineering, business officials must ask them the basic questions about their business like “what is their business”? “What are their do they want to do in their business”? And “what they want to change?”

Asking these questions bring clarity about the business operations and forces the people to look at the tactic rules which their organisation follow for doing business.

Reengineering works in two steps. First, it determines what the company must do for the improvement and second, how they have to do it. Reengineering accepts nothing as it is, it ignores what is it like and concentrates on what it should be like.

Radical Redesign:

Radical redesign means to get into the details of the things and not to make superficial arrangements for the things which are already in the place but to get into the roots of the things and looking for new innovative and efficient ways to do the same thing more productively.

Dramatic improvements:

It is often said that business reengineering is about the business reinvention and not about business enhancement, business improvement or business modification.

Hence, Reengineering is not about making small improvements but about making big, efficient and noticeable changes to achieve quantum leaps in the performance.

Marginal improvements are required for the fine tuning of the operations but reengineering should only be bought in when there is need for big changes for the dramatic improvements Reengineering should be bought in only when there is a need for drastic improvements which includes changing the old things with the new things.

Processes:

This word “process” is central to reengineering and it gives hard time to most of the managers of the organisations because most of the managers are job oriented rather than a process oriented. Job oriented managers focus mainly on the job (task) at hand rather than the process involved for the job. Business processes are the collection of activities which takes in inputs of different kinds and creates the output which is of value for the client or the customer of the organisation. Reengineering not only focuses on the different departments of the organisation but also the organisation in a whole because of which reengineering see the full picture of the work moving from one department of the organisation to the another with keeping an eye on the operational hindrances on the way.

Let’s distinguish between the traditional method of procurement of goods and reengineered process with the help of figures 1 and figure 2

Figure 1- Traditional Process for procurement of goods and services

Figure 2- Reengineered Process for procurement of goods and services

Steps involved in Process Benchmarking

Process benchmarking methodology mainly includes the following steps,

Identifying problem areas

Process benchmarking requires inputs in the form of information for comparison. The type of information required by benchmarking process depends on the process which needs to be compared. A range of research techniques are used for the processing of the information, so that comparison can be made quickly and effectively. It includes getting information on all the necessary sources. Customers are vital for any business and are the best source of information for the firm and hence their inputs should be included and processes should be designed in ways which include their suggestions and processes should take care of their issues related to the processes. Exploratory researches based on one to one interviews and group interview can sometimes prove to be very useful during this exercise.

2. Identifying industries with similar processes

In this step we look for industries which have similar processes. Sometimes different industries use some similar processes, in that case one can chose companies from other companies to compare particular processes. Say for example boiler is used in cement industry as well as sugar industries. Hence, a sugar company may compare its boiler processed steam operation with that of cement industries’ boiler processed steam.

3. Identifying industry leaders in these areas

In this step we look for firms with whom one has to compare its processes. Normally industry leaders are chosen for the comparison and it’s because of their superior processes which play vital role in the overall performance of any firm. For this one has to do through research, customers of the company, its staff and internet can be used to get this information.

4. Involving domain experts for measures and practices

Domain experts and survey companies are very useful in selection of comparable companies and processes as they are expert in getting information and masking the confidential information of the client firm which provide data theft security to the client.

Figure 3- Steps involved in process benchmarking

5. Visit companies to find their “best practices”

In this step one needs to visit different companies, those who are considered as good companies in that industry. During the visit he should notice all the best practices followed by the company and think logically whether he can apply those practices in his company or not since every organisation is different in its nature. Generally companies readily exchange those details and information which are helpful to all members in the benchmarking group.

6. Implement new and improved business practices

After knowing all the business processes of one’s company and best practices of other leading companies, one can compare the operation processes of his company to the leading company.

Steps involved in Reengineering

Planning for reengineering

Planning and preparation play vital role for any process or event to be successful and the same applies to reengineering. Before applying business process reengineering one should ask him that is reengineering necessary?, Grover,Varun., Malhotra, Manoj.K.,(1995), Since reengineering involves major changes and is not for small improvements and also it may include heavy costs, there should be a dire need for reengineering. This step starts with the consensus of executives of the firm for the process reengineering. During reengineering the processes are reengineered in such a way that they acts work in tandem with the mission & vision statements of the firm. Understanding customer expectations is most important, because the processes needs to be reengineered in the way which will lead to maximisation of customer satisfaction.

Mapping and Analysing As-Is Process:

Before reengineering any process, reengineering team should know the existing process. The underline aspect of business process reengineering is to bring the changes drastically. Process reengineering is not for small and slow changes. Many people advocate that it should be “To-Be” Analysis instead of “As-If” Analysis.

