About Business Process Engineering

Work process engineering, or otherwise known as business process engineering, is an approach that aims to improve the performance of the business that is undertaking it. These improvements are designed to achieve the desired results by elevating efficiency and effectiveness of different processes already existing within certain organizations. I will try to argue that work process engineering is a fad for companies to reduce their cost and increase profits.

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First, if we are to search for a definition for business process engineering we would find quite a lot. The following are some of them considered to be the most adequate:

“… 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 and Champy, 1993)

“Encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions.” (Davenport, 1993)

“Business Process Reengineering, although a close relative, seeks radical rather than merely continuous improvement. It escalates the efforts of JIT and TQM to make process orientation a strategic tool and a core competence of the organization. BPR concentrates on core business processes, and uses the specific techniques within the JIT and TQM ”toolboxes” as enablers, while broadening the process vision.” (Johansson et al, 1993)

The story goes that back in 1990 a Massachusetts Institute of Technology professor, Michael Hammer, published an article at the Harvard Business Review regarding, what he thought to be some relevant mistakes made by managers in general. He accused them that by trying to automate the working process as much as they could, in fact, they were undermining the basis of work performance.

He claimed that the major challenge for managers is to obliterate non-value adding work, rather than using technology for automating it (Hammer, 1990).

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This way hammer pretended that the human labour force is much more “intelligent” and creative than an automotive transmitter, or informative equipment, or any piece of technology could ever be.

Many acclaimed the idea of business process engineering as “revolutionary” for increasing company’s profit. But others expressed concerns toward the welfare of the labor force. Of course that by automating as much as the work process as they could managers would reduce the number of working force. This would have brought to many social problems and open social conflicts.

Open social conflicts are not good for the image of a company or a corporation. It affects negatively directly thee branding name they have on the market. This would finally result in less revenue that would give the company fewer and fewer profits.

With business process engineering, managers found a way of avoiding this social tensions and upcoming social conflicts. With business process engineering they would try to “engineer” the human labour force instead of doing it with the technology. By introducing a complex system of incentives and revenue maximization for the employees they tried to achieve their goals of maximizing the company’s profits.

There are many authors that point out the contradiction of these two concepts. On one side there is the appraised “humanistic” view that managers tend to think more of their employees and safeguard their interest by applying business process engineering. They are more sympathetic to the human capital of their company and do this in favour of the technology.

The other point of view is that by applying these kinds of processes the company tries to “use” its employees like a technology asset. The labour force is considered to be like the informative technology assets that can be easily manipulated. In this case a complex system of “myths” and concepts are formed in order to make the labour force believe that the company has their overall welfare as its primary focus. In fact, that is not the case. The complex system of “myths” that have been created relates mainly to pay and rewards that the labour force gains from its work.

Business process engineering propagates a view of the human labour force as a “one dimensional man”. That is, the only form of adequate reward for the lab or force is a reward related to money, or some alternative form that still relates to monetary reward. This view deliberately rejects that the human being can desire any other form of monetary reward, or that the human labour force can be satisfied with a certain amount of monetary related reward.

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But even if we presume that the human being is a “money making machine” and that the only interest of the labor force is to increase its payroll money reward, still this system does not function the way it is promulgated.

In fact, work process engineering is just a fad for organizations to reduce their payrolls and increase their profits.

By introducing the business process engineering techniques, managers induce the labor force to “compete” for the incentives offered by the company. It is crucial to point out that the policies initiated by business process engineering tend to make the labor force compete on a limited incentive “packet” that the company offers.

One of the main rules is that workers are not going to be rewarded the same for overtime hours, for example. The main promulgated idea is that who works more and has more skills would benefit more from these incentives. This is done on an individual basis. The facts show that the overall increase in productivity and revenue that the company gets from the overtime hours alone of its labour force is much higher, as a percentage, than the incentives offered and passed to the labour force. As Pfeffer (1998) points out for 1997 the increase in productivity and revenue for General Motors from the overtime hours of its labour force within the United States was of 4.2%. On the other hand the increase in revenue and payroll for this labour force, especially those on the “lower statuses” of labour, not-highly qualified workers, was no more than 3.6%.

