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Corporate Reengineering

More than 200 years ago, in 1776, a book came out of the American press and flew right into the consciousness of 18th century American business. It was called The Wealth of Nations - one of the business world’s earliest bestsellers - written by Adam Smith, a radical thinker in his time, who argued that productivity would increase by a factor of hundreds through task specialization and division of labor.

Today, observe two of America's newest business gurus Michael Hammer and James Champy in a book entitled Reengineering the Corporation: A Manifesto for Business Revolution (Harper Collins Publishers, Inc., New York, 1993), modern business management continues to be designed along 18th and 19th century assembly lines even as the world is entering the future.

Given the nature of production and the management needs of our times, Hammer and Champy further expound, the “thin-slicing” of work into special tasks has created many redundant and meaningless activities and tends to overlook the reason for which the work is being done; namely, the customers. Customers want companies to deliver quality goods and services pronto and couldn't care how companies do it. The duo therefore calls for a revolution that shall in effect re-invent the business wheel, a revolution by which the diverse, specialized components of an enterprise are re-assembled into integral management processes that save money during production and deliver goods and services faster to the customer.

Where should modern business start in reengineering itself? From scratch, say Hammer and Champy. The chief tool, chimes in Fortune magazine, is a clean sheet of paper. And the basic question is “If I were recreating this company, given what I know and given current technology, what would it look like?” The most important “given” is that today customers demand more innovation, greater flexibility and quicker response from business than customers of the last two centuries. And perhaps we should add that running a business today costs so much more.

To meet those demands at the least cost, today's companies must go through some very difficult and sometimes painful processes:

Several jobs are combined to eliminate duplications, errors and delays. And to avoid the expensive process of interdepartmental integration, work may be shifted across organizational borderlines. No more innumerable hand-offs.

Workers make decisions. This requires flattening out tall managerial hierarchies. No more interminable quality checks.

Work units change from functional departments to process teams. No more individual or unit specialists.

Measures of performance shift from activity to results. No more hard work that produces hardly anything.

Managers change from ” supervisors” to coaches. “Supervisors” prescribe solutions to problems. Coaches help solve them. And executive change from remove financial scorekeepers to hands-on leaders. No more executives who give tall orders to sell a million cases, tell their team to report how they've fared at the end of the week, then scurry to catch their planes to the world's finest vacation resorts.

For even greater results, corporate reengineering identifies business processes in terms of their beginning and end states. Manufacturing may be called the procurement-to-shipment process; sales, the prospect-to-order process product development, the concept-to-prototype process; personnel service, the inquiry-to-resolution process. The result is a clearer recognition of responsibilities and a more focused activity.

But since corporate reengineering involves radical changes, it could be quite threatening to most people. To sell the concept, senior executives must communicate two dramatic points. First, the case for action: if we don't do it, we die. And second, a vision statement: what specifically the company want to become. With companies like Del Monte, the case for action could be: “If we don't reengineer, Thailand and Indonesia will knock us out of competition.” And our vision statement should be: “To become the world's lowest-cost producer of pineapple.”

Where does that leave TQM?

Fortune magazine quotes a top executive of a successful reengineered American company for the answer: “You can’t do re-engineering without an environment of continuous improvement or TQM.” Re-engineering, which is essentially a top-down thrust, finds its best complementary in TQM which is basically a bottom-up initiative.

When the two meet, business is better than ever.

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