RE-ENGINEERING WITH QUALITY
THE STEPS TO SUCCESS
By: José Sánchez
Senior Partner
Management Resources, Inc. (MRI)

Re-engineering and TQM

    Much has been written about the new re-engineering efforts and how they are dissimilar and more rewarding than using TQM (Total Quality Management). Reports say that re-engineering provides a quantum leap in improvement while TQM contributes small, incremental change. It is also reported that highly motivated re-engineering teams climb the "mountain of change" with a unique sense of a new mission. Yet, they live long enough to see themselves fall hard when it is time to implement.

    MRI's 15 years experience as designers, practitioners and consultants in both Re-engineering and TQM has given evidence of a better way. It is important to note that many TQM efforts today are only activities with little or no emphasis on results. These activities include creating teams, training employees in TQM, placing slogans on walls, and using problem-solving techniques. Shortly afterward, employees begin to lose interest in TQM because results did not happen as predicted. TQM efforts are reduced and TQM gets blamed for the lack of success.

    In re-engineering, for the most part, efforts to change the way things have been done have been based on a "divine inspiration" that flows from some of the members of the re-engineering teams. It seems that these few have received a unique knowledge of what has to be done. They have become the new "gods" of the organization with power and change everything.
    Processes that have been in operation for years are changed, new rules are set up, people are retrained and resources are committed based only on the perception that the new way will work better. Soon afterward, corporations find a need to return to the "old way" because the re-engineering did not go deep enough into the process. The business world is littered with this kind of re-engineering.
    Some TQM efforts have included re-engineering and have resulted in major improvements. Why is it that some efforts work and others fail?
    The main reason is that efforts that succeed are based on pursuing results and those that fail are only pursuing efforts. By pursuing results, concentration is on outcomes of the process, the customer and customer needs. By pursuing efforts, the concentration is on how things are done, the company and the company's problems.
    It is important to understand two main points:

1. TQM is not merely the environment where teams draw charts and use statistics. TQM, rather, is a philosophy of serving customers, analyzing their needs, and focusing employees on achieving those needs. The true TQM environment includes employees who have become proficient at applying statistical tools and techniques in their analyzes.

2. Re-engineering will often require re-design. Improving parts of a process does not necessarily result in quantum improvements. Adding, deleting or changing components does not either. To achieve better results, the process must be redesigned to satisfy the needs of the customer. Otherwise, all that is satisfied are the needs of the process itself.

Several key facts listed below should be the foundation of all re-engineering and TQM efforts:

1. Customers are the driving force behind business improvements. Their continuous delight depends on a company's ability to meet their needs and satisfy their expectations.

2. Customers will pay for products or services they want. Customers are not concerned with how their product is produced. It is the company's responsibility to examine and improve processes so the customer is kept satisfied

3. Intense competition requires that companies find ways to produce a better product, at a lower cost.

4. It is not sufficient to simply make changes. Competitors are thinking of ways to win. Therefore, companies must use innovative methods and unorthodox thinking to improve processes.

5. The business environment requires constant flexibility. Processes need to reduce bureaucracy, speed up production, facilitate improvements, adapt to change and contribute to the bottom line.

Business Processes

Most business processes were never designed, they simply grew as the needs emerged. They were developed over time without specific guidelines or direction. Many have become complex, vulnerable to errors, expensive to operate and not responsive to the needs of their customers. They have also become the domain of those who feel protected by them.

Often, there are efforts made by "process experts" to make the processes more efficient, by looking at ways to reduce expenses and increase the throughput. These efforts are typical industrial engineering studies, time motion analysis, value added, etc. Very seldom was the focus on what the customer of the process needed.

Often, the process structure is different from the organization's (hierarchical) structure. It is very important to understand the differences since they can have a significant effect.

The organization structure:

• is based on reporting and responsibility relationships,
• is a static view of how people are structured in an organization.

The process structure:

• is based on the sequences required to produce a product,
• is a dynamic view of how the organization delivers value to its customers.

    Ignoring the process structure is one of the biggest mistakes "re-engineers" make. The redesign team is usually formed of members of the organization that support the process and as such it creates a natural bias for the existing structure. As a result, the redesign effort is nothing more than creating a new corporate reporting structure.

Customer requirements
Figure 1 shows the basic relationship that exists between what companies produce and what the customer wants.

Clearly:

• The product or service flows toward the customer,
• The requirements flow from the external customer back toward the company.
  

Therefore, to redesign any process properly, outputs must be designed before the inputs. That is, the valid requirements of the customers of the process must be known. Simply stating this another way:

In redesigning a process, listen to the voice of the customer that will define the outputs required of the process.

Because many re-engineering efforts bypass this voice, the final product is not a success.

Characteristics of a process
    To re-engineer processes properly, the effort must focus on 3 characteristics:

• Efficiency
• Effectiveness
• Adaptability

Efficiency is commonly understood to be a comparison of the amount produced with the cost incurred. It is a measurement of effort. It means:

• Producing results with the minimum amount of input
• Doing the job "right the first time"
• Examples:
  • How many calls processed by employee,
  • How many hours to build a device,
  • Miles per gallon consumed.

Efficiency is usually a result of a "company view" of a measurement and usually reflects a financial view.

Effectiveness is producing a specific, definitive or desired outcome. It is a measurement of results. It means:

• Producing the results that the customer of the process demands
• Doing the "right job"
• Examples:
  • Number of customers satisfied when they call
  • Number of customers satisfied when they purchased the device
  • Delivering equipment on time.

