Introduction

Previous unit gave you an insight on the employee involvement, various employee surveys carried out
and their empowerment. It also talked about the suggestion system and the performance appraisal. In
this unit you will study about the concept of continuous process improvement.

Continuous improvement is a very important component of Total Quality Management. As every

product or service is the outcome of a process, the effective way to improve quality is to improve the
process used to build the product. The corollary of focusing on process is that the focus is not on the
results – results are the dependent variable. The results come from whatever process is followed –
process drives results. TQM calls this focus on process „management by process‟. It consists of
realizing that results come from process, building a process to produce the desired results,
implementing the process so one can later figure out why it produced the results it did, and then
feeding this insight back to improve the process next time it is used.

Business Process Re-engineering (BPR) :

Business Process Re-engineering (BPR) is an approach aiming at improvements by means of

elevating efficiency and effectiveness of the business process that exist within and across
organisations. The key to BPR is for organisations to look at their business processes from a “clean
slate” perspective and determine how they can best construct these processes to improve how they
conduct business.

Business process re-engineering is also known as BPR, Business Process Redesign, Business
Transformation, or Business Process Change Management. It is the radical redesign of an
organisation‟s processes, especially its business processes. Rather than organising a firm into
functional specialties (like production, accounting, marketing, etc.) and considering the tasks that each
function performs; complete processes from materials acquisition, to production, to marketing and
distribution should be considered. The firm should be reengineered into a series of processes.

Hammer and Champy (1994) define BPR as “fundamental revision and radical redesign of processes
to reach spectacular improvements in critical and contemporary measurements of efficiency, such as
costs, quality, service and quickness.” Keywords in this BPR definition are:

• Fundamental: What is the company‟s basic style of working?

• Radical: All existing procedures and structures must be forgotten and new styles of working
must be discovered. Superficial changes are not useful. Changes must be made at the very root.

• Spectacular: Spectacular changes must be discovered, not marginal improvements.

• Processes: Redesign must be fixed on the processes not on the tasks, jobs, people, or
structures.

Consequently, a firm must start over, leaving their old procedures behind, testing the work without
prejudices, and forgetting systems used up to now. In other words, redesigning is changing. Re-
engineering is centred in the processes. Davenport and Short (1990) define a process as a set of
logically related tasks performed to achieve a defined business outcome. Furthermore, a process is a
sequence of activities which, when jointly taken, produce a valuable result for the customer.
Other methodologies are also centred in the processes, such as continuous improvement or total
quality management, and they reorient ate the basic tasks of the company to satisfy customers‟ needs.
However, they can be quite comfortable with their existing processes and they may not want to
introduce new ones.

Parker defines BPR as the analysis and redesign of the business and manufacturing processes with a
view to eliminating the activities that do not add up value. These definitions enable us to outline the
following main characteristics of BPR:

Concentration should be given on fundamental problems and not on departments or other

organisational elements.

Concentration should be given on processes and less on activities, functions, people and structures. A
process is a total of activities, which take one or several inputs, and creates an output, which is
valuable for the client.

Figure: BPR System

A radical approach which presupposes going to the root of things not only making superficial changes
of the existing things but acting by removing what is obsolete and inventing new ways of carrying on
the activity.

They are the changes that have a spectacular character that is achieving spectacular results and not
simply effecting marginal or gradual improvements.

A strong link of BPR with informatics technologies is a very important characteristic which cannot be
seen directly from definitions. The processes introduced through BPR could not exist without
applying informatics technologies.

Steps to Re-engineer the Process

Project phases required for successful BPR:

Phase 1: Begin Organisational Change

Activities

• Assess the current state of the organisation

• Explain the need for change

• Illustrate the desired state

• Create a communications campaign for change

The first step is to take a long, hard look at how the organisation operates. The focus of this
examination is on the operating procedures and the bottom-line results that are generated by them.
The purpose of performing the analysis described below is to determine whether dramatic change by
doing BPR is really necessary. It may be that only marginal change (the result of Continuous Process
Improvements, Total Quality Management, and other similar programs) is needed – which would
expose the change initiative and the organisation to much less risk.

Aspects of the business that need to be evaluated are: how things are currently done, what changes
may be occurring, and what new circumstances exist in our business environment. Next, a look at how
certain operating procedures within the organisation has caused or will cause irreparable damage to
the company‟s livelihood. What is the source of the organisation‟s concern? Maybe the demands of
the marketplace are shifting. Perhaps competitors have made significant advancements in products
and services. Regardless of the reasons, it should be clear whether or not the organisation, in its
current state, is able to meet the needs of the markets it serves.

