Business Process Reengineering: How Royal Bank of Scotland Succeeded

Executive Summary:

Business Re-Engineering Process (BRP) changed the firm’s operations into new ways required by environment to gain competitive advantage. This paper tries to explore the potential benefits of BRP. BRP redesign and bring radical (broad changes in core operation) changes in organizational processes that improve their operations’ speed, product quality and reduce cost. This study also explore the BRP in context of Royal Bank’s project “Columbus” for reengineering their operations and found communication and coordination problems between IT and business managers. At the end some cases of American airlines, FedEx, Cisco, Dell and Deer & co. prove the promise of BRP for improvements in operations.

 Business Re-Engineering Process (BRP):

Today in this innovative and ingenious world bringing change in organizational processes has become an essential need to survive. The term “reengineering” refers to the radical change and improvement in core business processes that increases the firm’s performance quickly (Attaran, 2004). In this context the term “Radical” means changing the organizational few core process through rethinking and redesigning (Currie & Willcocks, 1996). It’s mean that Business Process Reengineering deals with dramatically and quick changes in core business processes through rethinking and redesign so that firm can better perform in term of cost, quality and speed up there operations according to the need of internal and external environment. Reasons behind this radical redesigning the business operations are to reduce the needed resources, improve productivity and speed up the process that ultimately will lead to competitive advantage for the companies (Verespej, 1995:42; Wellins & Murphy, 1995). On the other hand today firms are connecting their web sites to their databases and enterprise systems that bring need to change traditional business processes to fully utilize their resources (Nissen, 1998). Though literature evidenced different approaches to change with respect to scale and type but holistic approach to strategy, processes, technology, structure and people is practiced centrally in the field of BRP that transform firms into more efficient re-engineered firms (Hygate, 1993; Johnson et al., 1993; Hammer & Champy, 1993).

So BRP is defined as redesigning and rethinking the business processes that will lead to a remarkable change in business processes for a quick and significant increased performance as it is an actuality that firms can not grow by using old process methodologies (Hammer & stanton, 1995). It is also found that there were 87 percent of the companies were improving their operations through practicing Business Re-Engineering Process in their projects or shows their intentions to do so (Ranganathana & Dhaliwal, 2001). So all these discussions show the importance of BRP leads to a quick increase in organizational performances through redesigning and Rethinking. This paper tries to explore the potential benefits of Business Re-engineering Process and what are the challenges that managers could face in bringing that new radical change in their core operations in the context of case study of a Re-engineering project “The Columbus” executed by Royal Bank of Scotland.

Need and objectives of Re-Engineering at Royal Bank Scotland:

To analyze the case of Royal Bank background information is needed that why and how bank use the concept of reengineering. A UK based bank “Royal Bank” faced extensive competition in early 1990’s with economic recessions that lead to increase the risk of bad debt and compel the company to maintain a ₤1.1 million provisions for bad debts. Profits are going down and company had to bear 63% of its income as cost. On the other hand senior managers conclude that their competitors affect on customers’ choices and firm can not find life time loyal customers. These factors lead managers to think about reengineering their processes and firm starts Columbus project in this respect. After analyzing business needs six key objectives are set that lead to re-engineer the bank’s core operations and senior management claims that Columbus project is not a large IT based project but it is a revolutionary and a large reengineering project for bank that will change its operations dramatically. Those six objectives are given below.

1. New Philosophy to work Organization
2. New Technology
3. The Outlet
4. The Network
5. Credit Process
6. Human Resource Practices

New Philosophy to work Organization:

Managing people and changing their attitudes was the most critical issue bank face in developing its new banking system as people were expecting more empowerment. Managers also recommend three different structural different but interrelated businesses to establish i.e. Retail, Commercial and Corporate. In doing so bank needed to re-define the roles of their managers and distinguished responsibilities in respect of sales and services. To implement this new philosophy of work firm decided to hire specialized work force with respect to a specific product or customer segment.

New Technology:

Over ₤1 million were invested in IT to covert their BRP plans into reality. Managers considered technology as an important resource in completing their BRP project but they see it as mean instead of final destination of success.

The Outlet:

From Columbus project firm tries to use IT throughout its outlets to improve fraudulent customer detection system and they do so by introducing three new main components including customer service, account opening and cash teller systems. Coordination between project sponsors, managers, programmers and users are very crucial as in many cases managers do not perceive IT to deliver required appropriate solutions. So building a new system that would be a user friendly, employees shows their positive intensions toward new system and customers welcome that technology are real challenges faced by managers in the process of reengineering.

The Network:

Currently each branch acts like a mini-bank and make specialized decisions on its own. Columbus contains to build new specialist centers like mortgage center service, corporate center service and service centers so that customer would be of bank rather than just for that branch.

Credit Process:

To speed up and to automate the administration technology will be used that will enhance the performance of credit process.

Human Resource Practices:

Columbus planned to integrate their work force both at business unit and technology department to design new radical change that will reduce the post conflict between two departments.

