Synopsis for the Executive Committee on:

Reengineering Management

by David Champy

Presenting Committee:

Mehmet Bicer

Barry Diller

May Fong Ho

Ting Kwan Hung

Ching-Hua Lin

Bob Stocco

Executive Summary:

The committee has been given the task of reviewing the book Reengineering Management, by David Champy and presenting this synopsis to the executive committee. A chapter by chapter breakdown follows along with these general observations:

Mobilizing, Defining, Measuring and Communicating.

development, social skills, resource development which were taken for granted in the past or

labeled as "soft" (p. 161), are now of same importance as "hard" operational skills.

Chapter 1: Management? Why Reengineer Management?

Champy quickly gains our attention when he begins by saying, "Reengineering is in trouble." (p. 1) He goes on to clarify this by saying that there have been many companies which have had dramatic success with reengineering. (pp. 2-3). Champy tells us, "On the whole, however, even substantial reengineering payoffs appear to have fallen well short of their potential." (p. 3) The "partial revolution" started with Reengineering the Corporation, which only discussed work, is not the one intended. He says, "...half a revolution is not better than none. It may, in fact, be worse." (p. 3) So, this book is written for managers and about managing. (p. 3)

Basically, reengineering works to a point and the obstacle is management. Reengineering management is the "... only way we're going to deliver on the full promise of reengineering." (p. 1) Champy discusses that the partial revolution is very evident when we look at managers at many companies today. Their titles may have changed and there may be far less managers than before (because of layoffs, etc.), but many managers have positions just like the one's they had before what they called "reengineering" took place. These positions include: (pp. 3-4)

There are key questions and issues which the practice of reengineering brings up. These include: (pp. 7-8) Management must face up to these issues and questions, along with "... the tensions, problems and conflicts of corporate leadership today." (p. 8)

Chapter 2: The Ordeal of Management

There are four key ideas in this chapter (p. 10):

1. Nothing is simple.

2. Whatever you do in not enough.

3. Everything is in question.

4. Everyone must change.

Champy calls these "refrains" which "¼will keep coming at you in this book." (p. 10) He stresses that it is important to abandon principles established before, in far different economic and competitive times. To show which principles arose and why they must be abandoned, Champy provides some brief management and economic history. Some major ideas include: (pp. 12 - 15)

Champy feels the Era of Smooth Sailing ended in 1973, primarily because of foreign companies producing goods to sell to (now relatively wealthy) Americans, the openness to free trade in America and the "Digital Revolution." (pp. 16-17) He says the "... new bosses are undoubtedly the customers." (p. 17) Old principles must be abandoned because there is now "...a dictatorship of the customariat or ... a market democracy - it's causing a total revolution within the traditional machine-like corporation." (p. 19) Customers (i.e. bosses) want to speak with the "... person in charge" leaving little need for bureaucracies corporations had become. (pp. 20 - 21) Champy concludes by saying, "The democracy of customers, voting with their money, is summoning a meritocracy of people and producers, responding with everything they've got." (p. 22)

Chapter 3: Living the Questions

Reengineering makes many managers worry about sharing their power of control. Because they are comfortable with power, they believe that everything would be chaotic if they do not control things. This is a key point in reengineering. By empowering your employees, you need to share the information they need and then educate them. Doing this allows the resources now wasted on supervision and control to be used productively. Also, freed employees will get more recognition. This in turn triggers their self-motivating needs, such as self-esteem and recognition. If this happens they will work as if this is their own job.

Champy says we should move from a theory 'x ' way of thinking to a theory 'y' way of thinking. When this happens we will not have to stick to the idea of classical thinking, which is finding the best way of doing something and working consistently that way. When we empower employees, we will get an opportunity to move from this consistency to betterment of our processes. This will come naturally by the contributions of the employees and also through the brain-storming sessions.

When we answer these questions Champy points out we will then have a better understanding of why we really consider, or mind, reengineering.

We also need to identify the reasons and purpose that our corporation exists. There has been a dramatic change outside of the corporation. This in turn has made it a very competitive environment for any corporation to excel or even survive in. The solution for taking the competitive edge in the market-place lies in change. Change is needed inside the corporation, in management, in leadership styles and in the culture that we have and we will be living in. These changes start from the top-down and exist in every part and procedure of a company. They include the employees who we would be working with. Champy tells us that one thing remains constant; that is consistency in looking for improvements and consistency in having the vision to do so.

Chapter 4 - What Is This Business For, Anyway ?

What does it take for a corporation to mobilize "for the total struggle that today's chaotic markets and customer driven competition demands?" (p. 40) One must articulate the motivating explanations that a business is being called on, to do the things it is being called on to do. Since leadership is spread throughout the organization, everyone must be able to articulate about the business' purpose; what the company does. Champy says that the only reasons to start reengineering are greed and fear. Fear is the most compelling.

The first step is recognizing that everyone associated with the company must be kept informed about the reengineering. Their concerns must be addressed. Management must freely share information with everyone (i.e. customers, employees, community groups, etc.) This will make them vulnerable, but that's the price you pay.

