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2EFFICIENCY OF REENGINEERING. ASSESSMENT TOOLS
Abstract
Russian organizations should master methods of business processes reengineering as an innovative administrative approach. At the same time there is a question to change indicators under the influence of reengineering. The need of thorough development of a complex scientific problem for transformations assessment as a result of reengineering implementation (instrument of effective use of organization resources) is caused by the developed economic situation. The most modern and successful administrative business strategy allowing to reach real competitive advantages and effective results is reengineering.
Keywords
reengineering, efficiency, assessment, assessment tools.
AUTHORS
Tatyana V. Lesina
PhD, Associate Professor, Financial Management Department.
Russian Presidential Academy of National Economy and Public Administration, Kaluga branch. 4/3, Okruzhnaya Str., Kaluga, 248021, Russia.
Evgenia V. Emelyanova
PhD, Associate Professor, Financial Management Department.
Russian Presidential Academy of National Economy and Public Administration, Kaluga branch. 4/3, Okruzhnaya Str., Kaluga, 248021, Russia.
Introduction
Russian organizations should master methods of business processes reengineering as an innovative administrative approach. At the same time there is a question to change indicators under the influence of reengineering.
The need of thorough development of a complex scientific problem for transformations assessment as a result of reengineering implementation (instrument of effective use of organization resources) is caused by the developed economic situation. The most modern and successful administrative business strategy allowing to reach real competitive advantages and effective results is reengineering.
A process approach within reengineering were a subject of repeated researches of the Russian and foreign scientists. The basic researches of N.A. Dubinina are devoted to questions of reengineering of economic entities business processes and their assessment. The essence of its author's technique consists in use of modeling method of structural analysis and technology of model design, object-oriented modeling, method of process-by-process analysis of business processes cost, functional-cost analysis, analysis of the key indicators (Dubinina, 2016).
V. Titova, O. Lyamzin conducted the research on assessment of business processes efficiency on the basis of the diversified integrated structures on the basis of innovations development (Losev, 2009).
The technique of assessment of business processes organizational efficiency, which basis is key indicators of enterprise efficiency, was presented by Yu.V. Taraskina. The author refers to D. Antipov, E. Balashova, V. Glukhov opinions (Antipov, 2010; Balynin, 2015; Glukhov, 2012). D. Antipov developed the technique of indicators for assessment of organization activity efficiency on the basis of integration of approaches of General quality management, economical production, system of the balanced indicators and the theory of restrictions of systems (Antipov, 2010). L.K. Ogoleva, V.M. Radikovsky created the technique and defined criteria of assessment of business processes efficiency. The authors offered to use system of the innovative analysis for organizational and technological reengineering (Ogoleva, 2004).
Foreign developments in this direction are presented by M. Hammer, J. Champy, G. Harrington and J. Hilston, who consider reengineering is revolutionary changes in activity of organization. The scientists offered techniques and instruments of improvement for business processes, which allow to increase organization competitiveness (Losev, 2009; Ogoleva, 2004; Pavlyuk, 2015;).
M. Hammer and J. Champy define reengineering as "fundamental reconsideration and radical redesign of business processes of the companies for achievement radical improvements in the main actual indicators of their activity: cost, quality, services and rates". We should emphasize that it is not about small improvement of business processes of the companies - for 10-100% - but about cardinal increase of their efficiency, in tens or even in hundreds of times. Thus reengineering is considered as a survival way for the modern companies in the conditions of rigid competitiveness in the world market.
It is possible to allocate three types of the companies, which need reengineering:
1. The companies, which are on the verge of crash, because goods prices are much higher and (or) their quality (service) is much lower, than competitors'. If these companies do not take the plunge, they will inevitably be ruined.
2. The companies, which do not have difficulties at the moment, but expecting inevitability of emergence of the stubborn problems connected, for example, with the advent of new competitors, change of clients requirements, change of economic environment, etc.
3. The companies, which do not have problems now, not predicting them in the near future. These are the leading companies pursuing aggressive marketing policy, which are not satisfied with good current state and want to achieve the best results by means of reengineering.
