How Process Enterprises

Really Work
by Michael Hammer and Steven Stanton

Harvard Business Review, November-December 1999

Presented by Jeff Schott

CS457 Fall 2005
Process Enterprises

What is a Process Enterprise?

Flexible groupings of intertwined work
and information flows that cut
horizontally across the business, ending
at points of contact with customers.
Replaces traditional organizations
Sets of discrete units
Well-defined boundaries
Business Process Reengineering

Benefits
Operate faster and more efficiently
Use information technology more
productively
Employees have more authority and a
better view of the big picture
Higher-quality products and service
Dividends to shareholders through
reduced costs, increased revenues, and
higher stock values
Impediments to BPR

Many companies have reorganized

core processes, but not the entire
organization
Power still resides in vertical units
Integrated processes and fragmented
organizations create cognitive
dissonance
Successful BPR Implementation
Appoint best managers to be process
owners
Give process owners authority over work
and budgets
Shift focus to process goals
Base pay and advancement on process
performance
Focus training on whole process
Cultural focus on teamwork and customers
Case Study Texas Instruments

Calculator development teams

Drawn from various departments
Responsibility from inception to launch
Initial results not encouraging
Teams barely functioned
Sabotaged by existing organization
Unwilling to cede people, space,
responsibility
Conflicting orders from team,
department
Case Study Texas Instruments

Organization changed
Teams became primary business units
Old departments refocused on training
Process owner management role created
Budgeting by process
Office space reconfigured
Improvements
Time to launch reduced by 50%
Break-even points reduced by 80%
Case Study IBM

Standardize Global Operations

Processes assigned to members of
the Executive Committee
Units expected to follow processes
Improvements
75% reduction in time to market
Increased on-time deliveries
Increased customer satisfaction
$9 billion savings
Case Study Owens Corning

Enterprise Resource Planning System

Managers were rejecting or
modifying ERP
Companywide process teams created
Improvements
50% increase in inventory turns
20% reduction in administrative costs
Millions in logistics savings
Process Owners
Senior managers with end-to-end
responsibility for processes
Must have authority over design,
measurement, and training
Process ownership is permanent
Process designs evolve with business
Old organizational structures will
reassert themselves
Separates control of work from
management of workers
Case Study Duke Power
Improve customer service in the face of
deregulation
Identified 5 core processes
Each assigned an owner
Owners given authority over
Designing process
Setting performance targets
Improvements
More installations per day
Meets 98% of construction commitments (up
from 30 - 50%)
New Style of Management

Cooperation is unavoidable
With other managers
With process workers
Duke Power developed a decision
rights matrix
Which managers make certain decisions
Who is consulted beforehand
Who is consulted afterward
Process Standardization
Benefits
Lowers overhead costs
Presents one face to customers
Increase organizational flexibility
Disadvantages
Different customers cannot be served differently
Some companies do both
Standardize as much as possible while still
meeting diverse customer needs
Harder to impose standard than allow diversity
Making the Transition
Determine relevant changes
Connect to overall strategy
Appoint high-profile executives as
process owners
Set realistic expectations
Dont try to do everything at once
Choose one unit as a prototype
Gain commitment of senior
employees to avoid resistance
New Process Infrastructure

Measurement
Compensation
Facilities
Training and Development
Career Paths
Is It Worth It?

Capitalize on new opportunities

Process is as important as
presentation
Dynamic processes for changing
markets
Does it Work?
70% failure rate
Excuse for job cuts
Ignores human dimension
Is actually time sensitive
New processes means new problems
Untested solutions
Security issues
Is being phased into ERP, BPM, Six Sigma
Source: Wikipedia [Business Process Reengineering]
http://en.wikipedia.org/wiki/Business_process_reengineering