Restructuring Organizations Network-Based Structures:

A network-based structure manages the diverse, complex, and dynamic relationships among multiple organizations or unit5, each specializing in a particular business junction or task. Sonic contusion over the definition of a network has been clarified recently by a typology describing four basic types of networks.
• An internal market network exists when a single organization establishes each subunit as an independent profit center that is allowed to buy and sell services and resources from each other as well as from the external market. Asea Brown Boveri’s (ABB) fifty worldwide businesses consist of twelve hundred companies organized into forty-five hundred profit centers that conduct business with each other.
• A vertical market network is composed of multiple organizations linked to a focal organization that coordinates the movement of resources from raw materials to end consumer. Nike, for example, has its shoes manufactured in different plants and then organizes their distribution through retail outlets.
• An inter-market network represents alliances among a variety of organizations in different markets and is exemplified by the Japanese keiretsu and the Korean chaebol.

• An opportunity network is the most advanced form of network structure. It is a temporary constellation of organizations brought together to pursue a single purpose. Once accomplished, the network disbands. These types of networks can be distinguished from one another in terms of whether they are single or multiple organizations, single or multiple industry, and stable or temporary. For example, an internal market network is a stable, single-organization, single-industry structure; an opportunity network is a temporary, multiple-organization structure that can span several different industries. As shown in Figure 46, the network structure redraws organizational boundaries and links separate business units to facilitate task interaction. The essence of networks is the relationships among organizations that perform different aspects of work. In this way, organizations do the things that they do well; for example, manufacturing expertise is applied to production, and logistical expertise is applied to distribution. Network organizations use strategic alliances, joint ventures, research and development consortia, licensing agreements, and wholly owned subsidiaries to design, manufacture, and market advanced products, enter new international markets, and develop new technologies. Network-based structures are known by a variety of names, including shamrock organizations and virtual, modular, or cellular corporations. Less formally, they have been described as “pizza” structures, spider webs, starbursts, and cluster organizations. Companies such as Apple Computer, Benetton, Sun Microsystems, Liz Claiborne, MCI WorldCom, and Merck have implemented fairly sophisticated vertical market and inter-market network structures. Opportunity networks also are commonplace in the construction, fashion, and entertainment industries, as well as in the public sector.

Figure 46: The Network Organization

Network structures typically have the following characteristics.
• Vertical desegregation.

This refers to the breaking up of the organization’s business functions, such as production, marketing, and distribution, into separate organizations performing specialized work. In the film industry, for example, separate organizations providing transportation, cinematography, special effects, set design, music, actors, and catering all work together under a broker organization, the studio. The particular organizations making up the opportunity network represent au important factor in determining its success.’” More recently, disintermediation, or the replacement of whole steps in the value chain by information technology, specifically the Internet, has fueled the development and numbers of network structures.

• Brokers.

Networks often arc’ managed by broker organizations that locate and assemble member organizations. The broker may play a central role and subcontract for needed products or services, or it may specialize in linking equal partners into a network. In the construction industry, the general contractor typically assembles and manages drywall, mechanical, electrical, plumbing, and other specialties to erect a building.

• Coordinating mechanisms.

Network organizations generally are not controlled by hierarchical arrangements or plans. Rather, coordination of the work in a network falls into three categories: informal relationships, contracts, and market mechanism. First, coordination patterns can depend heavily on interpersonal relationships among individuals who have a well-developed partnership. Conflicts are resolved through reciprocity; network members recognize that each likely will have to compromise at some point. Trust is built anti nurtured over time by these reciprocal arrangements. Second, coordination can be achieved through formal contracts, such as ownership control, licensing arrangements, or purchase agreements. Finally, market mechanisms, such as spot payments, performance accountability, and information systems, ensure that all parties are aware of each others’ activities. Network structures have a number of advantages and disadvantages, as shown in Table 16. They are highly flexible and adaptable to changing conditions. The ability to form partnerships with different organizations permits the creation of a “best-of-the-best” company to exploit opportunities, often global in nature. They enable each member to exploit its distinctive competence. They can accumulate and apply sufficient resources and expertise to large, complex tasks that single organizations cannot perform. Perhaps most important, network organizations can have synergistic effects whereby members build on each other’s strengths and competencies, creating a whole that exceeds the sum of its parts.