And even within the labour force the differences were considerable. For example let’s consider the differences Pfeffer pointed out from his study. The majority of the General Motors workers were semi-professionals or low-qualified workers. They put up together more than two thirds of the working force within the United States for General Motors (Pfeffer, 1998). The rest was composed of highly qualified personnel.

The monetary reward gain from the overtime hours for the majority of the workers of the general Motors, that is for those making up almost all the productivity the company had on the market, increased only with 2.14%. Compare this to the 4.4% of the high-qualified professional working for the company for the same number of overtime hours. And finally, compare both of this to the fact that Pfeffer point out that the company had a calculated increase in productivity and revenue on the market over 5% from the overtime hours of the workers (1998).

If we “translate” this into business language it means that the working process engineering techniques have increased the payroll profit for the majority of the workers less than half the profit increase of the company from their overtime work. Even within the working force this has widened the division between the high-professionals, who already have high payrolls, and the low-status working force.

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Are these arguments that tend to show that these processes of business engineering are just a facade for increasing the company’s profit and not in the benefit of the workers, as they pretend also to be.

“”When I wrote about “business process redesign” in 1990, I explicitly said that using it for cost reduction alone was not a sensible goal. And consultants Michael Hammer and James Champy, the two names most closely associated with reengineering, have insisted all along that layoffs shouldn’t be the point. But the fact is, once out of the bottle, the reengineering genie quickly turned ugly.” (Davenport, 1995)

Victims of downsizing are not those employees who were let go. Rather, the victims are the ones who have kept their jobs. Do you agree or disagree with this statement? Defend your position.

This question is the continuance of the previous once. Business process engineering is a “trick” that organizations use to reduce their payroll and, ultimately, increase their own profits. In this part I argue that victims of the downsize process are not mainly the employees that are let go but rather the ones that keep their jobs.

We must acknowledge that there exist a series of myths divulgated among managers, and workers alike, throughout the business community. One of them is the myth that we explained above; that business process engineering will help the company as well as the worker gain more profit from his/her deserved work. As I tried to demonstrate above by bringing the example of the American corporation General Motors this is simply misleading. Yes, it certainly brings more profit to the company, but it is not as fair to the increase in profit for the labour force, especially toward certain categories of the labour force.

But there are other myth’s too. In difficult times for the company, one of the measures managers more often take is to cut down the labour force. The recent financial meltdown and the subsequent effect on the economy are an example of this.

The myth is that when the aggregate demand is going down and, subsequently, the supply must go down then you must find some alternative ways of cutting the expenses of the company in order to keep it competitive on the market. A “good manager” has to find ways to cut the cost of the company in order not to lose market share or profit gain.

It follows that by cutting the company’s cost a manager attempts to improve company’s efficiency and effectiveness.

Hence, downsizing is the “conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness” (Baumol et al. 2003). Since the 1980s, downsizing has gained strategic legitimacy and is now considered to be a basic principle. In fact, recent research on downsizing in the US (Baumol et al. 2003), in the United Kingdom and in Japan (Ahmakjian and Robinson 2001) suggests that downsizing is being regarded by management as one of the preferred routes to turning around declining organisations, cutting cost and improving organisational performance most often as a cost-cutting measure.

In order to make it more practical let us recall one of the cases that is showed in the study made by Baumol et al. (2003) for the downsizing of many united States based companies after the September 11th, 2001, attacks on the World Trade Centre.

Especially the airlines industry suffered the most from these attacks. People’s confidence was shaken as were the branding names of many of the companies. Also, many new regulations and restrictions were put by governments for the airlines industry. Mostly these were new security regulations. All of these factors combined together affected negatively the airline market.

American Airlines, the company whose airplanes had been hijacked by the terrorists, was the worst damaged as a corporation. As a result of the attacks and the new regulations that followed after, the company’s stock value had gone down by 52% and company’s profits were also decreased by more than one third at the end of the fiscal year in December 2001.

By the end of 2001 they had to cut off 10,000 personnel all around the world. The unstoppable process of downsizing as an attempt to save the company had began (Baumol et al. 2003). But this was only the beginning. The first six months of the next year, 2002, they had to cut 50,000 more jobs, 6,000 of which in Britain, with the justification to preserve the efficiency and effectiveness on the market by cutting the production expenses (Baumol et al. 2003).

