The world of corporate management is loaded with jargon, acronyms, and specialized terminology. Some terms are downright opaque, while others are confusing because they sound more similar than they actually are.
Two such terms are “business process reengineering” and “continuous improvement,” which are related but fundamentally different management approaches for very different circumstances. They do have at least one thing in common, though ― they’re both management tools used to improve company efficiency and earnings.
It might surprise you, but following sports news ― when the topic is the management of a team and not the game itself ― can provide you with frequent examples of both the continuous improvement approach and the business process reengineering strategy.
Imagine your favorite baseball team is doing well overall but needs to improve where it’s underperforming to be competitive for the pennant race. When the team announces they’ve traded a second-string shortstop for a left-handed relief pitcher, that’s an example of continuous improvement.
Now imagine your favorite team has been losing since opening day. Nobody is hitting, and the pitching staff is the laughingstock of the league. Basically, the team needs to start over, or they’ll just see more of the same next season.
When the general manager announces that the organization has fired the manager and will trade the whole opening lineup before opening day next season, most people would call that a major shakeup. For our purposes, it’s what corporate management experts call business process reengineering.
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A closer look at the distinctions
Business process reengineering and continuous improvement are simultaneously similar and different in the way that firefighting is simultaneously similar to and different from fire prevention. Firefighting is the response to an emergency; fire prevention is about systematically reducing the possibility of fire.
Business process reengineering is a drastic move reserved for a moment when a company is seriously underperforming or maybe even in the midst of a crisis. It’s not the same as a new boss ordering some changes to show who’s in charge.
Business process reengineering
Business process reengineering is about completely rebuilding a company’s operations to improve efficiency, productivity, profitability, and other metrics determined by leadership. It’s the most fundamental blank-slate approach a company’s leaders can take when they’re convinced that change is necessary if they want to deliver the value customers demand.
Business process reengineering often leads to an unsentimental examination of entire departments ― right down to the level of individual employees ― with a parallel analysis of processes and customer outcomes.
In most cases, companies end up reducing the number of steps required to move from ordering to delivery. Improving customer satisfaction by building cross-functional teams is also a common tool for restructuring operations. Since cost-cutting is usually, though not always, a motivating factor, layoffs are often one unfortunate outcome of business process reengineering.
Continuous improvement is a cultural norm that high-functioning companies deliberately cultivate, especially to avoid a business crisis that results in business process reengineering. Continuous improvement is often associated with manufacturing, where incremental improvements deliver compounding benefits over time.
There’s a myth that companies adopt continuous improvement when they feel pressured to cut costs. In reality, continuous improvement focuses on empowering employees to embrace efficiency, make suggestions, and share insights. This leads to innovations in production and service that contribute to overall growth.
When team members have sincerely internalized the continuous improvement approach, reduced process costs are almost inevitable.
Risks and rewards
One successful example of business process reengineering is the Ford Motor Company’s revamp of its accounts payable department.
About 10 years ago, Ford discovered that Mazda, a key competitor, had 100 people handling accounts payable, while Ford employed 500 people to do the same work.
Ford opted to use business process reengineering to completely redesign and automate its system for processing invoices and payments. The newly reengineered process reduced the number of employees required for processing accounts payable by 75 percent.
It’s important to keep in mind that Ford, a successful corporation for more than a century, only applied business process reengineering to one back-office function in this example. Applying business process reengineering to an entire company, top to bottom, is a much riskier undertaking that can fail for many reasons, even when there’s no good alternative to a complete reengineering.
The continuous improvement approach is far less risky. A famous example of this approach is when Dave Brailsford took over as head of British Cycling in 2003.
The team at that point had won just one Olympic medal ― though it was a gold medal ― in decades of competition. Brailsford, a former professional cyclist with an MBA, started analyzing each aspect of competitive cycling with the seemingly modest goal of improving each step by just 1 percent.
The cumulative benefits quickly followed. The British team won eight gold medals at the 2008 Beijing Olympics, an achievement the team matched at the 2012 London Olympics.
Business process reengineering and continuous improvement are both well-established and heavily studied management approaches intended to rejuvenate a company’s performance. Understanding the differences between the two ― and knowing which one is the right approach for the circumstances ― is an important skill for company leaders to hone.