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Vol. 4 :: No. 2 February,
2002 (Magh
- Falgun)
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Management |
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Rave Reviews on Revolutionary Reengineering
By Surendra Bhusan Shrestha In the context of management of Rastriya Banijya Bank (RBB) been awarded to foreign consultants and Nepal Bank Ltd. going to be awarded contract and in the juncture of privatization of government corporations and government units, this issue of reengineering can not be left without being addressed in the minds of brainstorms. Reengineering has become a need of the present day as the whole idea of conventional downsizing and restructuring of the corporation can not fulfil the responsibility towards the stakeholders in the long run. What is Reengineering ? Reengineering is the fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance. Dramatic Reengineering addresses to substantial improvement of the business not the marginal improvement. It focuses on achieving breakthroughs with the quantum leap forwards in the performances. Radical Reengineering is the new dimension of work rather than the slight improvement of the activities that exist. It is the new way of doing things and it throws conventional methods and starts over with the new process. Process The process in reengineering means a group of related tasks that altogether create value for a customer. In traditional organizations, processes are orphans. Fragmented across many organizational units, they are effectively invisible and unmanaged. The processes are yet in the nucleus of every enterprise. The process is the means by which companies create value for the customers. Reengineering focuses on addressing end-to-end processes for dramatic improvement in the performance. Redesign Reengineering is based on the concept that the design of processes i.e. flow/sequence of activities/tasks are of vital importance. If the work is well designed, then the activities can be well executed even by the same employees. What is not Reengineering? Reengineering is not the downsizing, a ‘synonym’ for total quality management (TQM), - getting rid of people and jobs to improve short term financial results. Reengineering is the end result of improvising the way of doing things such that the rethinking of the work eliminates unnecessary ones to bring better ways to do work. It eliminates work rather than jobs or people. However, it is always true that in many cases, when it comes to radically rethinking the work, it may need fewer people to perform the work. But this is not the intent of reengineering. Reengineering is not restructuring; a terminology for moving boxes around an organizational chart or selling off some business units. Reengineering is focused on how work is to be done better rather than how the organization is to be structured. Reengineering is not automation. But the technology plays important role in reengineering thereby enabling new process designs. Reengineering is to enable new process designs, not to provide new mechanisms for performing old ones. Why Reengineering? The driving force behind reengineering can be characterized as three Cs: Customers, Competition and Change Reengineering has become important for some organizations to respond to the technological changes, customer’s awareness, new regulatory environment and constantly changing needs and tougher competition. Reengineering helps to achieve the success of the businesses by bringing cost reduction (reduction in cost per unit), increased speed, greater accuracy. The Ingredients of Reengineering Leadership Leadership is the key ingredient for reengineering success. Reengineering becomes successful only when it is driven from the topmost level of an organization. The people on top lines have the horizon of perspective that is required to see the entire process from beginning to end rather than from narrow expertise and purview as the people on front lines do. Normally in large organizations, the most common title associated with the leader of reengineering is Chief Operating Officer (COO), not Chief Executive Officer (CEO). Team A group of high-caliber individuals who are capable and comfortable working in the reengineering context and style having profiles of process-orientation, holistic perspective, creativity, restlessness, enthusiasm, optimism, persistence, tact, team player and communication skills should be involved as a team. Reengineering process should address mainly the 5 Cs namely Career paths, Compensation, Celebration, Communication, Care and Compassion. Consultants The consultants, though, are very expensive but cannot be ignored for their consulting experience in the business. There are different types of consulting firms - large general management consulting organizations, firms specializing entirely in reengineering, information technology oriented firms, a growing number of small advisory firms. Using consultants should focus in mobilizing their ability to leverage other companies’ experiences, getting access to essential skills and third-party objectivity. Making Reengineering Work Generally, in an organization, when the old process is unable to produce good results any more, the reengineering is called for the new one. But the question arises: Why didn’t we use the new process from the very beginning? Why did we consider the old process in the initial stage? Let us consider the story of Accounts Payable at Ford. In the old days Ford had a department called Accounts Payable, which would get a purchase order from purchasing, a receiving document from the receiving dock, and an invoice from the vendor. It would then compare them and, if they matched, issue a cheque. This process got replaced by much simpler and less labor-intensive process. Now, the person on the receiving dock takes possession of the goods, checks to see if they match against an order, and if so, authorizes payment; if they don’t match, the shipment is not accepted. The assumption at Ford was that accounts payable had to be a complicated, slow, bureaucratic process because the people at the receiving dock