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Reengineering the Corporation: A Manifesto for Business Revolution

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Overview

No business concept was more important to America's economic revival in the 1990s than reengineering -- introduced to the world in Michael Hammer and James Champy's Reengineering the Corporation. Already a classic, this international bestseller describes how the radical redesign of a company's processes, organization, and culture can achieve a quantum leap in performance.

But if you think that reengineering once was enough, think again. More changes, more challenges are coming ...

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Overview

No business concept was more important to America's economic revival in the 1990s than reengineering -- introduced to the world in Michael Hammer and James Champy's Reengineering the Corporation. Already a classic, this international bestseller describes how the radical redesign of a company's processes, organization, and culture can achieve a quantum leap in performance.

But if you think that reengineering once was enough, think again. More changes, more challenges are coming in the twenty-first century. Now Hammer and Champy have updated and revised their milestone work for the New Economy they helped to create -- promising to help corporations save hundreds of millions of dollars more, raise their customer satisfaction still higher, and grow ever more nimble in the years to come.

The New York Times bestseller that allows companies to make quantum leaps in performance by redesigning from scratch how they do their work.

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Editorial Reviews

Business Week
May well be the best-written, most well-reasoned business book for the managerial masses since In Search of Excellence.
Publishers Weekly - Publisher's Weekly
Management consultants Hammer and Champy thoughtfully critique the management procedures of American business and offer a promising prescription in this invigorating study. ``It is no longer necessary or desirable for companies to organize their work around Adam Smith's division of labor,'' they state, arguing that task-oriented jobs are becoming obsolete as changes in customer bases, competition and the rate of change itself alter the marketplace. Post-industrial companies must be ``reengineered,'' which necessitates starting anew, going back to the beginning to invent a better way of accomplishing tasks. The process requires a leader with vision using information technologies, consulting closely with suppliers to reduce inventories, and empowering employees so that decision-making ``becomes part of the work.'' Hammer and Champy acknowledge that reengineering can be difficult to launch and to sustain; yet they provide clear, specific guidelines and excellent case studies. Their superb book should have strong appeal to managers and general readers alike. (May)
From Barnes & Noble
The problem with American business is that it is entering the 21st century dragging behind it an outdated and cumbersome set of corporate principles formulated in the 1800s. Although these principles may have served us well in the past, the time has come to retire and replace them if we are to survive the 1990s and beyond. In this book, two respected management consultants address the most important issue in business circles today: reengineering. Neither a quick fix nor a plan for incremental improvements, reengineering is a radical corporate redesign that discards the accumulated business wisdom of the past 200 years, replacing it with a brand new model and an associated set of principles. Examining the firsthand experiences of companies that have reinvented themselves for success, Hammer and Champy present their revolutionary blueprint for creating a new kind of company for the brave new world of business.
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Product Details

  • ISBN-13: 9780066621128
  • Publisher: HarperCollins Publishers
  • Publication date: 6/28/2001
  • Edition description: Older Edition
  • Pages: 272
  • Product dimensions: 5.32 (w) x 8.16 (h) x 0.69 (d)

Meet the Author

Dr. Michael Hammer is the leading exponent of the concept of reengineering. He was named by BusinessWeek as one of the four preeminent management gurus of the 1990s and by Time as one of America's 25 Most Influential Individuals. He lives in Massachusetts.

James Champy is chairman of Perot Systems consulting practice. He is a leading authority on organizational change and development and business strategy. He lives in Massachusetts.

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Read an Excerpt

Chapter One



The Crisis That
Will Not Go Away




Not a company in the country exists whose management doesn't say, at least for public consumption, that it wants an organization flexible enough to adjust quickly to changing market conditions, lean enough to beat any competitor's price, innovative enough to keep its products and services technologically fresh, and dedicated enough to deliver maximum quality and customer service.

So, if managements want companies that are lean, nimble, flexible, responsive, competitive, innovative, efficient, customerfocused, and profitable, why are so many American companies bloated, clumsy, rigid, sluggish, noncompetitive, uncreative, inefficient, disdainful of customer needs, and losing money? The answers lie in how these companies do their work and why they do it that way. A few examples illustrate the point that the results companies achieve are often very different from the results that their managements desire.

