Corporate Re-Engineering - Managing change with ease.

Change management and corporate culture are two of the main themes of BPR96, this year’s annual conference and exhibition on re-engineering and corporate transformation, produced by Business Intelligence in association with Financial Director. Five re-engineering practitioners explain why these factors hold the key to performance improvement.

Turning a vision of radical performance improvement into hard results can test management to the limit. Potential difficulties can be encountered at all stages of the cycle. Targets may be too modest to stimulate breakthrough solutions. But by far the greatest set of problems cluster round the management of change and corporate culture.

“The more projects I have done, the more I have come to realise the importance of change management,” says Martin Boiling, a partner with Price Waterhouse with extensive experience of re-engineering. “Once you start tackling major projects you end up with a much more complex programme of change, and that means handling the people problems. It has been a traditional blind spot for most companies.” says Boiling.

Typically, it is at the implementation phase that re-engineering starts to show the stresses and strains of change. But if diagnosed and treated in time, the symptoms need not be fatal.

In 1993 SmithKline Beecham set itself the goal of establishing a single supply chain process supported by appropriate information technology systems to replace the jumble of incompatible systems and practices that linked its 150-plus trading units worldwide. In the end, its project turned out to be a success. Initial indications are that the group is likely to achieve a 60% improvement in cycle times, 40% improvement in inventory and error rates close to zero. But this was one re-engineering project that could easily have been added to the log of failure stories.

“There are always peaks and troughs in projects,” says Robert Abel, director and vice president, inter-company trade, SmithKline Beecham. “But in this case the trough was deeper than anticipated.” The reason why was not immediately clear, although it was apparent the project was lacking the support and commitment it needed to be driven forward.

It was around this time that Abel became aware of the change management concepts and techniques pioneered by ODR, an American-based company that had started out in the 70s studying success factors in corporate change.

Relating their framework to the problem showed where the main problem lay. Executive sponsors had been inadequately involved in the initiative.

While he now understood how the re-engineering programme should be managed, Abel was saddled with a difficult situation. There had been a change of ownership and senior executives. “When the new owners asked what was going on, the perception from the business was not very positive,” he says.

“It was that much harder to get started again, we had to go back to basics.

It was a hard sell.”

By this stage, the project had not entirely fizzled out but had gone underground. It was kept going through the personal network, more or less as a favour,” says Abel. Its revival hinged on the readiness of the new executive to take up the sponsor’s role and provide active support. Abel successfully put the case for continuation by demonstrating that, although patchy, some progress had been made.

Given the green light again, Abel applied the ODR tools and techniques to the project. This provided the means for engaging people to play their essential roles. That included senior executives as sponsors and front line staff as change agents, individuals prepared to play an active role in facilitating change over and above their regular commitments. Just as selling sponsorship to senior executives had been difficult, winning others to play their part in the change management process presented challenges.

“Change agents were hard to find,” says Abel. “We did it through education by looking at the issue from the ‘what’s in it for me?’ angle, and people signed up for it.”

As a result of getting the project back on track, Abel has now won himself the job of sorting out supply chain issues for the group and its external suppliers.

SmithKline Beecham’s experience underlines the high-risk nature of re-engineering. “If you can reach your goal through continuous improvement then this is always preferable because re-engineering is disruptive, risky and demands a high level of commitment,” says Mark Maletz, managing director of Business Process Design Associates, whose career is rooted in process improvement at Xerox and American Airlines. The choice depends on how wide the gulf is between current and target performance levels.

It is this gap that has been key to persuading some companies that re-engineering is the only option. Initially, British Airways Engineering believed poor information flows from the support areas of the business to aircraft maintenance staff was what was holding back performance. But it became apparent that there was a more basic problem to be tackled.

“Re-engineering is the vehicle for creating a new way of working within the engineering business,” says Ray Claydon, project manager, British Airways Engineering. When the programme is completed, it will affect a workforce of 9,500 people. The vision for the re-engineered organisation was signed off in June 95 and work is now well advanced.

“Implementation has been a major challenge,” says Claydon. “It involves project management on a massive scale to co-ordinate change across the entire business.”

Central to the programme was the restructuring of the business to create a number of cross-functional teams to support and manage aircraft maintenance, component overhaul, design modifications and supply chain logistics. Processes and product groups have replaced departments as the principle for the new organisational structure. Self-sufficient business units will each have their own integrated technical support, production engineering, planning and other management support facilities.

