Business Process Redesign National Study 2010 Edition (Executive Summary)

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2 INTRODUCTION At the beginning of 2008 the Romanian economy was seen by many as a locomotive that will lead all the companies to the country with rivers of milk and honey. In the autumn of that year, Ensight Management Consulting released the report of the first Romanian study on optimizing business processes. Few were the ones who looked closely at the warning signs highlighted in the 2008 report. In the report it was mentioned that most growths were achieved largely due to the economic bubble and were not backed up by a thorough organization of business processes. Two years have passed and the euphoria of many managers turned into wrinkles and sleepless nights due to the crisis. Some of our conclusions and pieces of advice are now even more relevant: transform/ reorganize the company and its processes to increase efficiency and reduce costs. The 2010 BPR national study continues the tradition Ensight started two years ago of offering support to the Romanian companies to increase their performance through business process optimization. The ability to make comparisons between the BPR processes before and during the crisis represents a significant advantage because it allows a better understanding of the success factors for such initiatives. To highlight the best practices in the organization of BPR projects the extended report also includes a comparative analysis between companies that have achieved significant success and those that have achieved a modest success. In addition, we are pleased that 100% of the participants in this study who launched BPR projects were successful. The fact that a high number of the respondents are part of the management or are directly involved in BPR projects allows us to have a high degree of confidence in the results of this study. The degree of achieving the benefits depends on the rigor with which the recommendations will be taken into account. The survival of the Romanian companies depends solely on how they will be capable of helping themselves. We can offer a helping hand, but the decision to act is at the discretion of the management. Ensight Management Consulting is dedicated to help you in your business TRANSFORMATION initiatives to increase operational efficiency, and assure more control and visibility on company s performance. The 2010 BPR national study continues the tradition Ensight started two years ago of offering support to the Romanian companies to increase their performance through business process optimization. Ensight Management Consulting Team 2

3 BRIEF DESCRIPTION OF THE STUDY RESULTS Ensight Management Consulting launched in mid-2010 the second edition of the national study of Business Process Redesign, meant to highlight the manner in which Romanian companies use this tool to increase business performance, their results and what are the best practices for obtaining positive effects in the operational field. Over 40 companies responded to our invitation by actively participating and filling in a structured questionnaire and by carrying out interviews in order to refine and validate our findings. All the data was processed exclusively by the Ensight consultants. Ensight s main objectives of the study were: 1. Identifying the best practices in the field, success factors and the evaluation of the implemented BPR studies 2. Increasing awareness of the concept and of the BPR specific tools as scientific methods of business optimization Redesigning business processes is a management tool that was used by many companies globally to improve business processes, operational efficiency, reduce costs and increase profitability. BPR methodology can be used to improve and professionalize the activities of the organization regardless of industry or functional area from logistics, finance or production, to marketing, sales and customer relations. This edition of the BPR study captures the experience of approximately 40 Romanian companies, primarily representing the retail and distribution sectors, telecommunications, financial services and other professional services. Cumulatively, the companies participating in the study have a total turnover of over EUR 5 billion and more than employees. Most participating companies are medium or large, and most of the respondents are part of the management structure. The results of the study have a high degree of confidence due to the massive participation of the management and of the 80% of respondents directly involved in BPR projects. All the respondents have reported successful projects, and 60% had a major success: very good results at the company level or have used short-term results to launch multiple optimization initiatives. Just as in the 2008 study, the expected level of benefits is greater than the effective results. Due to unfavourable economic conditions the most often expected benefit is to increase financial results. This objective has also the lowest achievement rate, probably because of the fact that the market was constantly contracting. The top benefits achieved in 2010 are related to operational efficiency: cost reduction, orientation towards processes, reducing the duration of the processes, increasing productivity etc. Projects with major success have an overall benefit level that is 30% higher if compared to the other respondents projects. Cumulatively, the companies participating in the study have a total turnover of over EUR 5 billion and more than employees 3