Thus, problems of reengineering are similar to problems of innovation: development of innovations for ensuring competitiveness of production and eventually survival of the enterprise.
The available scientific researches in the field of business processes assessment ( (Kaplan, 2005; Kutelev, 2003) give the chance to use practices of scientists in this area, however there is a need to study assessment of reengineering efficiency concerning a complex of financial and non-financial indices. Balashova, 2014; Balynin, 2015; Eliferov, 2006;
Methods of Experiment
The theoretical basis of the research is works foreign and Russian scientists in the field of innovative administrative approach - business processes reengineering (Ogoleva, 2004; Pavlyuk, 2015; Radikovsky, 2004).
The methodology of the research is based on a system approach. Instruments of the research are both general scientific methods, and methods of scientific analysis. Methodological and methodical questions of reengineering are presented in works of domestic scientists: L. Kozelrod, D. Kozenkova, E. Balashova, D. Antipov, K. Chuprov, I. Kurenkova, E. Luneva, Yu. Sukhanova and S. Tsapko, V. Glukhov, Yu. Taraskina, N. Dubinina (Kozenkov, 2011; Kozerod, 2009; Kozerod, 2008; Kutelev, 2003).
Application of the specified methods and sources defined the research direction and gave opportunity to confirm the received results of the analysis, theoretical inputs and the developed practical recommendations.
Results
Business processes reengineering essentially differs from the fashionable trends replacing each other for the last 30-40 years in management, such as management on the purposes, diversification, benchmarking, total quality management, assuming continuous "incremental", step-by-step improvement, etc.
Reengineering of business processes does not assume implementation of continuous and minor changes leading to small "incremental" (on units and even tens percent) and improvement of functioning indicators of a company. As a result of successfully carried out reengineering — fast implementation of profound and comprehensive basic changes of a control system — a company reaches the essential, "breakthrough" growth of efficiency (in tens and hundreds of times). The flexible and operational adaptation to the expected changes of consumers inquiries, revolutionary changes of business processes structure are the rod purpose of reengineering. The accompanying changes are changes in strategic, technological, organizational bases of production and management.
Reengineering is introduction of the latest information technologies for achievement of absolutely new business zeros. Orientation to constantly evolving services, which meet needs of consumers, is necessary. Therefore, development of IT strategy as a number of purposeful and coordinated actions allowing to use information and technological resources for creation and maintenance of steady competitive superiority of the company is necessary.
It is important to note that the method will be effective, only if it is in close connection with organizational development of the enterprise.
As any instrument of management, reengineering possesses both obvious advantages, and the certain shortcomings imposing restrictions on its use (Eliferov, 2006; (Losev, 2009).
If to consider the concept of reengineering (tab. 1), it is possible to mark out the following important lines:
- change of business processes is a mean of increasing economic efficiency of enterprise activity;
- changes can capture both manpower market, and services market;
- reengineering is concentrated on primary activity (Kutelev, 2003).
TABLE 1. CHARACTERISTIC OF THE CONCEPT "REENGINEERING"
Characteristic Reengineering
Purposes - optimization of productions - tax optimization - optimization of expenses on personnel - other
Scheme of parties' interaction Association of several positions
Coverage Market of manpower and market of services
Innovative potential - association of several positions in one - refusal of mass production of uniform products in favor to adaptation to requirements of the different markets and situations
The objective assessment of changes in business processes assumes complex consideration of questions that gives the chance for correct estimation of quantitative and qualitative effect. The presented and possible indicators can carry both financial and non-financial character. It is difficult to estimate non-financial indicators owing to their uncertainty, and "notable" indicators are required for the management. The hypothesis is that it is possible to offer the system of indicators allowing not only to estimate quantitative and qualitative results, but also to compare them for the studied periods to assess efficiency of reengineering processes.
Discussion. Efficiency of economic entities activity under the influence of cardinal changes is an actual subject for scientific researches, since this process has a cyclic form. Reengineering "maintains" efficiency and creates conditions for its development.
