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Combining Quality And Reengineering For
Operational Superiority

Over the last decade, the total quality movement has pushed many corporations to go back to the basics. People from all levels of the organization have been chartered to continually analyze and improve the steps in making a product, fulfilling an order, providing service, and the myriad other tasks that constitute the processes of business. The results from many of the quality initiatives have been heartening, sometimes electrifying. At the very least, they have alerted organizations to the importance of process improvement in operational excellence.

More recently, another type of process improvement has taken hold in corporations, even those with long standing and vigorous quality initiatives. It is Business Reengineering ®. (Business Reengineering is a registered service mark of CSC Index, Inc. All rights reserved.) At first glance appearing similar in technique and result to quality improvement, upon further scrutiny, reengineering emerges as a far different approach to process management and improvement, and with far different results.

But the point of this article is not to argue for one over the other. In fact, the authors believe companies need both quality and reengineering efforts to design effective business processes and stay competitive.

Sixty-seven years ago, Bell Laboratories physicist Dr. Walter A. Shewhart pioneered the use of statistics to reduce variations in the manufacturing processes of AT&T. Shewhart's ideas helped the telephone giant stitch together a vast, complex communications network across the United States. But their ultimate significance was even greater: They ushered in the modern quality movement.

The ideas weren't embraced overnight. It took a world war and postwar competition from Japanese companies before the rest of the world began adopting the techniques of Shewhart and quality emissaries like W. Edwards Deming, J.M. Juran, and Kaoru Ishikawa. At first relegated to the factory floor, quality improvement techniques now have been sweeping into the warehouses, clerical departments, and executive offices of corporations worldwide.

In the U.S., the search for continuous improvement has become pervasive. It has moved far beyond the institution of quality control measures to reduce product and process variability and remove defects. It has become a state of mind in the executive circles of many organizations, a concept for empowering the organization to deliver what the customer wants.

Yet in the last two years, another approach to process improvement - business reengineering - has been capturing the imaginations of a growing number of executives, even those with strong quality programs. In our estimation, the interest in reengineering reflects a growing realization that the continual and continuous improvements of total quality programs are critical - but not enough, especially in troubled economic times that call for periodic and massive improvements in a select number of key business process.

Reengineering involves the radical redesign of the business processes, organizational structures, management systems, and culture of an organization to achieve breakthroughs in business performance. Its underlying premise is that most of our present business processes are the products of accretion - work methods designed, added on to, tweaked, and reconfigured over dozens, sometimes hundreds, of years.

Despite the advent of the computer 40 years ago, their sequential steps and assembly-line procedures have remained essentially intact. In fact, most computerization efforts have only further cemented the steps in place.

In contrast, reengineering challenges the fundamental assumptions governing the design of work processes. Many of these assumptions are no longer valid because information technology alters the equation. As a result, we believe that in definition, technique, and result, reengineering is distinct from quality improvement principles (see Figure 1).

But we also argue that organizations need both reengineering and quality improvement to stay competitive. That is, corporations must make:

• Continual improvement in a wide range of individual jobs, departments, functions, processes, and "subprocesses" through quality-type initiatives.

• Periodic breakthroughs in a few key business processes spanning functional or departmental lines by reengineering these processes.

We have found a number of organizations that have become frustrated after unwittingly lumping all their process improvement efforts under one banner (usually quality improvement) and expecting both continuous and massive gains. We believe that, in process improvement, one size does not fit all.

But because quality programs raise awareness about process improvement, they more and more are setting the stage for the radical process redesign of reengineering. Furthermore, quality techniques can help an organization hold and build upon the gains it has made by reengineering a process. We, therefore, contend they are not mutually exclusive or competing phenomena.

This article shows how the combination of traditional quality improvement and reengineering techniques can result in unparalleled process performance. The key is knowing where and when to use each improvement method. This first requires managers to understand the similarities and differences between quality improvement and reengineering, which we analyze along six dimensions. Then managers must evaluate potential process improvement initiatives against certain criteria that will determine the appropriate improvement technique.

Quality improvement and business reengineering are based upon the premise that superiority in business process performance is critical to competitiveness. Both often take root at organizations in crises, such as Ford Motor Company in the early 1980s when it brought in Deming to help turn around waning product quality. Both require senior management to lead and manage extensive organizational change. (In the absence of crisis, a visionary and charismatic leader is essential to moving the company in a different direction.) Both require teams of people to implement new procedures and programs. And both improve relationships between customers and suppliers, empower employees, and improve products and processes.

But quality reengineering are distinct in motivation, objective, technique, and result, and the business circumstances in which they are applied, are different. Understanding when and how to use each requires understanding these differences. We believe these are six major ones:

1) Case for action

2) Goals for improvement

3) Scope and focus

4) Extent and pace of change in procedures, jobs, and organizational structure

5) Extent and nature of senior management involvement

6) Role of information technology

If quality improvement techniques are our daily dosage for a chronic condition, reengineering is strong medicine only to be used for an acute condition. One can always make a case for continuous and continual improvement. Companies should continually examine and improve all the numerous activities by which they do business. Many Japanese companies, and others like Motorola, are renowned for their unrelenting examination of every task and activity. This is one of the tenets of continuous improvement. If everybody continually examines the way he or she works and makes improvements, the aggregate result will be large, across-the-board change.

