Business Process Reengineering in a Six Sigma World

Through the years, there have been many different notions about what business process reengineering (BPR) is and how successful it has been as a process improvement approach. In the early 1990s, Michael Hammer and James Champy authored a best-selling book, Reengineering the Corporation, in which they promoted that sometimes radical redesign and reorganization of a process by wiping the slate clean was necessary to lower costs and increase quality of service.

Seven Principles of Reengineering

Hammer and Champy felt the design of workflow in most large corporations was based on no-longer-valid assumptions about technology, people and organizational goals. They also outlined seven reengineering principles to streamline the work process and thereby achieve significant levels of improvement in quality, time management and cost:

• Organize around outcomes, not tasks.
• Identify all the processes in an organization and prioritize them in order of redesign urgency.
• Integrate information processing work into the real work that produces the information.
• Treat geographically dispersed resources as though they were centralized.
• Link parallel activities in the workflow instead of just integrating their results.
• Put the decision point where the work is performed, and build control into the process.
• Capture information once and at the source.

In evaluating Hammer and Champy’s principles of BPR, one must note that BPR is not reorganizing, restructuring, downsizing, automation or cost-cutting – although these results are often part of a well thought-out, well planned, and well-executed reengineering project. A successful BPR project can be more identified with the following success factors identified in Prosci’s study “1998-1999 Reengineering Best Practices:”

• Proven methodology
• Compelling business case for change
• Effective change management
• Strategic alignment
• Line ownership
• Top management sponsorship
• Reengineering team composition

Prosci’s success factors directly map to tenants of Six Sigma:

• Executive management support
• Willing participation and buy-in of all associates involved in the redesign
• Focus on value-add and customer-focused processes

Using Six Sigma with BPR

The essence of Six Sigma is found in the reality that business processes are inherently unpredictable. Six Sigma provides a way of measuring the variability in a process as it delivers services to an end-user or customer. When most people talk about Six Sigma, they are thinking about the DMAIC methodology. This method is used for improving an existing process when it is not meeting customer needs. Since BPR speaks to “radical redesign and wiping the slate clean,” the BPR approach would, from a purist’s standpoint, align more with Design for Six Sigma (DFSS) than it does with DMAIC. Design for Six Sigma is typically used for designing a new process or redesigning an existing one from scratch to better meet customer needs and reduce variability in the process.

Often in the real world it is impossible to start literally with a blank sheet – even when Six Sigma capabilities reside in an organization. It is evident through mergers and cost-cutting activities, many companies have introduced complexity to processes without enabling technology to support the process. It is obvious to the naked business eye that the process is broken and the customer is not satisfied. Longer-term solutions may be gained through major technology upgrades and a blank-sheet BPR approach. However, when in survival mode, using Six Sigma DMAIC with traditional BPR efforts provides a customer-centric view of project identification within an organization. Six Sigma’s DMAIC problem-solving discipline within a BPR effort can provide:

• A proven set of statistically based tools and methods to eliminate variation and drive process quality.
• A method to help ensure that process improvement is data driven and encompasses baselines, scorecards, dashboards and other metrics.
• Creation of a common language for all process improvement.
• Stage-gating to ensure that initial assumptions identified in the project charters are valid and feasible, while maintaining vigilance on critical activities and deliverables through all five DMAIC phases.
• Reductions in cost that are associated with eliminating process defects, applicable scrap and re-work.
• A universal quality metric (sigma quality level, or SQL) that allows universal comparison of all processes and their ability to serve the voice of a company’s internal customers.

A Financial Institution Case Study

A recent business process reengineering effort at a large financial institution saw the wisdom of leveraging DMAIC within the company’s BPR effort. The company had an existing DMAIC approach to project execution when the root cause is unknown and coupled that with the BPR principal of evaluating end-to-end key processes from the customer initiation point, through the organization. The organization made the following observations:

• Processes are a “top down” view and cross-functional and cross-organizational lines
• Processes are cross-product and cross-business lines
• High-level site processing strategies and variances have been noted
• Processes will overlap with field offices given overlap in service touch-points
• Processes will utilize all existing work performed as part of current initiatives
• Initiatives should focus on key processes, utilizing the 80/20 rule, and will start at a strategy level
• Initiatives are process-based, not technology-based, and assume that the current technology will be used, incorporating and utilizing planned technology upgrades