The consequences of inaction should be identified and well understood. In most cases, these
consequences are the loss of jobs by shutting down portions of the business, or perhaps the entire
business. Finally, the proper future direction of the organisation should be decided. The future
“vision” of how the business must operate will serve as a clear and concise guide with measurable
goals for employees to focus on.

If an organisation wishes to change the way it operates, it must turn to its people to make it happen.
People are the agents of change. Creating business plans and strategies are important, but they are
only tools to guide the actions of people.

In order for change to be embraced, everyone must understand where the organisation is today, why
the organisation needs to change, and where the organisation needs to be in order to survive.

Phase 2: Build the Re-engineering Organisation

Activities

• Establish a BPR organisational structure

• Establish the roles for performing BPR

• Choose the personnel who will re-engineer

An infrastructure must be established to support re-engineering efforts. Although this phase consists
of only a few tasks, it has a tremendous impact on the success of a BPR endeavour.
Who are the people that will be chartered to re-engineer the business? What will their responsibilities
be? Who will they report to? These are the questions that must be answered as the re-engineering staff
is gathered together to communicate, motivate, persuade, educate, destroy, create, rebuild, and
implement.

One of the most important members of the re-engineering effort is the executive leader. The leader
must be a high-level executive who has the authority to make people listen, and the motivational
power to make people follow. Without the commitment of substantial time and effort from executive-
level management, most BPR projects cannot overcome the internal forces against them and will
never reach implementation.

A process owner is responsible for a specific process and the re-engineering effort focused on it.
There should be a process owner for each high-level process being re-engineered. Allocating the
responsibility of a process to a specific person ensures that someone is in charge of how that process
performs. Process owners are usually appointed by the executive leader.

The process owner convenes a re-engineering team to actually re-engineer his or her process. The
team dedicated to the re-engineering of a specific process should be made up of current insiders, who
perform the current process and are aware of its strengths and weaknesses, along with outsiders who
can provide objective input to spark creative ideas for redesign. The team should be small, usually
five to ten people. Since they will be the ones who diagnose the existing process, and oversee the
redesign and implementation, they should be credible in their respective areas. This qualification
plays an important role in reducing the resistance by company personnel to the new process.

In some BPR initiatives it is helpful to institute a steering committee. Especially in larger or multiple
re-engineering projects, a steering committee can control the chaos by developing an overall re-
engineering strategy and monitoring its progress.

Lastly, a re-engineering specialist can be an invaluable addition to the overall effort. A re-engineering
specialist can assist each of the re-engineering teams by providing tools, techniques, and methods to
help them with their re-engineering tasks.

Phase 3: Identify BPR Opportunities

Activities

• Identify the core/high-level processes

• Recognize potential change enablers

• Gather performance metrics within industry

• Gather performance metrics outside industry

• Select processes that should be re-engineered

• Prioritize selected processes

• Evaluate pre-existing business strategies

• Consult with customers for their desires

• Determine customer‟s actual needs

• Formulate new process performance objectives

• Establish key process characteristics

• Identify potential barriers to implementation

These processes, usually less than a dozen, are the major or core processes of the organisation. This
activity is not a time consuming task, but it is difficult because it requires a shift in how we think of
ourselves. One goal here is to identify the process boundaries (where the process begins and where it
ends), which will help set the project scope for those processes that are to be re-engineered.

In many cases, seeing the company from the customer‟s point of view can help identify what these
high-level processes might be. At this point, it is helpful to begin thinking about potential change
levers which may lead to dramatic changes in the organisation‟s processes.

Phase 4: Understand the Existing Process

Activities

• Understand why the current steps are performed

• Model the current process

• Understand how technology is currently used

• Understand how information is currently used

• Understand the current organisational structure

• Compare current process with the new objectives

Now that we know which process to re-engineer, we need to take a look at why we currently perform
the process the way we do. Understand is a key word here. We may not need to scrutinize every detail
of how we are performing the process – this effort has the potential to go on indefinitely, sometimes
referred to as analysis paralysis, which can weaken the momentum needed to carry the project all the
way to implementation. What we need to do is understand the underlying reasons why the existing
process is carried out the way it is, so that we can question those assumptions during our re-
engineering sessions later on. When we have the new process objectives clearly defined (in Phase 3),
we can measure our existing process in terms of the new objectives to see where we are and how far
we have to go.