What do they want to know?

1) The big picture.

History teaches us that past success does not guarantee anything. Capitalism is driven by fear. Fear of losing everything that one has achieved. Reengineering may be painful but the alternative is worse. This rational does not convey how the company should respond. It just points us in the right direction by acknowledging the fragile state of affairs.

2) Industry specific reasons.

"What changes are demanded by what causes in the industry?" (p 50) One must articulate these changes and focus your plan around them.

3) Corporate specific reasons.

No one says, "We don't want customers," but certain policies or beliefs could insidiously drive customers away. Common sense is the rule. Yet many business practices make no sense! Markets change so rapidly that core values are the only thing that remain constant. Common sense solutions of yesterday are today's illogical choices.

4) Purpose and Vision.

Reengineering creates a significant sense of loss. To balance this loss, purpose and vision are necessary. The trick is for management to hold them lightly, yet purposely. Vision will change as the markets change. Specific numeric targets achievable during a particular time period are required. One cannot rest because one set of targets has been achieved.

5) Purpose and Vision II

Targets are important but people are not inspired by them. Something more substantial is needed. Champy sites a metaphorical metamorphosis that occurred at Pizza Hut and Barnes and Noble. These companies viewed themselves in completely different terms and then reengineered themselves to accomplish this ideal. The challenge for management during a period of change is "¼to Acknowledge the stress, support [ the people who remain ] and keep focused on the positive, focused on the future." (p. 57)

6) Personal Meaning

The manager "¼must arouse each and every employee to the task." (p. 58) This is done by creating a personal significance of each employee in and to the corporation. When the employee sees and understands this vision, true reengineering can take place. "It's the corporate meaning where we find our personal meaning." (p. 58)

Chapter 5 Cases in Point - How We Decided

Purpose and vision must evolve in the context of these four major points.

  1. What is your business for? What customers are you trying to serve?
  2. What do you see in your markets future. What forces are transforming your business?
C. What can you learn from the past ? What should you unlearn from the past ?

D. What capabilities are needed to match what the future holds ? How can your company develop unique capabilities ?

Three case studies follow. In the interest of brevity, the team will focus on the most fully developed study, CIGNA health care.

Background

CIGNA was a traditional indemnity company that dealt with large corporate clients. Now they had to service individual customers in the highly competitive world of managed care. The old culture was one of high specialization. The head of sales had never met the director of health plan operations. They also lacked cost discipline. The traditional business had allowed the charge back of costs to the customer.

Vision

The new company would be organized by three main principals:

A. Superior product delivered to customers, as measured by the customers themselves.

B. Employ high-energy, hardworking people who want to get involved, not delegate.

C. Achieve high profits that come from delivering outstanding service to the customers.

Methodology

The company set out to identify its core interactions with the customer. The analysis found that many checks were involved in the process to insure that no one was responsible for anything. In the new procedure, "process champions" were assigned the responsibility for the entire interaction with the customer. They were accountable for process results.

Another problem discussed was the structure of the organization. Three regional presidents had their own autonomous organizations. No information was shared between groups. Under the regional presidents were area VP's and in some cases, sub-regional managers under them. Then you got down the field offices, where the real work got done. Lawrence English, president of CIGNA HealthCare said, "All health care is local." (p. 66) This requires that the organization be structured around local needs and circumstances. The regional organization was eliminated. Today, general managers have the authority to make the day-to-day decisions that arise from their market. These general managers would have been three or four levels down in the old organization.

Chapter 6: What Kind of Culture Do We Want?

The key ideas in this chapter are:

Change in concept of authority

The concept of authority is no longer restricted to internal obedience to the top authority of the hierarchy within a company. Authority goes to customers as well. The workers must try to please their customers and improve the products in a way that a customers desire. In turn, customers decide if they have done a good job.

Values needed to be defined for a reengineering culture

Champy lists a variety of work values as well as social values. These include the willingness to take up responsibilities, to adapt to change, to trust and be trustworthy and to respect others and oneself.

It is not possible to deliver high quality products to customers when internal fighting prevails within a company and employees distrust one another. It is the choice and challenge for a manager to cultivate a strongly supportive culture that blends the values of trust, respect and teamwork. Sometimes, with a prompt reaction to an existing bad culture, a new way of doing

things, a new culture, can be introduced. Xerox provides a good example. At Xerox

there was a problem with the communication channel between management and workers. The CEO was unaware of an unreliable new copier until it was already on the market. He changed his way of conducting meetings and conducted round table discussions with small groups of workers at different branches. Champy discusses that managers who were unwilling to change from their command and control style could have led Xerox to a market disaster. By then it would have been too late to talk about any changes.

Chapter 7: Cases in Point - What We Wanted

Ways to instill a new culture through actions of teaching, doing and living

There are also some ways not to install the new culture, These "DON'Ts" include: A person who refuses to adapt to the new culture should not be tolerated by a manager. The manager should change a job design where necessary to change their behavior. Last, but not least, a manager must act promptly to instantiate reengineering tasks rather, than talking about them over a long period of time.