Table 16 Advantages, Disadvantages and Contingencies of the Network-Based Form Advantages Disadvantages Contingencies


• Enables highly flexible and adaptive response to dynamic environments
• Creates a “best-of-thebest” organization to focus resources on customer and market needs
• Enables each organization to leverage a distinctive competency
• Permits rapid global expansion
• Can produce synergistic results
• Managing lateral relations across autonomous organizations is difficult
• Motivating members to relinquish autonomy to join the network is troublesome
• Sustaining membership and benefits can be problematic
• May give partners access to proprietary knowledge/technology
• Highly complex and uncertain environments
• Organizations of all sizes
• Goals of organizational specialization and innovation
• Highly uncertain technologies
• Worldwide operations The major problems with network organizations are in managing such complex structures. Galbraith and Kazanjian describe network structures as matrix organizations extending beyond the boundaries of single firms but lacking the ability to appeal to a higher authority to resolve conflicts. Thus, matrix skills of managing lateral relations across organizational boundaries arc critical to administering network structures. Most organizations, because they are managed hierarchically, can be expected to have difficulties managing lateral relations. Other disadvantages of network organizations include the difficulties of motivating

organizations to join such structures and of sustaining commitment over time. Potential members may not want to give up their autonomy to link with other organizations and, once linked, they may have problems sustaining the benefits of joining together. This is especially true if time network consists of organizations that are not the “best of breed.” Finally, joining a network may expose the organization’s proprietary knowledge and skills to others. As shown in Table 16, network organizations are best suited to highly complex and uncertain environments where multiple competencies and flexible responses are needed. They seem to apply to organizations of all sizes, and they deal with complex tasks or problems involving high interdependencies across organizations. Network structures fit with goals that emphasize organization specialization and innovation.

Downsizing:

Downsizing refers to interventions aimed at reducing the site of the organization. This typically is accomplished by decreasing the number of employees through layoffs, attrition, redeployment, or early retirement or by reducing the number of organizational units or managerial levels through divestiture, outsourcing, reorganization, or delayering. In practice, downsizing generally involves layoffs where a certain number or class of organization members is no longer employed by the organizations. Although traditionally associated with lower-level workers, downsizing increasingly has claimed the jobs of staff specialists, middle managers, and senior executives. An important consequence of downsizing has been the rise of the contingent workforce. These less expensive temporary or permanent part-time workers often are hired by the organizations that just laid elf thousands of employees. A study by the American Management Association found that nearly a third of the 720 firms in the sample had rehired recently terminated employees as independent contractors or consultants because time downsizings had not been matched by an appropriate reduction in or redesign of the workload. Overall cost reduction was achieved by replacing expensive permanent workers with a contingent workforce. Downsizing is generally a response to at least four major conditions. First, it is associated increasingly with mergers and acquisitions. One in nine job cuts during 1998 were the result of the integration of two organizations; second, it can result from organization decline caused by loss of revenues and market share and b1 technological and industrial change. In southern California, an economy traditionally dependent on the defense industry, more than one hundred thousand jobs have been lost to relocation or elimination as that industry has contracted and consolidated. Third, downsizing can occur when organizations implement one of the new organizational structures described above. For example, creation of network- based structures often involves outsourcing work to other firms that is not essential to the organization’s core competence. Fourth, downsizing can result from beliefs and social pressures that smaller are better. In the United States; there is strong conviction that organizations should be leaner and more flexible. Hamel and Prahalad warned, however, that organizations must be careful that downsizing is not a symptom, “corporate anorexia.” Organizations may downsize for their own sake and not think about future growth. They may lose key employees who are necessary for future success, cutting into the organization’s core competencies and leaving a legacy of mistrust among members. In such situations, it is questionable whether downsizing is developmental as defined in OD.

Application Stages:

Successful downsizing interventions tend to proceed by the following steps: 1.

Clarify the organization’s strategy.

As a first step, organization leaders specify corporate strategy arid communicate clearly how downsizing relates to it. They seek to inform members that downsizing is not a goal h itself, hut a restructuring process for achieving strategic’ objectives. Leaders need to provide visible and consistent support throughout the process. They can provide opportunities for members to voice their concerns, ask questions, and obtain counseling if necessary. 2.

Assess downsizing options and make relevant choices.