were not in a position to match invoice and order. But the advent of on-line computer systems made that assumption obsolete. Some assumptions become outdated over the years; others are false from the very outset. We can recall the IBM Credit’s old credit approval process which went through four steps. One person checked the applicant’s credit rating; another decided what interest rate to charge; a third person put together the lease agreement; and a fourth prepared the response to the customer. What is the underlying assumption here? What would have been IBM Credit’s response if, five or ten years ago, it had been advised to do what it eventually did? The company’s response would have been that this was a ridiculous idea as it would have been impossible in their minds. Because it would have been said that the work is too complex to be taken out by one person. It requires the sophistication of a legal expert, analytical capability of financial analyst, and the skills of a specialist credit checker. The only underlying problem here is that this assumption was wrong. On going through thorough examination, it was found that only a small fraction of deals were complex and the majority of deals were very straightforward and could have been dealt by one person. The new concept of one person doing the entire job is viable once you discard the old and false assumption. Arguments on Reengineering There are in common more arguments and criticisms to the new concepts and new advents as such reengineering is also not far from the arguments. Some of the common arguments we find can be outlined as below: Argument 1: Reengineering in not a new concept but at bottom nothing more than old-fashioned industrial engineering/automation or quality improvement wrapped up in new packaging. Argument 2: Reengineering is not radical enough and it only leads to fundamental re-conception of the identity of the company, of the nature of its products, services and basic strategies. Argument 3: Radical change is dangerous and inhumane. Argument 4: Reengineering is not affordable. Argument 5: Reengineering is another name for downsizing. Argument 6: Reengineering is just cost reduction and it isn’t concerned about growth. Argument 7: Reengineering is just common sense. Argument 8: Reengineering is not for us because we are different. Argument 9: We have been doing reengineering for years. Argument 10: Reengineering doesn’t work. These arguments are the result of misconception towards the basic concept of reengineering and it is found mostly in the minds of the people resisting to change. The resistance to change shall be overcome by giving them correct notion and by educating the people involved in the process. What comes after reengineering? The answer to the question is much sought about by the people concerned about this issue. In fact the question brings concern towards the next wave of the revolution in the management industry. Initially though it was primarily used in the cost reduction by controlling the costs of routine back-office processes in giant industries facing financial difficulties. Now situation has changed and each of the conditions are being relaxed thereby opening up new avenues for reengineering. Secondly, it is not also limited to the back office process and being applied to innovative and selling processes. It is also important to keep in mind that reengineering does not diminish the importance of the personal charisma of the people involved in the process and it can leverage the abilities of the people by revamping the process. Organizations are giving more attention to some of its enabling processes in addition to value-adding processes. Value adding processes are those that directly create the value delivered to external customers whereas enabling processes have a more internal focus. The links between these two processes are significant. Value-adding processes can achieve the highest potential only if enabling processes perform at their maximum capability. For instance, we can say that the process of employee recruitment and manpower development creates no customer value; but no other process can operate perfectly without well-trained manpower. Taxiing the Air Service By Ramesh C Arya It is common for a Westerner to promptly say "Thank You Very Much" and "Thank You Indeed" irrespective of the extent of whatever little service you render. The others would come closer and appreciate your (feminine) beauty by kissing you. It would be the most "uncommon" sight if you see an average Nepali doing so. At least, never so in the case of the second illustration! The word taxiing reminds me of Taxiing Taxis, a humorous article I wrote for the Friday Supplement of a national daily a few years back. It was on travelling experience of an average commuter using taxis in the capital. The taximeters seldom perform right in Nepal. They tend to show an exorbitant amount: the range is the reflection of the driver’s greediness and the extent they can dare surcharge the customers. And if you exceptionally protest, the taxi driver would immediately be considerate and tell you, "Here ra Dinus" (Kindly pay, what you think reasonable.) Like when I wrote on the Taxiing…, years back. Unfortunately, we still have hundreds of such taxi drivers. That was the case of private operators. The taxi service belongs to the private sector. The taxiing instance was for the surface transport. If you felt an unfair deal, in most of the cases, the private sector would reach into a compromise with the customer- the consumer. The epidemic is now sweeping over the air service too. From the trend I observed recently in the business of taxiing the air services - and unless the authorities act otherwise - I feel that the operators would ask its passengers for an amount as government tax. And if you question the rate, they would promptly say "Here ra dinus" and agree for the lower sum and wrongly pocket the amount into the personal box and not that of the exchequer. But there is no such opportunity for consumers in the air service. The practice may affect the services of the government sector too. In the recent years, there are a number of