Business Process Re-engineering and Outsourcing for Improving Efficiency

Need, Challenges and Role of Outsourcing in Business Process Re-engineering Invensis
Business Process Re-engineering and Business Process Outsourcing

Business Process Re-engineering (BPR) is also referred to as Business Process Change Management or Business Process Redesign. It represents the analysis and design of the work flow and methods within an enterprise and with external entities as well.

BPR aims to enhance business by increasing effectiveness and efficiency of the processes that are being implemented in the business. It plays a vital role in business and is considered the secret of success. The methods for conducting business can be revised and improved by determining how a business can best construct their processes of management.

In the book ‘Re-engineering the Corporation’1 by Michael Hammer and James Champy, the authors suggest seven principles of re-engineering:

  1. Organize around outcomes, not around tasks
  2. Have those who use the output perform the process for greater integration across departments
  3. Integrate the work related to information processing into the real work that produces the information
  4. Treat resources that are geographically dispersed as though they were centralized
  5. Link parallel activities in the workflow as compared to merely integrating their results
  6. Put the decision point where the work is performed, and build control into the process
  7. Capture information at the source to minimize errors

Implementing these seven principles enables an organization to streamline workflows and processes, with the objective of improving quality of output, management of time, speed of deliverables and the bottom line.

Need for BPR

Organizations all around the world have benefited by undergoing business process re-engineering for key activities. For instance, in a famous example from the 1980s, Ford eliminated the invoice and created a method to register a purchase order in the online database for the storekeeper to tally later when the goods were received. This change resulted in a 75% reduction in headcount in the accounts payable division, greater material control and improved accuracy of financial information.

Organizations take up BPR for a host of reasons, which include:

  1. To develop and fine-tune established processes to make them in sync with the changing business environment and compliance norms
  2. To align processes, people and systems with the strategic business objectives of the enterprise that may have evolved over time
  3. To streamline processes and remove steps that are unnecessary or are a duplication of other tasks
  4. To bring in more value-added steps into a process
  5. To leverage modern technology solutions for automation where applicable, to increase productivity and output
  6. To garner greater cost efficiencies as a result of process re-engineering
  7. To facilitate greater integration within the organization
  8. To incorporate best practices into process implementation
  9. To mitigate the chance of risks and errors in deliverables
  10. To gain a competitive edge in the market

Challenges of BPR

The challenges or barriers to business process re-engineering can be categorized into the following:

  • Conceptual Clarity: A long-term vision for the organization is required for the BPT project to achieve objectives. Without a focal point to the transformation, the entire exercise can become disjointed.
  • Financial Justification: The business case for BPR should be quantified in tangible terms as far as possible. Without this justification, it is unlikely that the case for BPR will be treated as urgent by the management and other stakeholders.
  • Organizational Barriers: Implementing the change recommended for BPR could be a challenge within the enterprise, facing resistance from the concerned department. Strong cooperation between departments would be needed to move past this barrier, as well as robust training to bring employees up-to-speed with the suggested change.
  •  Customer Resistance:  If the re-engineered process causes a change in the price or quality of the final product or service, the customer may be prone to resist the BPR transformation as well. BPR should hence be undertaken keeping in mind the requirements of the user.
  • Legal Barriers: Any process re-engineering should be done keeping in mind legal regulations, both existing and upcoming. Compliance should not be compromised as a result of BPR.
  • Technology Barriers: Any effort to bring in technological change should be done keeping in mind strategic objectives, workforce skill set, legacy systems, future advancements and so on, for the success of the transformation program.

The Role of Outsourcing in Business Process Re-engineering

There is a link between business process re-engineering and business process outsourcing. BPR is acknowledged as a method to review and improve processes; BPO is considered by many to be a solution for a process that can be implemented more effectively by an expert BPO service provider. According to a report ‘Business Process Re-engineering and Business Process Outsourcing’2 by the Chartered Institute of Procurement and Supply (CIPS), the journey from BPR to BPO typically follows the following steps:

  1. Simplification or removing unnecessary steps in a process
  2. Standardization across business offices and geographies
  3. Shared Services or realization of economies of scale from a shared service center within the organization
  4. Outsourcing or identifying processes that could be better implemented by an external outsourcing specialist for efficiency

 As enterprises look for methods to improve efficiency, business process re-engineering is one technique that can bear dividend if implemented in the right manner and with the right commitment. As part of this initiative, organizations can consider outsourcing non-core processes or steps of processes to gain business objectives of cost and process efficiencies and increase the productivity of internal resources.

References:

  1. The principles of Business Process Re-engineering from the book ‘Re-engineering the Corporation’1 by Michael Hammer and James Champy are cited here
  2. The CIPS ‘Business Process Re-engineering and Business Process Outsourcing’ PDF can be downloaded here

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