Business Process Engineering At Proctor And Gamble Commerce Essay

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In 1993, Edwin Artzt ("Procter Gamble" CEO) referring to Business Process Reengineering (BPR) happening within his organisation, described it as an approach and method where "… we are going to take this place apart brick by brick and put it back together again". (Hammer, 1996 p. 4) Translated in simple and sharp words, the statement above meant BPR works when each single individual organisation`s process has been deeply and separately analysed, assessed in view to obtain a fresh fertile ground for the creation of radically new reinvented processes, achieving dramatic improvements in performance. (M. Hammer, 1995)

Michael Hammer and James Champy (1993) adopted new revolutionary visions and approaches to business processes, in view to lead an organization to a major change and ability to face market continuous transformations; they both acknowledge dramatic performance achievements are the result of radical implementations, and changes of set of activities within a business.

These last twenty years have seen consolidated organisations operating in various markets adopting a BPR approach to gain profitability through a reconstruction of the organization itself, too.

Once it is understood that "…people have not just been reading about reengineering, they have also been doing it" (M. Hammer, 1995, p.XI) it is extremely important to know what it is and when business process reengineering began.

From a general overview of what BPR primary is to a deep research and related assessment of how BPR has changed organisations, we are going to specifically analyse the Italian ski resort organisation "Frais 2010"; throughout an evaluative and analytical analyse of the primary data collected using surveys and interviews it will be possible to understand whether a BPR approach in the business operations could positively affect the organisation as a whole of systems induced to create services for its customers.

The language used for the collection of secondary data is English, however primary data had been obtained using the Italian and French language; all surveys and interviews 'findings as well as gridlines are translated in English and reported in the tables.

Justification of research

BPR as stated by M.Hammer (1994) is not only for large organisation but can be an imminent rethinking of processes and management styles within an organisation at start-up point, too.

Pian del Frais ski resort could be a fertile ground for BPR because it is still not a consolidated business encountering department divisions, as well as it lacks a proper departmental structure and the nature of processes involved are most of the time reflected in daily "monotone" scheduled works.

Since 2009, a new incoming joint venture, "Frais2010" has begun to manage and operate the ski resort; an implementation of offers, products and services for tourists in the ski resort is among the main objectives for this company, to gain in a short time period return on investments and substantially positive growing equities for its business associates.

At the moment there are no academic researches specifically focused on Pian del Frais and its ski resort managing company, however the author intends to analyse and assess the ski resort business in view to create a written documentation able to critically assess the limits and potentials that this business could face approaching a BPR methodology and project.

Aim and objectives of the research

The research is aimed to discover whether BPR is suitable for an Italian limited ski resort organization affected by a chaotic business environment: years of operational inactivity have led the newly established company to an immediate need for work processes and company systems to move away from "old business habits", and to create new systems and methods to carry on daily field activities and management processes.

AIM

Is a BPR methodology able to improve quality and provision of services within "Frais2010" or is it just increasing its revenues and lower operational costs?

To understand whether the business needs to embrace a BPR methodology of "doing things", it is necessary to primary define the organization`s set of activities, opererations, the business environment and its resources.

OBJECTIVES

Understand the business environment at Pian del Frais

Identify "Frais2010" human, financial and material resources

Assess the value and efficiency of the systems of operations at "Frais2010"

To finally achieve the set aim written above, it is extremely vital to reach the three objectives in view to analyse and benchmark "Frais 2010" company`s operations, issues and management strategies with the customer`s willingness to change.

Chapter 2: Review of Literature

The literature review is focused to build up a consistent quantity of relevant and up to date academic information concerning BPR in view to compare, contrast and analyse these already existing theories and business practices with the author primary findings.

From a macro study of what in general and academically is BPR the literature review will focus on a micro view of how BPR is used in the tourism industry, specifically within a ski resort environment.

BPR what is it

In the last two centuries, industries throughout the World embraced part of Adam Smith`s theory of the division of labour (The Wealth of Nations, 1776): a whole system conceived to create a tangible/intangible product is fragmented in many series of works (processes) involving the introduction of machineries, able to cut down the number of employees, though, it drastically speeds up the production times and increases the volumes of production.