What BRP is not:

It is critical to know that BRP dealt with radical change and BRP is not about Automation where we bring improvement in our operations through old mechanisms or Restructuring where the concern is to restructure the organization or Downsizing where human resource are dropped but it is about bringing new mechanism to improve work, restructuring core operation to bring efficiency and eliminate the work to reduce waste (Attaran, 2004).

Challenges to BRP:

Today the scope of BRP has been expanded and through crossing organizational boundaries firms are also considering their customers, suppliers and other groups in redesigning their operations for better performance (Champy, 2002). This expanded scope of BRP also brings some challenges to managers. Firms put their efforts and resources at large scale to execute reengineering process successfully but they did not get required results from their BRP application, in fact well short payoffs as compare to its potential are evidenced (Grover et al., 1995; Hall, Rosenthal & Wade, 1993). Why these project are failed to produce output according to their potential. All these results didn’t shows the deficiency of the concept of re-engineering but shows lack of analyzing required radical change in processes for required outcome, managing challenges arises in response of BRP and its proper implementation. So the reasons of failure a BRP are the potential challenges for a manager. Bringing radical change in business operations is not an easy task and managers have to face many complex situations in this respect. In a survey of 100 UK firms it was found that firms misperceive and misinterpret the outcomes and the implementation of BRP within and across the boundaries of their country (Willcocks, 1995). It means that managers have to evaluate the accurate and reality based benefits of BRP and the cost they are incurring in this respect. Low investment in BRP and moderate change in their operation instead of bringing broad changes in their operations through radical rethinking was one of the most influencing factors in this respect (Currie & Willcocks, 1996). So bringing radical change can also needed high investments and broad changes in their operation to enhance quick performance. In conclusion lack of understanding the concept and its application leads to failure of BRP and managers should give a special intention in this respect (Heusinkveld & Benders, 2001). Firms will get best performance when they bring changes to their core processes that are directly related to customers as compared to supporting activities that support their core processes, managerial operations needed to manage and run the company and cross-boundary functions that links the firms to their customers and suppliers. That is why only 18 percent of the firms who completely practiced BRP projects found a benchmarked profitability of 20 percent and decrease in 10 percent cost milestones from reengineering their operations (Willcocks, 1995). This shows that the firms want improvements in their operations instead of radical change that didn’t increase performance as expected. Lack of leadership in one of the most frequent cause of failure of BRP and effective BRP implementation needed top-down directive leadership style but when managing employees having non programmable task and are motivated, skilled and independent then non-directive leadership style can be effective (Sutcliffe, 1999). Communication with human resource is also very critical as people expect some empowerment as a result of this radical change and can also be threatened from the probability of fired out from their jobs. Bringing wide range change through radical rethinking can lead to downsizing and can create problems in managing their human resource (Kavanagh, 1994; Willmott, 1995). Moreover BRP takes time and long BRP can reduce the commitment and can be late to get required benefits and that completion should be finished within 12 months preferably (Broadbent, Weill & Clair, 1999). So all these discussions addresses the four level issues that need to be solved and are challenging for managers. These are at organizational level, strategic level, managerial level and technical level. A framework of these risk assessments is showed by figure.

Challenges at Royal Bank:

Bank sees Columbus project as evolutionary change rather than a major IT project. To plan and implement over ₤1 million investments in IT to get required benefits is a big questions that act as a challenging task for senior managers because in past many IT projects didn’t pay back to the bank as it was expected. To solve this issue senior managers expand the scope of Columbus project to the evolutionary change and not just restricted to an IT project. Moreover coordination between IT department and their business unit were awful and they blame to each other in failure of IT project executed in past. The reason behind this was both departments interpret business strategy in their own ways that leads to discrepancies. To face this challenge both IT department and business unit users are consulted and involving in the process. On the other hand developing project management skills and technical skills for required processes was a challenging task. For example to bring all customers related data at one screen can lead to development of new programming languages and interfaces. For this purpose they have to develop skills in their employees in this respect. Moreover to handle new technology new technical person are hired at IT department.

BRP Results in Dramatically Improvements:

Today firms can reduce costs, improve quality of their products and can speed up their operations as a result of business reengineering while considering their customers, suppliers and partners outside the organization called X-reengineering as many firms did in past like Cisco, Dell, Solectron and Intel etc (Champy, 2002). So BRP promise will bring quick and dramatically improvements in business operations that ultimately will enhance firm’s performance if we cater all the challenging issues and ensure its efficient implementations. Planning and executing BRP combined with information technology enhanced firms’ capabilities to work in more flexible, coordinative, team oriented and communication based environment (Whiteman, 1996). Reengineering the firms with the help of technology allow the firms to run their operations smoothly and respond to the opportunities quickly as employees can get better information quickly and can be empowered them to make decisions on their own. Literature evidenced a number of cases in which BRP leads to achieve these miles stones. Following are some examples that illustrate that BRP really bring such improvements in business operations.

American Express:

American express bring radical changes in their credit authorization process by using IT that speed up the process with accuracy and achieve multiple objectives. As a result company found a decrease in US $7 million costs reduction annually, speed up the credit authorization process with 25 percent efficiency and also a found a decrease in 25 percent improper credit denials (Attaran, 2004).  