The primary definitions of success for this reengineering program were two-fold – improve customer satisfaction performance and absorb business growth without a corresponding linear growth in expenses. BPR and Six Sigma would claim that improving customer satisfaction performance begins with measuring and meeting both customer- and market-driven service level agreements, including quality and timeliness. This requires the development and implementation of customer service metrics to measure the customer’s experience, risk and continuous process improvement. The reengineering process also should increase external customer satisfaction measurements through surveys and other feedback metrics.

The companies over-arching goal of absorbing business growth without a corresponding linear growth in expenses is accomplished through reengineering the process based on both voice of customer (VOC) and business strategy alignment service models. This includes implementing cross-organization initiatives to reduce group-wide expenses and assimilate technical changes into the new process design. Focus first on high-priority/high-impact change projects while planning for – and beginning to implement – longer-term change. Use current unit costs for benchmarking, and implement recommendations that lower those unit costs.

BPR Helps Reemphasize Six Sigma

A proven approach to reengineering programs is conducting an assessment from the “customer inward,” bringing out things that are important for the organization to be doing from a customer perspective. Using the customer perspective, the company should conduct end-to-end process reviews, incorporating cross-discipline and cross-functional team perspectives. The teams can include:

• Customer Service Team – Subject matter experts and ownership of production outcome
• Six Sigma – Opportunity to further institutionalize Six Sigma within the organization
• Finance – Ensures that process improvements and efficiencies lower unit costs
• Consultant/External – Objectivity and best practices; change facilitation
• Technology – Enhances technology understanding of business processes and helps define future technology priorities
• Product/Distribution – Provides customer and product perspective (current and future) and buy-in to new service models
• Legal/Compliance/Audit – Ensures outcomes meet corporate standards
• Human Resources – Ensures proper human capital and staffing strategies

Other process reengineering reviews also can include site analysis for potential consolidation opportunities; project management office/management process gap analysis; performance metrics baseline reviews, and additional technology reviews. The goal is to identify several quick hit/early win actions that can be taken while driving out future-state strategies and plans.

In summary, the approach to this program must be:

• “Customer in”
• End to end
• Business strategy/VOC-driven
• Participative/collaborative among all organizations
• Managed to achieve “definitions of success”

Integration with Six Sigma Principles

The company established these basic tenants for integrating the BPR effort with its existing Six Sigma DMAIC approach

• The process reengineering effort will provide the company with an end-to-end view of the process from a customer and business value-added perspective. It will not simply be a cost reduction exercise within discrete business units or sub-processes.
• A key element of the reengineering effort is the work in breaking down strategic focus areas into customer centric project ideas. This process should ensure that high-value, well-scoped projects are identified and linked to the company’s strategic objectives.
• Once projects are identified, a discussion with key stakeholders will take place to validate initial findings and prioritize projects. This discussion would include the Six Sigma team with the BPR group and internal clients. Not only will many Six Sigma projects be identified, but other projects will come to light that the organization should address as quick wins and process improvement projects.
• The reengineering effort will identify improvement opportunities with known and unknown solutions. The effort will look to employ Six Sigma DMAIC methodology to solve for the unknown solutions.
• For all project ideas selected, project charters are drafted which provide the business case for each project and serves as the guiding framework for improvement efforts. It also is at this point that the Six Sigma baseline metrics are established allowing one to track project and process improvement performance.
• Six Sigma resources will be aligned with the process reengineering project team to identify and capture Six Sigma opportunities.

Business process reengineering and Six Sigma deal with improving an organization’s process from the customer perspective. Process reengineering relates quality to the process, and so does Lean Six Sigma. They do so by recognizing that a process is a collection of activities that takes one or more kinds of input and creates output that is of value to the customer. Both process reengineering and Six Sigma relates quality to the process. Focusing on the process as opposed to the individual will lead to greatly improved quality. Leveraging Six Sigma within a holistic process reengineering effort leverages the best of both worlds. In the end, it is all about increasing quality to the customer by designing, measuring and improving the process.