4 Moreover, the achieved benefits reflect the main BPR projects objectives: Greater operational efficiency; More control and visibility into the company s activities; Customer focus declined in comparison to 2008, but it is still important. The results indicate that the management has become more interested in exploring how to create All of the respondents have reported added value in the company. Instead of viewing the successful BPR projects, and 60% business processes as a black box with resources and had a major success revenues as respectively inputs and outputs, the management tries to follow the logic: understand measure optimize/ transform automate. The economic crisis offered even more beneficial effects for the Romanian companies managers. They are more careful in examining the impact of BPR projects and often try to quantify their success. The percentage of those that measure the impact of BPR projects has doubled in terms of cost level reduction (up to 73%) and internal rate of return (up to 23%), and the percentage of those that measure the return on investment increased to 41%. As a consequence, BPR projects are increasingly considered to be an investment. At the same time, management is more realistic in terms of return on investment. Instead of expecting to achieve profitability within a year (most often selected option in 2008), 60% of the respondents of the current study expect a positive ROI within 2-3 years. An analysis of the factors that may influence the success of a BPR study allows us to draw the following conclusions: The maximum impact factors that can be easily achieved are the following: setting clear goals, developing a competent team and good knowledge of processes Factors that prevent the successful development of the project: current organizational structure, existing IT and management systems. Successful projects were organized by companies that actually want to improve and focus on their relations with the customers as well as correlating their projects with the company s strategy. All of these characteristics may be associated with a professional management style which is a critical factor for the success of a BPR project. The lack of human resources and competencies represents the main obstacle for BPR projects. This fact reinforces the importance of the success factors outlined above. Based on the answers of the respondents there certainly is an acute lack of project management skills among internal resources and more than 50% of the companies have not taken any measure, nor do they intend to take measures to develop internal BPR competencies. This lack of skills is solved by using external consultants. In comparison to the 2008 study we noticed an increased use of consultants for facilitating BPR projects are increasingly considered to be an investment. 4

5 communication, as project managers and as additional resources, but their primary role remains that of methodological or functional experts. From the point of view of the Resistence to change 53% respondents the most Lack of resources 29% important advantages of Inefficient project management Lack of knowledge Lack of management involvement 18% 18% 12% external consultants are their experience in similar projects, objectivity and quality of service; the The most important difficulties of BPR projects greatest difficulty encountered was the insufficiency of effort allocated to consultants in comparison to the project s necessities. Moreover, the collected data shows that the positive impact on the projects is significantly higher when a bigger part of the project effort is allocated to consultants. The projects in which the consultants had a critical impact on the degree of success of the project allocated on average 40% of the total project effort to external resources, and the projects in which the consultants had only a partial positive effect allocated only 10% of the total effort. Another interesting result is that the first group included only projects that recorded a major success, while the second included projects with modest success. The comparison with the 2008 study indicates the increased importance of change management and involvement of external consultants for the success of BPR projects. The respondents consider these factors to have a critical or significant 60% impact for change management and around 80% for external consultants. If we only consider the successful projects, these percentages increase to 75% and 100% respectively. Companies that have not launched BPR projects, but responded to the survey declared in proportion of 80% that they do not have the necessary resources or have not thought about this option at all. A common characteristic of these companies is increased focus on clients which is at a similar level with that of the companies with very successful BPR projects. It may be precisely this quality that motivated the respective companies to participate in this study. If they were to launch such a project, a vast majority of the respondents would prefer to limit themselves to minor changes of the business processes (probably due to lack of resources). Otherwise, the approach would be similar to that seen in respondents who have BPR projects underway. The analysis of the answers received from respondents that have not undertaken BPR projects reveals that this concept is perceived by the management as being more interesting than in 2008, but still little known. We hope this study will help all companies wishing to efficiently organize future projects and become the new promoters for BPR. The experience of the companies that have already launched BPR projects is more than encouraging and demonstrated that such projects bring significant benefits. The lack of human resources and competencies represents the main obstacle for BPR projects. 5

6 CONCLUSION Following this turbulent economic period only two types of companies will emerge: those that will survive and those who will no longer exist. Similar to a human organism that needs more vitamins and minerals when exposed to prolonged stress, a company needs in times of crisis an additional supply of resources, skills and experience. BPR projects represent a toning exercise for the companies, which, although common sense, is often neglected in favor of other priorities that consume the company s resources. In the absence of an updated and fine-tuned business process, the company will eventually collapse under the weight of its own inefficiency and incapacity to react to environmental changes. Continuously reviewing and optimizing business processes will help avoid crisis situations when companies can only be resuscitated by painful interventions for both the company management and its employees. The existence of healthy companies will be beneficial to all. ENSIGHT S BPR COMPETENCES Ensight Management Consulting is a management consultancy company evolving continuously since Currently, we are the largest management consultancy company in Romania, both in terms of turnover and number of employees. Prepare for support functions outsourcing Create a process management system for ISO 9001 certification Audit of existing business processes and efficiency improvement Classic BPR Support complex strategic transformation of companies at the operational level Define/structure the processes for implementation of ERP, CRM, etc. Support the development and implementation of Balanced Scorecard or Controlling systems The 10 years of experience in transforming Romanian companies represent the guarantee of the quality of services offered by Ensight Management Consulting. Due to the multiple competencies and solid experience of our team we are able to offer you integrated business solutions. Since the main concern of Ensight Management Consulting is assisting Romanian companies in their transformation initiatives, the development of strong BPR skills was facilitated. Thus, BPR projects represent one of the most important services our company is offering. Our experience in financial services, utilities, oil and gas, heavy industry, food industry, telecommunications, retail, as well as other industries allows us to offer an extensive array of services related to process management adapted to the needs of our customers. The full study is available upon request. For further information and questions please contact: Ion Ghimbovschi Project Manager ion.ghimbovschi@ensight.ro