Many labour unions, along with other segments of the civil society, protested for this massive layoff of tens of thousands of workers all around the world in the sites of the company. But the main problem still left aside. It is not the workers who were laid off who “suffered” the most severe consequences. In fact, to these workers the company offered a certain “assistance program” by continuing to pay a portion of their payroll for a number of months after they were laid off. This was used to easy the social tensions that could have risen worse and would have further negatively affect the brand name the company had constructed over the decades.

What many do not speak is the fact that to the remaining labour force in the company the working load was increased heavily. Unfortunately, this was not the same for their reward and payroll. As Baumol et al. (2003) have pointed out in their study, the work load of the remaining workers increased up to one fourth of that before.

For particular sectors of the labour force it was even close to one third of the previous working load. And the payroll, the reward, for this increase was no more than 10% in the best of the cases.

In reality, for the remaining working force the total pay per hour was decreased by 5.8% (Baumol et al. 2003).

Baumol et al. 2003 continue their analysis by making a comparison between the layoff workers and the ones that were still at their place. As mentioned above, the first took some kind of monetary assistantship by the company. This monetary assistantship turned out to be up to, one fourth, 25%, of the payroll of the still-in-place workers. This may seem irrelevant if not compared to the number of working hours. For the first category, the layoff workers, the number of working hours for the American Airlines Company went from 100% down to 0%, while their revenue from the company went from 100% down to 28%-30%.

For the remaining labour force, the working hours load went up from the previous 100% to 114%-117%. The payroll revenue for them went also up, but from the previous 100% to an astonishing 105%-108%. Practically, the layoff worker took the equivalent monetary revenue that the remaining labour force needed almost one week of hard work to gain (Baumol et al. 2003).

You can point out by yourself who is the social category that is more damaged here, the remaining workers or those who were removed from their duties. It is a situation that from the outside it seems not like the one just described above, but unfortunately this is the reality.

The “real” victims of downsizing are not those employees who were let go. Rather, the victims are the ones who have kept their jobs. I think the case brought by Baumol et al. (2003) is very significant regarding this issue.

In conclusion, the final question to be asked is whether it is true that downsizing, along with business process engineering, really do help in cutting costs and preserving effectiveness and efficiency for companies.

The answer is negative. I will take another example from the same airlines industry.

“Southwest Airlines has never used such a system, and it is the cost and productivity leader in its industry. Southwest is not alone, but still it takes smart, informed managers to buck the trend of offering individual rewards. It is curious to note that they never used, or intended to use, downsizing as a resource for gaining market share or balancing their costs”. (Pfeffer, 1998)

There are quite a lot of myths that nowadays managers would consider as true and proved knowledge. Some of them are the myths that I have mentioned and analyzed above. In reality, truth turns out to be much different than what it is presented.

So, as future managers, it is our duty to better try to understand the business world that surrounds us and try to give “real” effective solutions to our business problems.

References

Hammer, Michael and Champy, James (1993), Reengineering the Corporation: A Manifesto for Business Revolution. Harper Business Review.

Davenport, Thomas (1993), Process Innovation: Reengineering work through information technology, Harvard Business School Press, Boston

Johansson, Henry J. et al. (1993), Business Process Reengineering: BreakPoint Strategies for Market Dominance, John Wiley & Sons.

Hammer, Michael (1990), Reengineering Work: Don’t automate, obliterate, Harvard Business Review, pp 104-112.

Pfeffer, Jeffrey. (1998). Six dangerous myths about pay. Harvard Business Review v76.

Davenport, Thomas (1995), Reengineering – The Fad That Forgot People, Fast Company.

Baumol, W. J., Blinder, A. S. & Wolff, E. N. Downsizing in America: Reality, Causes and Consequences. New York: Russell Sage Foundation. 2003.

Sahdev, K. ‘Survivors’ reactions to downsizing: the importance Human Resource Management Journal, Vol.13, No.4, pp.56–74. 2003.

Mroczkowski, T. and Hanaoka, M. ‘Effective downsizing strategies in Japan and America: is there a convergence of employment practices?’, Academy of Management Review, Vol.22, No.1, pp.226–56. 1997.

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