BPR: Business Process Reengineering

In an earlier Gyan, I had briefly explained the various theories of management and how it evolved. Management, perhaps, is as old as the Human race itself. Be it the construction of huge Pyramids or that of Taj Mahal, be it the gruesome battles and wars fought so far in the human history or be it the ancient empires and cultures, Management existed, though not being termed explicitly so. It was with the advent of the Industrial Revolution that a huge class of labourers and workers came into existence. Thinkers like Adam Smith had envisioned the concept of work distribution amongst these workers, laying up the foundation for Management. Every worker was supposed to carry out a certain set of tasks repeatedly. This repetition of tasks would eventually lead to specialization in performing that particular task, “Skill Set” as one would like to call it now! What Smith envisioned was further extended by people like Frederick Taylor and Henry Ford who invented the “Assembly Line” and succeeded in “Mass Production”.


The underlying principle was that the workers can not think or plan and need to be constantly monitored to get the job done. The strategy, planning and rest all things are for the Top Managers to worry about. Now that, it was assumed that the workers are no better than human robots, the “Middle Managers” were appointed to keep an eye on the workers. They worked as a link between the higher management and the workers. The task for the middle management was to execute the strategy decided by higher management and manage the workers. Slowly but surely, the middle managers started expanding themselves both horizontally and vertically.

As the structure of the industries grew more complex, various departments like HR, Purchase, Sales, Marketing, and Finance etc. were created to handle different aspects of the industry. This only helped the middle managers to occupy more space and gain importance in the system. Thick, high walls rose up between various departments, leading to a big chaos in the companies as a whole. The communication gap between them increased. Middle Managers made sure that it only widens because all they were interested in was the well being of themselves and their respective departments. Tedious and rigid processes made their way, thanks to layers after layers of Middle Managers. But, finally it was the customer who had to pay the price.

Let’s take a few examples of these rigid processes we always get to see almost daily.

You want to apply for Home loan. You go to the bank and stand in the queue where a man is giving away the Home Loan forms. You fill it and hand it over to the peon who in turn, sends it to another official who checks if the form is filled properly and all the documents are attached. He, in turn, sends it to another official who checks your credit history and other transactions to make sure that you can afford to pay the loan back. If satisfied with the documents, he forwards it to the Branch Manager who signs off the form if the loan amount is as per the bank rules. If he doesn’t have the authority to approve, he forwards it to Head office. Head office would then scrutinize the documents all over again and would, then, order the accounts department to disburse the loan. In the “process” of getting the loan, the documents changed hands so many times!

Another example: you go to the bank to withdraw some cash. You, again, stand in the queue to get the withdrawal slip. You fill it and submit it. The person sitting at the counter makes an entry in his register and hands over a token. Then you wait for another 15 – 20 minutes more for the cashier to announce your token number and only then that you get the cash. The whole “process” of getting cash took on an average half an hour.

What was that that took the task of approving loan or getting cash so long? Wasn’t the intention of the customer just to get loan or cash quickly? What stood as an obstacle – instead of facilitator – between the customer and his objective? It was the “Process”!

The Process got prolonged because the system is made up of so many intermediate persons – the middle managers. One way to speed up the process could be to get rid of one or two middle layers. But what if a radical design or major changes were made to the process so that it drastically reduces the turnaround time? This is exactly what the underlying principle of “Business Process Reengineering” is.
In their book “Re – engineering the Corporation – The Manifesto of an Industrial Revolution”, authors Michael Hammer and James Champy from Harvard stressed the point of how effective radical changes and redesigning of the business processes is, compared to traditional incremental improvements preached by Total Quality Management. It started the BPR (Business Process Reengineering) movement.

BPR professes drastic change in the processes and involves use of technology and especially IT, to speed them up. It also assumes delegation of tasks and empowerment.

In case of the first example, the objective was to give the customer the loan he needed… with minimal time. Now, how a reengineered process would have looked like?
Michael Hammer James Champy
There would be a single form capturing all the information about the customer the bank needed. An official, who is “empowered” with the authority to grant the loans as per the bank’s rules, verifies the form and checks the history of the customer on his computer. If he finds the document to be proper, he can quickly ask the accounts department to disburse the loan amount. The redesigning of process and introduction of computer not only reduced the turn around time but also cut the number of people required for serving the same purpose!

Similarly, the use of ATM machines has almost made the concept of cashier obsolete and at the same time has reduced the turnaround time 20 – 30 times! Today, to promote usage of ATMs, some of the banks even charge you extra if you, at all, end up at their branches to withdraw cash!

As we all know, it takes around 3 days for a cheque to transfer from the branch, where it was submitted, to the clearing center and then to the branch from where it was drawn. And it is only after 3 days, that the customer can use his own money.

The terrorist attack on 9/11 had halted the airline business in US for many days continuously. In a country like US, where 40% of the transactions are made through cheques, the sudden stoppage in the flow of cheques (stuck in those planes) made a big impact on the economy. So much so that a new act named “Truncation Act” was brought into immediate action. According to this act, every cheque would be “scanned” and the scanned image would be sent directly to the branch from where it was drawn. When the green signal was received from that branch, the cheque is immediately encashed within a day. In a way, the disaster had indirectly forced the authorities to change the way they did their business for years! If I’m not mistaken, the same act is soon going to be introduced in India.

I have deliberately explained the concept of BPR with examples of banking as they are quite a routine thing for us but it can be very well applied to any other business. BPR resulted in downsizing and flat organizations. Following BPR, many UK banks laid off around 80,000 people, P & G got rid of 13,000 personnel, GTE reduced its workforce by 17,000!

But in spite of all this, BPR is not considered a popular and successful movement. I believe, for any business to become successful, it is important to have development of 3 P’s: People, Process and Product. If and only if there is an all round development of all these P’s, the fourth P – Profit increases!

But in case of BPR, even when the Processes were made better, the most important part – the People and their emotions were neglected. Although, it was quite a logical and radical concept, it couldn’t quite take off as it failed to handle the human emotions…

Regards,
Abhishek