Program 1: Business Process Reengineering
What is Reengineering?
Reengineering is the radical redesign of business processes to achieve major gains in cost, service, or time.
Reengineering is also called process management, process innovation, or process redesign, involves reconfiguring or redesigning work, jobs, and processes for the purpose of improving cost, quality, service, and speed.
Reengineering does not usually affect the organizational structure or chart, nor does it imply job loss or employee layoffs. Instead, reengineering is concerned more with employee and customer well-being than shareholder well-being.
Reasons for Firms Pursuing Reengineering
Many companies historically have been organized vertically by business function. This arrangement has led over time to managers’ and employees’ mindsets being defined by their particular functions rather than by overall customer service, product quality, or corporate performance. Over time, routines become entrenched, turf becomes delineated and defended, and politics takes precedence over performance.
Business process reengineering strives to break away from the old rules and procedures that develop and become ingrained in the organization over the years. Cornerstones of reengineering are decentralization, reciprocal interdependence, and information sharing.
In reengineering, a firm uses information technology to break down functional barriers and create a working system based on business processes, products, or outputs rather than on functions or inputs.
These barriers may be a combination of policies, rules, and procedures that have never been seriously questioned because they were established years earlier. These rules of organization and work design may have been based on assumptions about technology, people, and organizational goals that may no longer be relevant.
Reengineering today must go beyond knocking down internal walls that keep parts of a company from cooperating effectively. It must also knock down the external walls that prohibit or discourage cooperation with other firms, even rival firms.
Reengineering offers employees the opportunity to see more clearly how their particular jobs affect the final product or service being marketed by the firm. However, reengineering can also raise manager and employee anxiety, which may lead to corporate trauma.
Principles for Reengineering
The first principle is to organize around outcomes, not tasks. This means to design a job around an objective or outcome instead of a single task or series of tasks.
The second principle is to have those who use the output of the process perform the process. Processes can be reengineered so that people who need the result of the process can do it themselves.
The third principle is to subsume information processing work into the real work that produces the information. People or departments that produce information can also process it for use instead of just sending raw data to others in the organization to interpret.
The fourth principle is to treat geographically dispersed resources as though they were centralized. With modern technology, companies can provide flexible service locally while keeping the actual resources in a centralized location for coordination purposes.
The fifth principle is to link parallel activities instead of integrating their results. Instead of having separate units perform different activates that must come together, have them communicate while they work so that they can do the integrating.
The sixth principle is to put the decision point where the work is performed and build control into the process. The people who do the work should make the decisions and be self-controlling.
The seventh principle is to capture information once and at the source. Thus, instead of having each unit develop its own database and information processing activities, the information can be put on a network so that all can access it.
Program 2: Six Sigma
What is Six Sigma?
Six sigma is an analytical method for achieving near-perfect results on a production line.
In statistics, the Greek letter sigma would denote that one sigma equals 690,000 defects per 1 million. Six Sigma reduces the defects to only 3.4 per million, thus saving money by preventing waste.
Although the emphasis of six sigma is on reducing product variance in order to boost quality and efficiency, it is increasingly being applied to accounts receivable, sales, and R&D.
Six Sigma Process
The process of Six Sigma encompasses 5 steps.
They are as follows: (1) define a process where results are poorer than average; (2) measure the process to determine exact current performance; (3) analyze the information to pinpoint where things are going wrong; (4) improve the process and eliminate the error; and (5) establish controls to prevent future defects from occurring.
Disadvantages of Six Sigma
The training costs at the beginning of the program may outweigh any savings. The expense of compiling and analyzing data, especially in areas where a process cannot be easily standardized, may exceed what is saved. And most importantly, the program can lead to less-risky incremental innovation based on previous work.
Lean Six Sigma
A new program called Lean Six Sigma is becoming popular.
It incorporates the statistical approach of Six Sigma with the lean manufacturing program. Similar to reengineering, Lean Six Sigma includes the removal of unnecessary steps in any process and fixing those that remain.
Program 3: Total Quality Management
What is Total Quality Management?
Total Quality Management (TQM) is an operational philosophy committed to customer satisfaction and continuous improvement. TQM is committed to quality and excellence and to being the best in all functions.
TQM emphasizes prevention, not correction.
Because TQM aims to reduce costs and improve quality, it can be used as a program to implement an overall low-cost or a differentiation business strategy.
Successful TQM programs occur in those companies in which top management moves beyond defensive and tactical orientations to embrace a developmental orientation.
TQM program involves a significant change in corporate culture, requires strong leadership from top management and employee training, empowers lower-level employees to give them more control over their work, and emphasizes teamwork in order to succeed in a company.
Quality circles or quality improvement teams are formed to identify problems and to suggest how to improve processes that may be causing the problems. Inspection for quality still takes place, but the emphasis is on improving the process to prevent errors and deficiencies.
Objectives of TQM
TQM has 4 objectives.
They are as follows: (1) better and less variable quality of the product and service; (2) quicker and less variable response in processes to customer needs; (3) greater flexibility in adjusting to customers shifting requirements; and (4) lower cost through quality improvement and elimination of non-value-adding work.
TQM Core Principles
TQM has 5 core principles.
The first principle is the intense focus on customer satisfaction. Everyone understands that their jobs exist only because of customer needs. Thus, all jobs must be approached in terms of how they will affect customer satisfaction.
The second principle is the focus on both internal as well as external customers. Everyone understands that pleasing the internal customers is as important as satisfying the external customers.
The third principle is the accurate measurement of every critical variable in the company’s operations. Every employee has to be trained in what to measure, how to measure, and how to interpret the data.
The fourth principle is the continuous improvement of products and services. Everyone realizes that operations need to be continuously monitored to find ways to improve products and services.
The fifth principle is the new work relationships must be based on trust and teamwork. Empowerment gives employees wide latitude in how they go about achieving the company goals.
Program 4: Management by Objectives
What is Management by Objectives?
Management by Objectives (MBO) is a technique that encourages participative decision making through shared goal setting at all organizational levels and performance assessment, based on the achievement of stated objectives.
MBO links organizational objectives to the behavior of individuals. MBO provides an opportunity for the corporation to connect the objectives of people at each level to those at the next higher level. It, therefore, acts to tie together corporate, business, and functional objectives, as well as strategies developed to achieve them.
Because this is a system that links plans with performance, it is a powerful strategy implementation technique.
One of the benefits of MBO is that it can reduce the amount of internal politics operating within a large corporation.
Political action within a firm can cause conflict and create divisions between the very people and groups who should be working together to implement a strategy.
People are less likely to jockey for a position if the company mission and objectives are clear and they know that the reward system is based not on game playing, but on achieving clearly communicated measurable objectives.
Implementation Process of MBO
The implementation process of MBO involves 4 steps.
They are as follows: (1) establish and communicate organizational objectives; (2) set individual objectives that help implement organizational ones; (3) develop an action plan of activities needed to achieve the objectives; and (4) periodically review performance as it relates to the objectives.
Resources
Further Reading
Related Concepts
References
- Hitt, M. A., Ireland, D. R., & Hoskisson, R. E. (2016). Strategic Management: Concepts: Competitiveness and Globalization (12th ed.). Cengage Learning.
- Hitt, M. A., Ireland, D. R., & Hoskisson, R. E. (2019). Strategic Management: Concepts and Cases: Competitiveness and Globalization (MindTap Course List) (13th ed.). Cengage Learning.
- Hill, C. W. L., & Jones, G. R. (2011). Essentials of Strategic Management (Available Titles CourseMate) (3rd ed.). Cengage Learning.