Modelling the current process is an important part of this phase. It not only helps us to better
understand the existing process, but also helps with planning the migration from the old to the new
process and executing the physical transformation of personnel, organisational structures, information
requirements, and how technology is used. Information that should be included in the models include
process inputs (such as task times, data requirements, resources, demand, etc.) and process outputs
(such as data outputs, cost, throughput, cycle time, bottlenecks, etc.).

Understanding how and why the current processes use information is also important. Do staff
members have access to essential information? Are some business areas wasting time and effort by
creating duplicate information when it can be shared across organisational boundaries? Why is
technology used to support some tasks and not others? How effective are the current interfaces? Are
they easy to use, or are they counter-intuitive and thus inhibit the effectiveness of current tasks? In
what way does the existing process take advantage of technology, and in what way has technology
imposed artificial restrictions? We need to end up with an estimate of the current cost, robustness, and
functional value of each technology and information systems currently being used.

Phase 5: Re-engineer the Process

Activities

• Ensure the diversity of the re-engineering team

Question current operating assumptions

• Brainstorm using change levers

• Brainstorm using BPR principles

• Evaluate the impact of new technologies

• Consider the perspectives of stakeholders

• Use customer value as the focal point

During this phase, the actual “re-engineering” begins. We‟ve moved from strategy and analysis
phases into the redesign phase. The Re-engineering Team that was formed to take part in the re-
engineering sessions should consist of designers and implementers, including people well versed in
technology. These team members should come from both inside and outside the existing process.

The “inside” perspective may reveal information about the existing process that was not uncovered in
Phase 4. Having people who will be the future process owners or those responsible for the new
process are critical components of the Team. Including the future owners will help to ensure that the
re-engineered process succeeds once it is implemented.

Equally important is the “outside” perspective of someone who will look at the process with a “fresh
eye” and raise questions about operating assumptions that may not be obvious to the insider who
might be too close to the process to see this.

Lastly, a technologist will provide insight as to how technology can be applied in new and innovative
ways. In other words, the technologist will help to visualize how the process can be performed outside
the boundaries of the current implementation. Including both outsiders and technologists on the team
will help spark “out-of-box” thinking (thinking creatively above and beyond the current restrictions –
the walls of the box).

Phase 6: Blueprint the New Business System

Activities

• Define the new flow of work

• Model the new process steps

• Model the new information requirements

• Document the new organisational structure

• Describe the new technology specifications

• Record the new personnel management systems

• Describe the new values and culture required

Blueprints are detailed plans required to build something in accordance with the designer‟s intentions.
In BPR, blueprints must be created to identify all the necessary details of the newly re-engineered
business system and ensure it will be built as intended. This phase of the project takes the re-
engineered process developed in the previous phase, and provides the details necessary to actually
implement it.

Blueprinting involves modelling the new process flow and the information required to support it. Just
as we modelled the “as is” process and information requirements in Phase 4, we need to create “to be”
models to illustrate how the workflow will be different. The information models, or data models, will
indicate where the new process will use information that is shared across functional areas of the
business.

The blueprints should also contain models of the redesigned organisational structure. Instead of the
traditional organisation chart, a different kind of chart is needed. This chart will show the new process
flow along with the process team members, the process owners, the case managers, the process
facilitators. The chart should also indicate parts of the organisation which interact with the process
personnel.

In addition, detailed technology specifications required to support the new process should be defined.

Phase 7: Perform the Transformation

Activities

• Develop a migration strategy

• Create a migration action plan

• Develop metrics for measuring performance during implementation

• Involve the impacted staff

• Implement in an iterative fashion

• Establish the new organisational structures

• Assess current skills and capabilities of workforce

• Map new tasks and skill requirements to staff

• Reallocate workforce

• Develop a training curriculum

• Educate staff about the new process

• Educate the staff about new technology used

• Educate management on facilitation skills

• Decide how new technologies will be introduced

• Transition to the new technologies

• Incorporate process improvement mechanisms

Six Sigma Methodology

Six Sigma at many organizations simply means a measure of quality that strives for near perfection.
Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects, driving
towards six standard deviations between the mean and the nearest specification limit, in any process-
from manufacturing to transactional and from product to service.