Not only A. Smith shaped today`s industrial systems of production but also Henry Ford (1863-1947) and Alfred Sloan (1875-1966) contributed to develop production in the actual way we see it now, reflected in how companies "do" their job.

Henry Ford implemented the fragmentation of works by simplifying each single process and "bringing the work to the worker", A. Sloan implemented Ford`s partitions of work by setting up small divisions, uniquely assessed and controlled under financial and productive efficiency statistics by decentralized headquarters.

Both H. Ford and A. Sloan created the pyramidal structure of work and management the majority of organisations still have on place: parallel divisions are created among professional labour and manual labour, complex systems are created for budgeting, planning and control and the outsourcing of workforce is the main tool to grow up the organisation when higher production is needed.

These theories and work practices led companies throughout the years to focus on specialist functions rather than on value creating processes.

Untill now, most of the organisations have based their productions in well-defined systems of processes to comply with high fast pace demands, and requests for homogenise products or services able to satisfy a global scale of customer`s expectations and standards.

M. Hammer and J. Champy recognised in their work "Reengineering the corporation"(2006) a pyramidal structure is nowadays no more sustainable for any organisation willing to compete and exceed in the XX century`s market: management and employees are too far from their customer`s opinions and requirements, sprawling enterprises have complicated and enormous amounts of bureaucracies just to stretch power and responsibilities through their hubs, and finally each single organisation has too many functional/middle managers laying in the middle of the organisation chart.

"Companies today consist of functional silos, or stovepipes, vertical structures built on narrow pieces of a process" (Hammer M. and Champy J., 2006 p. 31)

The too stretched, and vertical power pyramidal organisation has created fragmented processes, and the management prevalently focus on growth and budget cost cutting; these characteristics do not pay attention to the organisation`s flexibility, responsiveness, customer focus, results, innovation and costs, for specialised high skilled people able to join different individual tasks done in functional departments. (Humpy Dumpty School of organisational management)

Contemporary socio-economic factors (recession, public awareness and consumer rights enforcement) have changed industrial trends in creating and delivering products/services: from a globalised market creation of products and services, consumers are now asking, seeking for real added values, and preferably individuality, within the products/services they purchase.

"In today`s environment, nothing is constant or predictable-not market growth, customer demand, product life cycles, the rate of technological change, or the nature of competition. Adam Smith`s world and its way of doing business are yesterday`s paradigm". (Hammer M. and Champy J., 2006 p. 20)

So, the initial idea and practice companies had to separate workers, in hermetic divisions able to perform one single set of activities is left behind, to create and empower cross functional employees/divisions able to run processes in a faster, more flexible responsive way, and mostly everyone in the company knows the product and can add value for the customer.

Successful organisations nowadays depend on three major market forces (the three Cs): customers, competition and change; everyone working in a company is responsible for the improvement, flexibility and quality of the selling output, to efficiently manage and face these three modern market forces.

Customers and suppliers are now considered as individuals, seeking for products and services uniquely designed for their specific needs, trade barriers are falling down and competition is fierce thanks to national/international deregulations, SME`s and start-up companies are faster than bigger organisations to introduce new products/services on the market, information technology and scientific research have diminished the products lifecycle, promotion and expansion for new products/services now rely on speed and technology.

Organisations until now have managed and run their businesses as asset portfolios where employees are fitted within narrowed task-oriented jobs and have no chance to "move" from one department/unit to another; in this way no one at lower level is responsible for the overall production system, the customer service value is limited to a fewer, which means not so many people are empowered to fulfil customer`s requirements and needs.

