CHAPTER 1,
MANAGEMENT? WHY REENGINEER
MANAGEMENT?

Reengineering is in trouble. It's not easy for me to make this admission. I was one of the two people who introduced the concept.

Reengineering the Corporation has sold nearly two million copies worldwide since it was published in 1993, an astonishing success for a business book. But it's your bottom line, not ours, that ought to measure the success of any set of management ideas. And by that measure, there's much more reengineering to do.

Reengineering the Corporation was written to improve business performance by showing managers how to revolutionize their key operational processes—product development, for example, or order fulfillment. And it has worked. I have the evidence of my own eyes and ears, from visits to scores of companies that practice reengineering. I have the testimony of more than 150 managers, gathered over 18 months' worth of interviews for this book. I have the evidence, too, of the first thorough study of the effects of the would-be revolution.

That study, "The State of Reengineering Report," was conducted in early 1994 by CSC Index, the strategic management consulting arm of the firm I head. Six hundred and twenty-one companies, representing a sample of 6,000 of the largest corporations in North America and Europe, completed an extensive questionnaire. The sample showed that fully 69 percent of the 497 American companies responding, and 75 percent of the 124 European, were already engaged in one or more reengineering projects, and that half of the remaining companies were thinking about such projects.

In North America, projects tended to be driven by competition and customer pressure, and focused therefore on processes with direct customer contact—e.g., customer service (25 percent), order fulfillment (16 percent), and customer acquisition (11 percent). In Europe, the focus was on cost-cutting initiatives in manufacturing and its service-industry equivalents (23 percent). On both continents there were a smattering of projects across the full range of operational processes: 9 percent on links in the inbound supply chain, 6 percent on corporate information systems, 4 percent on product development, and so on.

Many companies reported big changes and reaped big rewards. An American mining company, for example, saw its revenues increase by 30 percent and its market share by 20 percent, while its costs went down 12 percent and its cycle time 25 percent. A European retail group gained a 50 percent improvement in cycle time and a 15 percent improvement in productivity. After reengineering its inventory-replenishment process, a U.S. clothing manufacturer doubled sales, increased its market share by 50 percent, and cut its cycle time by 25 percent. A North American chemical company cut its order-delivery time by more than 50 percent and its costs by more than $300 million.

There have been many equally dramatic success stories. On the whole, however, even substantial reengineering payoffs appear to have fallen well short of their potential. Reengineering the Corporation set big goals: 70 percent decreases in cycle time and 40 percent decreases in costs; 40 percent increases in customer satisfaction, quality, and revenue; and 25 percent growth in market share. Although the jury is still out on 71 percent of the ongoing North American reengineering efforts in our sample, overall, the study shows, participants failed to attain these benchmarks by as much as 30 percent.

This partial revolution is not the one I intended. If I've learned anything in the last 18 months, it is that the revolution we started has gone, at best, only halfway. I have also learned that half a revolution is not better than none. It may, in fact, be worse.

Our earlier book was largely about reengineering work—the operational processes performed by salespeople, clerks, factory and warehouse hands, repair people, engineers, technicians, customer-service folks, field representatives—anyone and everyone in the value-adding chain. Now, in this book, I must shift my focus. This book is not about operational processes. It is about managing, written for managers, and (it may be reassuring to note) by a manager. It is about us, about changing our managerial work, the way we think about, organize, inspire, deploy, enable, measure, and reward the value-adding operational work. It is about changing management itself.

But who, exactly, is a manager these days? How do we know one when we see one?

In the wholeheartedly reengineered corporation, responsibility and authority are so widely distributed throughout the organization that virtually everyone becomes a manager, if only of his or her own work. Still, there's no ignoring two facts. First, as our study shows, the thoroughly reengineered corporation is as yet a rarity. Second, even a reengineering revolution leaves some people with more general authority and responsibility than it leaves others. The old pyramid may be flattened out, but the remnants are still discernible in these levels of managerial accountability:

• Self-managers—people who may not think of themselves as managers because, in the last analysis, they answer only for the quality of their own work. Examples include customer-service representatives, researchers, salespeople, lawyers, and accountants—in short, just about everyone working individually or as a member of a team.

• Process and people managers—those who answer for the work of others, usually individuals, a team, or group of teams working closely with customers or on a specific process. An example would be a manager of a case team, a group of people who have among them all the skills needed to handle a specific process—the installation of a telephone, say, or the sale of an insurance policy, or the development of a new drug. In the reengineered workplace, employees often rotate in and out of this sort of managerial responsibility as the occasion demands.

• Expertise managers—people whose responsibility is the care and development of a company's intelligence (in all senses of the word). Examples are technology managers and managers of human resource development programs.

• Enterprise managers—CEOs, division heads, all those with profit-and-loss responsibility. "Senior management" we used to call them, when business authority was established by years of service.

This book is written for managers on all these levels. It is written out of the conviction, buttressed by solid evidence, that without their help the revolution we began with the 1993 book will remain painfully incomplete. We certainly knew back then that management was critical to reengineering's success. But not until we had some real experience of how these ideas worked in practice did we begin to understand how radically managers themselves would have to change their way of doing things for reengineering to fulfill its promise. Anything less than a fundamental revolution in actual management practice, we discovered, is like a communist regime introducing free enterprise into a controlled economy while trying to hold on to power. It can be done for a while (look at China), but no one supposes that such an arrangement can last. Something's gotta give, and history shows that it's not going to be free enterprise. It has to be management. If management doesn't change, reengineering will be stopped in its tracks, and we can't afford to let that happen.

Look what takes place when work gets reengineered and management doesn't:

• The three vice presidents (for sales, service, and order-fulfillment) at a major computer company were thrilled that reengineered work processes promised to cut product introduction time in half, raise customer retention rates by 20 percent, and slice 30 percent from administrative costs in their areas. They weren't thrilled enough, however, to willingly give up control of their fiefdoms and collaborate. Result: The reengineering effort died a year after its inception.

Copyright ©2006 by James Champy.