Business process reengineering (BPR) is the latest process oriented technique, presumed to radically improve business performance (Davenport, 1993; Hammer, 1990). Since the seminal article of Hammer (1990) in the Harvard Business Review, BPR has gained prominence among the widely used management techniques for improving business performance. However, there is evidence that a majority of BPR projects end in failure. Some of the reasons include complexity of operationalizing BPR techniques, tools and practices, as well as underestimating the need for management support, task restructuring, people management, and information technology (IT) (Chung et al. 1997). This paper begins with a description of ALPHA Bank, and its strategies in emerging financial competitive environments. Next, we describe ALPHA Bank’s BPR efforts and finally, conclusions and implications for managers follow

Bhatt, Ganesh

Sugumaran, Vijayan

English

AIS Electronic Library (AISeL)

Association for Information SystemsAIS Electronic Library (AISeL)AMCIS 1999 Proceedings Americas Conference on Information Systems(AMCIS)December 1999A Case of Business Reengineering Failure: Lookingfor Traditional Management PhilosophyGanesh BhattMorgan State UniversityVijayan SugumaranLe Moyne CollegeFollow this and additional works at: http://aisel.aisnet.org/amcis1999This material is brought to you by the Americas Conference on Information Systems (AMCIS) at AIS Electronic Library (AISeL). It has been acceptedfor inclusion in AMCIS 1999 Proceedings by an authorized administrator of AIS Electronic Library (AISeL). For more information, please contactelibrary@aisnet.org.Recommended CitationBhatt, Ganesh and Sugumaran, Vijayan, "A Case of Business Reengineering Failure: Looking for Traditional Management Philosophy"(1999). AMCIS 1999 Proceedings. 229.http://aisel.aisnet.org/amcis1999/229662A Case of Business Reengineering Failure: Looking forTraditional Management PhilosophyGanesh D. BhattDepartment of Information Science &SystemsMorgan State University1700 E. Cold Spring LaneBaltimore, MD  21251Vijayan SugumaranDepartment of Business AdministrationLe Moyne College1419 Salt Springs RoadSyracuse, NY 13214 IntroductionBusiness process reengineering (BPR) is the latestprocess oriented technique, presumed to radically improvebusiness performance (Davenport, 1993; Hammer, 1990). Since the seminal article of Hammer (1990) in the HarvardBusiness Review, BPR has gained prominence among thewidely used management techniques for improving businessperformance.  However, there is evidence that a majority ofBPR projects end in failure.  Some of the reasons includecomplexity of operationalizing BPR techniques, tools andpractices, as well as underestimating the need formanagement support, task restructuring, peoplemanagement, and information technology (IT) (Chung et al.1997).This paper begins with a description of ALPHABank, and its strategies in emerging financial competitiveenvironments. Next, we describe ALPHA Bank’s BPRefforts and finally, conclusions and implications formanagers follow.Background of ALPHA BankALPHA Bank is a regional bank in Texas.  Inconsumer lending services, ALPHA has consistently faredwell with an average market share of about 13%.  ALPHAprovides loans to almost one third of the automobile dealersin Texas.  It serves about five hundred thousand activecardholders, with outstanding credit card balance of about$500 million.In terms of technology, the bank serves itscustomers with 24-hour telephone banking, PC-based homebanking, and a very large number of ATMs.  The bank hasalso implemented state-of-the-art computer technology toenhance its relationship with its customers by providingthem easy access to customer information.The banking industry has traditionally understoodcompetition in terms of price, quality, convenience, andservice.  However, in the present information intensiveenvironment, banks are redefining competition byunderstanding customer preferences and needs for financialservices and delivering those services in a timely,convenient, price-sensitive, and comprehensive manner.To meet the challenges of the new competitivebanking sector, ALPHA Bank chose to reengineer itsconsumer lending function to expedite loan processing,reduce redundant work, and standardize business practiceson an enterprise-wide basis.  To implement these changes,ALPHA made extensive use of information systems toattract new customers and meet existing customers’ demandsin services.BPR Efforts at ALPHA BankIn 1996, ALPHA Bank made dramatic changes inits operations, however, it short-circuited the process ofoperationalizing and pilot testing the business processes forchange.  By moving to dramatically change businessprocesses, it created an overcautious change environment inthe bank, producing distrust and an uncooperativeatmosphere.  Employees and management were unsure ofthe kinds of changes they were looking for.  