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A Manifesto for Business Revolution

You want to make your company more successful?

How about reimagining it from scratch?

“Reengineering the Corporation” offers a blueprint.

Who Should Read “Reengineering the Corporation”? And Why?

“Reengineering the Corporation” was probably “the most successful business book of the last decade,” so people interested in business management don’t really have the luxury not to read it.

However, parts of it are a bit outdated, so be sure to consult the revised edition – and even that with a lot of caution.

About Michael Hammer and James A. Champy

Michael Martin Hammer was an American engineer and management author, as well as long-time professor of computer science at MIT, from where he earned a Ph. D. in EESC in 1973.

He was ranked as one of America’s 25 most influential people by “Time” magazine in its inaugural 1996 list.

James A. Champy is an American business consultant, with an M. S. in civil engineering from MIT and a J. D. from Boston College Law School.

CEO of the CSC index, Champy is currently a senior research fellow at Harvard’s Advanced Leadership Initiative and is primarily known for his work in the field of BPR.

“Forbes” voted “Reengineering the Corporation” – a book Hammer and Champy co-authored in 1993 – as the third most important business book of the past 20 years.

“Reengineering the Corporation PDF Summary”

Back in 1776, in the very first sentence of his monumental work, “The Wealth of Nations,” Adam Smith – the world’s preeminent economist for centuries – pointed out that division of labor is the essence of industrialism and progress.

In other words – to use his example – by dividing the manufacturing process into several steps and assigning each step to a particular worker, a pin maker will certainly produce many more pins than if each of his workers was assigned with making a complete pin.

Makes a lot of sense, doesn’t it?

Well, everybody in America seems to have shared this opinion up until the 1990s when two important things happened: modern technology and globalization.

Most of the American companies tried countering the effects by swift automatization of certain processes, but a 1989 MIT study titled “Made in America” uncovered that this might not have been the best strategy.

Namely, even after implementing it, many US companies still lagged behind their foreign counterparts in terms of productivity, time-to-market, and competitiveness.

Obviously, Adam Smith’s organizational strategies were a thing of the past.

But, what was the future?

In 1990, Michael Hammer, a former professor of computer science at MIT, in a suggestively titled 8-page article published in the “Harvard Business Review,” suggested a radical change:

“Reengineer Work: Don’t Automate, Obliterate.”

In other words, Hammer didn’t think that technology should just computerize some of the steps the manufacturing processes had been broken down to in the past.

Oh no!

According to Hammer, IT should completely reimagine the process by which one company works, making it (contrary to Adam Smith) much more holistic and integrated.

Three years after this study, Hammer teamed up with James A. Champy – the CEO of the CSC Index (the management consulting arm to the Computer Sciences Corporation) – and wrote “Reengineering the Corporation,” the management Bible of the 1990s, which practically made BPR (business process reengineering) a fad on par with Macarena.

In fact, by the end of this very year, more than half of United States’ Fortune 500 companies had either initiated or planned to initiate a reengineering effort!

But, what is BPR?

Straight from the book, as a purely theoretical framework:

Reengineering is… 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.

In practical terms, BPR means reorganizing a company in a way which will put quality and control first, while establishing a more direct connection between the managers and the customers, something which Smith’s division of labor practically prevents altogether.

And the first and most important step of BPR proved to be the least popular one: combining jobs.

Why?

Because, combining jobs meant that some people would get a lot more responsibility, but others would lose their jobs.

Which is exactly what happened during the first half of the 1990s, when, to many laymen, BPR sounded much less as an acronym for a progressive management strategy (Business Process Reengineering), than as an abbreviation for a notorious corporate dictum (a Bunch of People are Redundant).

Even so, BPR worked well for numerous giants in their industries, and Hammer and Champy share the success stories of IBM, Ford, Duke Power, and even Kodak – which, in retrospect, may not have been the best choice for a success story.

Because, after all, BPR doesn’t merely mean combining jobs.

It also means giving workers decision-making power, which many books in the meantime have proven is a better way to manage a company than the obsolete leader/follower philosophy.