That is the reason why not only well established companies but even companies at a start-up level must reinvent their processes, in view to understand and face their exposure to the three Cs. The organisation`s flexibility and success to keep up with the external and internal market forces is achievable when the company knows, how to get the work done and people work together to invent, make, sell, and provide services. (Hammer M. and Champy J., 2006)

BPR could be summarised as a methodology to have major changes and transitions in different structures within two major parts of the company: the technical side (machinery, processes, operations) and the human resources side (employees behaviour, attitude to changes). (Cummings T. and Worley C., 2004)

Drastic changes within the organisation can lead to significant, limited, local, widespread, reversible, permanent outcomes; this is why BPR has impacts across organisational boundaries, and generally impacts or effects over external suppliers, customers, and as well on the organisation` structures.

The organization`s commitment to redesign itself introducing new future strategies, operating-business environments and technical capabilities are the main objectives for a successful BPR. These changes involve the assessment whether old and new resources are required, or are just wastage for new systems; the organization power distribution is object of studies and analysis for the initiation, development and implementation of a BPR project.

An accounting system, able to follow up the BPR project and its outcomes, is able to control, reduce and assess the financial benefits and costs related to changes in practice and behaviours.

Drastic changes, leading to breakthrough improvements to the organization`s system of activities and practices implicate major investments, and related financial losses due to temporary abnormality within the delivery performance for products/services.

It is important to financially understand whether the organization is able to undertake a major investments to bring radical innovative changes within the whole of its operations and systems or, it is more suitable for the company to embrace a "Kaizen" vision: continuous changes affecting single processes and business units, but as well everyone within the organization.

If it is not financially possible to undertake a BPR project, the company can always aim for a Total Quality Management methodology. (Slack N., Chambers S. and Johnston R., 2007 p. 595)

Key Concepts of BPR

…"A completely fresh start, or blank sheet of paper approach, to organisational redesign ignoring past history or present structure or practices"…

"A process-orientation approach to organisational analysis centred around a horizontal review of all activities involved in the process, or set of activities, in the delivery of a product or service to the customer"… (Mullins L.J., 2007 p. 764)

BPR is seen as a whole of new processes able to reduce costs of inputs, production processes eliminating unnecessary activities, where technical, economic, administrative and accounting aspects are improved and restructured. (The role of BPR in reducing costs, 2010).

In 1993 Hammer and Champy described this method of production and production system as:

"Reengineering concentrates on the end-to-end business processes to create a real customer value and eliminates all functional boundaries, which otherwise slow down the processes and add non real values to the finished product."

BPR is specifically assessing and reconstructing business processes.

"A business process is, usually, understood as a sequence of activities, functions or tasks which leads to a well-defined operational goal" (Planning Business Processes in Product Development Organizations, 2003)

Each single activity involves knowledge, information and materials to transform an input into an output and, all the activities work simultaneously at the same time, sometimes overlapping each other's and other times synchronised. To manage and control all activities are efficiently done and deliver an output at a determinate time, a process plan is required.

Preconditions for a successful BPR Project

BPR Case Studies

Benefits and limits of BPR

At the beginning of all major changes within any organisation we can notice five common transitional phases inheriting to the past and future dynamic timing of the company: denial, resistance, awareness, exploration and commitment. (Cummings T. and Worley C., 2004)

A reengineering failure can be associated to a wrong implementation of information technology and a misunderstanding of non-clear strategic needs, responded with partial changes (Clemons E.K, Thatcher M.E. and Row M.C., 1995) and the increasing of direct and indirect costs, added to the lack of identifying and managing other different risks, which undermine the BPR project development outcome.

Those risks are:

Financial - returns on investments do not repay the changes done within the organisation.

Technical issues - new methodologies, processes and machine requirements are not available or effective.

Functional - the BPR outcome is not within the organisation and final users` needs.

Political - commitment and efforts are lost along the way of the project and management levels are not persuaded by the BPR project, too.

At the end, it is important as well to see failure motivations within a human prospective: workers, specialists and all employees within an organisation prompted to implement changes, are resisting to changes in fear of job cuts, diminishment of professional expertise in favour of mechanical/technological machineries and merely non understanding of the BPR concept.