The results of reengineering of organization business processes usually are following:
- the number of company personnel is reduced at a stable level of production;
- the cost of finished goods (works, services) decreases, keeping former volumes and quality of finished goods;
- the number of management levels of is reduced;
- the cost of business reputation increases;
- the branch rating assessment of business raises;
- profitability of economic entity grows.
Realization of business reengineering assumes some stages:
- development of an image (vision) of future organization, i.e. how to develop business to achieve strategic objectives;
- analysis of the existing business assumes a research of the organization and drawing up schemes of its functioning at the moment;
- development of new business: the new and/or changed processes and the information system supporting them, selection of prototypes and testing of new processes;
- introduction of new business.
In this regard, it should be noted that the listed stages are carried out not consistently, but in parallel and some of them repeat.
By experts' estimates, in a case of the correct reengineering, expenses decrease, duration of a cycle is reduced by 60-90% and the level of mistakes by 40-70%.
Methods of business processes improvement have a number of general characteristics, which were defined during the analysis of literature and publications devoted to a problem of improvement of organization processes. These features reflect a number of requirements, which consider teams, improving processes.
Business Process Analysis is a systematic data acquisition for identification, definitions, estimates and representations of process as a base for its organization and improvement.
As a rule, the reason for the analysis is competitive position of the company in the market. Comparison of the prices, expenses and products/services can clear necessary requirements and push to improvement.
Indicators of the actual situation can be the following:
- long time of production delivery and the arising problems with terms of orders implementation;
- opaque course of process and its insufficient depth;
- excessively wide range of products and details;
- frequent change of expenses places, when passing the order;
- considerable intra firm transport and warehouse expenses, freezing of materials and areas;
- high costs of re-equipment at change of a product or technology;
- small time for processing in the general time of passing an order;
- high expenses and high loading of capacities; emergence of "bottlenecks", etc.
The called indicators refer mainly to key processes. However, it does not mean that
all research has to be concentrated only on them. The bigger result brings the analysis of all types of business processes - key, administrative, supporting.
The analysis is, first, productivity assessment, which turns out by means of indicators. Continuous process of improvement, as well as effective management, requires creation of system of indicators, which consists of two and more factors. There are three types of indicators: structural, relative and measured or indexes.
The main indicators to assess efficiency of business processes are the following:
- the quantity of the made production with the set quality paid for a certain interval of time;
- number of consumers;
- number of standard operations, which need to be executed to make a product for a certain interval of time;
- production costs;
- duration of standard operations;
- capital investments in production.
The purpose of business processes analysis is determination of key parameters, their changes, definition of reserves to increase efficiency of business processes and identification of perspective changes under the influence of reengineering.
The subject of the analysis is a set of financial, material, labor and other resources in business processes used for their implementation, cause-effect relationships and methods of their research.
The task of the analysis is assessment of a set of financial, material, labor and other resources in business processes.
The objects of the analysis are business processes by types of economic activity.
The users (subjects) are, mainly, owners, managers and personnel. In some cases, they are external users (for example, investors, suppliers, clients, etc.)
The information sources are data of financial, management accounting and financial and administrative statements, standard-reference information.
The principles are objectivity and relevance; scientific validity; systemacity and complexity; importance and optimality; attributability; principle of allocation of the leading link; timeliness; quantitative definiteness, alternativeness, reliability, clarity and comparability.
The methods are the following: statistical. accounting, economic-mathematical.
The tools are receptions and methods of the analysis. Components and categories of analytical procedures are comparison, forecast, calculations, polls, inspections, supervision.
The output information is forms of financial and economic calculations, analytical tables, schemes, charts, schedules, models.
The objects of the analysis and accounting of business processes are administrative technologies, functional processes in the organizations. Unfortunately, the analysis of business processes of even successful organizations shows that implementation of financial management is often insufficiently effective, as from the point of view of organizational and functional structure of these services, as the organization of the main business processes, such as financial planning and control, management of working capital, management of investments. Statement of regular financial planning and control is a necessary condition and has paramount value for effective implementation of business processes in the organization. In turn the analysis of business processes includes different types of the analysis on such signs, as:
- roles in management and organizational forms of carrying out;
- contents and completeness of research;
- frequency of carrying out research;
- nature of analysis object.