  • A manufacturer we visited has, like many other companies, set a goal of filling customer orders quickly, but this goal is proving elusive. Like most companies in its industry, this company uses a multi-tiered distribution system. That is, factories send finished goods to a central warehouse, the Central Distribution Center (CDC). The CDC in turn ships the products to Regional Distribution Centers (RDCs), smaller warehouses that receive and fill customer orders. One of the RDCs covers the geographical area in which the CDC is located. In fact, the two occupy the same building. Often and inevitably RDCs do not have the goods they need to fillcustomers' orders. This particular RDC, however, should be able to get missing products quickly from the CDC located across the hall, but it doesn't work out that way. That's because even on a rush/ expedite order, the process takes eleven days: one day for the RDC to notify the CDC it needs parts; five days for the CDC to check, pick, and dispatch the order; and five days for the RDC to officially receive and shelve the goods, and then pick and pack the customer's order. One reason the process takes so long is that RDCs are rated by the amount of time they take to respond to customer orders, but CDCs are not. Their performance is judged on other factors: inventory costs, inventory turns, and labor costs. Hurrying to fill an RDC's rush order will hurt the CDC's own performance rating. Consequently, the RDC does not even attempt to obtain rush goods from the CDC located across the hall. Instead, it has them air shipped overnight from another RDC. The costs? Air freight bills alone run into the millions of dollars annually; each RDC has a unit that does nothing but work with other RDCs looking for goods; and the same goods are moved and handled more times than good sense would dictate. The RDCs and the CDC are all doing their jobs, but the overall system just doesn't work.

    Often the efficiency of a company's parts comes at the expense of the efficiency of its whole. A plane belonging to a major American airline was grounded one afternoon for repairs at Airport A, but the nearest mechanic qualified to perform the repairs worked at Airport B. The manager at Airport B refused to send the mechanic to Airport A that afternoon, because after completing the repairs the mechanic would have had to stay overnight at a hotel, and the hotel bill would come out of B's budget. So, the mechanic was dispatched to Airport A early the following morning, which enabled him to fix the plane and return home the same day. A multi-million dollar aircraft sat idle, and the airline lost hundreds of thousands of dollars in revenue, but Manager B's budget wasn't hit for a $100 hotel bill. Manager B was neither foolish nor careless. He was doing exactly what he was supposed to be doing: controlling and minimizing his expenses.

    Work that requires the cooperation and coordination of several different departments within a company is often a source of trouble. When retailers return unsold goods for credit to a consumer products manufacturer we know, thirteen separate departments are involved. Receiving accepts the goods, the warehouse returns them to stock, inventory management updates records to reflect their return, promotions determines at what price the goods were actually sold, sales accounting adjusts commissions, general accounting updates the financial records, and so on. Yet no single department or individual is in charge of handling returns. For each of the departments involved, returns are a low-priority distraction. Not surprisingly, mistakes often occur. Returned goods end up "lost" in the warehouse. The company pays sales commissions on unsold goods. Worse, retailers do not get the credit that they expect, and they become angry, which effectively undoes all of sales and marketing's efforts. Unhappy retailers are less likely to promote the manufacturer's new products. They also delay paying their bills, and often pay only what they think they owe after deducting the value of the returns. This throws the manufacturer's accounts receivable department into turmoil, since the customer's check doesn't match the manufacturer's invoice. Eventually, the manufacturer simply gives up, unable to trace what really happened. Its own estimate of the annual costs and lost revenues from returns and related problems runs to nine figures. From time to time, the company's management has attempted to tighten up the disjointed returns process, but it no sooner gets some departments working well than new problems crop up in others.

  • Even when the work involved could have a major impact on the bottom line, companies often have no one in charge. As part of the government's approval process for a major new drug, for instance, a pharmaceutical company needed field study results on just one week's dosing of thirty different patients. Obtaining this information took the company two years. A company scientist spent four months developing the study and specifying the kind of data to be collected. Actually designing the study took only two weeks, but getting other scientists to review the design took fourteen. Next, a physician spent two months scheduling and conducting interviews in order to recruit other doctors who would identify appropriate patients and actually administer the trial drug. Securing permission from all the hospitals involved took a month, most of which was spent waiting for replies...

