The external team (consultants) can facilitate the process, but it has to be led by the internal team. When Hindustan Unilever started implementing its new distribution system in Mumbai, it eschewed external help. They felt their people has the knowledge at the ground and are best suited to design and implement their plans.
BPR is only a means to an end and cannot be an end in itself. When the Godrej Group realised it could gain from synergies in its three FMCG companies, it set up a separate FMCG Portfolio Cell. The group has set itself a target of Rs 5,000 crore over the next few years, and the cell was set up as a step towards that end. At times, the BPR initiatives have less to do with controlling costs and are more about managing business. At Spencer’s, the RPG Group retail arm, it was a clear case of a massive ramp-up in operations necessitating a series of restructurings. Going from an area of 2.5 lakh square feet to 15 lakh sq ft (from 52 to 400 stores) meant that the older systems were no longer adequate. Rather than do an incremental improvement on the existing processes, the company introduced an automatic replenishment system last year. As a result of the new system, stock outs at stores have reduced, leading to increased same-store growth (one of the most important parameters in tracking retail growth).
But cost-cutting is not the only reason for a company to consider restructuring processes. When consumer goods behemoth Hindustan Unilever decided that it was time to revamp its distribution system, the change was brought about more by wanting to be in-line with the way retail, and consumers, would evolve over the next five years and less as a result of trying to cut costs. This once again required the company to do something radically different and not a piecemeal improvement on its existing systems. The result was a new system that relied a lot more on technology and a different distribution structure.
Process outsourcing firm First source started reengineering its processes about a year ago, and there was a fair amount of scepticism as the company was growing at a perfectly respectable 70%. CEO of Firstsource says that it couldn’t have been done at a better time. In retrospect, doing it when they did has been a big advantage. They have been able to counter balance some of the negative pressures thanks to the improvements made. It helps that they have a year of this behind them.
Similarly, when KEC, the power transmission business of the RPG Group merged group company RPG Transmission and National Information Technologies (NITEL) with itself, the idea was to add a new business stream (NITEL) as well as bring in cost efficiencies. The merger was done before the slowdown, the company today is almost unaffected by recession.
They were convinced about the rationale even when they decided to do this merger the benefits have been brought to light thanks to the recession. Considering that the company has an order book that covers its revenue at current growth rates over the next 15 months, its little wonder that the word ‘recession’ means nothing to the organization..
Irrespective of the reason for the reengineering, perhaps the most important part of any such exercise is change management. And at the heart of the change management process lie the people. You can start with good intentions and great economic logic for doing it, but it will simply fall apart if you don’t manage to convince your people. Doing things before others can prove beneficial in the long term, but it does come with its own share of pitfalls. While the top managers had to convince sceptical employees and clients that the company was not in any sort of trouble, the ‘unfortunate’ choice of name – Project Slim – with its immediate connotation of downsizing did not do much to allay people’s concerns. As a result, the company undertook a communication exercise involving 17 sessions with the 1500 employees who would be part of the first wave of reengineering. There was also a separate section on the group intranet site where employees could get all the information they needed as well as post queries on the initiative.
When Essar recently introduced the system of e-bids for the procurement of supplies the CEO had to deal with disgruntled employees as well as suppliers. Whenever people see their job being automated, they aren’t too welcoming. On the other hand, certain blue chip companies refused to participate in the e-bid process, so after a few months of trial and error the company has now moved on to a hybrid model. While most suppliers send in their bids using the portal, the company continues to interact with the others and then decide on who to go with. The company has also introduced an additional round of negotiations with the short-listed suppliers before the final decision is made. This means that while employees are more involved, they also need to brush up on their negotiating skills.
A final word of caution: companies often treat BPR as a one-stop measure and an excuse for downsizing and not a long term process. The other mistake companies tend to make is pick the wrong process to be reengineered, or make only superficial changes. Companies will often come up with a brilliant process change, but will then customise it to how they think it should be done. As a result, they’re basically taking a new, roundabout route to get to where they already are.
Most crucial is making the changes stick, and this can be brought about only by a fundamental shift in organisational thinking. If this doesn’t happen, a year down the line, the company is back to where it was which gives the nay sayers an opportunity to say ‘I told you so’. As a result, the company goes back to the earlier inefficient processes.