Reengineering a Project Management Process: a Case Study

Reengineering a Project Management Process: a Case Study

Franck Tétard

Institute for Advanced Management Systems Research Turku Centre for Computer Science

Lemminkäisenkatu 14-18 20520 Turku, Finland

Frank.Tetard@abo.fi

Research-in-progress paper

Abstract:

New forms of organisation, competitive pressures and the use of Information Systems seemed to have decreased productivity of managers. One reason that has been identified is the fragmentation of working time taking place in organisations. In the context of a research project conducted with 6 small and medium-sized high-tech companies located in South-West Finland, the author tries to confirm if the previous statements hold and investigates solutions to remedy to fragmentation of working time using the Business Process Reengineering approach. This paper defines the concepts which are relevant to this research and presents some early results which have been obtained with one of the business partner as a case study.

Keywords:

Introduction

As competition is becoming fiercer, it is difficult for any global or local organisation to come up with an innovation and substantially take advantage of it. We can identify two main reasons for that: (i) markets are global and an organisation can be challenged by any local or global competitor, (ii) the reaction time of competition is decreasing, enabling competitors to adapt quickly to new market conditions and copy innovations almost over night and at a minor cost. This also shows that tangible resources such as machinery, land and buildings, and even financial capital are easily available. These resources, considered as ”traditional” barriers to entry (Porter’s five competitive forces model)1, offer decreasing opportunities to create and sustain a competitive advantage. In some industries, these resources are not anymore forming a barrier to enter the market.2

As a result, organisations turn to their intangible assets. Among these intangible assets, two may be the future grounds for competitive advantage: customers and intellectual capital. By customers, it is meant the customer base: it is the raison d’être of any organisation indeed since there is no business without customers and no successful business without satisfied customers. Customers have to be understood in order to be properly served, and the analysis of the customer base is one mean to achieve that. Intellectual capital is a wider field: it includes the personnel, its skills and its effective management, patents, brands, and all knowledge that can be found in the organisation. Small and medium-sized organisations work under strong competitive pressures because of scarce resources. Especially, the working time of key persons in these organisations has been poorly managed and, as we will show, we have left these key persons to organise their own work. One consequence is the fragmentation of working time which we will define as the result of the implementation of new forms of organisation and the emergence of new information technology (IT), mainly.

This problem is tackled in a research project conducted with 6 small and medium-sized companies. By using the Business Process Reengineering method (BPR), we select a few processes in each company, try to understand the causes of fragmentation of working time, prepare some recommendations for attaining sustainable improvements and develop an IT-based solution to follow up the processes.

Fragmentation of working time

Fragmentation of working time can be explained as a result of a paradox: For years, workers’ efficiency (front-line workers, managers and even top management) has been limited by lack of information (quality and up-to-date information); then, thanks to IT developments, information barriers have been removed and organisation’s information flows have grown: nowadays, we are in such a position that we receive more information than we can actually process. Especially, key people are getting involved in so many activities that they are not able to focus long enough on any task. We have built tools for improving productivity but we are becoming less productive.

Several reasons for this can be identified:

1. The network organisation: Small and medium-sized firms are subject to strong competitive pressures which lead them to look for cost-effectiveness and trim their organisation. Combined with the emergence of new organisational models (network and lean organisations), it has the effect of involving people in too many activities. Especially the working time of key people of the organisation is eaten up by daily routines, and they hardly find the necessary time to focus on their core activities, at which they are good at, and to use their skills at their full potential. Involving people in many teams (which is good, in a sense, since it promotes teamwork) has the vicious effect to increase the need for information and knowledge.