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Table of Contents

Prologue: Reengineering for the Twenty-first Century 1
1 The Crisis That Will Not Go Away 9
2 Reengineering: The Path to Change 34
3 Rethinking Business Processes 53
4 The New World of Work 69
5 The Enabling Role of Information Technology 87
6 Who Will Reengineer? 106
7 The Hunt for Reengineering Opportunites 122
8 The Experience of Process Redesign 139
9 Embarking on Reengineering 153
10 One Company's Experience: Duke Power 165
11 One Company's Experience: IBM 185
12 One Company's Experience: Deere 202
13 Succeeding at Reengineering 221
Epilogue 235
Frequently Asked Questions FAQs 237
Index 247
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First Chapter

Reengineering the Corporation
A Manifesto for Business Revolution

Chapter One

The Crisis That Will Not Go Away

Not a company exists whose management doesn't say, at least for public consumption, that it wants an organization flexible enough to adjust quickly to changing market conditions, lean enough to beat any competitor's price, innovative enough to keep its products and services technologically fresh, and dedicated enough to deliver maximum quality and customer service.

So, if managements want companies that are lean, nimble, flexible, responsive, competitive, innovative, efficient, customer-focused, and profitable, why are so many businesses bloated, clumsy, rigid, sluggish, noncompetitive, uncreative, inefficient, disdainful of customer needs, and losing money? The answers lie in how these companies do their work and why they do it that way. The results companies achieve are often very different from the results that their managements desire, as these examples illustrate.

• A manufacturer we visited has, like many other companies, set a goal of filling customer orders quickly, but this goal is proving elusive. Like most companies in its industry, this company uses a multi-tiered distribution system. That is, factories send finished goods to a central distribution center (CDC). The CDC in turn ships the products to regional distribution centers (RDCs), smaller warehouses that receive and fill customer orders. One of the RDCs covers the geographical area in which the CDC is located. In fact, the two occupy the same building. Often and inevitably RDCs do not have the goods they need to fill customers' orders. This particular RDC, however, should be able to get missing products quickly from the CDC located across the hall, but it doesn't work out that way. That's because even on a rush/expedite order, the process takes eleven days: one day for the RDC to notify the CDC that it needs parts; five days for the CDC to check, pick, and dispatch the order; and five days for the RDC to officially receive and shelve the goods, and then pick and pack the customer's order. One reason the process takes so long is that RDCs are rated by the amount of time they take to respond to customer orders, but CDCs are not. Their performance is judged on other factors: inventory costs, inventory turns, and labor costs. Hurrying to fill an RDC's rush order will hurt the CDC's own performance rating. Consequently, the RDC does not even attempt to obtain rush goods from the CDC located across the hall. Instead, it has them air-shipped overnight from another RDC. The costs? Air freight bills alone run into millions of dollars annually; each RDC has a unit that does nothing but work with other RDCs looking for goods; and the same goods are moved and handled more times than good sense would dictate. The RDCs and the CDC are doing their jobs, but the overall system just doesn't work.

• Often the efficiency of a company's parts comes at the expense of the efficiency of its whole. A plane belonging to a major U.S. airline was grounded one afternoon for repairs at airport A, but the nearest mechanic qualified to perform the repairs worked at airport B. The manager at airport B refused to send the mechanic to airport A that afternoon, because after completing the repairs the mechanic would have had to stay overnight at a hotel and the hotel bill would come out of manager B's budget. Instead, the mechanic was dispatched to airport A early the following morning; this enabled him to fix the plane and return home the same day. A multimillion dollar aircraft sat idle, and the airline lost hundreds of thousands of dollars in revenue, but manager B's budget wasn't hit for a $100 hotel bill. Manager B was neither foolish nor careless. He was doing exactly what he was supposed to be doing: controlling and minimizing his expenses.