Six Sigma uses a variety of statistics to determine the best practices for any given process.
Statisticians and Six Sigma consultants study the existing processes and determine the methods that
produce the best overall results. Combinations of these methods will be tested and upon determining
that a given combination can improve the process, it will be implemented.

Six Sigma statistically ensures that 99.9997% of all products produced in a process are of acceptable
quality. Six Sigma allows only 3.4 defects per million opportunities. If a given process fails to meet
this criterion, it is reanalyzed, altered and tested to find out if there are any improvements. If no
improvement is found, the process is reanalyzed, altered and tested again. This cycle is repeated until
you see an improvement.

Once an improvement is found, it is documented and the knowledge is spread across other units in the
company so they can implement this new process and reduce their defects per million opportunities.

Table : Cost of Quality at Various Levels of Sigma

Sigma Defect Rate (PPM) Cost of Quality Competitive Level

6 3.4 <10% World Class

5 233 10-15% Industry Average

Non Competitive
4 6210 15-20%

3 66807 20-30%

2 308537 30-40%

1 6,90000 >40%

The statistical representation of Six Sigma describes quantitatively how a process is performing. To
achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six
Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is
then the total quantity of chances for a defect. Process sigma can easily be calculated using a Six
Sigma calculator.
The fundamental objective of the Six Sigma methodology is the implementation of a measurement-
based strategy that focuses on process improvement and variation reduction through the application of
Six Sigma improvement projects. This is accomplished through the use of two Six Sigma sub-
methodologies: DMAIC and DMADV. The six sigma DMAIC Process (define, measure, analyze,
improve, control) is an improvement system for existing processes falling below specification and
looking for incremental improvement. The Six Sigma DMADV process (define, measure, analyze,
design, verify) is an improvement system used to develop new processes or products at Six Sigma
quality levels. It can also be employed if a current process requires more than just incremental
improvement. Both Six Sigma processes are executed by Six Sigma Green Belts and Six Sigma Black
Belts, and are overseen by Six Sigma Master Black Belts.

Six Sigma experts (Green Belts and Black Belts) evaluate a business process and determine ways to
improve upon the existing process. Six Sigma experts can also design a brand new business process
using DFSS (Design for Six Sigma) principles. Typically it is easier to define a new process with
DFSS principles than refining an existing process to reduce the defects. Six Sigma incorporates the
basic principles and techniques used in Business, Statistics, and Engineering. These three form the
core elements of Six Sigma.

DMAIC

Motorola developed a five phase approach to the Six Sigma process called DMAIC.

• Define opportunities

• Measure performance

• Analyze opportunity

• Improve performance

• Control performance

Table : DMAIC Process

Stage Phase Objective

Identification Identification Identify key business issues

Characterization Characterization Understand current

performance levels

Optimization Optimization Achieve breakthrough

improvement
Institutionalization Institutionalization Integrate Six Sigma in day
to day functioning

Introduction
Benchmarking :

Organizations need to improve continuously in various areas to keep them in a competitive position.
They can learn from various sources for their continuous improvement. Learning can be from both
internal and external sources. Many firms choose to compare their performance against that of another
firm in order to learn how they are performing in the market place. This can help them measure not
only in understanding their current performance, but also help them in best practices in other
organizations from which they can learn and improve. Thus benchmarking best industry practices is
one of the popular quality management methodology used by organizations all over the world. Xerox
was the first organization which initiated benchmarking concept and it went on win Malcolm Baldrige
National Quality Award. Xerox basically studied best practices of its competitors to learn and
improve its own performance. Since then many other organizations have used benchmarking as tool
for quality and productivity improvement.

Definition of Benchmarking

Benchmarking is the systematic and continuous process of determining what the best performances
and underlying skills of leading organizations are in their pursuit of excellence, and based on this, of
stimulating the organization‟s own strife for excellent performance at all organizational levels –
Camp.

Benchmarking involves management identifying the best firms in their industry, or any other industry
where similar processes exist, and comparing the results and processes of those studied (the “targets”)
to one‟s own results and processes to learn how well the targets perform and, more importantly, how
they do it.

Figure : Benchmarking

Benchmarking is most used to measure performance using a specific indicator (cost per unit of
measure, productivity per unit of measure, cycle time of x per unit of measure or defects per unit of
measure) resulting in a metric of performance that is then “Benchmarking is a continuous, systematic
process of evaluating and comparing the capability of one organization with others normally
recognized as industry leaders, for insights for optimizing the organizations processes.” compared to
others.