There are external and internal analysis of business processes of agricultural organization on a role of management and organizational forms.
The external analysis of business processes assumes the analysis of business processes, which proceeds outside the organization, but, nevertheless, information on them influences or can influence efficiency of organization activity. For example, the transportation of agricultural production to the buyer, which is carried out by the third-party organization on condition of payment of transportation costs by agricultural organization, can be considered as the business process directly related to activity of this organization. Choice of transport company by agricultural organization is guided by the cost of transportation of finished goods, which should be paid to the transport organization. Thus, agricultural organization has to analyze the cost of this service in potential contractors to choose the most optimum option. In a row the organization can compare information on the business process, which is carried out in it (for example, transportation of finished goods carried out by own transport) with information on business process cost in case of its carrying out in environment (for example, contract with transport company). Thus, the analysis of business processes is important at justification of decision on efficiency of transfer of concrete business process on outsourcing. Features of the external analysis are the following:
- plurality of analysis subjects;
- difficulties in collection of information;
- need to use techniques and receptions of strategic analysis.
The internal analysis of business processes is carried out by internal services (departments) of the organization. Information base of such analysis is much broader and, as it was already noted, demands structuring in a section of business processes. The purpose of internal analysis of business processes consists of determination of key parameters of business process, identification of reserves to increase efficiency of business process and analysis of opportunities of its change in the future.
Features of the internal analysis of business of processes are the following (in comparison with external analysis):
- narrow circle of analysis subjects;
- orientation of analysis results to internal users, use of information sources allowing to structure it in a section of business processes, application of independent methods of analytical research along with standard techniques of analysis;
- lack of regulation of analysis;
- carrying out deeper analytical work and adoption of the correct administrative decisions;
- carrying out the analysis as required in connection with requirements of management.
According to the contents and completeness of research, it is possible to allocate the full and thematic analysis of business processes. The full analysis of business processes is carried out to study all business processes proceeding in the organization in a complex. The thematic analysis of business processes is limited to studying separate business processes. A subject of the thematic analysis of business processes can be:
- assessment of efficiency of acquisition of production means;
- purchases of production materials, fuel and other materials;
- acquisitions of technologies, etc.
On the period of carrying out, it is possible to allocate the preliminary, current and consecutive analysis of business processes. The preliminary analysis of business processes assumes studying of conditions of business processes implementation in organization. Flowing (or quick) analysis of business processes is carried out to have an operational impact on them and, as a rule, it is limited by the short period of time. The perspective analysis of business processes consists in proving possibilities to redesign business processes and a chain of value in general and estimation of possible results of financial and economic activity in the future from a position of their compliance to the purposes of development of the organization on the basis of studying the developed tendencies in both external, and internal environment of organization.
The model of business process forms a basis for the analysis of that, how optimum it lead to a goal. The process duration, its cost, and other characteristics defining efficiency of performance can act as the analyzed indicators. Data of the analysis allow to change process, constantly increasing its quality. Results of the analysis of business processes allow to reveal reserves to increase efficiency of organization activity by optimization of business processes. In particular, such shortcomings in implementation of business processes as duplication of functions, "narrow" places, excessive cost of any operations, poor quality of operations execution, existence of excessive operations, inconsistency of actions of participants, etc. can be revealed.
The choice of forms and methods of the analysis of business processes and system of indicators is defined by specific tasks and needs of internal users. In the course of the analysis of business processes are estimated the following factors:
- change of absolute measures determined by business process;
- dynamics of relative indicators of efficiency of business process implementation.
Estimating business processes, it is necessary to consider the following indicators:
- assessment of possibility to represent parameter in a numerical look;
- choice of measure units of parameter;
- choice of measurements type (direct or indirect measurements);
- gage choice (instrument of direct measurements or method of indirect measurements).
To assess consequences of reengineering, it is offered to use system of indicators presented in table 2.