"The use of reengineering processes brings down the costs of inputs and the production process and the cost of post-production processes" (The role of BPR in reducing costs, 2010)

"Work that requires the cooperation and coordination of several different departments within a company is often a source of trouble" (Hammer M. and Champy J., 2006 p. 11)

Major barriers to change: resistance to change, Limitations of existing systems, Lack of Executive Champion, Unrealistic expectations, Lack of cross-functional team, Inadequate team and users skills, Technology Users not involved, Project charter team narrow.

Individual resistance and denial are due to habit, economic factors, job security, and fear of the unknown, selective information processing; these issues can be overcome by all employees within the organisation adopting negotiative, manipulative, co-optational and coacertive behaviours, creating and enhancing a policy of communication, involvement, active participation, education, support and facilitation among employees.

Organisational resistance: threat to established power relationship, threat to established resource allocations, structural inertia, limited focus of change, group inertia; when the organisation is going through a BPR project, it is extremely important the creation of separate teams to limit collateral damages by the organisation structure itself, too.

These teams are made to evaluate the political support and reaction for changes by identified, influent stakeholders, and finally in view to implement the product mix a group must assess the level of business the customers are doing with a company (agent power). Analyses and assessments by this group of people are useful to understand how does changes affect stakeholders and foresee their consequential reaction to BPR.   (Cummings T. and Worley C., 2004)

BPR is seen as an important tool to change company`s strategies in a foreseeable future and this methodology, used with total quality management (TQM) is an actual widespread practice management and strategy, used to face and predict cultural changes, as well as a performance measure. (Mullins L.J., 2007 p. 765)

"It also seems that when used in an integrated manner, BPR and TQM can produce a profile of organisational change characterised by periods of continuous improvement interrupted by episodes of radical innovation which serve to steepen the overall improvement/learning curve".

(Mullins L.J., 2007)

Chapter 2: Pian del Frais

A geographical, economic description of the location

Pian del Frais (Frais) lies in the Northern Italian region of Piedmont, it is a small ski resort part of Chiomonte County which have been in the 1970`s an important and growing centre for Winter sport activities, and a holiday destination for local inhabitants living in Valle di Susa and Turin.

Throughout Italy and Europe Piedmont is known for its industrial creativity and car industry; many Worldwide organisations started their businesses right in Turin and neighbourhood towns such as "FIAT" automobile, "Ferrero" chocolate, "Pininfarina" and "Giugiaro" designing.

Tourism has recently played a key factor for Piedmont to project itself over the Italian Alps, the history, the arts and the sporting-cultural happenings have created the opportunity for Italy, and particularly the City of Turin to host the Winter Olympic Games in the year 2006.

During the Olympic Games various alpine locations had been chosen as hosting and training venues for the competing National teams. Pian del Frais has seen the American team with Ted Ligety and Bode Miller training on the slopes in view of the super-G races.

Throughout the years, Pian del Frais although being chosen as a training location for the Olympic Games, has fallen into a rapid decline due to various social, political and financial issues, which have pushed its inhabitants and investors to close businesses or disinvest in local economic activities.

The private owned ski resort organisation operating at Frais did not operate the business for five years because of climatic unforeseeable constraints, a major lack of economic resources and commitment of private and public investors.

The few local business activities related to the skiing industry have faced a high economic recession and the overall morale of the mountain resort inhabitants has perished throughout those years, creating a consequential backlash effect on potential incoming investors and local authorities.

Since 2009, an incoming new joint venture managing and operating the ski resort has begun to implement the offer of products and services for tourists but, it is still far away from gaining a short time return on investments and obtains substantial equities for the business associates.

Chapter 3: "Frais 2010"

Vision, Values and Core Business

Stakeholders

Organisation structure and behaviour

"Associazione Frais 2010" is a private organisation owned and managed by a group of business partners, willing to run and implement the already existing ski resort at Pian del Frais.

The organisation originally

Identifying resources and operations within "Frais 2010"

All private and public organisations deliver a product or service (output) using transformed and transforming resources (input); people would eventually buy the final output not because of its tangible or intangible characteristics but because of the values it has in creating a benefit.

