Business Process
References Reengineering Case (Last Item)
June 13, 1994
"It's embarrassing, really," said Peter Scott-Morgan, a director at Arthur D. Little, Inc. "The U.S. is hitting its highest failure rate for major change since business began, yet most companies won't acknowledge it."
In two recent surveys of Fortune 1,000 companies, top information systems and business executives confirmed that so far, re-engineering has in a vast number of eases been, well, a bust.
In Arthur D. Little's 1994 study of 350 executives in 14 industries, less than one-sixth reported favorable re-engineering outcomes, Scott-Morgan said last week. Moreover; six out of every 10 executives said they encountered unanticipated problems or unintended side effects from re-engineering. These include turf battles, a lack of management buy-in and inadequate implementation skills.
Meanwhile, another as-yet-unreleased 500-company study recently completed by the granddaddy of re-engineering consultancies - CSC Index, Inc. in Cambridge, Mass.- found the re-engineering dissatisfaction rate "closer to 50%," said Gary Gulden, an executive vice president at CSC Index.
Re-engineered IS "departments are being downsized, then told, 'We need all of you to pull together On cross-functional teams,'" Scott-Morgan said. Yet the performance rewards available to information technology staffers, such as interesting development work, demand a high degree of individual effort. The up- shot is that IS "departments are quite often downsized, only to be set up between a rock and a hard place," he said. IS departments also suffer when the user groups they serve are downsized in the name of re-engineering, said Ken Harris, vice president of worldwide IS at Pepsico, Inc. subsidiary KFC Corp. in Louisville, Ky.
"I've seen a lot of situations where companies have reduced head counts with the idea of putting replacement technology in," Harris said. "But then the resources get pulled before the technology is ready, and [IS] gets blamed for the failure."
Scott-Morgan and Gulden both said they have observed the same phenomenon.
"What's happening is that re-engineering is increasingly being used as an euphemism for downsizing," Scott-Morgan said. "Interestingly, there's a very close correlation between companies in industries that went through the largest downsizings and those where re-engineering dissatisfaction is highest."
Yet companies continue to downsize in the name of business redesign - even those in good financial stead. Last week, Chicago-based Sara Lee Corp. announced that it intends to cut 6% of its worldwide work force at a time when the company "is strong and on course for another record year," according to Chairman and Chief Executive Officer John H. Bryan. "Our ability to remain a growth company, competing effectively in rapidly changing markets both today and in the future, requires these actions," Bryan said.
So in the face of a minimum 50% failure rate, why do companies continue to reengineer?
"It's human nature to defend what you've done," Gulden said