The usefulness of this step is in identifying anything that prevents the process from

achieving desired results and in particular information transfer between organizations or people and value adding processes and is implemented by using different models used for creation and documentation of Activity and process models. Then with the use of activity based costing amount of time and amount of cost consumed by each activity is calculated.

Figure 4- Steps involved in process reengineering

Designing To-Be process:

This phase starts with looking for alternatives in the current situation which moulds well with the strategic goals of the organisation. The first part of this phase begins with benchmarking which is comparison of the firm with the other firms in the same industry. It’s a general practise to select industry leaders for the comparison so that the firm can use its best practices. This is not necessary to select the firm for comparison from the same industry, once can chose any firm from any industry with similar processes. For example, both textile mills and food processing industries use Reverse Osmosis technology (process) for the purpose of water purification; hence they can be compared for water treatment process. Next we do activity based costing analysis for analysing time and costs involved for different processes. Once ABC analysis is done To-Be models are prepared using different modelling techniques. This is important to know that this modelling is iterative process and different To-Be models are prepared for the analysis. At last we make trade-off matrix to select the best To-Be scenario.

Implementing Reengineered Process:

The implementation phase is that phase where reengineering encounter maximum resistance. It is because the environment is not readily changeable and hence, it is most difficult phase of all the phases in reengineering. As the firm invest a lot of time and incur heavy expenses for the planning phase it is justifiable to invest in training programmes for the employees of the firm for the cultural change. Winning the hearts of all the employees and motivating them is crucial for process reengineering.

Next step is to make a transition plan to move from As-Is to the redesign process. The plan should be chosen in a fashion that it goes well with the long term strategy of the firm. Implementation of information technology which support reengineering is must for the process. The total amount of work which needs to be done for the reengineering is broken down into different components using work break down structure techniques and them these individual components are worked upon.

Improve Process Continuously:

The last but most important phase of any reengineering process is continuous monitoring of processes and the results which come from modified/improved processes. If there are deviations from the expected to actual then they should be taken care immediately. The performance of reengineering is measured by the competitive advantage the firm gain by reengineering, the amount of satisfaction of the employees, and the amount of commitment management shows.

Criticism

As with any new concept there are those who are in favour of the idea and those who oppose or criticize it and benchmarking and process reengineering are no exception. These techniques should not be used to set goals for the firm and those who are responsible for bringing about the change in the firm should understand the processes of the firm well.

One of the criticisms drawn by process benchmarking and process reengineering is that they motivate firms to spy on the competitor firms and force firms to copy other firms (Boxwell, 1994). But this statement is not true as these methods are useful for firms for gaining competitive advantage and they helps in informing firms about what other firms are doing.

Some organizations do not utilize process reengineering and process benchmarking because of their thinking that if something is not broken then it need not to be repaired. It’s because when the financial performance of the firm is good, people resist the change and stop comparing themselves with competitors ( Harper, 1996).

When the financial performance of the company is good, they have a tendency to resist change and not worry about competitors.

In Japan, benchmarking is a part of their manager’s job descriptions (Boxwell, 1994). This is how Japanese are able to gain competitive advantages in automobile and electronic industries all round the world.

Conclusion:

Superior processes, customer satisfaction and strong management leadership are essential for any business firm to be successful.

Reengineering and benchmarking are the techniques which all organisations can use, when required to attain success. None of these techniques work as miracle nor are they quick fix for the problems which firms face. One needs to invest money and time to implement them. But only money and time don’t guarantee successful implementation of these techniques. For every business customer satisfaction is the key, both these techniques are centred around customers, both internal and external. Until and unless the people don’t accept the change no business can improvise using any technique and hence change in attitudes of the people is key. “50 to 70 percent of reengineering efforts fail to deliver the intended dramatic results, Hammer,M., Champy.J., (1993), and those who have successfully implemented it are reaping the benefits.

Planning has vital role to play in any technique implementation. Sometimes people set very high standards and after implementation they don’t achieve them. This failure to achieve previously set targets should not be called as unsuccessful implementation but inefficient planning.

These days not only the private firms, who are considered to be very competitive but also the public companies are using these techniques. Japanese automobile and electronic component firms dominate all markets of this world; the reason for their dominance is that they change fast and they adjust with change quickly. In a world of rapid flux, organization must change their priorities from a traditional focus on planning, control, and managed growth, to emphasize speed, innovation, flexibility, quality, service, and cost. It is virtually impossible to retrofit organizations into this new reality. Reengineering and benchmarking are the only solution available with firms. For every firm customers and competition are the most important. Since the demands of the customers change with the rapidly changing environment, firms have to change themselves to satisfy the needs of the customers. If they don’t change their competitors will change and satisfy the demands of the customers.

“Wisdom lies neither in fixity nor in change, but in the dialectic between the two”, Octavio Paz 1914-1998. Hence one should ask himself before using these techniques that what needs to be changed and why it needs to be changed.