Cisco sales system:

Cisco change its operations and bring a automated online sales system with the help of IT and this dramatically changed operations shift their sales concentration online and company found a 75% of sales online that also results in 20 percent increased productivity in two years (Attaran, 2004).

Deer & Co.:

They bring CAD and CAM (IT technologies that help to design) in their product development processes and material management that change the way of manufacturing their products and company found a substantial decrease in material and manufacturing overhead costs (Attaran, 2004).

Dell Computer:

Dell change their way of supply chain build an internet based order system that ensure the delivery of that product within 5 days that  previously was 13 days that cut their costs and increased sale and ultimately company saved US 5millions due to this BRP (Attaran, 2004).

FedEx Corporation:

Reengineering their core operation with the use of IT convert their paper work into automatic and streamline approach that allow them to reduce their no. of suppliers and their employees can work with better services and environment that ultimately reduces their purchasing cycle times to 20% (Attaran, 2004).

Many other examples can illustrate the miles stones that firms gain through reengineering their processes. But on the other hand still researchers criticize on the promise of BRP that it leads towards quick and dramatically improvements in business operations and increases firm’s performance as a result. They argued so because literature also found many failures of BRP and firm loses their resources and efforts for nothing. But these failures are not caused by the construct “BRP” but due to lack of its proper and appropriate planning and implementations and furthermore people expect much more against moderate improvements in their operations that is not reengineering. In conclusion Reengineering didn’t break down its promise but it is other factors and challenges that can lead to failure of a BRP project.

Conclusion:

In conclusion BRP is one of the needed construct that firms need to practice in this innovative and changed world. Reengineering doesn’t mean the improvement in processes with current processes or restructuring organization or practicing downsizing to make efficient their operations but it is about to change every operation into new way and redesign and rethink business core operations dramatically. Firms could face many challenges in bringing BRP that can be at four levels i.e. organizational, strategic, managerial or technical level. Communication and coordination between business unit and IT department was the basic issue that results in failure of previous major IT project at Royal bank of Scotland. Moreover another reason of past failure IT project was just considering IT improvement as the final outcome. The project Columbus is designed to fulfill their required needs that will change the operations dramatically and bank can better overcome their deficiencies. At last different case studies shows that BRP leads to dramatically changed operations for low cost, high quality and speed up the operations but this success is contingent with the challenging and risk issues.

  References:

Attaran M. (2004), “Exploring the relationship between information technology and business process reengineering”, Information & Management, Vol41: 585–596

Broadbent M., Weill P. & Clair D. S., (1999), “The implications of Information Technology information infrastructure for business process redesign”, Management Information System Quarterly, Vol23 (2): 159–182

Champy J. (2002), “X-Engineering the Corporation: Reinventing Your Business in the Digital Age”, New York: Warner Books

Currie W. L. & Willcocks L. (1996), “The New Branch Columbus Project at Royal Bank of Scotland: The Implementation of Large Scale Business Process Re-Engineering”, Journal of Strategic Information System, Vol5: 213-236

Grovera V., James T., Segarsb A. H. & Fiedlera K. (1998), “The influence of information technology diffusion and business process change on perceived productivity: the IS executive’s perspective”, Information & Management, Vol34 (3): 141–159

Grover V., Jeong S. R., Kettinger W. J. & Teng J. T C. (1995), “The implementation of business process reengineering”, Journal of Management Information Systems, Vol12 (1): 109–144

Hall G., Rosenthal J., Wade J. (1993), “How to Make Reengineering Really Work”, Harvard Business Review”, November–December: 119–131

Hammer M. & Champy J. (1993), “Reengineering the Corporation”, New York: Harper Collins

Hammer M. & Stanton S. (1995). “The Re-Engineering Revolution”, New York: Harper Collins

Heusinkveld S. & Benders J. (2001), “Surges and sediments: shaping the reception of reengineering”, Information & Management, Vol38 (4): 239–251

Heygate R. (1993), “Immoderate Redesign”, The McKinsey Quarterly, Spring: 73-78

Johnson H., McHugh P., Pendlebury A. & Wheeler W. (1993), “Business Process Re-Engineering: Breakpoint Strategies for Market Dominance”, Chichester: John Wiley

Laudon K. & Laudon J. (2008), “Management Information Systems”, 11^th (Ed), Prentice Hall

Nissen M. (1998), “Redesigning reengineering through measurement driven inference”, Management Information System Quarterly, Vol22 (4): 509–534

O’Brien J. O & Markas G. M (2004), “Management Information System”, 8^th (Ed)

Ranganathana C. & Dhaliwal J. S. (2001), “A survey of business process reengineering practices in Singapore”, Information & Management, Vol39 (2): 125–134

Sutcliffe N. (1999), “Leadership behavior and business process reengineering (BPR) outcomes: An empirical analysis of 30 BPR projects”, Information & Management, Vol36 (5): 273–286

Verespej M. (1995), “Reengineering Isn’t Going Away”, Industry Week, February

Wellins S. R. & Murphy J. S. (1995), “Reengineering: Plug Into the Human Factor”, Training & Development, January: 33–37