British Airways Engineering has placed great emphasis on the change management side of the project. Audio-visual presentations for all staff have been a key feature of the structured communications programme. This was followed by an open job forum where staff had the opportunity to find out about the re-engineered organisation from the “new world” managers and the new roles and responsibilities they will be required to take on. To date, the programme has affected 2,500 support staff, most of whom have had to apply for these new jobs. Already, says Claydon, there is evidence of performance improvement.

The re-engineering project deliberately tackled the people and organisational changes first, leaving the systems strategy review until now. “In this way we can be sure our future systems are designed to support our new ways of working,” he says.

If strong sponsorship and project management are features of successful re-engineering projects, another factor is the close involvement of those most affected by the changes brought about by re-engineering. For Roger Boyes, financial director of the Halifax Building Society, this is an essential ingredient in the society’s Finance 2000 project, now about half way through its two-year programme. “I am asking the people involved to design the new systems. It’s not me telling them what to do. I am empowering people to come up with new processes.”

Behind Finance 2000 is recognition that the changes that were begun in the 80s with the deregulation of financial services require a new mindset and approach to serving the market. In the past, building societies have tended to be inward looking. But continuing rapid changes in financial services call for a different outlook.

“It is no good having a customer-facing branch network, if support does not recognise customers are both internal and external,” says Boyes. The primary goal is to re-engineer financial processes and services so they support the business unit strategy that will enable the Halifax to develop into a broad-based financial services organisation.

“We will have focussed self-accounting business units, responsible for strategy and financial control with upward consolidation into the group,” he says. “This gives you the opportunity to re-engineer all those processes.”

The programme of changes is extensive and will involve the introduction of fully loaded P&L reports at the business unit level, the application of leading-edge cost accounting techniques, distribution channel and customer profitability, the use of value engineering and the development of a balanced score card.

But it is not only processes that will change. “It doesn’t make sense to have a customer-oriented branch network and inward looking support services,” says Boyes. “You’ve got to have one culture.”

According to Maletz, management should turn their attention to corporate culture to ensure it is aligned with the goals of the transformed organisation before embarking on any transformation programme. “Unless that happens, you are unlikely to bring about the improvements you want.” In a re-engineering context, the values, beliefs and behaviour consistent with the desired changes can include a willingness to take risks and experiment with new ways of working, increased responsibility and accountability among those who deal directly with customers, and a more entrepreneurial approach to business.

Maletz argues it is possible to turn round corporate culture, even in international groups, within two years or so. “If they are prepared to tackle the three main dimensions of corporate culture: strategic direction, organisational structure and organisational behaviour as part of a timetabled programme of change, then the results can start to come through even faster than that. But it calls for a high level of commitment, time and energy.”

Siemens Nixdorf, one company with which he has been working, has bet its future on achieving a dramatic turn-round in its corporate culture to give it the capacity to compete in the global information technology market. Inside two years, it started to win new business as a direct result of its transformation into a customer-focused, market-oriented company.

Organisationally, its switch to process-based operations has begun in conditions where the changes have the best chance of taking root.

Siemens Nixdorf, and other companies, are discovering that investing in what has been regarded in the past as the soft side of business pays off. The right corporate culture not only enables performance improvement to work well. It may be the only investment that can guarantee longer term success.

David Harvey is a director of Business Intelligence.

Two free places at BPR 96 for Financial Director readers

As a special offer to Financial Director readers, Business Intelligence will provide two complimentary places at BPR 96, October 30-31, Olympia, London, the annual conference and exhibition on re-engineering and corporate transformation. The places will be awarded following a draw on October 11.

Robert Abel, Ray Claydon, Roger Boyes and Mark Maletz are four of the the speakers at this year’s event, chaired by Martin Boiling. The event has been streamed to cover re-engineering, continuous improvement, change management, the role of information technology, programme implementation and process redesign.

The event includes an exhibition featuring suppliers of leading change management, process redesign tools and consultancy services. Conference delegates have automatic entry to the exhibition. Alternatively, there are free exhibition-only tickets.

For details about the prize draw and to obtain a full BPR 96 conference programme, or an exhibition-only ticket, contact Roz McGuinness at Business Intelligence, on 0181 543-6565.