Management: The process of getting more from less

HOW is it that one company has been able to reduce its management layers from more than 20 to just four and another has been able to reduce administrative costs by 40 per cent? Both have also seen quantum leaps in profitability along with improved service levels in a short space of time.

The seductive solution lies in the latest management philosophy - process re-engineering. As my Ashridge colleague Eddie Obeng and Stuart Crainer write in their recently published book, Making Re-engineering Happen, re-engineering is about 'changing anything which provides a block to improving today's business performance even if it means going back to the drawing board'. And a growing number of companies across the whole spectrum of commercial life are doing just this.

Process re-engineering usually involves top management identifying the core processes that distinguish a company in the marketplace. They then champion a collective, often team effort, to implement short and long-term improvements. This is a revolutionary approach to business and one that cuts across traditional structures and patterns of work.

At face value the logic appears impeccable and the smattering of publicised results is impressive. However, there is a rising chorus of sceptics. Is this just another overstated management fad or, worse still, a camouflage for redundancy campaigns?

Since the 1950s the business world has been cluttered with new fads and fashions - most of them over-promised and under-delivered. Like most fashions, any potential is often squandered in the rush to jump on the bandwagon. As managers we are historically too eager to realise the benefits without recognising the costs, difficulties, and time involved in getting there.

Applying an engineering mindset in the management arena is not new. In the early 1900s, industrial engineering was all-powerful and led to the standardised car. In the 1970s, information engineering created the powerful central computer.

The early 1990s are arguably the era of process re-engineering because of the drive to break down functional barriers and improve access to real- time information. Businesses are frantic to improve service and quality while reducing costs.

Great claims are made about the benefits of business process re- engineering but Michael Hammer and James Champy, the acknowledged gurus, state that while 50 per cent of large US companies are trying to re-engineer, only 5-10 per cent are doing it effectively.

And herein lies one of the problems. Re-engineering business processes in an established, and possibly successful organisation requires the determination and radical thinking of a visionary. In effect, the whole organisation will be turned on its side, and the implications are far reaching. Some staff may face redundancy - not just because they may now be surplus to requirements but because they are not perceived as able to cope in the new environment.

The Milk Marketing Board and Reuters are two British companies that have taken the plunge proactively rather than because of a crisis. National & Provincial, on the other hand, needed to act quickly and found inspiration in David O'Brien, its new chief executive. It believes the benefits are just beginning to flow through but recognises that re-engineering is not a destination, but a journey.

In Volkswagen, under the leadership of Jose Ignacio Lopez de Arriortua, the charismatic manufacturing director, a simi1ar revolution aims to restore the company's world- class performance within a few years. What he calls 'the protagonists' - the workers - are being forced into self-directed project teams to bring about radical improvements using the methods and guidance of Dr Lopez and his team of internal consultants, or 'warriors'.

But, as in most management situations, the reality is more complex than the headlines suggest. As more considered analysis emerges, it helps us understand the issues involved in achieving the re-engineered organisation.

Obeng's and Crainer's book is one of the first to put into context the critical steps in managing the change process. And as you begin to read it you also begin to realise the complexity and inherent paradoxes in implementing such change successfully.

It is clear that success hinges on marrying business logic with the less predictable human dynamic. In particular, employees need to develop the high-level skills required to contribute effectively in project teams; to communicate across specialist barriers; to develop the conceptual skills to see the big picture as well as master their small part; to be motivated by teamwork, not just individual recognition; to feel comfortable with less career and job security and yet be more committed to the organisation than ever before.

Process re-engineering is very much a product of the times in which we live. In the optimistic 1980s the mood was for vision and achieving ambitious synergies. In the 1990s, process re-engineering is essentially about achieving quantum leaps in performance, usually within known market and competitive arenas. It is about getting more from less, or as management thinker Charles Handy puts it, about getting three times the output from half the staff paid twice as much.