2. Introduction of new IT: The use of IT is increasing at a tremendous rate in any organisation. Large investments in IT are made, even if it remains difficult to assess the payback of these investments. Studies indicate that there is no correlative link between IT investments and increased productivity3. On an indvidual level, the introduction of new technology translates into periods of adjustments: any new application has to be assimilated before it can be used at its full potential. The use of different applications and their increasing complexity also causes frustration for the workers. An other aspect worth to be mentioned is the opportunity that IT offers to reach other people and to be reached in a much easier way: for example, it is not rare nowadays that managers receive per day about 50 electronic messages whose content is not so crucial for running the business. 3. The changing nature of work

Work has been changing quite a lot from divided, specialized and monitored work to integrated, multifunctional and self-coordinated work. These new properties of work indicate that work is becoming more knowledge-intensive in the sense that the worker needs to understand the business across functional areas of the organisation. This has been commonly called knowledge work: product development, project management and system development are some examples4. Knowledge work activities are primarily subject to the problem of fragmentation of working time we are talking about, because the nature of knowledge work is such that it requires some flexibility to be performed in optimal conditions, at the same time work flexibility can be a trap leading to fragmented working time. From our reengineering point of view, knowledge work is very challenging: as Davenport underlines5, knowledge work, when reengineered, resists the tayloristic structured approach, where work is decomposed into small, standardised, measurable tasks).

Fragmentation of working time is in itself a symptom that the allocation of competences, resources and capabilities in the organisation is wrong. Therefore, a BPR approach is suggested as a solution for minimising fragmentation of working time, as it will free up managers from time-consuming routines and let them focus on their core business. Information Technology-based solutions could bring improvements in this area: the suppression of routines can be interpreted as the establishment of a new working equilibrium. People spend more time at developing competences of the organisation.

Business Process Reengineering

Business Process Reengineering (BPR) is defined as ”the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of cost, quality, service and speed” (Hammer and Champy, 1993). This is a method that enables an organisation to make fundamental changes in the way it carries out its business. Above the measures previously mentioned, BPR should serve an overall organisational strategy as a response to the pressures of the new business environment, known as the three Cs: customers, competition and change (Hammer and Champy, 1993)6.

In BPR, the focus moves from functions to processes (see figure 1). Traditional functions of the organisation are overhauled and reconstituted as simplified processes. We find two distinct approaches to BPR called respectively 1st and 2nd order BPR. 1st order BPR suggests that BPR should be achieved according to an evolutionary approach, while 2nd order BPR is achieved according to a revolutionary aproach.

Figure 1: A process cuts across organisational functions

It is also often mentioned that BPR is powered by the use of information technology (IT). We should however underline here that IT only supports BPR, and that a clear distinction should be made between Automation (optimisation of existing processess) and Obliteration of processes (Hammer, 1990)7.

R&D

Marketing

_Production

Customer

support

Cross-functional process

Customers

and

markets

We find that the shift from a functional organisation to a process-oriented (or re-engineered) organisation implies many changes (Hammer and Champy, 1993; Turban, 1996)8:

- Employees are empowered to make more decisions. - Non-value added tasks are eliminated

- Processes are customised to provide the customer with value-added products and services.

- Steps of business processes are performed in a natural order.

One consequence of BPR implementation is that information needs are different: information has to be spread accross the organisation so that people can execute the processes and make decisions at their own level. At this stage, IT makes one of its most significant contribution to BPR, by bringing new solutions to problems of the organisation.

BPR in Practice

Obviously, reforming radically business processes is not straightforward. Many authors have advocated the use of the white sheet approach, that is redesigning totally new processes without taking into account the existing processes and related constraints. Michael Hammer (1994) proposes to use the ”problem-rule-assumption” approach9:

- Problem: it is identified as a specific performance shortcoming of the process

- Rule: a specific aspect of the process design that causes the problem - Assumption: a belief about the environment that gives rise to the rule

In order to remove or solve a problem related to a process, the practitioner must elicit the rules of the business and question them. Doing so, he will discover the assumptions which enforce the rules: breaking the assumptions will enable the practitioners to redesign process with new rules and avoid the problems that existed before. This process is iterative: if an assumption cannot be discarded, the entire procedure should be repeated until an assumption that can be broken is revealed.

