What it means
The idea became popular in the early 1990s, when management writers argued that many companies were running processes built for an older era. Orders might pass through a dozen hands, with each step added to fix a problem from years ago.
Reengineering questions the whole chain. Unlike continuous improvement, which looks for small, steady gains, reengineering aims for step changes, such as cutting processing time by half.
It focuses on end-to-end processes like order-to-cash or hire-to-retire, not on individual departments. This often means merging steps, removing hand-offs and giving one person responsibility for a whole outcome.
Technology is usually a key enabler. Automation, shared databases and workflow software can remove manual checks and re-keying of data.
However, putting technology on top of a poor process only makes the poor process faster. The finance perspective is practical.
Reengineering projects need an upfront investment, in consultants, software and training, and they promise savings later. The business case should therefore show the cost of the project, the expected annual savings and the payback period.
Risk is substantial. Many reengineering efforts have failed because staff resisted change, because leaders underestimated disruption, or because the benefits were overstated.
Good projects involve the people who do the work, test the new process in a pilot and track results against the original case. Today the same ideas appear under other names, such as digital transformation and process automation.
The principle of redesigning the work, not just speeding up the old way, remains the core of the approach.
In practice
Real-world examples
Example 1
A bank used to take ten days to approve a small business loan because the file passed through six departments. It redesigns the process so one team handles the file, with automatic credit checks. Approval now takes two days, and customers are more satisfied. The bank also needs fewer staff hours per loan, which lowers its cost.
Example 2
A manufacturer reorganises its order-to-delivery process so that sales, production planning and shipping use one shared system. Duplicate data entry disappears and delivery errors fall. The finance team measures the saving in lower rework costs.
Example 3
A hospital redesigns its patient discharge process by setting up a single checklist and a coordinator role. Beds are freed up faster and waiting times in the emergency department fall. The change allows more patients to be treated without extra buildings. The hospital reports the gain in patients treated per bed.
Think of it
BPR is throwing out old processes and designing completely new ones-radical redesign from scratch.
Formula
Calculation
Payback period = Project cost / Annual savings
Suppose a company processes 50,000 supplier invoices a year at a cost of $12 each. After reengineering the process, the cost falls to $4 per invoice.
Annual saving = 50,000 x (12 - 4) = 50,000 x 8 = $400,000.
If the project costs $600,000, the payback period is 600,000 / 400,000 = 1.5 years.Case study
Seen in the real world
Pinecrest Insurance is a fictional insurer that took an average of 21 days to settle a simple claim. A claim passed through intake, assessment, approval and payment teams, and each hand-off added waiting time. Customers were complaining and the cost per claim was rising.
Management formed a team with staff from each step and designed a new process in which a single handler owned a claim from start to finish, supported by an online portal and automatic checks for simple cases. A pilot in one region cut the illustrative settlement time to six days.
The finance team compared the project cost of $900,000 with annual savings of $450,000 from lower handling costs and fewer complaints. The payback period of two years convinced the board to roll the new process out across the company. Before the rollout, the team retrained claims staff, set clear targets for settlement time and customer satisfaction, and agreed to report progress to the board every quarter so that early problems could be fixed quickly.
Watch out
Common mistakes
- Automating a broken process. Technology applied to a poor design only produces the same errors more quickly.
- Ignoring the people involved. Reengineering fails when staff are not consulted or trained.
- Overstating the savings. A realistic business case includes the cost of disruption and a pilot test before full rollout.
Questions
People also ask
How is it different from continuous improvement?
Continuous improvement makes small steady changes, while reengineering redesigns the process from scratch to achieve a large leap.
Is it still used today?
The name is less common, but the approach appears in digital transformation and automation projects. Many modern programmes borrow the same step of redesigning the process before buying software.
How do you measure success?
Compare cost, speed and quality before and after, and check the savings against the project cost. A baseline measured before the project starts is essential for a fair comparison.
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