When asked toarticulate their vision of BPR changes, the perception ofchange among management was related to productivity andquick turn around, while for employees it was related to lay-off and head-count, and still to some others, it meantcreation of more bureaucracy.  None of the employee andthe management teams explicitly expressed their visions andideas about changes from the perspective of customerpreferences and values.There were problems related to understandingemployee information requirements for new processes. Even though management tried to initiate the change, it didnot foresee the gravity of the employee support that isessential for fully implementing the BPR project. Bychoosing wrong problems to solve or solving a rightproblem wrongly can have disastrous impact on theorganization.  That is exactly what happened at the ALPHAbank.663Research ApproachThe case study analysis of ALPHA Bank beganwith a site visit in early August 1996.  Data were gatheredfrom interviews, and ALPHA’s annual reports.  FourALPHA executives and several bank employees, includingthe Manager of Asset Systems, the Director of StrategicInformation Systems, the Manager of ApplicationProcessing, and a Development Team Leader wereinterviewed.  Since August 1996, contact with bankmanagers and employees were maintained via telephone andfax.All the formal interview sessions were recordedthrough tape-recorders and the transcribed tapes wereanalyzed by a set of faculty members and students.  Themain key points were identified and expanded.  Because ofthe exploratory nature of the study, we used a grounded-theory approach for the study.  Based on interviews,conversations, and follow-ups, the salient features of thecase were compared to other studies available in the BPRliterature.  Since the main aim of the study was to highlightthe problems that the bank was facing in light of availableBPR literature, the case was analyzed with a focus ofdetermining the deviations from the prescribed norms.  Ifsome discrepancies were found between the discussion ofthe participants and the results from the literature review, wetried to analyze the discrepancy.  For example, althoughBPR literature is indifferent on the role of IT in BPR,despite the critical role of IT advocated by Hammer (1990),in our study we found top management committing a lot offaith in the IT department in restructuring the businessprocesses (see also Kettinger et al. 1997).  At the same time,we also found that top management was reluctant to expandthe authority of the IT department.  These un-seeminglycontradictory facts were new in light of the available BPRresearch.  An in depth-analysis revealed that during therestructuring phase, the bank was going through lot of hardtimes in its financial benefits.  This caused lack of trustbetween management and employees, and at the same timemade it almost mandatory that management make changesand increase its control over the employees.Problems in Redesigning the BusinessALPHA Bank’s main reasons for reengineeringwere based on a number of factors.  First, obviouslymanagement wanted to create a sense of order oflegitimacy by trying to do something new.  Second, whilemany other banks boasted their success in redesigningtheir businesses, it was imperative for ALPHA to redesignits own processes for competitive advantage andimprovements.  It was also important because consumerlending operations were becoming inefficient, andreconciliation of different accounts from various sites wasdifficult because of inconsistent, redundant, and stand-alone operations.Even though in ALPHA bank the BPR initiativestarted from the top, it was not a strategic priority. Moreover, management did not communicate its strategicvision as a result of BPR (see also Cardarelli, et al. 1998). One of the reasons for this misalignment was that ALPHABank was not very clear on what it wanted to achievethrough BPR.  For different members, includingmanagement, the goals were different.  As one of theexecutives put it, “I believe we want to fire some people,and BPR is just an excuse to do it.”  One of the membersstated, “We are not sure what we are trying to achieve bydisrupting a well-running company. There is no goal, justdisruption.”Regardless of whatever the expectations of the BPReffort were, top management failed to articulate its vision toother employees.  Moreover, without committing necessaryresources and responsibilities to employees, managementtried to find easy solutions for problems it wanted to solve. For example, without offering authority to the ITdepartment, management entrusted it to find users’requirements and work with other employees to increaseemployee cooperation. However, in reality, many employeesdid not take these initiatives seriously, and considered ITdepartment as a nuisance and did not rely on IT division’sinitiative in designing their systems.  With thesecontradictory views of IT from employee and topmanagement perspectives, IT department was sandwiched inpleasing top management by working on systems whichwere incomplete in their specifications, and designrequirements.  