• Work that requires the cooperation and coordination of several different departments within a company is often a source of trouble. When retailers return unsold goods for credit to a consumer products manufacturer we know, thirteen separate departments are involved. Receiving accepts the goods, the warehouse returns them to stock, inventory management updates records to reflect their return, promotions determines at what price the goods were actually sold, sales accounting adjusts commissions, general accounting updates the financial records, and so on. Yet no single department or individual is in charge of handling returns. For each of the departments involved, returns are a low-priority distraction. Not surprisingly, mistakes often occur. Returned goods end up "lost" in the warehouse. The company pays sales commissions on unsold goods. Worse, retailers do not get the credit that they expect, and they become angry, which effectively undoes all of sales and marketing's efforts. Unhappy retailers are less likely to promote the manufacturer's new products. They also delay paying their bills, and often pay only what they think they owe after deducting the value of the returns. This throws the manufacturer's accounts receivable department into turmoil, since the customer's check doesn't match the manufacturer's invoice. Eventually, the manufacturer simply gives up, unable to trace what really happened. Its own estimate of the annual costs and lost revenues from returns and related problems runs to nine figures. From time to time, management attempts to tighten up the disjointed returns process, but it no sooner gets some departments working well than new problems crop up in others.

• Even when the work involved could have a major impact on the bottom line, companies often have no one in charge. As part of the government's approval process for a major new drug, for instance, a pharmaceutical company needed field study results on thirty different patients who took the medicine for one week. Obtaining this information took the company two years.

Reengineering the Corporation
A Manifesto for Business Revolution
. Copyright © by Michael Hammer. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.
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Reading Group Guide

Introduction

No business concept was more important to America's economic revival in the 1990s than reengineering -- introduced to the world in Michael Hammer and James Champy's Reengineering the Corporation. Already a classic, this international bestseller pioneered the most important topic in business circles today: reengineering -- the radical redesign of a company's processes, organization, and culture to achieve a quantum leap in performance.

In Reengineering the Corporation, Michael Hammer and James Champy explain how some of the world's premier corporations are reengineering to save hundreds of millions of dollars each year, to achieve unprecedented levels of customer satisfaction, and to speed up and make more flexible all aspects of their operations.

Now, more changes and challenges are coming to the corporation in the throes of the Internet age at the start of the 21st century. Hammer and Champy have updated and revised their milestone work for the New Economy they helped to create -- promising to help corporations save hundreds of millions of dollars more, raise their customer satisfaction still higher, and grow ever more successful and adaptive in the years to come.

Discussion Questions

  1. At the start of Reengineering the Corporation, Michael Hammer and James Champy argue that sellers no longer have the upper hand; customers do. Can you think of some examples of this trend in today's consumer climate?

  2. Hammer and Champy write: "Winning companies know how to do their work better." To what extent do you agree or disagree with this statement? What comparative examples fromReengineering the Corporation illustrate this theory?

  3. Hammer and Champy argue that reengineering is "a close partner with information technology." To what extent do you find this to be the case in your industry? What are some of the ways that information technology has revolutionized the way you work?

     
  4. "Reengineering must focus on redesigning a fundamental business process, not on departments of other organizational units." How is the implicit emphasis on process (rather than on individual steps) implicit in reengineering a key to reengineering's success? Discuss the examples of Ford and IBM.

  5. A key component of reengineering involves combining many jobs into one. Can you brainstorm some ways that this element might be introduced successfully into your workplace?

  6. Why might a customer-oriented organization of a reengineered corporation (as opposed to a more traditional hierarchical business structure that emphasizes control and past performance) lead to a change in company values?

  7. How does advanced technology give companies a distinct competitive advantage? For the purposes of discussion, consider the story of Xerox's creation of the photocopy machine, or Sony's development of the Walkman.

  8. Hammer and Champy explore the idea that broken processes are good candidates for processes to reengineer. Can you think of any dysfunctional processes in your company that come to mind?

  9. Why do the authors recommend benchmarking with some reservations? Why might benchmarking inhibit the process of reengineering?

  10. What have you learned about reengineering that you did not know when you began this book? What are some of the key themes and ideas that you would like to incorporate into your own workplace?

About the authors

Dr. Michael Hammer is the originator and leading exponent of the concept of reengineering. The author of the seminal Harvard Business Review article "Reengineering Work: Don't Automate, Obliterate," Dr. Hammer was named by Time to its first list of America's 25 most influential individuals.

James Champy is a leading practitioner of reengineering and the chairman of Perot Systems consulting practice. He works with major companies in reinventing their operations for the Digital Age. He is also the author of the BusinessWeek bestseller Reengineering Management.

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