HAS REENGINEERING LEFT YOU FINANCIALLY STRONGER?

By Susan C. Longo

Reengineering‹is it a euphemism for downsizing layoffs, job shift, and owner/manager sell-out? When done right, reengineering can work wonders. But for the companies that tried and failed, the process is dismissed as merely the latest consultant's buzzword designed to confuse gullible management into fees for activity rather than action.

What Is So Difficult and Painful About Reengineering?

Virtually everyone who has lived through reengineering describes it in terms such as "agonizing and heartbreakingly tough." Those who are disillusioned admit that the root problem was failure to consider the impact reengineering can have on people. Reengineering changes work processes and the people who work in them. It changes jobs and skill requirements and, most importantly, the attitudes people must have toward what is important about their work assignments.

Reengineering may leave the same bodies in place; but the concerns with pleasing the boss and building structured work routines is replaced with concern for creating value for the customer and taking responsibility for the performance of an entire process. New measures of rewards and organization must be created. Traditional hierarchical, functional departments are replaced by process teams. These changes create a ripple effect as career paths, management roles, interpersonal relationships, and value systems all undergo transformations to support a very different way of working.

Reengineering Roadkill: Lessons from Those Who Failed

The number one source of difficulty with implementation of reengineering is the disregard for, or underestimation of, the resistance to change. As John Kenneth Gailbraith observed, "Faced with the alternative between changing one's mind and proving it is unnecessary, just about everyone gets busy on the proof." Resistance to change is natural and inevitable. In fact, resistance to reengineering change is a sign that something significant is happening. But management must tackle the resistance head on and employ one or several techniques to address the resistance.

Get people involved in the reengineering effort so they are criticizing from the inside rather than resisting from the outside. Making people feel they own the reengineering effort can provide a catharsis for negative feelings. People can put their energy toward improving work design and performance measures rather than carping about it. Participation also creates a feeling of control. Management should develop internally validated benchmarks which can be compared externally to identify competitive gaps.

The second biggest problem is communication. Getting people to buy into reengineering isn't easy because people put little stock in what management is selling. Senior managers dilute, filter, and distort information. Reengineering is viewed as the latest version of plain vanilla cost cutting. Communication needs to stress that changes benefit customers and employees, not consultants and upper management. Reward and incentive systems should be realigned to emphasize increases in value-added measures that directly affect customers. Payback measures should emphasize financial and nonfinancial performance indicators.

Change: What Is Gained Is Clearly Better than What Is Lost

What does it take to break down resistance to change? You must find ways to break down people assumptions, biases, habits, and other ways of thinking that impede the new work processes. But before that can be done we need to analyze how the old process came to be considered the appropriate work mode. More often than management would like to admit, ad hoc decisions about specific decisions simply accrete into policy. ("Sam designed the form and its routing to solve one problem" or "We've always done it that way" wind up in the procedures manual.) Other times, changes in technology should have changed work processes but no one has taken the time to re-examine work flow.

The most prevalent reason, however, is that assumptions and biases have never been identified and examined. If everyone using the forms and work processes got together and discussed what was efficient and what was inefficient, work flow and job assignments assumptions would become visible. It doesn't take multipart forms and a cumbersome matching of order, invoice, and receiving report to approve accounts payable anymore. On-line computers at the loading dock and empowered employees work more efficiently. The result is better service to the customer and vendor, reduction in processing cycles, increased cash flow, and the opportunity to increase compensation to the employee. Senior management needs to set ambitious, bankable reengineering goals; give the reengineering team a powerful incentive to change work processes, not just eliminate people or cut costs.

The lesson: Even when change is for the better, there is still loss. The old life always had some redeeming aspects. Whenever people change, they leave a piece of themselves behind. The challenge of reengineering is that it profoundly rearranges the way people conceive of themselves, their work, their position. It create a world in which people have careers rather than jobs, in which they grow rather than get promoted, in which income is based on results rather than position. Management must translate clear- cut goals and objectives into entity and individual performance measures. Planning and budgeting systems must be restructured to reflect the new benchmarks. And actions and activities must be consistent with the reengineered work processes. *

Susan C. Longo, CPA, is director of program development, Professional Development Institute.

Reprinted with permission of the Professional Development Institute.

Editor:

Michael Goldstein, CPA

The CPA Journal

JANUARY 1996 / THE CPA JOURNAL