TQM ASSIGNMENT I

ON

BUSINESS PROCESS REENGINEERING

SUBMITTED TO ANTHONY SIR

GROUP MEMBERS

GROUP MEMBERS Gaurav Sonar Nilesh Kotere Snehalata Rampalli Nikunj Shah

ROLL NO. 216 232 254 231

Sheila Raheja School of Business Management & Resear

Business Process Re-Engineering

Definition
The most notable definitions of reengineering are: "... The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary modern measures of performance, such as cost, quality, service, and speed." "Encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions." BPR is different from other approaches to organization development (OD), especially the continuous improvement or TQM movement, by virtue of its aim for fundamental and radical change rather than iterative improvement. In order to achieve the major improvements BPR is seeking for, the change of structural organizational variables, and other ways of managing and performing work is often considered as being insufficient. For being able to reap the achievable benefits fully, the use of information technology (IT) is conceived as a major contributing factor. While IT traditionally has been used for supporting the existing business functions, i.e. it was used for increasing organizational efficiency, it now plays a role as enabler of new organizational forms, and patterns of collaboration within and between organizations. BPR derives its existence from different disciplines, and four major areas can be identified as being subjected to change in BPR - organization, technology, strategy, and people - where a process view is used as common framework for considering these dimensions. Business strategy is the primary driver of BPR initiatives and the other dimensions are governed by strategy's encompassing role. The organization dimension reflects the structural elements of the company, such as hierarchical levels, the composition of organizational units, and the distribution of work between them. Technology is concerned with the use of computer systems and other forms of communication technology in the business. In BPR, information technology is generally considered as playing a role as enabler of new forms of organizing and collaborating, rather than supporting existing business functions.

The people / human resources dimension deals with aspects such as education, training, motivation and reward systems. The concept of business processes - interrelated activities aiming at creating a value added output to a customer - is the basic underlying idea of BPR. These processes are characterized by a number of attributes: Process ownership, customer focus, value adding, and cross-functionality. Business Process Reengineering Formally Defined Hammer and Champy have revolutionized the idea of reengineering. They define BPR as, the fundamental rethinking and radical redesign of business systems to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed. In this definition you can find four important key words: Fundamental: "Why do we do what we do?" and "Why do we do it the way we do?" Reengineering ignores what is and concentrates on what should be. Radical: Disregarding all existing structures and procedures and inventing completely new ways of accomplishing work Dramatic: Used for quantum leaps in performance, not used for small jumps Process: the most important key word, Collection of activities taking multiple inputs to create an output that is of value to the customer In the following paragraph three kinds of companies are listed which undertake reengineering: a) Companies which are already in deep trouble: If the company cost's are higher than competitors, if the customer service is really bad and the customers are already against it, if the product failure is much higher as the competition's b) Companies which are not in trouble yet: If the financial situation is still good but problems might appear in the future such as new competitors, changing customer requirements and an altered economic environment c) Companies which are in a peal condition:

The company is in a healthy condition and not even in the future problems might appear. But the management of such companies are ambitious and aggressive. These companies want to improve their own level in order to stay in lead over their competitors.But companies do not reengineer them self. The people do it. It is very important for every company that it selects the right people who can do this changing process thus it will lead to success.

The following roles are mostly involved by implementing reengineering at a company: Leader: a senior executive who authorizes and motivates the overall reengineering effort. Process owner: a manager with responsibility for a specific process and the reengineering effort focused on it. Reengineering team: a group of individuals dedicated to the reengineering of a particular process, who diagnose the existing process and oversee its redesign and implementation. Steering committee: a policy-making body of a senior manager who develop the organization's overall reengineering strategy and monitor its progress. Reengineering czar: an individual responsible for developing reengineering techniques and tools within the company and for achieving synergy across the company's separate reengineering projects.
Benefits Of BPR

