Applied reengineering
Most organizations have a structure, a series of components that make them unique. Those components define the tasks. Eg: pyramidal structure.
These structures contain processes, methodologies, etc.
Adam Smith discovered the efficiency that was obtained through division of labor. The pyramidal structure arises from this, determining a series of tasks that, as the final product became more complex, that is, it required more tasks to achieve it, more and more people were needed to carry out the different tasks. This produced the need to coordinate in some way that people did their jobs well and led to supervision. The more tasks were carried out, the more supervisors had to check that they were done well. This led to the pyramidal structure growing larger and larger.
With this model it was produced without taking into account the demand. Henry Ford creates the production line, making the product go to the workers instead of the latter.
This series of "previews" allowed production to increase enormously.
Sloan creates the Management System tailored to the Ford production line. The financiers are born, the accountants who determined how much it cost to produce a car and if people were going to buy it. From this, they generate budgets.
Bureaucracy appears, that is, following the rules to the letter. Written standards, procedural manuals become commonplace. In the pyramidal system the bureaucracy allows the organization, that is, it gives it the "form", it organizes it.
The concept of "the 3 Cs" (Customer, Competition, Change) appears.
This occurs because the Client obtains awareness of such and demands. You have satisfied the need for a product, now you want a better and different one.
Japan maintains that the pyramid structure is useless because there is no quality. He grows up with the philosophy of unmet needs.
Deming created the concept of "Total Quality" (philosophy of "just in time", everything that is done wrong once, is done twice).
Reengineering theories appear, where it focuses on customer demand, whether internal or external; the quality; after-sales (customer satisfaction). Reengineering appears due to the stagnation of production, which leads to a stop or poor quality due to the dragging of errors and the lack of quality control.
Competition appears for the Japanese alternative (better and cheaper). The company must aggiornrse to the competition because otherwise it disappears. The first to generate a competitive advantage becomes the market leader.
The change: what used to be used is now obsolete. Today the structure is flat and it is evolving to the virtual organization (e-commerce; e-business). The unit of time is not measured by years, but by changes.
The fundamental problem is that people do not know what they are doing, why they are doing it and for whom.
Structures
Structures are the support of the organization. They comprise a set of factors:
- Physical: technology, logistics, infrastructure, etc. Human: human resources Financial: capital, investments, etc. Legal and administrative: regulations, contracts, etc. The order necessary for the organization to function.
Structure types
- IndustrialCommercialServicesMixed
Classification of structures
• Defender: companies whose product-market relationship is very stable. They are neither successful nor low profile, generally 2nd or 3rd line. They avoid changes. Typical family businesses.
• Reactive: they follow the market. They try not to lose the step to the proactive ones. They react to changes so as not to be left out of the market.
• Hybrid: it is part defender (stable, does not change) and part reactive. The problem with this type of structure is that, by virtue of being stable, it is difficult for it to internalize changes or even to anticipate them, so when it wants to implement one it ends up failing.
• Proactive: those organizations that impose changes. They run the market with their innovations; they generate new ways of thinking.
These structures pursue an end, which is reflected in:
View
Mission
goals
Strategies
Goals
Programs
Policies
Plans
Strategies
To generate a strategy, 5 factors must be taken into account:
- Oneself (SWOT) The Customer (who they are, how does it affect me) The Competition Suppliers (who they are, how they affect me) Substitute products
There are barriers to compete:
- Legal • I don't know my competition
• Physical (technology) • Resistance to change
• Economic • Bad customer service
• Low efficiency
Components of the strategy
The starting point of a strategy lies in the definition of these.
1. Product: what do I want to produce? Characteristics.
2. Market: for whom? Who is not for?
3. Capital (investment level): it can be:
• Growth capital: when it is invested to grow the company.
• Maintenance capital: when money is put in to keep the company stable.
• Capital to decrease growth: when upon reaching a certain point of growth, the level of investment is lowered to bring the company to a lower level than it was. Once there, it is maintained.
• Divestment capital: when all the capital is withdrawn to close the company.