Discussion on BPR

There has been a large debate on BPR in the 1990s. At the very first, many articles were lauding the virtues of BPR as a management concept to introduce organisational change; then, it can be said that as many criticising articles were written about BPR in the last 4 years as it appeared that the most famous examples and models business process change failed for some reason to bring sustainable benefits to the organisation10. Still, BPR as a management concept is not dead, but there is a need to rethink its purposes and take into account important factors which have been forgotten: the organisation’s structure, human factors and information politics, for example.

Now, after a decade of BPR experience, we can affirm that a lot of work has been done about the BPR framework: Edwards and Peppard draw some recomendations about which process an organisation should reengineer first11. Peter Keen mentions further that firms can reap benefits from BPR if they get the right process right. Below, we list reasons why so many organisations have initiated BPR projects in the beginning of the 90s, and why they should now engage into BPR.

Why did an organisation implement BPR? Why should your organisation do BPR?

ü It is a ”buzzword” nowadays: management concept heavily marketed by consultants.

ü To forge an organisation that will compete in the future.

ü To catch up with the competition. ü To create an organisation more suited for knowledge creation and sharing.

ü As a means to automate, reduce costs and downsize the organisation.

ü To make the full use of your knowledge capital.

Case study

Description of the S.M.A.R.T.E.R. project

The project S.M.AR.T.E.R. aims at investigating the problem of fragmentation of working time in 6 small and medium-sized companies. We want to know if tackling this problem could bring improvements in the productivity of key people of the organisations; BPR is proposed as a method to identify the problems and solve them. The project is structured in 3 phases as shown in Figure 2.

Figure 2: Structure of the Project

Phase 1 (duration 1 year):

- Feasibility study of 3 months

- Pilot project (BPR, design of a pilot prototype)

Phase 2 (duration 1 year):

- Follow-up of the processes (measurements) - Full-scale prototype

Phase 3 (duration 6 months):

- Further follow-up and eventual modifications - Development of a commercial software system

Here we present some results for the first half of the first phase, that is the feasibility study and the pilot project. The feasibility study consists of understanding the problem area specific to the company, then we explicit our understanding of the problem with the help of cognitive mapping techniques. For each of the companies, we select 2-3 processes. In the phase of pilot prototype development, we carry out and design process changes, involve and train personnel, test the changes made. During this phase we keep in mind the BPR approach presented earlier (problem-rule-assumption).

We will start the case with some background information about the company, and then we will show some results about the mapping of the problem areas. Finally, we will present the processes which will be reengineered, make some reengineering suggestions and show the early actions that have been taken in prototype development.

Company Information

General background information

The organisation we are working with is the development unit of a large Nordic company manufacturing household appliances. The whole group has 110,000 employees and an annual turnover of USD 120 million. The development unit has about 60 employees. Customers of this unit are mainly internal customers (50%) and the automotive industry (25 %). The product of the unit is product development, which is also called project, in the organisation’s jargon. The products developed are typically prototypes which can be used by the customer as visual, functional or production prototype. The projects are classified according to the technology used: vacuum casting, metal casting, stereolithography, laser sintering, …

Considering the products of the unit, 3 factors are important for the business to expand: - Project precision: how well the terms of the project are defined with the customer. - Project efficiency: how efficiently the project is conducted.

- Degree of innovation: how innovative the technology is vis-à-vis the competitors

Information Technology Platform

The development unit has quite a long experience of the use of Information Technology, but IT policy remained somewhat incoherent for many years: many software programs, working with different platforms, are in use. However, during the recent months, large efforts have been made to integrate the different programs and move towards a Web-like environment. Before the start of the research project, the company had been using Lotus Notes, office applications and other specific software, and they were planning to introduce the newest Microsoft Office software Suite in order to be aligned with the IT policy of the whole group.

Mapping of the processes

From the first meetings with the company’s representatives, it appeared clearly that there was a need to harmonise the use of IT in the organisation: the results of a questionnaire, distributed to 12 white-collar workers which are closely involved in project management activities, shows that about 15 applications are used. These applications are sometimes recurring, meaning that 3 different word-processing and 2 spreadsheet applications are used in parallel. The knowledge level of the users varied then greatly from novice to expert level. Especially, the respondents felt that the different systems in use and the related compatibility problems were source of frustrations at work (a lot of time is spent to convert files, import and export information; learning new software is also an important issue).