Throughout a set of activities, together called operations function or generally speaking "operations" or "processes", transformed resources (materials, information, customers) and transforming resources (facilities, employees) generate, by the way these are elaborated, a specific product or service for internal and external customers of the organisation. (Slack, 2007, p. 4)

When Slack defines processes does not go far from M.Hammer (1996, p.4)`s theory: a process is the whole of tasks effectuated to generate a value for a customer.

All organisations have three core functions (marketing, product/service development, operations) which create support operations able to meet customer`s needs, demand and selling objectives. All set of activities within an organisation are divided in internal suppliers and internal customers, sharing and adopting mutual objectives at different stages, to cooperate following a specific hierarchic pathways. (Slack N., Chambers S. and Johnston R., 2007, p.18)

The organisations designs and operate functions to reflect its activities domain: culture, strategy, structure, power distribution and control system (Romanelli, 1996). The success of the output depends on the company`s ability to manage and predict the volume, variety and variation of its processes, according to the level of demand on long/short term objective strategies.

Operations manager's main role is to ensure processes are designed, and controlled to meet the organisation`s objectives at competitive levels, positioning its products/services within a continuous changing business environment.

The identification and assessment of internal and external factors such as sustainability, social responsibility, environment, globalisation and technology play an important role in the manager`s commitment, to reorganise organisational responsibilities and process boundaries (BPR). Doing so, managers reach high performances in quality delivery, and operations improve their speed, dependability, flexibility and an overall minimization of costs and losses. (Slack, 2007, p. 21)

Pian del Frais ski resort, as well as all the other ski venues around the World is extremely affected by the number, variety and type of natural, artificial resources it can exploit for its business operations.

A ski resort is generally chosen by tourists for its total length (in kilometres) of ski runs, variety of ski slopes (levels of difficulty, off-piste, grooming…), services (public/private) and natural features such as the landscape and the presence of woods and small glaciers.

These natural and artificial attributes of the ski resort as a whole of slopes, facilities… are relevant to the customer`s willingness to pay a set fee for the enjoyment of the location and vacation; variable added values to the ski resort are the presence of shuttle bus services linking different locations, the onsite accommodation`s location, type and quality, activities and services offered to a general or niche market which is not always using the ski lift tickets. (Falk M., 2008)

lift ticket prices to have a significantly positive correlation with lift capacity. In order to measure lift capacity, we first calculate the vertical transport metres per hour for each lift

"Frais 2010" stakeholders

Chapter 4: Research methodology

The research is based on contemporary business management issues affecting the ski resort, and these are object of tourism and management studies within recent published academic literature, where case studies are provided and assessed in details and critically discussed.

Theories, findings and hypothesis are collected through primary sources and a field research will be directly undertaken in Italy, where people involved in the ski resort businesses are questioned about physical and human resources management topics, using a qualitative survey.

Italian interviewed people are actually covering management positions within the Tourism sector as well as within other different sectors where management skills and knowledge are required at their professional levels, this will enforce the credibility for primary data collected in Italy during informal meetings at Pian del Frais; each contacted individual has its written profile in the research appendix.

To better understand the ski resort company, a quantitative pilot survey has been done to identify the type of customers Pian del Frais has throughout the year; another quantitative survey was made to obtain all the data required to assess whether the introduction of a BPR methodology would suit within "Frais2010".

The language used for the surveys and interviews is Italian as well as most of the collected primary data concerning the ski resort and "Frais2010";summarised English version of those transcripts can be found in the appendix.

Chapter 5: Analysis of results

Chapter 6: Conclusions and Recommendations

Table 1.0: Differences between BPR and TQM

BPR

TQM

Major advances in performance from a horizontal, cross functional anatomy of performance perspective

Continous incremental improvement within a specific framework

A challenge to traditional structure, relationships, boundaries or barriers among departments/business units

It requires a supportive environment and relies on teamwork, participation and commitment

It has a strategic approach and requires management to initially lead

It involves both management and lower level of the companies, they are together and carry on all tasks

(Mullins L.J., 2007 p. 764)

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