4. Strategic assets or skills: what am I good at?
5. Synergy: when I have several business units and it is convenient to integrate.
Strategy types
When there are several Business Units:
1. Stable growth
2. Growth
3. Retract
4. Completion
1. Stable growth: applied by companies that keep pace with the market, that are not innovative, that are 2nd or 3rd line, defenders.
2. Growth: companies that go faster than the market, innovative, benchmarking, aggressive.
Alternatives:
a) Focusing on a single product: you have only one product and you specialize, that is, it has to be the best. There is economy of scale (large quantities are produced, reducing costs)
b) Concentric diversification: many different products.
c) Vertical integration:
• Upwards: the company has its own premises, where it distributes the product.
• Downwards: the company is its own supplier of raw materials.
• Both: the company is its own supplier and, in addition, distributes the product in its own outlets.
d) Horizontal integration: the company absorbs the competition, the purchase.
e) Completion: disarmament of the company and its subsequent sale in parts, allowing profit.
3. Withdrawal: used when there are conjunctural factors in the market, that is, non-structural ones. (Ex: when there is a recession there is no consumption, so the company adjusts by reducing expenses). They are measures taken under the circumstances.
4. Completion: when the threat cannot be overcome and it exceeds the company, what you have to do is sell or close. It is used for structural factors (bankruptcy).
When there is only one business unit:
1. Cost leader: efficient, neat company, there are no excessive expenses, so it produces at the lowest cost.
2. Leader in product differentiation: the product is the best in its class. Unlike the targeting strategy, the product is not different, it is the best in its class.
3. Focus or high segmentation: the company focuses on one area or market niche. It offers what there is not.
These 3 strategies have a lot to do with Intentional Renewal (Reengineering)
Paradigms
Why is the pyramidal structure no longer useful?
The pyramidal structure imposed a paradigm, a way of doing things, that was appropriate for that moment, where there was no influence from the "3 Cs" Customer, Competition and Change.
Some paradigms out of context
1. Control should be top-down.
2. The further away the HR department is from the Administration, the better.
3. Operators and Administrators are 2 totally different things. In reality, they are part of the same organization.
4. The success and failure of an organization are determined by the market. The truth is that they are largely determined by the Mission itself, by the Structure itself.
The resistance to change is given by the old paradigms that are internalized. The only ways to change those paradigms is by training and reengineering.
Reengineering Concept
It is the fundamental revision and radical redesign of the processes, to achieve exceptional results in the value measures: costs, quality and service.
It is necessary to review the MISSION and then review and redesign the processes.
These dramatic changes made to improve cost, quality, and service are CUSTOMER-oriented.
Johanson raises a fundamental revision of the structure in this way:
Does what I'm doing work?
What is the company for?
Do I know how to do what I have to do?
Review the elements (physical, human, financial, legal and administrative):
Are these items?
What state are they in?
Are they appropriate to the situation?
From this it seeks to define what is the true MISSION, VISION, what are its POLICIES, its STRATEGIES, its GOALS.
Radical redesign refers to precisely these aspects, which are reflected through the processes. MISSION is the most important thing to define.
How do I want the elements to be in the next few years?
What is my vision for the next few years?
Where do I want to be in the next few years?
Processes
They are a set of related activities that is applied to a set of inputs, which allow obtaining a product or service with added value for the CLIENT. It must conform to 3 C.
The processes are so important because if they are not reviewed (if they are not adequate with the Vision, the Mission, etc.) and not redesigned, there is a risk of returning to the pyramid structure.
Classification
1. Main and accessories: main is one that adds value to the product or service itself. Always oriented to customer satisfaction. Accessories are those that are necessary to make the product, but that by themselves do not add value. It is important to determine if the accessory process (s) are a priority, that is, necessary. If they are disposable, they must be eliminated, in order to lower costs and be more competitive.
2. External and internal: external are those that transcend to the customer, who knows them. Internal are those that do not reach the customer, they are only part of the production process.
3. Visible and hidden: visible are those that the client can access. Hidden are those that are not in view of the client so that he cannot find out what is happening.
The process does not end in the sale, but in Customer Satisfaction. The process is dynamic, it must be constantly reviewed. The Mission, objectives, strategies, etc. must be reviewed. It should be checked if they are out of time and adapt them to the present.
Contributed by: Uch Human Resources Student Portal
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