The term reengineering comes from the process of taking apart an electronic product and designing a better version. As applied to organizations, process reengineering means that management should start with a clean sheet of paper rethinking and redesigning the processes by which the organization creates value and does work, ridding itself of operations that have become antiquated. The three key elements of process reengineering are identifying an organizationâ€™s distinctive competencies, assessing core processes, and reorganizing horizontally by process.
An organizationâ€™s distinctive competencies define what it is that the organization does better than its competition. Examples might include better store locations, a more efficient distribution system, higher-quality products, more knowledge sales personnel, or superior technical support.
Dell, for instance, differentiates itself from its competitors by emphasizing high-quality hardware, comprehensive service and technical support, and low prices. Identifying distinctive competencies so important because it guides decisions regarding what activities are crucial to the organizationâ€™s success.
Management also needs to assess the core processes that clearly add value to the organizationâ€™s distinctive competencies. These are the processes that transform materials, capital, information, and labor into products and services that the customer values.
When the organization is viewed as a series of processes, ranging from strategic planning to after sales customer support, management can determine to what degree each adds to value. This process-value analysis typically uncovers a lot of activities that add little or nothing of value and whose only justification is â€œweâ€™ve always done it this way.â€?
Process reengineering requires management to reorganize around horizontal processes. This means using cross-functional and self-managed teams. It means focusing on processes rather than on functions. It also means cutting out unnecessary levels of middle management.
Process reengineering has been popular since the early 1990s. Almost all major companies in the U.S. , Asia, and Europe have reengineered at least some of their processes. The result has been that lots of people have lost their jobs. Staff support jobs, especially middle managers, have been particularly vulnerable to process reengineering efforts. So, too, have clerical jobs in service industries.
Employees who keep their jobs after process reengineering have typically found that they are no longer the same jobs. These new jobs typically require a wider range of skills, including more interaction with customers and suppliers, greater challenge, increased responsibilities, and higher pay. However, the three to five year period it takes to implement process reengineering is usually tough on employees. They suffer uncertainty and anxiety associated with taking on new tasks and having to discard long established work practices and formal social networks.