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Risks of ReengineeringRisks of ReengineeringWe mentioned earlier that the business cases for reengineering are extremely compelling. Any bank CEO would want to dramatically reduce her cost per loan. Yet, why do BPR efforts fail? There are four major risk points in a reengineering engagement:
Unreasonable ExpectationsWe mentioned that a distinctive feature of BPR is that it involves large-scale change. Politically speaking, big changes require large incremental benefits to be accepted. Many of these efforts are justified by astronomical cost savings. This creates a vicious cycle of exaggeration and overcommitment to unattainable goals. The proponents of these types of initiatives will tend to hype the benefits of BPR just to get approval to move forward. The decision makers will demand more, and the proponents of the effort will overpromise just to get the initiative approved. This puts the SA at risk by overlaying unreasonable expectations on an effort that would deliver strong benefits. This feeds the next risk. Lack of Sustained Executive CommitmentBPR efforts are difficult to execute and often encounter delays in progress. This tends to test the resolve of the executives who have sponsored the SA. As delays occur resulting from resistance to change, short-term operational disruption, and technology, senior management will look to terminate the effort, since the operation has gotten worse as opposed to better. The loan origination capability of the bank described above could have gone from two days for an approval to three days because the staff is getting used to the new process. This would cause customer complaints, declines in customer satisfaction, and loss of revenue to the bank. Since executives have been sold on improvements in customer service and cycle times, they would begin to question the effort. If things do not improve, then they may want to scrap the effort entirely. These types of disruptions also exert political pressure on the executive sponsors. Being associated with a large-scale failure could be a career-ending occurrence. Executives do not want to be associated with a failure and will tend to distance themselves from the initiative. The bar of success may have been set unrealistically high to push the initiative forward. The frustration caused by delays and political exposure may be enough to scuttle the effort, leaving angry employees, customers, and a great deal of money spent with no benefit stream. Resistance to ChangeAll humans are creatures of habit, and change is not welcome unless it is absolutely necessary. Doing things differently is uncomfortable and inconvenient for most employees. Just because a new process makes logical sense does not mean that people will embrace change. For example, there was going to be a change in the renewals process for commercial lines of credit for a regional bank. The existing process was causing customer service problems for the bank's existing customers. Customers had been complaining that the process took too long, required too much information, and rehashed details that the bank already covered. The bank was losing accounts to competitor banks in the region that touted hassle-free renewals. The effort to change the renewals process was sponsored by both the president and the CEO of the bank. This was considered a reengineering effort because it affected the largest customers of the bank and cut across two major functions of the operation. The team that was created to spearhead this effort worked with the bank officers and staff to construct a process that would eliminate unnecessary work steps and diminish the functional barriers. The team was careful not to expose the bank to inordinate risk by changing its processes. In a series of meetings, all those involved agreed to the new processes and procedures, and no one voiced a dissenting opinion about the new way of doing things. The president of the bank made sure that the procedures were put in place quickly. After one month everyone was still doing things the old way. It was discovered that the chief risk officer (although he had verbally endorsed the process) was resisting the change. He stated that he would not approve any renewals using the new process. This is one example of how resistance to change can come at any level of the organization and can foil any BPR. Technology Performance FailuresMany reengineering efforts do not increase value because the technology that was expected to be the linchpin in the effort does not work. This can happen for many of the reasons stated above. Since employees are depending on technology to help them perform daily functions, weak performance of technology will render the new processes dysfunctional. This risk can also cause resistance to change, as well as loss of executive sponsorship. For instance, ERP systems were supposed to deliver seamless integration of functions. These implementations were notorious for dismantling a perfectly good process and replacing it with laborious, time-consuming processes that required more work than the original way of doing things. 143
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