The questionnaire also revealed that some sub-processes are slowed down or not effective: for example, making quotations to a customer is complex since there is no quotation standard in the development unit, project simulation is difficult as the software is inefficient. This questionnaire indicated that there is some improvement potential in the project management-related process.

Further interviews with project managers of the company have given then a general picture of the current project management process, though it should be mentioned that each project manager has his own understanding of the proces, his own way to describe it and also his own approach to put it at work. The project management process is described in Appendix 1. Interviews also revealed interesting shortcomings of the processes:

- Although all the workflow is necessary, all the information collected in project management activities are not important for the project manager (some detailed information is used by someone else at a later stage)

- Some procedures are missing: feedback, control procedures, quality management, automatic calculations for sales and quotations, resource management, …

- Some information is missing: real-time cost information, information from the customer (the project manager has to return to the customer many times to get complete information)

- There is some time-consuming and routine work: Project Planning , Project Simulator, customer conversations.

Finally, given the information collected after a third round of interviews, it was decided to concentrate reengineering efforts on standard processes: Vacuum casting, Metal casting and Injection molding, since they account for 60-70% of the turnover and they are quite standard (the technology is mastered and there is experience with these processes). The reengineering effort goal is to integrate procedures along the project management workflow (through a database of documents).

There has been an attempt to quantify the possible improvement that BPR would bring: Figure 3 below shows the typical structure of a project and the average length of each part of the project.

3 weeks 3 weeks

Figure 3: Typical Structure of a Project

In most cases, it appears that the duration of the project management part is very difficult to shorten since a large part of the time is used waiting for the customer. A smoother process could reduce the project management time by a couple of days but this would not be a significant improvement and will not be regarded as a particular distinctive factor from the customer point of view. The benefits to be reaped from this improvement are more internal: if routine work can be facilitated, more time can be delegated to more important tasks. In the case of our case company, some technologies can be used to facilitate routines: (i) a better Project Simulator, (ii) a Document Management System. As a conclusion to process mapping, the following figure 4 shows how IT themes are interrelated: the combination of different research projects lead to a Business Development framework. In this framework, the use of IT is harmonised in the organisation through the investment in easy-to-use and modern IT technology according to reengineering recommendations, meaning that technology is implemented and adapted to management practices of the organisation.

Figure 4: the Business Development Framework

Information Technology SMARTER – Fragmentation of working time LUCOS – Process visualisation modelling Project simulator GECOS

Reengineering

In our reengineering approach, we try to question the underlying assumptions in the project management process. For example, why the sales confirmation comes so late in the process? is all the information necessary in the workflow? In the project, we identify 3 points where we could bring some improvement:

1. Clear business rules: it appears that each project manager has his own understanding of the process; although the main structure of the project is the same for everyone, each project manager performs the process in his own way and with his own tools. There is a lack of standard in the communication with the customer: a customer can receive two different offers if he is in contact with two different persons in the company.

2. Handling of documents: as many applications are used, handling of documents is difficult: time is spent converting, scanning, importing and exporting documents. Here, two actions can be taken:

(i) educate customers, so that the transfer of information is done with formats agreed upon. This initiative, however, is limited to regular customers of the company, as it is impossible to educate a new and occasional customer in a short time1.

