What Is Business Process Reengineering? (With Benefits)

Updated September 7, 2023

As businesses grow and expand, it's crucial they make continuous improvements to their operations. Being deliberate about improvement ensures businesses last longer and have an advantage over their competitor. Understanding business process reengineering can help you optimize business processes in your workplace for better performance. In this article, we discuss what it means to reengineer business processes, outline how it differs from business process improvement, detail how to do it, and highlight additional tips to aid efficiency.

What is business process reengineering?

Business process reengineering is a business management process that involves making significant changes to central business processes. These changes usually aim to increase efficiency, reduce waste or cost, and improve product quality. Business reengineering is a thorough process, usually involving the recreation of essential business processes. It can involve introducing a new business process, significantly altering existing processes, or combining two or more existing processes to create a new one. Business reengineering can also optimize the interaction between two processes to improve information dissemination and efficiency. An example of business reengineering is transitioning to cloud storage.

Business reengineering can occur at any point in a company's lifetime. One of the major reasons for reengineering is business expansion. As companies take on new markets with unique challenges, it's vital they modify their business processes to meet greater demands. Reengineering is also a great option for companies experiencing challenges with growth and meeting sales or production targets. In such cases, reengineering business processes can help the company improve its product quality, cost management, and efficiency, helping it grow. For the best results, it's important that business reengineering aligns with current corporate goals.

The difference between business reengineering and business process improvement

While business process improvement and business reengineering are similar concepts, they have some significant differences. They include:

Scale

The major difference between reengineering and improvement is the scale of change involved. Reengineering is a radical or drastic change to a business's processes. It usually involves looking beyond the existing structure to create different, new, and more efficient ones. Reengineering is usually holistic, focusing on the interaction between various processes in a system. In contrast, business process improvement doesn't require altering the current structure. Instead, it focuses on making little changes within the current structure to improve its function. As a result, business process improvement usually focuses on a specific part or function of a core business process.

Rate of occurrence

Reengineering is a thorough and drastic change to a business' processes, making it incredibly tasking. As a result, it usually occurs occasionally and as a full project rather than a normal part of business operations. It's common to see companies undergoing reengineering shut down some aspects of their operations, pending completion. Alternatively, business process improvement relates to the smooth functioning of the business' current structure. It's less tasking than reengineering and is a continuous process in most organizations. As a result, business process improvement can occur alongside regular operations.

Use

The primary aim of business reengineering is to improve a business' overall performance. As a result, even profitable companies undergo reengineering if they believe they can do better. Reengineering can also be to adjust to drastic changes in the business environment. Contrastingly, business process improvement is usually to prevent or address a problem in the existing business structure. An example of reengineering is transitioning from a paper-based storage system to a cloud-based one. In contrast, an example of business process improvement is colour-coding paper files to make them easier to organize and retrieve.

How to reengineer business processes

Here are some of the steps you can follow to reengineer business processes:

1. Communicate the need for change

The first step in the process of business reengineering is convincing relevant stakeholders that a change is necessary. Depending on the organization's nature, this may include shareholders, a board of directors, or an executive team. Where business reengineering is to adapt to new environments or resolve existing challenges, this process is straightforward. It can become tricky if the organization is already doing well, as some stakeholders may feel there's no need for a change. An effective way to convince them is to show what the company can achieve with reengineering through forecasting and research.

2. Create a team

After getting the necessary authorization, you can create your reengineering team. The team is responsible for strategy and supervision, so ensure you select them carefully. Here are some of the essential parts of a reengineering team:

Senior manager: A top-level company executive that can serve as the team leader and bridge communication between the team and other executives. The senior manager is responsible for supervising the process and representing the interests of the reengineering team to other executives.
Operational manager: Operational managers are employees responsible for core business processes in the organization. You can also call them process owners, and their role is to provide insight into the different business processes.
Reengineering team: This is the group of professionals responsible for implementing the reengineering strategy. They usually comprise professionals with varying skills, depending on the organization's current needs.
Steering committee: The steering committee is responsible for resolving any dispute or friction between units affected by the reengineering process. It usually consists of senior managerial staff who're familiar with the purpose of the reengineering.

3. Define key performance indicators (KPIs)

Key performance indicators are quantifiable criteria you use to evaluate the performance of a business process. It's important you set KPIs, as they form the basis for assessing business processes and reengineering them. Taking the time to develop a comprehensive list of KPIs ensures your reengineering process is thorough. The appropriate KPIs depend on the business process you want to engineer. For example, when reengineering manufacturing processes, essential KPIs are cycle time, changeover time, inventory turnover, and defect rate. In contrast, KPIs like mean time to repair and application development is more relevant when reengineering information technology processes.

4. Assess all business processes

After determining the relevant KPIs, you can assess various business processes to see how efficient they are. You can consult departmental heads or interview employees to gain more insights into the processes and their usual challenges. Conducting your analysis diligently can help you discover problems you weren't aware of previously. This allows you to solve more problems in a single reengineering effort, conserving valuable time and resources. It's important you don't restrict your assessment to problematic processes. Instead, analyze how they interact with other processes within the organization's structure and how any changes can affect those interactions.

5. Reengineer the business processes

After conducting your analysis and identifying the challenges in the company's business processes, you can start developing solutions. The team can hold regular brainstorming meetings to discuss different strategies and evaluate their feasibility. It's important you record your brainstorming sessions so you can review all discussions before creating a wholesome solution. Once the team has developed a solution, you can commence implementation. You can start by implementing slowly to observe the solution's effectiveness before applying it to other processes. Ensure you collect feedback from employees and department heads and record them for future reengineering purposes.

Benefits of reengineering business processes

Here are some of the benefits of reengineering business processes:

Reduces cost

One of the major aims of business reengineering is reducing cost and wastage. Through reengineering, companies can identify materials, production processes, and equipment contributing to waste in the company. Similarly, reengineering helps identify redundant roles among staff, which companies can merge or remove. As a result, reengineering saves costs by reducing expenses and limiting waste.

Increases efficiency

When companies undergo business reengineering, they optimize their processes to function better. This includes automation, system integration, and upgrades. As a result, companies usually become significantly more efficient. Eliminating wastage and time-wasting processes allows the company to get more done with the same time and resources, leading to an increase in overall productivity.

Improves product quality

Reengineering aims to help companies satisfy customer needs more effectively. As a result, most reengineering processes focus on improving product quality or service delivery. For example, a company may transition to a more environmentally friendly material, making the product more agreeable to potential buyers. Additionally, improvement in production processes usually allows employees to focus more on the quality of products.

Builds brand image

When a company dedicates itself to constant improvement, it shows good corporate ethics and concern for customers. This can help build the company's brand image and increase customer loyalty. Business reengineering also means the company can deliver products and services with higher quality, leading to a better brand image.

Encourages innovation

While reengineering business processes, employees analyze various organizational structures and brainstorm ways to improve them. Such efforts can lead to innovations that change the nature of work in the industry. Through such innovations, companies can increase their capacity and develop more sophisticated products.

Fasttrack adoption of new technology

Transitioning to new technology from old ones can be a strenuous process for most organizations. Business reengineering offers a great motivation for companies to adopt new technologies speedily. This usually leads to better service delivery for customers and can also help organizations improve their productivity.

What Is Business Process Reengineering? (With Benefits)