Business Process Reengineering (BPR) can be defined as the elemental rethinking and radical redesigning of the business processes in order to achieve remarkable improvements in critical measures of performance like cost, service, quality, and speed. An organization where application of BPR is being done is process -oriented, where all processes are identified and given specific names. Each individual is aware of the particular process in which he or she is involved and complete process measurement such as monitoring and control is performed. Business Process Reengineering or BPR is also

known by other names like Business Process Redesign, Business Process Change Management or Business Transformation. BPR brings numerous benefits to organizations and companies in which it is implemented. Some of the common benefits of BPR are:

Increase Effectiveness : As all employees are aware of the processes to which they belong , they have a greater sense of responsibility. All processes are completely monitored under the strict control of the management. The net result of this is that employees deliver high quality products to their customers. Helps to improve efficiency. Proper management and control of all business processes reduces the time lag between different processes, which otherwise is quite high causing delays. This in turn reduces the time to market the product to the target customers and givesquicker response to buyers. Reduces cost : With the proper management of processes, improved efficiency and quick delivery of products to the buyers ,the overall product costs are reduced resulting in cost saving for the organization in the long run.
Meaningful job for employees. As the time lag of product processing between different departments gets reduced due to the application of business process reengineering, there are more meaningful tasks to be performed by employees. This leads to increase their levels of motivation and the desire to perform well. Improvement in organizational approach: According to the traditional approach of managing an organization there is no flexibility or adaptability to change. The management formulated strict rules for employees of the organization. Whereas now, when most organizations have implemented business process reengineering there is an increase in flexibility and adaptability for change. This has created better environment for people to work, thus leading to employee satisfaction.

Growth of business Implementation of BPR results in the growth of the present business thus enabling the emergence of new businesses within the same organization. Although BPR is very effective in controlling cost and improving efficiency, its implementation is a hard nut to crack. Employees are very resistant to this kind of change thus, it is important to have extensive support from the top management.

Basic steps in Business Process Reengineering

We can generalize Business Process Reengineering (BPR) efforts as an eight step process as follow Step 1: Formulate / Modify business visions, policies, objectives Step 2: Formulate / Modify business strategies according to changing customer requirements, technology changes and competition Step 3: Analyze the existing business process cycles & workflows and determine how they may be modified or refined Step 4: Apply IT to setup an optimal Business Information Management Architecture (BIMA) to support the reengineered business process Step 5: Modify or redesign the existing processes according to the reengineering strategies and develop refined Business Process Automation Systems (BPAS) Step 6: Apply IT strategies to map BIMA onto an Enterprise Information Management System (EIMS) that is integrated across the enterprise and that fits into and supports the reengineered Business process cycles and workflows. Step 7: Integrate the EIMS with the BPAS to build up the completed reengineered business system Step 8: Repeat steps 1-7 for continuous BPR due to changing customer demands, technology changes and business strategies, which leads to business stability Since information management is a key factor in BPR, the BPR efforts are enabled & supported by a variety of IT solutions.

A Summary of Key Success/Failure Factors In BPR

Advantages of BPR
1. Satisfaction A big advantage of reengineering is that the work becomes more satisfying because the workers get a greater sense of completion, closure, and accomplishment from their jobs. The employee performs a whole job, a process or a sub process, that by definition produces a result that somebody cares about. The workers not only try to keep the boss happy or to work through the bureaucracy. More important is the fact to satisfy the customer needs. 2. Growth of Knowledge Furthermore, the personal development within a process team environment does not play such an important role which means climbing up the hierarchy is a minor goal. In this case it is much more important to get a widespread knowledge of the whole process and there are no such things as "mastering" a job; as a worker's expertise and experience grow, his or her job grows with it. 3. Solidarity to the Company "Moreover, since workers in a reengineered process spend more time on value adding work and less time on work that adds no value, their contributions to the company increase, and, consequently, jobs in a reengineered environment will on the whole be more highly compensated." 4. Demanding Jobs "There is, however, a challenging side to all this good news about work in a reengineered environment. If jobs are more satisfying, they are also more challenging and difficult. Much of the old, routine work is eliminated or automated. If the old model was simple tasks for simple people, the new one is complex jobs for smart people, which raises the bar for entry into the workforce. Few simple, routine, unskilled jobs are to be found in a reengineered environment. This fact that the jobs are more demanding can be either an advantage or a disadvantage. It depends on the view from where you consider it. Unskilled employees might get difficulties to get along with the process changings. Some people are just not able to perform several tasks.