(ii) build a software solution, which would facilitate the visualisation of the file and the conversion of different formats. 3. Design procedures to empower workers, for example, to manage their

own working schedule, to produce feedback information, …

Reengineering suggestions

On the basis of the various questionnaires and interviews, we draw a list of reengineering suggestions:

- design simpler management routines - establish clear business rules,

- invest in a better Project Management-system, - integrate information provided by various systems

- delegate responsibility to line workers (sub-processes): for example, for the planning and management of their timetable, produce feedback to project managers

Software development

During the first months of the project, work has also be done to develop an IT-based solution. Two main projects are currently under way: (1) the development of an interface to facilitate the handling of documents and (2) the construction of an Access-based

1

This phenomenon has also been noticed in an other company taking part in the same project. This company’s business is in printing. There, they want to keep the sales process as flexible as possible, and allow the customer to submit the specifications in any format and make changes to the print even an hour before the printing process starts. This kind of process is very difficult to manage as the salesmen must be

database to facilitate the creation, the storage and the retrieval of routine documents such as quotations, orders, invitations to tender, sales confirmation, …

Figure 5 is a screenshot of the interface developed in Visual Basic 5.0, a Java version should also be implemented. This is an effort to develop a platform which would integrate different applications (word-processing, spreadsheet, database, electronic mail, … ) and their related documents organised in folders. The application is constructed so that the user does not need to run a specific appplication to view the document. The program is provided with an application which can filter incoming electronic mail, and shows headlines of incoming messages as a ticker. Furthermore, we aim at providing the possibility to easily cut, copy and paste information from one document to another.

Figure 5: a screenshot of the interface

In order to improve the quality of this work, we have started an evaluation. Demo versions of the interface and the database are being tested by the users of the case companies, and results taken into account for further development.

Conclusion

The case study shows that fragmentation of working time is a problem which can appear under many forms. The fact is that fragmentation of working time takes its roots in a lot of factors (human, organisational, technological, … ), therefore finding a solution to the problem is not straightforward.

We have also promoted BPR as a method to redesign better processes, adapted to the knowledge-intensive work of people. However, at this stage of the project, we cannot pretend if we will achieve any improvement, since we do not have any measurements of process effectivity. Still, we can estimate that the changes will not be dramatic but rather incremental, one reason for that is that we tackle small problems, due to restrictions in project scope.

Appendix 1: The project management process

- Check the payment information - Choose the manufacturing process

- Set up preliminary timetable

Project management:

- Confirm the documentation for the project - Distribute instructions to the workers - Follow-up of the schedule

- Receive more detailed info from the customer, if needed

Sales confirmation

Delivery:

- Check the quality

- Inform the customer Prepare the offer:

- Invitaton to tender send to subcontractors

- Check capacity and availability of raw material

Send offer to the customer:

- Quotation form, filled with delivery conditions and other appendixes

Order from the customer:

- Reserve necessary work capacity and schedule the project

- Open the project according to instructions

Subcontracts:

- Place orders, if needed

Close project:

- Archive project information Accounting:

References:

1

Porter M., “Competitive Advantage”, The Free Press, 1985, p 7

2

Whitehill M., ”Knowledge-based Strategy to Deliver Sustained Competitive Advantage”, Long Range Planning, Vol 30, August 1997, pp 621-626

3

Roach S., “Technology and the Service Sector: America’s Hidden Challenge”, Morgan Stanley Special Economic Study, Technical Report, 1987

4

Davenport T., “BPR: Where It’s Been, Where It’s Going” in “Business Process Change: Reengineering Concepts, Methods and Methodologies” by Grover V. and Kettinger W., Idea Group Publishing, 1995

5

Davenport T. et al, “Improving Knowledge Work Processes”, Sloan Management Review, Summer 96, pp 53-65

6

Hammer M. and Champy J., “Reengineering the Corporation : A Manifesto for Business Revolution”, HarperCollins, 1993

7

Hammer M., “Reengineering Work: Don’t Automate, Obliterate”, Harvard Business Review, July-August 1990, pp 104-112

8

Turban E., “Information Technology for Management : Improving Quality and Productivity”, John Wiley & Sons, 1995

9

Hammer M. and Stanton S., “The Reengineering Revolution: A Handbook”, Harperbusiness, 1995

10

Keen P., “The Process Edge: Creating Value Where It Counts”, Harvard Business School Press, 1997

11

Edwards C. and Peppard J., “ Operationalizing Strategy Through Process” in Long Range Planning, Vol. 30, No. 5, pp. 753 to 767, 1997