Reengineering

By Emily Neidhart

Hammer & Champy (1993) defined the process of reengineering as "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." This process became a buzzword in the 1990's, appearing at first to be a silver bullet intervention that would forever fix and perfect businesses. Businesses would radically redesign the company by changing current processes, information systems, business strategies, and the overall organizational structure of the company in turn creating a more efficient business. Reengineering is implemented when a company deems the current system is no longer efficient, or is failing to compete with other companies. Corporations see value in streamlining jobs by investing in technology instead of employees. The advance of technology would free up task-oriented jobs previously held by personnel. Changing the structure of a business from employees to business strategies can have a disadvantageous effect, if attempted without a systems approach to change (Brandenburg & Binder, 1999).   Without proper analysis of a business' needs, reengineering could be disastrous. Hammer admitted later to paying little attention to the human element when first defining reengineering. He used such expressions as, "In reengineering, we carry the wounded and shoot the stragglers", and "It's basically taking an ax and a machine gun to your existing organization." This terminology resulted in massive layoffs for some companies that were quick to "fix" their business via reengineering. Reengineering became synonymous with downsizing when Pacific Bell announced the reduction of 10,000 employees as a result of "reengineering" in 1995. Apple Computer publicized a cutback of comparable proportions shortly after Pacific Bell, again due to the "reengineering" of the company (Davenport 2003) 2.6 million jobs were cut by 500 of the largest firms in the U.S. between 1984 and 1993 by one estimate owing to massive overhauls under the label of "reengineering" (Sheridan, 1997).   Some companies jump on the reengineering bandwagon when the economy slows down and fear of overspending sets in. American Expresses did just that in 2001 when the company's earnings dropped 76% from the previous year. Chief executive Kenneth Chenault said that the company was "making substantial progress in the reengineering efforts announced earlier this year… We're moving some stuff to the Internet to reduce support staff. We'll also be moving more rapidly to scale back American Express Bank's infrastructure in overseas markets". (Ring, 2001) American Express cut 6,000 jobs by the end of the year, and moved customer service departments online. This quick attempt to fix the company's losses once again equated "downsizing" to the definition of reengineering. Although Hammer and Champy's first idea of reengineering was misconstrued and poorly implemented by many companies, the process could work for companies that need to simply scratch a broken system and start over. Using information technology as a tool to enable a current system to operate more cost-effectively could, and does benefit companies in today's age of information. Sheridan (1997) writes that manufacturers who applied the basic concepts of reengineering sensibly to become leaner and more competitive, will then shift gears from a cost-cutting mode into a growth mode. The IBM Corporation cut 154,000 employees in 1989, only to hire more employees totaling a net increase of 16,000. Even though the corporation focused on reducing cost by streamlining jobs, they also planned for growth under the process of reengineering. Chairman and CEO Louis Gerstner Jr. pointed out that, "Even as we grow, we are relentlessly continuing to fine-tune our operations to improve our efficiency and productivity, mostly through our reengineering efforts." (Sheridan 1997). The trouble with Hammer and Champy's first presentation of reengineering was that it asked for too much from companies. Changing multiple processes, information systems, organizational structure and at times business strategy within a short time frame was next to impossible for companies to handle (Davenport, 2003). Consequently, companies made hasty decisions which resulted with the loss of many employees, some of whom were called back in to help the business as consultants, once the employers were not getting the desire results from reengineering tactics. If companies had conducted a proper needs analysis that focused on the human component of the company as well as new technologies and methods, reengineering could be far more productive. Brandenburg and Binder (1999) suggest that a systems approach that includes reskilling, revising incentive and reward systems, along with the use of new performance measurements and more appropriate organizational structures would provide a more humane approach to change management. Champy has recently introduced a revision to reengineering he calls "X-engineering", or cross engineering with the advent of the Internet. This version of reengineering focuses on transparency (openness with other companies), standardization of processes and technology, and harmonization, or collaboration between companies. Wal-Mart and Dell Computer Corporation currently operate under the X-engineering model, working with suppliers that are integrated into their operations. Now that reengineering has been attempted successfully and unsuccessfully, perhaps X-engineering can give reengineering the chance to redeem itself as a beneficial intervention for struggling companies.

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Author Note

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