Once corporate strategy is clear, the full range of downsizing options can he identified and assessed. Table 17 describes three primary downsizing methods: workforce reduction, organization redesign, and systemic change. A specific downsizing strategy may Use elements of all three approaches. Workforce reduction is aimed at reducing the number of employees, usually in a relatively short timeframe. It can include attrition, retirement incentives, outplacement services, and layoffs. Organization redesign attempt to restructure the firm to prepare it for the next stage of growth. This is a medium term approach that can be accomplished by merging organizational units, eliminating management layers, and redesigning tasks. Systemic change is a longer-term option aimed at changing the culture and strategic orientation of the organization. It can involve interventions that alter the responsibilities



and work behaviors of everyone in the organization and that promote continual improvement as a way of life in the firm. Case, a manufacturer of heavy construction equipment, used a variety of methods to downsize, including eliminating money-losing product lines; narrowing the breadth of remaining product lines; bringing customers to the company headquarters to get their opinions of new product design (which surprisingly resulted in maintaining, rather than changing, certain preferred features, thus holding down redesign costs); shifting production to outside vendors, restructuring debt; amid spinning off most of its 250 stores. Eventually, these changes led to closing five plants and to payroll reductions of almost 35 percent. The number of jobs lost would have been much greater, however, if Case had not implemented a variety of downsizing methods. Unfortunately, organizations often choose obvious solutions for downsizing, such as layoffs, because they can be implemented quickly. This action produces a climate of fear and defensiveness as members focus on identifying who will be separated from the organization. Examining a broad range of options and considering the entire organization rather than only certain areas can help allay tears favoritism and polities are the bases for downsizing decisions. Moreover, participation of organization members in such decisions can have positive benefits. It can create a sense of urgency for identifying and implementing options to downsizing other than layoffs. Participation can provide members with a clearer understanding of how downsizing will proceed and can increase the likelihood that whatever choices are made are perceived as reasonable and fair. 3.

Implement the changes.

This stage involves implementing methods for reducing the size oh time organization. Several practices characterize successful implementation. First, downsizing is best controlled from the top down. Many difficult decisions are required, and a broad perspective helps to overcome people’s natural instincts to protect their enterprise or function. Second, identify arid target specific areas of inefficiency and high cost. The morale of the organization can be hurt if areas commonly known to be redundant are left untouched. Third, link specific actions to the organization’s strategy. Organization members need to be reminded consistently that restructuring activities are part of a plan to improve the organization’s performance. Finally, communicate frequently using a variety of media. This keeps people informed, lowers their anxiety over the process, and makes it easier for them to focus on their work.

Table 17 Three Downsizing Tactics Downsizing Tactic Characteristics Examples

Workforce reduction Aimed at headcount reduction Short-term implementation Fosters a transition Attrition Transfer and outplacement Retirement incentives Buyout packages Layoffs Organization redesign Aimed at organization change Moderate-term implementation Fosters transition and potentially transformation Eliminates functions Merge units Eliminate layers Eliminate products Redesign tasks Systemic redesign Aimed at culture change Long-term implementation Fosters transformation Change responsibility Involve all constituents Foster continuous improvement and innovation Simplification Downsizing a way of life

4. Address the needs of survivors and those who leave.

Most downsizing eventually involves reduction in the size of the workforce, and it is important to support not only employees who remain with the organization but also those who leave. When layoffs occur, employees are generally asked to take on additional responsibilities and to lean new jobs, often with little or no increase in compensation. This added workload can he stressful, arid when combined with anxiety over past layoffs and possible future ones, it can lead to what researchers have labeled time “survivor syndrome.” This syndrome involves a narrow set of self-absorbed and risk-averse behaviors that can threaten the organization’s survival. Rather than working to ensure the organization’s success, survivors often are preoccupied with whether additional layoffs will occur, with guilt over receiving pay and benefits while co workers are struggling with termination, and with the uncertainty of career advancement.



Organizations can address these survivor concerns with communication processes that increase the amount and frequency of information provided. Communication should shift from explanations about who left or why to clarification of where the Company is going, including its visions, strategies, and goals. The linkage between employees’ performance and strategic success is emphasized so that remaining members feel they are valued. Organizations also can support survivors through training and development activities that prepare them for the new work they are being asked to perform. Senior management can promote greater involvement in decision making, thus reinforcing the message that people are important to the future success and growth of the organization. Given the negative consequences typically associated with job loss, organizations have developed an array of methods to help employees who have been laid off. These include outplacement counseling, personal and family counseling, severance packages, office support for job searches, relocation services, and job retraining. Each service is intended to assist employees in their transition to another work situation. 1.

Follow through with growth plans.

This final stage of downsizing involves implementing an Organization renewal and growth process. Failure to move quickly to implement growth plans is a key determinate of ineffective downsizing For example, a study of 1,020 human resource directors reported that only 44 percent of the companies that had downsized in the previous live years shared details of their growth plans with employees; only 34 percent told employees how they would lit into the company’s new strategy. Organizations must ensure that employees understand the renewal strategy and their new roles in it. Employees need credible expectations that, although the organization has been through a tough period, their renewed efforts can move it forward.

