Back Business process re-engineering: A tool to further banks' strategic goals
Manoranjan Sharma
BPR, which is a multi-dimensional tool, utilises several methods to examine processes from a holistic perspective, transcending the narrow borders of specific functions. Michael Hammer and James Champy's definition "the fundamental reconsideration and radical redesign of organisational processes, in order to achieve drastic improvement of current performance in cost, service and speed'' (Reengineering the Corporation: A manifesto for Business Revolution, 1993) enjoys a fair measure of consensus.
Value-creation for the customer is the leading factor for BPR and information technology often plays an important enabling role. Business processes encompass a wide spectrum of activities — procurement, order fulfilment, product development, customer service and sales.
The multiplier effects of BPR provide an impetus to the industry through impressive success across companies. For example, radical and fundamentally new BPR ways enabled Motorola to slash order fulfilment for paging devices from 30 days or more to 28 minutes and progressive insurance to slash the claims settlement from 31 days to 4 hours.
Such examples of a definitive solution are merely illustrative and, by no means exhaustive and, hence, could easily be multiplied. But the basic BPR drivers — the four Cs (customers, competition, change and cost) — remain incontrovertible.
Honing a concept
Today's business computing with multi-tasking and background processing demands intelligent and prudent solutions — not just products — to streamline business processes and increase profitability. This blueprint for change is also necessary to keep systems responsive and users operating at peak efficiency.
True, computers and other kinds of technology information and communications technology spurred productivity growth. But the reorganisation of work, changes in labour and production practices too lead to significant productivity gains.
Transforming socio-economic milieu, shifting paradigms, level of techno-economic development and different socio-economic needs and goals necessitate BPR to work as an effective instrument of change. However, Kevin F. Cross, et al (Corporate Renaissance: The Art of Re-engineering, 1997) stressed that this rests on whether customers demand more for less, competitors likely to provide more for less, hand-carrying of work through the process five times faster than the normal cycle time, stalling of incremental quality efforts, not panning out of investments in technology, plan to introduce radically new products and services or serve new markets, danger of unprofitability, failure of downsizing and cost-cutting efforts, merger or consolidation of operations, fragmented and disintegrated nature of core business processes.
Thus, BPR emerges as a key policy variable, salubriously influencing banking transformation across countries. Goldman Sachs, in a recent report on B2B eCommerce, placed this in a proper historical and comparative context: "Ever since the Internet began to take hold with companies in the late 1990s, we have believed that it will have a major influence on the direction of enterprise software. The world of enterprise software is tied to that of business process innovation.
"In the early 1990s, as businesses were busy reinventing themselves, they focussed on reorienting their departmental functions (finance, accounting, order entry, purchasing, etc.) into enterprise business processes (customer management, supplier management, product management, etc).
This process, known as reengineering, depended on new enterprise software products that had the ability to share data on customers, products, and suppliers with all members of the enterprise.
The rise of enterprise resource planning (ERP) software and relational databases was in direct response to this need."
The new growth formula
The basic objectives of BPR are to reduce transaction process time without sacrificing security aspects, quality and real time service to clients and extensive propagation of single window concept.
Davenport (1992) suggests a sequential five-step approach to developing business vision and process objectives, identifying the business processes to be redesigned, understanding and measuring the existing processes, identifying IT levers and designing and building a prototype of the new process. Sometimes, as a sixth step, adapting the organisational structure and governance model to the newly designed primary process is also suggested.
BPR benefits customers through significantly reduced transaction time, flexibility in servicing and improved value chain of service. Banks are benefited by increased volume of business and higher productivity, reduced operating cost (due to dismantling of unwarranted tiers) leading to higher profitability, improved employee loyalty and sense of belongingness and establishment of "Bank within a Branch'' concept.
Employees benefit through empowerment leading to higher job satisfaction, effective job rotation as an additional incentive and effective interface with customers as work load is evenly distributed.