TABLE 2. ASSESSMENT OF REENGINEERING CONSEQUENCES EFFICIENCY
Comparison sign Traditional business processes Business processes under the influence of reengineering Indicators for calculation
Non-financial indicators
Extent of achievement of the objectives Expansion of a share of sales market Percent of expansion of sales market It is necessary to set limits to norms of an indicator for assessment. For example, sufficient level is 10%. We estimate this indicator from 0 to 1 points, so the share is estimated 0,5, and after transformations of business processes it makes 0,7 points according to the experts. 0,7/0,5*100=40%
The assessment criteria of connected with the enterprise management Quality, efficiency and productivity of information on special inquiries. Reliability and safety of information. Increase in scales of information collecting and processing at reasonable expenses. Economy percent from scales of information collecting and processing It is necessary to set limits to norms of an indicator for assessment. For example, sufficient level is 15%. We estimate this indicator from 0 to 1 points, so the share is estimated 0,5, and after transformations of business processes it makes 0,8 points according to the experts. 0,8/0,5*100=60%
Changes in quality of labor Power of workers and their responsibility. Satisfaction degree of the performed work Percent of satisfaction with the performed work It is necessary to set limits to norms of an indicator for assessment. For example, sufficient level is 15%. We estimate this indicator from 0 to 1 points, so the share is estimated 0,6, and after transformations of business processes it makes 0,7 points according to the experts. 0,7/0,6*100=16,6%
External and internal social and economic conditions Ability to use resources effectively. Loyalty of clients. Level of integration of organization structural divisions. Efficiency of resources use It is necessary to set limits to norms of an indicator for assessment. For example, sufficient level is 14%. We estimate this indicator from 0 to 1 points, so the share is estimated 0,6, and after transformations of business processes it makes 0,8 points according to the experts. 0,8/0,6*100=13,3%
Indicators of efficiency are offered to be estimated in two directions: non-financial and financial performance.
Non-financial indicators are the extent of objectives achievement, criteria of assessment connected with enterprise management, expansion of sales market, satisfaction with the performed work, term of formation of the administrative reporting, etc.
Financial indicators are number of personnel salary, general expenses, etc.
Non-financial indicators are estimated by experts in points. The received assessment is determined by levels: from 0 to 0,3 - low level, from 0,4 to 0,7 - average level, from 0,8 to 0,10 - high level.
We can conclude about efficiency of resources use, changes in quality standards or satisfaction with the performed work under the influence of business processes.
The technology of management based on improvement of business processes by means of reengineering brings "noticeable" economic effect even in practice of small organizations.
Certainly, reengineering improves both non-financial and financial indicators, however, reengineering disadvantage is the high risks connected with transformations.
Conclusion
Recently external and internal conditions of organization activity promptly change, one of the reasons for changes is transformation as a result of reengineering, latest information technologies and revolutionary change of business processes of the companies.
High dynamism of business aspiration to quantitative and quality changes causes need of high-quality changes, as the interested heads do, trying to increase the competitiveness. Continuous transformations in different fields of activity: purchases, sale, information technologies, research and design development became the ordinary phenomenon, and heads of the organizations are compelled to reconsider the strategy and tactics.
Generalizing results of the research, it should be noted that to assess business processes efficiency it is necessary to use set of indicators characterizing all fields of activity of economic entity. However, the principle "expenses should not exceed the income" concerning expenses and income from implementation of results of reengineering has to be present.
The special attention should be paid to sets of financial and non-financial indicators of business processes efficiency. Their complex efficiency, certainly, will provide growth of efficiency of organization activity.
The results of the research allow to draw some important conclusions. Long functioning of organization without transformations of business processes is difficult. Any organization, irrespective of scales of activity, branch specifics, needs transformation of business processes by means of reengineering. Therefore, development of a technique for assessment reengineering effect is actual in modern conditions.
Recommendations
The offered system of non-financial indicators (extent of objective achievement, assessment criteria connected by the management of the enterprise, expansion of sales market, satisfaction with the performed work, term of formation of the administrative reporting, etc.) and financial indicators (number of personnel, salary, general expenses) allow to estimate reengineering effect and provide it in an option convenient for
information users. There are possible financial and non-financial indicators for assessment and the developed system of indicators assessment accounting sufficient level.
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