Results of Downsizing

: The empirical research on downsizing is mostly negative. A review conducted by the National Research Council concluded, “From the research produced thus tar, downsizing as a strategy for improvement has proven to be, by and large, a failure.” A number of studies base documented the negative productivity and employee consequences. One survey of 1,005 companies that used downsizing to reduce costs reported that fewer than half of the firms actually met cost targets. Moreover, only 22 percent of the companies achieved expected productivity gains, and consequently about 80 percent of the firms needed to rehire some of the same people that they had previously terminated. Fewer than 33 percent of the companies surveyed reported that profits increased as much as expected, and only 21 percent achieved satisfactory improvements in shareholder return on investment. Another survey of 1,142 downsized firms found that only about a third achieved productivity goals.39 In addition, the research points to a number of problems at the individual level, including increased stress and illness, loss of sell-esteem, reduced trust and loyalty, and marriage and family disruptions. Research on the effects of downsizing on financial performance also shows negative results. One study examined an array of financial performance measures, such as return on sales, assets, and equity, in 210 companies that announced layoffs. It found that increases in financial performance in the first year following the layoff announcements were not followed by performance improvements in the next year. In no case did a firm’s financial performance after a layoff announcement match its maximum levels of performance in the year before the announcement. These results suggest that layoffs may result in initial improvements iii financial performance, hut such gains are temporary and not sustained at even pre-layoff levels. In a sin3ilar study of sixteen firms that wrote off more than 10 percent of their net worth in a liveyear period, stock prices, which averaged 16 percent below the market average before the layoff announcements, increased on the day that the restructuring was announced but then began a steady decline. Two years after the layoff announcements, ten of the sixteen stocks were trading below the market by 17 percent to 48 percent, and twelve of the sixteen were below comparable firms in their industries by 5 to 45 percent. These research findings paint a rather bleak picture of the success of downsizing. The results must be interpreted cautiously, however, for three reasons.

First

, many of the survey-oriented studies received responses from human resources specialists who might have been naturally inclined to view downsizing in a negative light.

Second

, the studies of financial performance may have included a biased sample of firms. If the companies selected for analysis had been poorly managed, then downsizing alone would have been unlikely to improve financial performance. There is some empirical support for this view because low-performing firms are more likely to engage in downsizing than are high-performing firms.

Third

, disappointing results may be a function of the way downsizing was implemented. A number of organizations have posted solid financial returns following downsizing, such as Florida Power and Light, General Electric, Motorola, Texas instruments, Boeing, Chrysler, and Hewlett-Packard. A study of thirty



downsized firms in the automobile industry showed that those companies that implemented effectively the process described above scored significantly higher on several performance measures than did firms that had no downsizing strategy or that implemented the steps poorly. Several studies have suggested that where downsizing programs adopt appropriate CD interventions or apply strategies similar to the process outlined above, they generate more positive individual and organizational results. Thus, the success of downsizing efforts may depend as much on how effectively the intervention is applied as on the size of the layoffs or the amount of delayering.

Reengineering:

The final restructuring intervention is reengineering—the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in performance Reengineering transforms how organizations traditionally produce and deliver goods and services. Beginning with the Industrial Revolution, organizations have increasingly fragmented work into specialized units, each focusing on a limited pan of the overall production process. Although this division of labor has enabled organizations to mass-produce standardized products and services efficiently, it can be overly complicated, difficult to manage, and slow to respond to the rapid and unpredictable changes experienced by many organizations today. Reengineering addresses these problems by breaking down specialized work units into more integrated, cross-functional work processes. This streamlines work processes and makes them faster and more flexible; consequently they are more responsive to changes in competitive conditions, customer demands, product life cycles, and technologies. As might be expected, reengineering requires an almost revolutionary change in how organizations design their structures and their work. It addresses fundamental issues about why organizations do what they do, and why do they do it in a particular way. Reengineering identifies and questions the often unexamined assumptions underlying how organizations perform work. This effort typically results in radical changes in thinking and work methods a shift front specialized job, tasks, and structures to integrated processes that deliver value to customers. Such revolutionary change differs considerably from incremental approaches to performance improvement, such as continuous improvement and total quality management, which emphasize Incremental changes in existing work processes. Because reengineering radically alters the status quo, it seeks to produce dramatic Increases In organization performance. In radically changing business processes, reengineering frequently takes advantage of new Information technology. Modern information technologies, such as teleconferencing, expert systems, shared databases, and wireless communication, can enable organizations to reengineer. They can help organizations to break out of traditional ways of thinking about work and embrace entirely new ways of producing and delivering products. At IBM Credit, for example, an integrated information system with expert systems technology enables one employee to handle all stages of the credit-delivery process. This eliminates the handoffs, delays, and errors that derived from the traditional work design, in which different employees performed sequential tasks. Whereas new information technology can enable organizations to reengineer themselves, existing technology can thwart such efforts.4’ Many reengineering projects fail because existing information systems do not provide the data needed to operate integrated business processes. The systems do not allow Interdependent departments to interface with each other they often require new Information to be entered by hand into separate computer systems before people in different work areas can access it. Given the inherent difficulty in trying to support process-based work with specialized information systems, organizations have sought to develop information technologies that are more suited to reengineered work. The most popular software system, SAR was developed by a German company of the same name. With SAI firms can standardize their information systems because the software processes data on a range of tasks and links ft all together, thus integrating the information flow among different pans of the business. Because they believe that SAP may be the missing technological link to reengineering, many of the largest consulting firms that provide reengineering services, such as Anderson Consulting, Deloitte Touché, and Price water house Coopen, have developed their own SAP consultants. Reengineering also is associated with interventions having to do with downsizing, the shift from functional to process-based structures, and work design. Although these Interventions have different conceptual and applied backgrounds, they overlap considerably in practice. Reengineering can result in production and delivery processes that require fewer people and fewer layers of management. Conversely, down sizing may require subsequent reengineering interventions. When downsizing occurs without fundamental changes in how work is performed, the same tasks simply are being performed with a smaller number of people. Thus, expected cost savings may not be realized because lower productivity offsets lower salaries and fewer benefits. Reengineering also can be linked to transformation of organization structures and work design. Its focus on work processes helps to break down the vertical orientation of functional and self-contained—unit



organizations. The endeavor identifies and assesses core business processes and redesigns work to account for key task interdependencies running through them. That typically results in new jobs or teams that emphasize multifunctional tasks, results-oriented feedback, and employee empowerment characteristics associated with motivational and socio-technical approaches to work design. Regrettably, reengineering has failed to apply these approaches attention to individual differences in people’s reactions to work to its own work-design prescriptions. It advocates enriched work and teams, without consideration for the wealth of research that shows that not all people are motivated to perform such work.

Application Stages:

Reengineering is a relatively new intervention and is still developing applied methods. Early applications emphasized identifying which business processes to reengineer and technically assessing the work flow. More recent efforts have extended reengineering practice to address issues of managing change, such as how to deal with resistance to change and how to manage the transition to new work processes. The following application steps are included in most reengineering efforts, although the order may change slightly from one situation to another. 1.

Prepare the organization.

Reengineering begins with clarification and assessment of the organization’s context, including its competitive environment, strategy, and objectives. This effort establishes the need for reengineering and the strategic direction that the process should follow. Changes in an organization’ competitive environment can signal a need for radical change in how it does business. As preparation for reengineering at GTE Telephone Operations, for example, executives determined that although deregulation had begun with coin-operated telephones and long-distance service, it soon would spread to the local network. They concluded that this would present an enormous competitive challenge and that the old way of doing business, reinforced by years of regulatory protection, would seriously saddle the organization with high costs. 2.

Specify organization strategy and objectives.

The business strategy determines the focus of reengineering and guides decisions about the business processes that are essential for strategic success. In the absence of such information, the organization may reengineer extraneous processes or ones that could be outsourced. GTE executives recognized that the keys to the firm’s success in a more competitive environment were low costs and customer satisfaction. Consequently, they set dramatic goals of doubling revenues while halving costs and reducing product development time by 75 percent. Defining these objectives gave the reengineering effort a clear focus. A final task in this preparation step is to communicate clearly throughout the organization why reengineering is necessary and the direction it will lake. GTE’s communications program lasted a year and a half, and helped ensure that members understood the reasons underlying the program and the magnitude of the changes to be made. Senior executives were careful to communicate, both verbally and behaviorally, that they were fully committed to the change effort. Demonstration of such unwavering support seems necessary if Organization members are to challenge their traditional thinking about how business should he conducted. 3.

Fundamentally rethink the way work gets done.