CHAPTER 8: How Will We Do Our Work?

Reengineering is supposed to redesign the core operational processes. Some companies miss this point when undertaking reengineering. They initially test reengineering by starting with non-critical processes. Champy suggests five core management processes based on his experience:

Mobilizing is defined as the process at the point where employees in the company accept the changes, prepare and will to make the changes happen. Many companies think reengineering is just downsizing. Alone, downsizing will decrease capacity and capability.

Enabling is defined by Champy as "reengineering demands that managers empower people to do the new operational work and to do whatever it takes to serve the customer's needs." Empowerment needs a shift in authority and accountabilities. To ensure the shift, the managers have to give up the power of control.

Defining the objectives in the process is not enough. The company has to define their radical goals and real, positive objectives.

Measuring a company's performance is usually based on financial reports produced by accountants. The traditional measurement process does not give much information on the company's objectives nor is it targeted toward customers. The author suggests that the measurement process should be focused on the process results, which can accurately predict company's performance. Champy uses AT&T Universal Card Services' "Daily Indicator Report" as an example. The most important measurement in the report is evaluations by customers.

Communicating should be done by all the managers. People should know what the changes mean for the company, for their work and for themselves. Champy points out that authenticity, in communicating is very important. He thinks "... an authentic communication will bring people together in a community engaged in the perpetual process of change."

CHAPTER 9: Cases In Point - Thinking About Management Processes

Champy discusses some important points in terms of management processes by reviewing cases. Here are his interpretations:

- Performance - measurement processes should be based on the person's potential ability. It is important to ask the people who know the person's potential. Managers should lay out standards to help people know what is expected.

- Customer satisfaction is the ultimate measurement. It can also help managers get feedback directly from customers.

- Employ a variety of ways to communicate with people about the reengineering message and effort. These include publishing an internal newspaper or conducting manager-staff meetings.

- People should know "why," "what" and "how" changes from reengineering will impact them.

Chapter 10: What Kind of People Do We Want to Work With?

In the old days "management" was a small group of educated men (p. 153) while "labor" was a large group of uneducated men and women. The subordinates "values" were not important as long as they performed their jobs. Technological changes, however, made the separation of management and labor become less and less obvious. (p. 154)

Employers nowadays look for the "deep generalist." (p. 156). That is a person with a broad spectrum of knowledge to cope with the ever-changing challenges that one could expect at the workplace. Some characteristics employers look for include: (p. 157 and p. 189)

Chapter 11: Cases in Point - How We Chose

In educating current employees, areas like culture, values, teamwork and leadership development, social skills, resource development which were taken for granted in the past or labeled as "soft" (p. 161), are now of the same importance as "hard" operational skills. Education should therefore include the changing work environment (p. 184), peer understanding (p. 183) and technical know-how. (p. 182)

Compensation in reengineering means that employees are to be paid for the contribution they have made to the organization. It is used as a tool kit (p. 167) to modify individual-based verses pay team-based pay. A highly skilled individual contributor thus can be paid as much as someone who manages people (p. 196). A combined team- and skill-based pay scheme can encourage employees to become more productive by learning new skills since the latter means the possibility of a pay raise. (p. 197) New employees are chosen because of their ability to contribute to a reengineered community. (p. 168)

In the screening processes, employers look for signs of teamwork, willingness to use resources and the ability to learn. Interviewing is the rigorous test of the candidate's communication skills and interpersonal savvy - not to mention memory, imagination and general mental resourcefulness. (p. 169) Grueling interviews reveal applicants' communication skills and attitudes toward work. (p. 170) Assessment in the form of role playing after the interview identifies candidates with favorable characteristics. (pp. 192-193)

Sometimes unbeknownst to the applicant, a job offer is much more like a membership. (p. 171). Peer Participation is gaining momentum in the selection process since the sense of "belonging" (p. 171) is crucial in teamwork. Fellow employees have a say in the hiring process helps determine a better "fit" for their team. However, the problem with peer participation is that people tend to hire someone similar to themselves. Diversity allows different perspectives to solve problems of the new work (p. 173) and it can be directed in a positive way.

A social contract adds business value to the company and on the performance of the company. (p. 177) It should address the questions of purpose, culture, process and people.

Chapter 12: The Second Managerial Revolution

"The first managerial revolution shifted power. The second will deliver our freedom." (p. 201) Reengineering has affected people everywhere. The changes are seen in the every dimension of many corporations. To have a better understanding of what has really been happening we should go back in history and understand what happened to US farmers. They had to change the way they farmed their lands. They learned more efficient, profitable and productive ways of doing business. Champy says that this was triggered through the advancements in technology.

Champy concludes by saying that many American corporations have suddenly realized that they are behind. Profits are down and customers have been chased away. Something has to be done. Champy suggests that the answer is more freedom. Freedom for customers, employees, and overall, freedom for everything and everybody interacting in the market place.

Analysis and Possible Concerns:


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