Adaptability means the capability of the process to be modified to continuously satisfy the needs of its customers. It is a measurement of flexibility.

• Some processes are very rigid and cannot be changed without major modifications.
• Processes need to adapt to continuous changes.

In summary:

• A process can be effective without being efficient since expected results can be produced by using excessive resources.
• A process cannot be efficient without being effective. Efficiency without effectiveness has no significance.
• A process needs to be flexible to change as conditions warrant.
  

In order to re-engineer a process:

1.- Decide what the output should be (effectiveness).

2.- Design it to use fewer resources (efficiency).

3.- Assure that it can be modified in the future (adaptability).

Re engineering failures

It is very important to select a process to be re-engineered based on the following factors:

• How important is the process in meeting the most critical needs of its customer?
• How flexible is the process?
• What are management's objectives?
• What is the strategic importance of the process?
• What are the catalysts for change? Can they support it?
• What is the culture of the company? Can it absorb the changes without breaking down?
  

    Often, processes are selected based on a very shallow analysis of what the customer desires or based on the desires of the re-engineering team. When this happens, processes are selected that have no real impact on the products or services of the company. (For example, selecting an internal staff process over a customer contact process.)
    Most process improvement efforts start by flowcharting the existing process and making changes in some "boxes." Typical problems with fixing "boxes" are as follows:

• Activities are looked at as they are done today. There is a failure to see future requirements or the need to add delight to the customer.
• The ties that exist with other processes are not well documented, and are often not taken into consideration.
• People get disenfranchised because not all the outcomes were considered, nor were the interests of all the stakeholders.
• There is no measurement of improvement because before and after snapshots were not taken.
• Only internal fixes were considered while the external customer requirements were overlooked.
• Activities added to or deleted from "boxes" without examining the needs that support them can cause trouble.
• And, most importantly, re-engineers get restricted by the "current thinking" and often fail to break out of that frame of mind to look for innovative or unorthodox solutions.
• As a result, these efforts end in only minor changes to the process. This is not true re-engineering.
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Re-engineering and corporate policy
    All re-engineering efforts have to confront existing management policies. Most of the time these policies reflect the thinking of some one high up in the organization, who, after many years on the job, feels threatened by anyone trying to change them.
    These policies are based on a multitude of reasons that when looked at individually make sense. However, when looked at as how they affect the process, the need for change becomes obvious.
    Re-engineering efforts that do not consider existing management policies often fail because they try to change the way things are done without changing the basic structure that needs change. Here are a few examples:

• Payroll processes are automated, but checks are still mailed externally or internally.
• Budget processes are re-engineered but no basis for analyzing cost is established nor is there anyone held accountable for them.
• Personnel processes are decentralized, but a central personnel department still exists.
• Purchasing systems are streamlined, but six signatures in purchase order approval are still required.

Existing management policies may need to be re-engineered. If so, they should be questioned as to:

• Their need or purpose
• Their customer or whom do they protect or serve
• Their owner or who champions or requires them.

The Reengineering Teams
    Experience has shown that the best improvements have come from team efforts. Perhaps no other decision in re-engineering is more important than to decide to use re-engineering teams. There is no magical formula for creating teams to re-engineer a process. Often, several teams will produce a more optimal result:

1. A senior management team to look at the customer's needs, the key corporate processes, the company needs and select the process to re-engineer.

2. An "existing process" team to look at the existing process, its problems and opportunities, new needs, the products and services, etc.

3. A "desired process" team to design the desired process based on satisfying the needs of the customers.

    The senior management team is composed of the top echelon of the company. Supported by the right personnel, their job is to select the process to re-engineer and to select the existing process and desired process teams.

    The existing process team should include members from the functional areas within the process, customers who receive the product or service, and the suppliers that provide input. Member selection is based on knowledge of the process, use of quality tools and ability to communicate with others. Their job is to fix.

    The desired process team should include the same type of members as the existing process team plus members from other areas that do not know anything about the process. Members are chosen based on creativity, problem solving ability, visionary thinking, leadership ability, and knowledge. Their job is to dream and to anticipate, not to fix.

    Because their focuses are different, it would be a great mistake to combine teams. Each has different characteristics, requiring not only different experiences but personalities as well. The first group is the "dictating" group, the second one the "practitioners" and the third one the "utopians." The last two teams will become more clear later on as the steps to re-engineering are discussed.

Selecting the process to re-engineer
    In selecting which process to re-engineer, the senior management team first must learn what the customer needs are on a global basis. That is, this team learns all the needs and desires of the customers in order to select the process that impacts them the most.

    In learning customers' needs, follow a Customer Needs Analysis (CNA), based on data the company already has. It is may not be necessary to conduct expensive surveys to find out what the customer needs. The workers know, they talk to the customer continuously, they handle their complaints and requests. This CNA process results in the most important customer's requirements based on:

• what the customer needs,
• the significance of improving on those needs,
• the market emphasis management wants to place in satisfying those needs.

Once the customer's requirements are defined, identify the process that has the most impact on those needs. As a result, the points learned will be:

• the significance of a process and its role in the organization.
• the criticality that the process changes have on the customer needs.

    Sometimes companies re-engineer processes that have no impact on the customer. Efforts like these usually go unnoticed because the customer sees no benefit. As a result, resources were spent which were not warranted.