This step lies at the heart of reengineering and involves these activities: identifying and analyzing core business processes, defining their key performance objectives, and designing new processes. These tasks are the real work of reengineering and typically are performed by a cross-functional team who is given considerable time and resources to accomplish them.

a. Identify and analyze core business processes.

Core processes are considered essential for strategic success. They include activities that transform inputs into valued outputs. Core processes typically are assessed through development of a process map that lists the different activities required to deliver an organization’s products or services. GTE determined that its core processes could be characterized as “choose, use, and pay.” Customers first choose a telephone carrier, then use its services, and pay for them. GTE developed a process map for these core processes that included the work flow for getting customers to choose, use, and pay for the firm’s service. Analysis of core business processes can include assigning costs to each of the major phases of the work flow to help identify costs that may be hidden in the activities of the production process. Traditional costaccounting systems do not store data in process terms; they identify costs according to categories of expense, such as salaries, fixed costs, and supplies. This method of cost accounting can he misleading and can result in erroneous conclusion about how best to reduce costs. For example, the material control department at a Dana Corporation plant in Plymouth, Minnesota, changed from a traditional to a process-based accounting system. The traditional accounting system



showed that salaries and fringe benefits accounted for 82 percent of total costs—an assessment that suggested workforce downsizing was the most effective way to lower costs. The process-based accounting system revealed a different picture, however: it showed that 44 percent of the department’s costs involved expediting, resolving, and reissuing orders from suppliers and customers. In other words, almost half of their costs were associated with reworking deficient orders. Business processes also can be assessed in terms of value-added activities the amount of value contributed to a product or service by a particular step in the process. For example, as part of its invoice collection process, Corky’s Pest Control, a small service business dependent on a steady stream of cash payments, provides its customers with a sell-addressed, stamped envelope. Although this adds an additional cost to each account, it more than pays for itself in customer loyalty arid retention, and reduced accounts receivables arid late payments handling. Conversely, Organizations often engage in process activities that have little or no added value. For instance, in a Denver hospital an employee on each workshift checked a pump that circulated oxygen. Eight years earlier, the pump had failed and caused a death. Since that time, a new pump had been installed with fault-protection equipment and control sensors that no longer required the physical inspection. Yet because of habit, the checking process remained in place and drained resources that could be used more productively in other areas.

b. Define performance objectives.

Challenging performance goals are set in this step. The highest possible level of performance for any particular process is identified, and dramatic goals are set for speed, quality, cost, or other Inca- sores of performance. These standards can derive from customer requirements or from benchmarks of the best practices of industry leaders. For example, at Andersen Windows, the demand for unique window shapes pushed the number of different products from 28,000 to more than 86,000 in 1991. The pressure on the shop floor for a “batch of one” resulted in 20 percent of all shipments containing at least one order discrepancy. As part of its reengineering effort, Andersen set targets for ease of ordering, manufacturing, and delivery. Each retailer and distributor was sold an interactive, computerized version of its catalogue that allowed customers to design their own windows. The resulting design is then given a unique “license plate number” and the specifications are sent directly to the factory. By 1995, new sales had tripled at some retail locations, the number of products had increased to 188,000, and fewer than one in two hundred shipments had a discrepancy.

c. Design new processes.

The last task in this third step of reengineering is to redesign current business processes to achieve breakthrough goals. It often starts with a clean sheet of paper and addresses the question “If we were starting this company today, what processes would we need to create a sustainable competitive advantage?” These essential processes are then designed according to the following guidelines:
• Begin and end the process with the needs and wants of the customer.
• Simplify the current process by combining and eliminating steps.
• Use the “best of what is” in the current process.
• Attend to both technical and social aspects of the process.
• Do not be constrained by past practice.
• Identify the critical information required at each step in the process.
• Perform activities in their most natural order.
• Assume the work gets done right the first time.
• Listen to people who do the work. An important activity that appears in many successful reengineering efforts is implementing “early wins” or “quick hits.” Analysis of existing processes often reveals obvious redundancies and inefficiencies for which appropriate changes may be authorized immediately. These early successes can help generate and sustain momentum in the reengineering effort. 4.

Restructure the organization around the new business processes.

This last step in reengineering involves changing the organization’s structure to support the new business processes. This endeavor typically results in the kinds of process-based structures that were described earlier in this chapter. An important element of this restructuring is implementing new information and measurement systems that reinforce a shift from measuring behaviors, such as absenteeism and grievances, to assessing outcomes, such as productivity, customer satisfaction, and cost savings. Moreover, information technology IS one of the key drivers of reengineering because it can drastically reduce the cost and time associated with integrating and coordinating business processes.