For such persons it will be probably difficult to survive within this new environment which mostly leads to a personal failure in their job. 5. Authority In a traditional oriented company the management expects from the employees that they follow some specific rules. In contrast to that the reengineered companies "dont want employees who can follow rules; they want people who will make their own rules. As management invests teams with the responsibility of completing an entire process, it must also give them the authority to make the decisions needed to get it done."

Disadvantages of BPR
1. Resistance to the change "There will certainly be some resistance to the change necessary for reengineering, but the key is to expect this resistance and develop ways to confront it. Employees will be most concerned about their job status after a reengineering; they will often show this by promoting opposition to the plan. Employers must confront this and deal with the employees concerns and not their arguments." 2. Drawbacks to Business Process Reengineering "People are not inherently opposed to change... but they dont like surprises. It is a leader's responsibility to let people know what the issues are." [Mark Wallace, CEO, Texas Children's Hospital] "Just understanding how to reengineer does not ensure success. When clearly thought out and implemented properly, BPR can be a very good way to improve the success of a company. Unfortunately, many companies implement BPR as a fad, forgetting completely about the people involved. Companies that wish to use Business Process Reengineering must determine the best strategy and follow through with the objectives. BPR will not be successful if the company flagellates. It will also not be successful if the company uses BPR over and over again. The reengineering process must come from the top down the executives must be committed and ready to promote the changes as an example for the rest of the company." 3. Higher Demands to the Workers Empowering the workers is an inevitable step in a reengineered process. Therefore the companies which hire new workers have to consider additional criterias in their hiring. "It is not longer enough merely to look at prospective employees' education, training, and skills; their character becomes an issue as well. Are they self-starting? Do they have self-discipline? Are they motivated to do what it takes to please the customer?" [27] [Hammer, Champy, 2001]This might be more complicated to find the right people for one specific job. The worker has to be a kind of "All-rounder" which can perform several jobs. As it was enough to convince a possible employer in a

job interview with practical skills, now it is also very important to have the more and more demanded soft skills. "For multidimensional and changing jobs companies dont need people to fill a slot, because the slot will be only roughly defined. Companies need people who can figure out what the job takes and do it, who can create the slot that fits them. Moreover, the slot will keep changing. In an environment of flexibility and change, it is clearly impossible to hire people who already know everything they're ever going to need to know, so continuing education over lifetime of a job becomes the norm in a reengineered company."

CASE STUDY ON SBI

We will discuss the BPR initiatives in one of the largest banks in India, State Bank of India. The bank has started Business Process Reengineering in the mid-nineties and almost took nearly more than 5 years to implement the reengineered processes across its 9600 branches in India and abroad. State Bank of India is the biggest bank in India with assets ranging from 10000 Billion Rupees in assets as of 2010 and having employee strength of around 200,000. The bank was established in by an act of 1955 and is the first nationalized bank in India. THE BACKGROUND Till the early nineties (till 1992) the Indian banking sector was dominated by t henationalized banks. Private Banks were few and are operated in a very small scale. Private Banks (non-nationalized banks) were not allowed to raise capital and there was a cap on number of braches they can open.With the government of India, deciding to bring in reforms in the bankin g sector authorized the Reserve Bank of India (RBI), the banking sector regulator in India to identify the possibility of reforms in banking sector. The regulator RBI relaxed the norms for banking sector and allowed the private banks to raise capital from abroad and allowed them to be listed on the stock exchanges. At that time State Bank of India had around 8000 Branches and none of the branches are computerized, and inter connectivity between branches was this change has brought in a remarkable change in the banking sector. In this assignment we will see what challenges State Bank of India faced, the need for a Business Process Reengineering and how the Michael Porters models can explain the Business Process Reengineering in State Bank of India. Mostly the business process reengineering is driven by technology. MICHAEL PORTERS 5 FORCES MODEL