Intensified competition and increased business complexities forced organisations to reorganise their organisational structure and business model through an emphasis on deconstruction of their value chains and realigning business processes. The resounding success of value players such as, Dell Inc., Cisco Systems Inc., Wal-Mart Stores Inc., Target, Aldi, ASDA, E*Trade Financial, JetBlue Airways, Ryanair and Southwest Airlines clearly shows that apart from technological competence, the process of `work' itself also changes.
There are inexorable pressures for BPR. The ubiquity and rapid expansion of value players across markets and geographies raises important questions, such as "how should work be redesigned?", "who does it?" and "where does it get performed?" These questions necessitate dovetailing of BPR into the overall strategy for sustained competitive advantage, check costs, differentiate products and effective price management with greater intensity and then flawless execution.
In view of the mixed successes of many BPR projects aimed at transforming inefficient work processes, banks and financial institutions need to optimise results from this model in real business situations.
Changing dynamics of banking and financial institutions market in India forced players at all levels to reengineer their operations and functions to meet the emerging challenges of slashing operating cost, outsourcing, portfolio investment, payments and settlements systems, consolidation and cooperation.
Innovative banking practices enabled Indian banks to incorporate strategic innovative customer-centric schemes to bridge the service and product gap inherent in the banking system. These changes are increasingly reflected in product and service revamping by introduction of product and service schemes (such as credit cards, hassle-free housing loan schemes, educational loans and flexi-deposit schemes), integration of the branch network by use of advance networking technology and customer personalisation programmes (through ATMs and anytime banking).
The major differentiating parameter that distinguishes the new private sector banks in India from other banks in the system is the high level of service. Leveraging of their strengths and competencies — management, operational efficiency and flexibility, superior product positioning and higher employee productivity skills — forms some of the key efficiency instruments of these new private sector banks.
Such far-reaching changes are basically aimed at maintaining long-term profitability and strengthening the competitive edge of banks in conformity with transforming market realities. To survive and flourish in a global economy, businesses must respond to major trends reshaping markets. Hence, the dynamics of the underlying forces at work require a renewed thrust on BPR in banks to contribute to management and diversification of growth horizons by impacting on profitability and productivity.
Global literature on both banking reforms and field-level experience suggests the need for aggressive use of BPR to further the strategic goals of banks. This requires, inter alia, training and skills development for absorption of new technologies.
Despite the sound theoretical background and striking results in several cases, BPR has not always led to stellar success. In fact, Barbara Bashein et al (Preconditions for BPR and How to Prevent Failures, Information Systems Management, 1994) showed that only 30 per cent of BPR projects achieved performance breakthroughs. Reasons for large failures include lack of sustained management commitment and leadership, unrealistic scope and expectations, resistance to change, non-encouragement to conceptualisation of business processes and non-dovetailing of rewards and recognition with the new business processes.
Adoption of a conceptual research model to develop some research hypotheses and a suitable research methodology is integral to development strategy of banks. But adoption of the required strategy evoked animated discourses, including Gateway's Rapid Re Methodology and Process Reengineering Life Cycle (PRLC).
Some of the main strands of this debate relate to the need for an unflinching commitment of the top management, a responsible BPR project manager, a core BPR team, a steering committee, individual task teams for analysis, design and implementation and a reengineering expert to iron out problems and ensure a smooth transition.
Long way to go
Easier access to information, availability of cheaper and easier funds, reduced inventory levels, reduction in direct administrative employment and customisation of product/service unmistakably reveals that a successful company requires a threshold level of performance in terms of three key parameters — customer service, product innovation and operational excellence — and a clear leadership in one dimension.
Given the interplay between BPR and sustainable economic growth for banks and financial institutions, development strategies must be broadened to incorporate these three critical dimensions for secular dynamic change and structural transformation.
We need to adopt effective strategies for consolidating core competencies and exploring new options for sustained fast-track development on an ongoing basis and effecting midcourse correction, wherever necessary. Accordingly, BPR in India must constitute a focal area of ongoing banking reforms.
(The author is chief economist, Canara Bank, Bangalore. E-mail: sharma_m@canbank.co.in)
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