The justification for reengineering a business process is much more difficult to make, and has to be made more judiciously. The case has to be compelling enough to get the organization moving and management to keep its resolve in the face of resistance to radically new ways of operating.

Since reengineering results in large-scale changes to a business process, organizational structures, management systems, and culture, executives must carefully target only a few critical (although cross-functional) business processes. (We typically find about a half-dozen broad processes in any organization.) Many times, the reengineering of a single business process is all a company can handle at once. Therefore, executives must decide much more carefully if - and what area of - the business should be reengineered.

Quality and reengineering programs both strive to correct organizational procedures that over time have become complex, rife with errors, lengthy, and focused on satisfying internal demands, not the marketplace. Both approaches to process improvement are predicated on the idea that process performance should be based on what it takes to satisfy the customer, not on internal benchmarks. But while quality programs often stress making numerous small-scale improvements, reengineering looks for radical result. Its seemingly unreasonable goals require "out-of-the-box" solutions and a reexamination of the entire way a process works, as well as the assumptions upon which it is based.

An organization should look to reengineer a business process when it needs massive improvements quickly: cutting order-to-delivery times from a month to a day; halving a multi-year product development cycle; taking hundreds of millions of dollars in costs out of providing field service. But to achieve this, reengineering doesn't look to improve the way a process works today. Instead, it looks to make radical changes in the process, to eliminate much of the work, alter the steps, redefine the jobs, and off-load tasks onto customers and suppliers.

That's why reengineering techniques do not put the existing business process under the statistical microscope; a key tenet is that the secrets to designing a process lie not so much in intimately understanding the way it is performed today, but rather in thinking about how to reshape it for the future. Reengineering assumes that despite heavy investments in computerization, most business processes still reflect a pre computer era way of doing business -- that is, the tasks, the people, the structure of the process, and the management of the people in the process haven't changed much. The power of information technology has been underrealized.

A reengineering initiative focuses on outcome rather than task. It constructs a high-level view of the way the process works to expose the drivers of cost, time, and quality. It also exposes process shortcomings such as excessive inventory and other "buffers, high ratios of checking and control, rekeying of data, and multiple points of contact for customers. Last, it uncovers the inhibiting "rules" of the organization -- that is, the often unarticulated beliefs about how a process should work, which constrain thinking about how to radically redesign the process.

A key difference between business reengineering and quality improvement is the scope of the process each addresses. Reengineering looks at the broad business processes that cut across departmental areas (such as order-to-delivery, concept-to-market, service request-to-problem resolution, and customer acquisition) or even across traditional organizational boundaries between customers and suppliers (where some of the largest gains in process improvement exist).

The "boundaries" of these processes will vary from company to company. But the point in reengineering is to look at all the factors that influence how well we sell, deliver on orders, produce goods, provide service, bring new ideas to market, and accomplish other mandates. Taking an "elevated" view results in removing nonessential steps, activities, subprocesses, and sometimes even whole departments.

Quality improvement techniques tend to be applied bottom-up by the people working in the subprocesses and activities that constitute a larger process. (A subprocess in the order-to-delivery process might include order acquisition, order processing, production, distribution/installation, and financing. Activities in the subprocess of order acquisition might be developing proposals, capturing and transmitting orders and authorizing credit.)

After commitment from the top of the company, quality initiatives often drive the locus of activity down in the organization; workers are motivated, trained and counted on to make many small-scale improvements to their activities in the belief they collectively will add up to major gains. The idea is to empower everyone in the organization to focus on improvements they can individually achieve.

Reengineering depends less on individual empowerment because no one person is typically accountable for the type of processes a reengineering effort addresses. Reengineering is intrinsically cross-functional: It is undertaken when a critical business process that cuts across functional areas of an organization requires a dramatic overhaul.

Quality teams tend to accept a process and work within its basic structure to improve it. Reengineering is effective when the basic process is fundamentally flawed.

However, redesigning the process -- and capitalizing on information technology -- is not enough. In reengineering, process change must come hand in hand with change in three other areas:

1) Jobs, skills, and organizational structure

2) Management systems

3) Values and beliefs

The organizational changes from reengineering a process go far beyond new workflows. A reengineered process results in new jobs, which require new skills and organizational structure to manage the work (see Figure 2). Thus, process design dictates job and organizational design. In turn, the jobs and organizational structure require new recruiting, incentive, training, resource allocation, and other management systems. Finally, these management systems determine the values and beliefs of the organization. We refer to this self-reinforcing model as the "business system."

