Business Process Reengineering’s applicability in Corporate Restructuring

Business Process Reengineering is a term we all have heard a lot of over the past few years especially in relation to large well-capitalized companies that have successfully implemented Business Process Reengineering (BPR). The question put forth here is. Does BPR have a place in turnarounds where time is of the essence? This creates an interesting question; is the company at a critical stage, merely praying for a miracle to survive, or is it under-performing with a viable market niche, or something in-between?

Traditionally, corporations have changed their way of doing business in several ways: upgrading technology, manufacturing & operations, restructuring the organization, replacing the senior management team, and downsizing across the board. None of these changes in themselves will create a long term solution. Yes, downsizing across the board is a favorite among traditional turnaround experts, but it will not solve the long term problem. That does not mean you can merely implement BPR in a crisis situation but neither can it be excluded in totality from a successful turnaround. BPR is the comprehensive process requiring a change in the fundamental way business is conducted. BPR discards unneeded activities, while taking advantage of automation opportunities. BPR requires a thorough analysis of how you can perform each process more effectively with a constant focus on customer satisfaction. Successful BPR efforts are generally: customer driven, based on recent validated data, focused on "stretch goals," high value processes with top management leading the process.

BPR encompasses all of the "in" vogue terms; TQM, Bench-marking, and CSM (customer satisfaction measurement) with a focus on:

• increasing profits
• increasing market share
• improving employee participation and morale
• improved customer satisfaction
• survival

BPR requires a change from traditional management/leadership to one of empowered leadership. The change requires sharing of financial information at all levels, controlling the organization via establishing goals, roles and strategies vs. mandates, budgets and controls. A major focus is on customer satisfaction. The customer is not only external but internal. Experience has shown that a happy loyal customer base results in: more stability, reduced operating costs, decreased sensitivity toward pricing, sustained growth and profitability.

Can Business Process Reengineering be used in a turnaround? Part of the process includes empowering line management and creating an entrepreneurial atmosphere throughout the organization. This process takes time and most companies do not have the time to embark on the process especially in critical situations. I could just see my friends at X bank looking at me as if I were crazy. I could hear Mark explaining "cut the expenses, decrease the inventory, collect those receivables and get back to profitable quick." That is the obvious. The easy part of the turnaround is the first step. Decreasing the expenses, identifying and selling excess inventory, and collecting and installing good credit policies are only part of the solution. BPR provides a company with the possibility for long term success. The company needs to look beyond doing fewer tasks with fewer employees, putting employees on unpaid vacation, or lowering quality and service standards. Yes, many companies in need of restoration require increased productivity, improved inventory turns, cost reductions, but not lower quality and service. Lower quality and service can spell disaster in today’s globally networked market place.

To look closer at the use of BPR in a turnaround you need to determine up front if the company is terminal, critical or in need of long term restoration. The terminally ill company is definitely not a candidate for BPR. The terminally ill company needs to focus on quick reductions in costs and maximizing asset value and cash flow to protect the secured lenders and shareholders. The critically ill company requires a more thorough analysis of the business problems and usually requires quick action followed by a plan for long term restoration.

Traditional cost cutting methods use the stair step approach, which results in a series of cost reductions over time. This process allows for quick achievement of cost cutting goals, involves little analysis, and allows for across the board reductions. The problem is that the traditional approach does not focus on quality, the customer, product or the morale and emotional state of the employees. Employees usually are the company’s most important asset. Yes, the first step in any turnaround can be the traditional cost cutting approach, but that is not enough.

TQM: The company and its operations must be analyzed. The use of activity based computer simulation models can provide a road map to a positive financial solution. During the development phase of creating the simulation models a thorough analysis of the company encompassing BPR is necessary. Line management must be heavily involved in the development of the plan. The turnaround consultant must lead the way and focus management on finding a total quality solution. A company’s success and quality are defined by the customer. The organization must be managed by facts, continually improving through innovative solutions, improving on an incremental and a breakthrough basis. A key component is getting management to understand that operating under a total quality approach reduces costs, satisfies customers, improves employee morale and delivers solid returns to the company.

Bench-marking: Management usually has not had time nor the resources to benchmark their operations. Bench-marking is an essential part of any restoration. If the company is going to compete they must understand and implement the processes that allow the competition to be successful.
Bench-marking is an important tool in developing activity based simulation models. Working with management to understand why the competition is successful and what they must accomplish to be successful is essential. Once you provide a road map that management understands you can find a positive financial solution.

Bench-marking helps management focus on key performance gaps, identifies opportunities for improvement, creates a consensus to move forward, and implements ideas to provide better quality products and services.

CSM: The plan/computer simulation model cannot be developed with tunnel vision. Time and resources are essential during the initial phase of a turnaround. Customer satisfaction measurement (CSM) requires compilation of data frequently using: written surveys, focus groups, roundtable discussions and other costly time consuming methods. The data is essential to developing a positive financial solution. Gathered data using telephone surveys, complaint monitoring, and internal information is an economical way of gathering useful data on customer's wants and desires. Measuring customer satisfaction becomes the art of measuring and quantifying satisfaction and translating the data into a series of gaps in performance. These gaps are an opportunity to improve. Customer satisfaction becomes a leading indicator for predicting revenue growth or shrinkage in relation to total market growth and market share. It is essential that the turnaround consultant understand these opportunities to improve and translates them into a road map for a positive financial solution.

There is no set way to reengineer a troubled organization. Much will depend upon whether it is a financial operation of a $100M company, a sole proprietor or something in between. Getting started is complex. The role of the turnaround consultant is to help answer the questions of:

• where is the company headed?
• why is the company going there?
• what fundamental beliefs will guide the organization's actions?

Getting started is somewhat complex. The use of activity based simulation models helps establish a clear vision of where the corporation is now and where it should be. The process is not easy and can be painful. You are looking to change the way the corporation and it’s employees work and react to the market place. Employees in a turnaround have high anxiety. The turnaround consultant must be able to empower the companies future leaders to produce rapid, tangible results. BPR is not applicable to every situation. It is however a critical tool in any successful turnaround leading to long term survival.