airline operators in the private sector, beside the sick Royal Nepal Airlines Corporation. If my observation is correct, the rogue has already entered the air transport sector too in a premise maintained by none other than the Civil Aviation Authority of Nepal. In a most "unceremonious" and untimely manner! And the taxiing matter is the real tax. It’s VAT, the Value Added Tax if not the tax itself. VAT is not a new tax for Nepal. The tax that I am talking about is relatively not too old - less than a couple of years. It is added to the Airport Tax, now called the Airport Service Charge. Many countries charge it as Embarkation Tax. To embark, as I understand from my little Random House Dictionary, is "to put or receive on board a ship or aircraft". But we pay the tax while we are on ground and prior to boarding the aircraft. It is permission to board. As of now, many airports in the outside world still don’t charge such a tax. May be, the countries are adopting indirect measures. Nepal has a tax rate higher than the neighbourly India! To start with, it was a flat amount of Rs 10 per passenger. But, as any tax that gradually spirals onwards, it went up over time. Later, for the same act of boarding the same aircraft at different airports in Nepal, three different rates applied. Two different rates, more or less depended upon the place where you are boarded - Kathmandu or elsewhere. And, you may have a tax -free ride if you are flying from a backward area. Principally, meant for the services provided at the airport that served before one boarded, the differentiated rate, (but never for the quality of service) or no tax had some logic. Recently I experienced a domestic flight on board the Necon Air on its Kathmandu- Janakpur-Kathmandu sector. During the "Up" trip, the outbound journey from Kathmandu, once duly checked in at the domestic wing of the Tribhuvan International Airport, I could buy tea, coffee and candy at the waiting hall. I had a place to sit and I could listen to the delay announcement and invitation to board the aircraft through the speaker system. I could have expected much more but would content for the airport tax of Rs 165. During the return journey from Janakpur, I had no such amenities. Perhaps that was the reason that I had to pay just Rs 137.50 that included VAT. There is a sense in paying a tax for the service that you are offered. Better the service, higher the rate! For some kind of tax, it may be a flat amount or convenience of the tax collector and the customer, it is linked as a percentage of what you pay for another service. Paying for street lamp service, for example, while you pay for water supply and sewerage! In whatsoever way you are charged, flat or as a percentage over the "basic" charge, normally the tax component is well identified. Just like a problem on interests that explains the Principal, the simple or compound Interest and the Amount that is a summation of the principal and the interest. And, at least over the past 20 years, I am used to that kind of tax receipts. Also, the bills are duly impressed with a serial number. But it seems the present practice is more dynamic. It just tells the amount and leaves it to you to guess the principal and the interested that resulted in the amount. But over the years, it has been so widely accepted by the customers that the authorities- the CAAN, in the present case- don’t bother to explain break up of the amount. May be it is left between the treasury and the collectors to back calculate the VAT component on the total collection bills. But how reliable the bill, the adh-katti, is, specially as the bills are not serialised in a manner, generally acceptable to a common man. At least, the receipt I received at Janakpur intended that. Also, the receipt carried a hand written serial number. Number 1030383 (if I rightly read the handwriting!). To add to the authenticity of the tax bill, it was stamped with an office seal. Is this the way other government accounts are maintained? I don’t know if that is the practice uniformly carried out elsewhere. But with the kind to receipt, my tax payment was acknowledged, I have reasons to believe that the bill could have been a forged paper. It took quite some time to back calculate and say that Rs 125/-is the Principal in this case and Rs 12.50 the VAT (@10% of Rs 125) that, together, amounted to Rs 137.50. During the twenty- year period we are learning to avoid the harsh words the administrators conventionally used. Air Service Charge is definitely more polite compared to the conventional Embarkation Tax popularly known as Airport Tax. And, also one can charge an additional tax, known as Value Added Tax, over what is known as the Service Charge which was already a tax earlier. If a service charge is VATable, it may be wise to decide what kinds of services are really chargeable and what not. Teaching in school is a service. Medical care to patients is service. Keeping the public toilets clean is a service. And all those services are available for some charge. How many of such services are subject to additional tax called VAT? It may be a clue to the tax collectors for more areas open for introducing VAT. There are several ways of making money. Tax- direct or indirect- is the way the government makes money. For one reason or other! For good reasons or no reasons! We have long forgotten to justify the reasoning. The people or the so-called Consumer Association hardly care to examine if the consumers are rightfully taxed. But with the recent wave for good governance, one may like to examine if the collection system is rightly governed and more importantly the basket full of such collections really reach the treasury. Shall the recently introduced (and much hyped) Voluntary Declaration of Income be applied to VAT also? Does it not prove the inefficiency in the government tax collection system which needs some change? It may not be wise to tax the people and siphon it out to the wrong corners and the tax benefits they can’t perceive. The airport tax may just be one such example. Businessmen would like to illustrate several cases. |
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