Reengineering the Corporation

MICHAEL HAMMER AND JAMES CHAMPY

Reviewed by Todd

Reengineering became the magic managerial term of the 1990s. Cover stories in business magazines touted Michael Hammer and Jim Champy as the strategic gurus of the moment. Companies like Deere, Ford, and Duke Power all found huge success using the concepts. Even Lou Gerstner, in his autobiography Who Says Elephants Can’t Dance?, calls out reengineering as having played a role in his turnaround of IBM. The trouble with every fad is the ridicule that follows.

In the 1990s, the term “reengineering” became an easy substitute for the prior decade’s “reorganizing,” “restructuring,” “delayering,” “downsizing.” The popularity of the term gave embattled executives needed cover when faced with media scrutiny and stock market pressure. The mere mention of a new reengineering initiative acknowledged the severity of a problem and indicated to shareholders that proper steps were being taken. But the actual results varied widely, and business leaders and journalists were quickly off to find and report on the next silver bullet. What’s left is general ambivalence for one of the most important business concepts in the second half of the twentieth century.

In Reengineering the Corporation, Hammer and Champy center their argument on Adam Smith and his theory of the division of labor. Smith believed that the shift from a craftsman mentality—when all tasks were done by a single person—to a separation of simple, repeatable tasks among specialists was the key to economic growth. Henry Ford’s assembly line and Alfred Sloan’s introduction of managerial specialists are the modern embodiment of Smith’s thinking.

Many organizations still model their operations on the division of labor used by their automotive forebearers. But inherent in Smith’s theory are productivity issues. Handoffs between specialists create queues and introduce the opportunity for errors; ninety minutes of actual work is drawn out over several days as the work snakes its way through the organizational labyrinth. And when someone raises a hand to suggest a better way, multidepartmental finger-pointing delays any real progress in determining where the problem really lies.

Reengineering the Corporation turns that theorizing on its ear. Hammer and Champy believe it is the whole process, not the individual steps that make up the process, that should be simple. Generalists take on the responsibilities of several specialists, making the decisions about what will be done and when. Multiple processes replace standardization, and with individuals or small teams responsible, quality control checks and oversight controls are reduced or eliminated. The measurement of success in the new work flow is the satisfaction of the end customer.

More important, the nature of work itself changes. Workers hired as automatons become case managers, empowered to deal with situations as they see fit. Their managers shed responsibility and become coaches, monitoring performance based on how well something is done, rather than how many units are completed.

“‘Reengineering,’ properly, is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance . . .”

Hammer and Champy recommend bold moves, suggesting “starting over” as a synonym for reengineering. The blank sheet of paper may be daunting, but broken processes that directly affect the customer are the place to start. The visual evidence, whether an unaccounted-for pallet of boxes or notorious piles of paperwork, is an indicator of systemic uncertainty. E-mail trails or full voicemail boxes show overcommunication among individuals, a prime spot for process redesign. The natural evolution of a company creates these complexities as products and customers evolve. Reengineering gives leaders the opportunity to untangle these webs and simplify overgrown business processes.

Jack Welch said he always needed to be on the “lunatic fringe” to get his company to move just a little, and reengineering’s extreme form of process redesign has a similar effect. Reengineering the Corporation has permanently added process analysis to the toolbox of every business leader, whether they know it or not. TS

Reengineering the Corporation: A Manifesto for Business Revolution, Collins Paperback Business Essentials Edition, Revised and Updated 2003, ISBN 9780060559533

WHERE TO NEXT? Here for a primer on Adam Smith Here for an ex-CEO’s endorsement of reengineering Here for how to implement change | EVEN MORE: Lean Thinking by James P. Womack and Daniel T. Jones; The Discipline of Market Leaders by Michael Treacy and Fred Wiersema; Business Process Improvement by H. James Harrington