The IT department had to not only strugglefor getting adequate resources, but also had to deal withpeoples’ resistance.  Many members blamed IT departmentas the chief catalyst for disrupting the organizationalharmony.  To facilitate understanding of the bankingbusiness in the IT department, top management did not makea conscious effort to facilitate the task force (in which ITdepartment and management teams cooperated) understandeach others’ roles and capabilities to build on changeprocess (Sayer, 1998).  IT department was not sure of thestrategic directions of the company, and management wasskeptical of IT department’s capabilities for change.  In away, the relationship between management and the ITdepartment became more strained rather than cooperative,as a result of the BPR initiative.There were problems in employee reorientationprograms as well.  Employees seemed to perform worseafter BPR efforts were initiated.  As one of the employeesput it, “I don’t know, what the hell is going on here.  Thereare a lot of lies in the name of change.  It is better if I go onleave, because I cannot focus on my job any more.  I don’tknow when it is going to be redesigned and who knows if Iwill ever work on it.”  The qualitative study of ALPHA664Bank’s BPR initiative provides many insights into how acompany actually deals with BPR on an enterprise-widebasis.  The study uncovered the ideological methodologiesused to guide BPR efforts that led to the failure of BPRimplementation.Lessons LearnedThe lessons we learnt from the study are that thefirst and foremost requirement for top management is tocommunicate its strategic vision to the entire organization. Top management should be clear and precise as to what itexpects out of the BPR effort and articulate it to every onein the company.  Without a clear understanding of the goals,the BPR efforts are likely to be pushed into differentdirections, creating confusion and disruption.  Topmanagement should also make personal efforts andcommitment to ensure that adequate resources for thechange process are provided.  For the people who are put incharge of leading the change, management should make itclear what their new roles, responsibilities, and authoritiesare.  Without assigning any new authorities, people incharge are likely to be frustrated in bringing any worthwhilechange in the business.  BPR should be based on a businessneed and not the other way around.  One of the ways to doit is to make it a strategic priority.  If business processes areinterdependent and require too much time and effort forimplementation, business reengineering should beapproached with a strategy that includes incrementalimprovement.  Incremental improvement can act as backupin case reengineering does not succeed, as incrementalimprovement can easily be comprehended by employees andcan be rolled back if they do not succeed.The relationship between systems analysts and theircustomers should be a healthy one.  An unhealthyrelationship often manifests in over-budget, late-completiontime, and not meeting customers’ expectations.  To balancethis situation, IT managers and customers need to cometogether to build a partnership based on trust. Based on our experience, we view BPR changecomprising of the following major activities.  The firstactivity involves employee training, the second activitystarts with the implementation of task-force, the thirdactivity encompasses a phased IT integration, and finallyprocesses are redesigned.  If efforts fail at this point, theorganization can revert to its earlier state without causingmuch disruption.  If BPR efforts succeed, employee trainingand task-force become catalysts to improve to a new set ofrealities.Conclusion and ContributionThis study makes a number of contributions.  First,the study highlights some of the dangers of implementingBPR without a thorough analysis of the working principles. Participation between top management, employees, andtechnical people is important, but equally important is thecommitment of resources.  The study also highlights theimportance of the IT department in process re-engineeringendeavors.  Even though IT departments can be peripheralto most of the strategic issues, they play a very crucial rolein BPR.  If the IT department is not provided with enoughresources and authority, most of the BPR efforts can end indisaster.  In essence, the outcome of BPR implementationcould be quite drastic, if the top management does notconvey their demands, and goals to the organization.  Whilemuch of BPR literature is reluctant in pointing out thedangers of BPR, this study makes important contributions byhighlighting some of the dangers of BPR based on the field-study. ReferencesAvailable from the authors.

A Case of Business Reengineering Failure: Looking for Traditional Management Philosophy

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A Case of Business Reengineering Failure: Looking for Traditional Management Philosophy

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