There is no better model than Michael porters model to explain the predicament and the need for Business Process Reengineering for State Bank of India in the early nineties. We will discuss one by one the forces that Porter describes and see how they have influenced the State Bank of India. Threat of New Entrants: Till the early nineties State Bank of India enjoyed near monopoly being BIG daddy of banking industry and virtually no one to challenge. From the start of reforms a slew of new banks obtained licenses and started operating. The institutes that obtained the licenses were already operating in the finance industry, some are leading housing fianc corporations like HDFC ( Housing finance and Development Corporation) and some are institutional financing companies like ICICI (Industrial Credit and Investment Corporation of India). These institutions have already has a huge customer base and their opening their branches. These new banks were crafty, i.e. they knew that about 20% 30 % of the population contributes to more than 80% of the assets of the bank. They also knew that most of the banking happens in Metros and other cities them small towns and Villages, so they first targeted the metro customers. The new entrants opened posh lookingbranches in the metros with excellent interiors and layouts. The new b ranchesautomatically attracted the new generation customers and made them to complain about the old and dilapidated branches of State Bank of India. In response to the new entrants State Bank of India opened new branches called Personalized Banking Branches, where personalized care is provided to the customers, of course the branches catered to only the High Net worth Individuals (HNI).The new entrants brought a change the strategy of State Bank and to adopt different strategies for different markets. Threat of Substitute Products: Banking is predominantly a service industry and there can be hardly any difference in the products since the products need to comply with the regulations in the banking sector. Unsurprisingly the new banks wanted to create the differentiation based on how the service is offered. Take the example of term deposits. We all know that Term Deposits carry better interstates than other accounts. What the private banks started offering is something called Auto Sweeping. What Auto Sweeping does, when the balance in an account (say current account) crosses a threshold (say 10,000) the amount above the threshold is converted to a term deposit. This was possible because of the technology they brought in with operating branches and they had no legacy systems like State Bank of India. State Bank of India had to respond and match the competition. Bank has to revamp its existing process of creating and closure of fixed deposits.

State Bank introduced a new product called Multi Option Deposit (MOD). State Bank has identified the branches which are facing tough competition from the privatebanksand introduced the product selectively in those branches. The pr oduct has certain advantages over the Auto Sweep products offered by private banks. The MOD product not only allowed for creation of deposits but also allowed for partial withdrawal of the term deposit in multiples of hundreds. Example:- If the Term Deposit was for Rs 10,000then user can withdraw Rs 400 and the rest of the amount Rs 9,600 will be treated as a term deposit and will remain attracting higher interest rate. The product was a huge success, however State Bank of India need to revisit their processes of creation of term deposits and training of staff on the new product. Bank also needed to spent considerable amount on advertising the new product to the public. It was almost first time in many years that State Bank visited their term deposit process. The process change also demanded investments in creating infrastructure for the new product like enhancing their existing IT systems etc. and training staff. Bargaining power of Suppliers: Though the bargaining power of suppliers is applicable only for manufacturing industry, in finance industry the suppliers can be equated with suppliers of capital. Since State bank of India is a nationalized bank, most of the capital for the bank was contributed by the government of India by having the president of India as the biggest shareholder. In the nineties with more than 50% of the population under below poverty line government of India was more concerned about State Bank serving the poor than serving the burgeoning middle class and the rich. The possibility of adopting different strategies to cater to different needs was not taken up on priority. In the midnineties government of wanted to dilute its stake (Still a major shareholder with nearly 60%share) and wanted the people of India become shareholders. The initial public offering by the bank was a huge success. The bank was listed in the Bombay Stock Exchange (BSE). After becoming a public listed company, the bank started to feel the pressure from Share Holders who expected a better return for their investment. Unlike before, State Bank of India has become answerable to the public in the Annual General Meetings and to show the performance based results. State Bank of India also needed to comply with the regulations of Securities Exchange Board of India (SEBI) as it is a listed company. This involved in change of processes related to reporting. Initially bank was reporting its performance once a year, after listing it has to report its performance every quarter. Because of this the entire process of collecting information from about 8000 branches across India had to undergo change. Bargaining power of Customers:

The advent of new private banks in the early nineties the banking customerswerefacing a situation like oligopoly, where the Banking Industry is dominated by fewnationalized banks and lack of innovation and shabby services. The banking operations were conducted in specialized counters. There are counters in each branch for every specific banking activity. There were cash counters with tellers who perform only cash related transactions. There were ledger operators who post the transactions in the ledgers (No computers), there were clearing counters who just perform activities related to local clearing transactions. If there were 10 people standing in the queue at the teller counter, and none at the clearing counter, there is no way the person clearing could attend the queue at the teller counter. This led to the inefficient use of human resources, where one resource was idle while other resource was over the over working. Here it is also important to highlight the changing profile of the customer. Th edemographic profile of the customer in the nineties was very much different from earlier generations. The new age customers were young and were willing to adopt change fast. The new age banks wanted to prove the difference. Backed by the latest technology they have done away with the specialized counters. Any operation was possible at any counter. They also introduced ATMs at every branch. The customers were surprised by the swift service rendered by the private banks. Customers started complaining about the services offered by State Bank of India. Many customers moved to the new banks to get the services offered. Another most common complaint was availability of cash transactions (India was predominantly cash carrying nation, checks and plastic cards were not introduced at that time) after the office hours, which is just 4 banking hours in a day. Hit by the private banks State Bank of India started looking into its operations and process and introduced a concept called Single Window, where any banking related transactions could happen at a single window. That is one of the Major initiatives in the area of BPR taken up by State Bank of India. Expectedly the move to introduce SingleWindow was protested by the labor unions, which feared job losses. Aft er muchnegotiation with union bodies the Single window was finally introduced in 1998.The existing infrastructure technological as well as physical was not ready for thechange. Bank had to entirely redesign its office layouts to accommodate S ingleWindow. State Bank also tied up with NCR and Diebold the two major ATM machine manufactures and started rolling out ATMs at all branches. Now State bank of India owns the maximum number of ATMs in India. Even though this moved cost a lot for the bank, there were two strategic advantages gained by the bank1. The customers were happy and stopped

moving to private banks2. Employees changed their attitude towards changing technology and embraced the change. This is how the bargaining power of customers has forced a change in State Bank of India business processes. Competitive Rivalry within an Industry: The competitive rivalry means, companies try to gain competitive advantage over other companies. The common indicator of competitive rivalry is measured by Industry Concentration. The Industry concentration is measured by Concentration Ratio (CR). Measures of Concentration: An Empirical Analysis of the Banking Sector in India a study in summer 2010 by Summer 2010bySharma, Manoj Kumar ,Bal, Harpreet Kaur shows that the CR in the banking Industry has come down from 44.92 in 1998-1999 to39.38 in 2008-2009.The more the ratio the less is the competition. As we can see that the ratio has comedown which means there is more competition in the Banking Industry than ever before. State Bank of India is ready for the new challenges by reengineering its business processes and ready for the competition.

CONCLUSION
An intense customer focus, superior process design and a strong and motivated leadership are vital ingredients to the recipe for the success of any business corporation. Reengineering is the key that every organization should possess to attain these prerequisites to success. BPR doesnt offer a miracle Cure on a platter. Nor does it provide a painless quick fix. Rather it advocates strenuous hard work and instigates the people involved to not only to change what they do but targets at altering their basic way of thinking itself.