A process to drive production change
Sometimes business owners need to fundamentally change the way things are done in order to grow profit, or just to survive. This is termed ‘Business Reengineering’.
What is Business Reengineering?
Business Reengineering usually means eliminating activities or processes which are not adding value. In some cases, they will be substituted with better processes. This is challenging because changing the way a business acts and thinks is complex.
Here’s a reengineering process which can help improve profitability and business resilience.
1. Define the CRITICAL SUCCESS FACTORS (or numeric goals). The first question is: “What do we have to do to become more successful?” Often the answer lies in decreasing costs or improving speed, quality, or efficiency.
Performance measurement systems ensure these factors can be properly tracked.
Example: A business defined its critical success factors as reducing personnel costs by 25 per cent and decreasing order-to-delivery time by 20 per cent.
2. Get clear on the CURRENT STATUS. To make meaningful change, you need to understand the current situation exactly. For example, what is the current organisational chart? What job descriptions are in place? Which business processes are currently in use?
Example: A business analysed the current state of marketing to reveal heavy investment in a range of campaigns which were not bringing results.
3. Identify OPPORTUNITIES. The question is how to bridge the gap between the current situation and the critical success factors. This starts with a brainstorming process to generate ideas. It’s likely that you’ll have a number of meaningful ideas but can’t implement all of them. So which ones should you prioritise?
Example: A business had low customer retention. They decided to change customer service policies to increase customer satisfaction because this would bring the quickest results and help achieve their critical success factors.
4. Develop the PLAN. Making significant changes is challenging. Resistance to change can be overcome by carefully explaining the reasons for the change and the long-term benefits. In addition, detailed plans can be broken down into clear steps or tasks, each assigned to a person with a timeline. This encourages confidence in the proposed direction.
Example: A business decision is to close down one office in a high-rent district. They made a detailed plan which involved HR (to relocate team members), Legal (to negotiate an early termination of the lease), Finance (to forecast cash flow in different scenarios), and Operations (to liquidate assets which were no longer needed). Their attention to detail paid off.
5. IMPLEMENTATION. This is the final step which should go smoothly if the prior steps were followed. That said, there may be unexpected events, so management needs to continually track progress and re-evaluate the approach.
Example: A business decided to offshore its payroll function to save costs. They appointed a Change Manager (an outside consultant) whose only job was to manage this project. They felt that assigning this project to an internal team member would put the project at risk due to a lack of time and skills.
Increasing the Chances of Success
When undertaking a reengineering project, what will help ensure success?
- Maintain executive involvement. If the decision-makers are not directly involved, the chances of a successful implementation are dramatically reduced. A show of support and commitment from above is vital if the rest of the employees are to cooperate.
- Get experts involved. Reengineering involves change and breaking new ground. Don’t expect everyone will step up in an environment which is both challenging and new.
- Pay attention to the negative stakeholders. Middle managers are frequently the biggest obstacles to reengineering because they view themselves as the ones with the most to lose. A company should develop a plan to work with this personnel so that they are less fearful and more receptive to change.
A Final Word
Keep an open mind as you go through this process. Be open to opportunities and challenges which may arise. Sometimes a situation which looks dire can actually bring unexpected opportunities. People may step up in interesting ways, and that can make a real difference.
Need help with growing profit in your business? Get in touch with Alliotts' award-winning team in Auckland on 09 520 9200.