An appropriate implementation of IT – let’s not forget that Hammer was an engineer – can certainly make this possible.

And, case in point –

By today, two and a half decades after “Reengineering the Corporation” saw the light of day, there’s basically no successful company in the world which doesn’t use shared databases, expert systems, telecommunication networks – and many other disruptive technologies which now make possible for a company to be both decentralized (in reality) and centralized (in its virtual cloud-based existence).

To sum up –

Hammer and Champy – by their own admission – may have been wrong in terms of people and layoffs – but they were right about many other things.

And numerous companies have profited from implementing BPR.

Key Lessons from “Reengineering the Corporation”

1.      Adam Smith’s Division of Labor Is an Obsolete Business Strategy
2.      Business Process Reengineering Revolutionized Business Management in the 1990s
3.      Rethinking the Business Process… and Layoffs

Adam Smith’s Division of Labor Is an Obsolete Business Strategy

Adam Smith’s “The Wealth of Nations” is rightfully considered one of the greatest economics books ever written.

Published at the dawn of the Industrial Revolution, the book – among many other things – is credited with identifying labor division as the essence of industrialism.

In other words, dividing a manufacturing process into several steps and assigning a specific worker for each step results into a substantial increase of productivity.

However, in the 1990s, the world was in the middle of another revolution, the IT revolution.

And, it seemed that automating some of these steps – the straightforward option – yields worse results than completely reimagining the processes – the radical solution.

Business Process Reengineering Revolutionized Business Management in the 1990s

Largely inaugurated by this very book, “Business process reengineering” (or BPR for short) was possibly the first – and certainly the most famous – business management strategy which took into consideration the fact that IT may be able to produce previously unimaginable hybrid-companies.

Namely, such that could be decentralized at workers-level – granting workers more responsibilities and combining their jobs into a cross-position – but centralized at a computerized, technological level (networks, shared databases, decision-supporting tools, etc.)

And this made all the difference!

Practically two-thirds of the Fortune 500 companies implemented BPR, and many of them survived the reengineering processes as much stronger, more productive, and bigger conglomerates.

With fewer employees.

Rethinking the Business Process… and Layoffs

Now, BPR is a radical strategy, in that it aimed (and, in fact, still aims) to rethink how a company works from root level, justly claiming that many of the processes which are still followed in most of these companies are just a remnant of some previous times and have added no value to the final product for decades.

It’s a four-fold cycle, divided into two phases: the as-is phase when companies identify, review, update and analyze their current processes and the to-be phase when they are designing, testing and implementing their wished-for procedures.

However, as it soon became much too obvious, in practice making the move from as-is to to-be meant layoffs.

A lot of them.

This gave BPR its bad name, which meant that by the later editions, Hammer and Champy had no option but to defend their strategy on the grounds of efficacy, with companies realizing in the meantime that, in the long run, people may be just as important as profit – if not more.

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“Reengineering the Corporation Quotes”

To reengineer a company is to take a journey from the familiar into the unknown. The journey has to begin somewhere and with someone. Click To Tweet

Reengineering is not restructuring or downsizing. Click To Tweet

As few people as possible should be involved in the performance of a process. Click To Tweet

Reengineering… demands the direct and personal involvement of senior management. Just as it cannot bubble up from the bottom of the organization, reengineering cannot be delegated. Click To Tweet

We say that more than 50% of reengineering efforts have failed, not that they inevitably will fail. Click To Tweet

Our Critical Review

When it appeared in 1993, “Reengineering the Corporation” was a pioneering work that even well-established management thinkers advocated as a great new tool for achieving success.

Peter F. Drucker described it as “an important book” adding that BPR is “a new and systematic approach to structuring and managing work.”

However, thousands of sackings later, BPR fell out of favor, and even the revised and updated edition of the book didn’t rescue the concept from its notoriety.

In other words, there’s a lot you can learn from this book – but there’s also a lot in it which is currently behind the times.

So, use it with caution.

Emir Zecovic

Emir is the Head of Marketing at 12min. In his spare time, he loves to meditate and play soccer.