When one company reengineered its order-to-delivery process, it needed a new incentive system for the people who had end-to-end responsibility for fulfilling the order. The old incentive system was based on people moving up the corporate ladder by managing more and more people. In the new process, the layers of management have been removed, since there's only one type of job. The new incentive system records workers on their ability to handle many types of product orders (that is the acquisition of knowledge and skills), not on how many people they manage and which rung of the corporate ladder they occupy.

Because they push for attention to quality and small-scale changes in everyone's job, continuous improvement programs typically spawn massive education and training programs for workers at every level of an organization. Everyone, from upper management to mail-room employees, is implored to find ways to continually improve his or her jobs. The top-down push quickly becomes a bottom-up effort to improve every activity in an organization.

Reengineering requires a heavier participation by senior management because it poses some emotional and political issues that can only be resolved at the highest levels: fundamental changes in jobs and organizational structure; the possible elimination of steps or even whole departments; shifts in power in the organization.

In both programs, top management must take the lead. But where quality programs require buy-in from the bottom of the organization, reengineering is driven top-down, at least until the emergence of a new process, workflow, and potential benefits that the reengineered company can rally around. In addition, in reengineering, senior executives must become intimately involved in the change effort, especially when the redesign of business processes eliminates activities and sometimes whole departments, which shifts power in the organization.

Information technology (IT) is incidental to the success of most quality improvement programs. In reengineering, IT is fundamental (see Figure 1).

In quality improvement, we generally find that information systems are regarded as crucial for collecting data and measuring process performance. Computerized statistical process control has flourished and has helped continually refine the existing processes of many organizations. At the very least, when a quality initiative improves individual functions independently in a company, any computer initiatives arising out of the quality program usually stay within the walls of these functional areas.

In reengineering, information technology occupies a different and much more central role: enabler of entirely new, cross-functional business processes. Computer and communications technology enables organizations to break the old rules and conventions that dictated the design of business processes. The sequential nature of most business processes is a direct result of the fact that information used to be passed around by paper, and that paper could only be in one place at one time.

The ability of computers to put information in the hands of multiple people simultaneously enables organizations to break their sequential, throw-it-over-the-wall approach to order management, product development, customer service, and other key business processes. As such, information technology is the key element in achieving the aggressive improvement targets of reengineering.

We believe the subsidiary role of information technology in the process design stage of many quality programs is reflected in another way: the absence of representatives from the information systems function in many a quality program. Whether in quality or reengineering programs, the IS executive needs to alert all the key players on the transformational capabilities of information technology.

Both quality improvement and reengineering are crucial to keeping a company's business processes effective (see Figure 3). Quality improvement techniques are an effective tool for identifying trouble spots and correcting them. Furthermore, adopting the quality philosophy of continual and continuous improvement keeps everyone on the lookout for ways to keep refining their part in the corporation's work.

However, there are other times when abrupt changes in the regulatory environment, technology, competition, or needs of customers will mean that incremental improvements in organizational work are not enough. Those times call for radical changes in a few critical business processes, changes when information technology must be used to remove time and distance, steps in process, and sometimes whole functions. These changes will ripple through organizational structures, management systems, and the values of an organization. Because reengineering could polarize an organization, it must be driven top-down and led by innovative people who can relinquish allegiances to the old process.

We therefore believe (see Figure 4) that the decision on whether to reengineer a process or make continuous and continual improvements to it depends on:

• The strength of the case for action.



• The level of ambition and urgency.



• The scope of the process.



• Whether the initiative will have a strong sponsor and champion who is high enough in the organization to bring all the relative parties to the table, and to remove the obstacles to change.

If the case for action is compelling (for example, the competition is turning around orders and/or new products in half the time), the goals for improvement are extremely ambitious, the process cuts a wide swath across many departments, and a leader is determined (and positioned well) to create the change, reengineering the process is in order.

Once a critical business process is reengineered, everyone involved in the process has to continually improve his or her tasks and activities through quality techniques. By adopting the philosophy of both large and small improvement in business processes, managers and workers over time will come to recognize the appropriate moments for refining an existing process or radically reengineering it.

With quality improvement techniques fast gaining adherents, executives are recognizing that business success is in large part due to the effectiveness of an organization's business processes. What's now becoming clear is that different process improvement techniques yield different results. Broad, ongoing attention to all the activities that constitute a business must happen all the time. But there are moments when a few key business processes require more intense attention and radical change. Companies need both types of process improvement to stay viable.

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• Executive Information Systems: An Overview of Development
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• Critical Success Factors : Helping IS Managers Pinpoint Information Needs
• Combining Quality and Reengineering for Operational Superiority
• Steering IS Committees Straight
• Internal Consultants and a Consultative Approach
• EIS Plays Critical Role in Reengineering
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Kendall Consulting Group is an international general management consulting firm specializing in strategy execution, change management, and executive education. We invite you to contact us for how we might help you and your company grow and prosper.

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