Advantages and disadvantages of reengineering

But opposition to the new design can be overcome if top-level managers approach reengineering as a painful but necessary disruption of the status quo. Inevitably, managers and employees may feel that their turf, jobs, and organizational equilibrium are under attack. Without strong leadership from top management, the psychological and political disruptions that accompany such radical change can sabotage the project. As the experiences of BAI, AT&T, and Siemens Nixdorf reveal, wide-scale reengineering exacts extraordinary effort at all levels of an organization. Ultimately, however, a reengineering project, like any major change program, can produce lasting results only if senior executives invest their time and energy. They then completely restructured all organizational elements-from the layout of BAIвЂ™s branch offices to the skills required of AT&TвЂ™s salespeople-in order to implement the new designs successfully. Senior executives at Banca di America e di Italia (BAI), AT&T, and Siemens Nixdorf Service, for example, set broad goals, from creating a paperless bank at BAI to becoming the most customer-responsive and skilled computer-servicing company at Siemens Nixdorf.

Successful reengineering projects in diverse industries and locations demonstrate how companies can expand the dimensions of their reengineering projects. And the redesign must penetrate to the companyвЂ™s core, fundamentally changing six crucial organizational elements, or depth levers: roles and responsibilities, measurements and incentives, organizational structure, information technology, shared values, and skills. First, the process to be redesigned must be broadly defined in terms of cost or customer value in order to improve performance across the entire business unit. Our study identified two factors- breadth and depth-that are critical in translating short-term, narrow-focus process improvements into long-term profits. Our research into reengineering projects in more than 100 companies and detailed analysis of 20 of these projects have revealed how difficult redesigns actually are to plan and implement and, more important, how often they fail to achieve real business-unit impact. Why then canвЂ™t companies convey these results to the bottom line? What is going on here? The promise of reengineering is not empty: it can actually deliver revolutionary process improvements, and major reengineering efforts are being conducted around the world.

In short, too many companies are squandering management attention and other resources on projects that look like winners but fail to produce bottomline results for the business unit as a whole. Managers proclaim a 20 % cost reduction, a 50 % process-time reduction, a 25 % quality improvement-yet in the same period, business-unit costs increase and profits decline. An insurer cuts claims-process time by 44 %-yet profits drop. A computer company reengineers its finance department, reducing process costs by 34 %-yet operating income stalls. By now, paradoxical outcomes of this kind have become almost commonplace. After months, even years, of careful redesign, these companies achieve dramatic improvements in individual processes only to watch overall results decline. In all too many companies, reengineering has been not only a great success but also a great failure.

Advantages and disadvantages of reengineering