Business Process re- engineering in a bank
Business Process re- engineering in a bank Prepared by:
Submitted to:Muhahmmad Ali Sir Ali Mubasher Sb Roll # Course
CoordinatorBI 591436 ICMS 6th Road Rawalpindi
Introduction The rapidly growing markets, information and
awareness in the world demand organizations to change their
operational processes to compete globally. People have more
knowledge, more information in these days and this has compelled
banks of many countries to advance the quality of their customer
service, lessen their operating cost and improve their performance
especially in the developing countries
IntroductionToday customers demand low prices and better quality
services due to which organizations are facing stiff challenges.
Focus of the organizations should be not only to lessen the cost of
the operations but also to provide better and unique services to
attract the new and retain the existing customers. Rapid
improvements in the technology have forced the organizations to
change theirstrategy, policies and capacities. For the last few
decades banks are doing mergers and acquisitions because of changes
in their strategies to become more efficient, effective and
attractive.
IntroductionOrganizations are taking initiatives to provide
better and different services to their customers in different ways
to meet the expectations of the customers. Organizations need
satisfied and loyal customers to survive and operate in the long
run. Mergers and acquisitions are also playing their role as an
important tool to enhance the resources, skills, abilities,
operations, market access and performance and to meet the global
requirements. Business Process Reengineering (BPR) is also
important and organizations are using this approach now days to
improve their performances, to become more efficient and
effective.
Topic ReviewThis research study has tried to measure the impact
of business process reengineering on the performance of banks in
Pakistan. Banking sector is the part of financial sector which has
its own importance. Financial sectors always play an important role
in the progress of any country. Pakistan is one of those developing
countries which are facing problems in economic growth therefore
business process reengineering has more importance for the banking
sector of Pakistan. Organizations can perform in a better way,
satisfy the customers, satisfy the employees and enhance the
quality of their products through business process
reengineering.
Important Sub-topicsIntroductionTopic ReviewImportant
sub-topicsDefinitions (i) What is process? (ii)What is
BPR?Practical study of the organization (i) Why re-engineer? (ii)
Why banks dont re-engineer?
Important Sub-topicsReview of theoretical and practical
situationAnalysis of BPR implementationMerits , Demerits ,
deficiencies or strengths of the organizationFindings (i) Critical
success factorsConclusionsAnnex
BUSINESS PROCESS RE-ENGINEERING What is a Process? A specific
ordering of work activities across time and space, with a
beginning, an end, and clearly identified inputs and outputs: a
structure for action. (Davenport, 1993)
BUSINESS PROCESS RE-ENGINEERING What is a Business Process?A
group of logically related tasks that use the firm's resources to
provide customer-oriented results in support of the organization's
objectives.BPR is radical redesign and reorganization of an
enterprise is necessary to lower costs and increase quality of
service and that information technology is the key enabler for that
radical change. (Michael Hammer's 1990 & James Champy)
BUSINESS PROCESS RE-ENGINEERING
Reengineering is the fundamental rethinking and redesign of
business processes to achieve dramatic improvements in critical,
contemporary measures of performance, such as cost, quality,
service and speed. (Hammer & Champy, 1993)
Practical Study of the Organization Why
Reengineer?CustomersDemandingSophisticationChanging
NeedsCompetitionLocalGlobal
Practical Study of the Organization ChangeTechnologyCustomer
Preferences
Practical Study of the Organization Why Banks Dont
Reengineer?
ComplacencyPolitical ResistanceNew DevelopmentsFear of Unknown
and Failure
Practical Study of the Organization BPR seeks improvements
ofQualityServiceSpeedCost
Practical Study of the Organization Added ValueBPR Initiatives
must add-value over and above the existing process.
Customer-Led BPR Initiatives must meet the needs of the
customer.
Practical Study of the Organization Focus on End-Customers
Process improvements must relate to the needs of the
organization and be relevant to the end-customers to which they are
designed to serve.
Review of Theoretical and Practical
situationsConstructsDimensionsNumber of itemsCronbach Alpha
Change ManagementReward and recognitionPeople
involvementTraining and educationEffective communicationEffective
cultureReceptive to changeTotal items6333333180.874Process
Redesign150.858Use of IT150.823
Review of Theoretical and Practical situationsIT
Capability530.921IT Business PartnershipIT External LinkIT Business
Strategy IntegrationIT ManagementIT InfrastructureTotal
items33333315
Table 1 , 2 : Reliability analysis of constructs.
Review of Theoretical and Practical situationsBPR Processes in
BanksFrequencyPercentageCumulative PercentageBPR1:Credit Risk
operations processes: YESNOTOTAL60379761.8538.1510061.85 100BPR2:
Domestic operations processes:YESNOTOTAL50479751.5548.4510051.55
100BPR3:International operations
processes:YESNOTOTAL50479751.5548.4510051.55 100
Review of Theoretical and Practical situationsBPR Processes in
BanksFrequencyPercentageCumulative Percentage
BPR4: Branch operations
processes:YESNOTOTAL63349764.9535.0510064.95 100BPR5: E- Banking
Processes:YESNOTOTAL77209779.3820.6210079.38 100
Table 3 , 4: Analysis of BPR implementation.
Analysis of BPR implementation
In the above table results for implementation of business
process reengineering are measured by using SPSS software. It is
clear from the results of above table that 79.38% of the banks have
implemented services of electronic banking in Pakistan which has
provided convenience to the customers. 64.95% reengineering have
been implemented in the branch operations which has enhanced the
efficiency of the banks in Pakistan. Credit risk operational
processes are reengineered 61.85% through loan processes, consumer
loan appraisal analysis, disbursement, administration. 51% of the
respondent confirmed to have redesign their domestic and
international operational processes of transactions.
Advantages and disadvantages of BPR Advantages of BPRBPR
revolves around customer needs and helps to give an appropriate
focus to the business.BPR provides cost advantages that assist the
organization's competitive position.BPR encourages a long-term
strategic view of operational processes by asking radical questions
about how things are done and how processes could be improved.
Advantages of BPRBPR helps overcome the short-sighted approaches
that sometimes emerge from excessive concentration on functional
boundaries. By focusing on entire processes the exercise can
streamline activities throughout the organization.BPR can help to
reduce organizational complexity by eliminating unnecessary
activities.
Disadvantages of BPR
BPR was sometimes seen (incorrectly) as a means of making small
improvements in existing practices. In reality, it should be a more
radical approach that questions whether existing practices make any
sense in their present form.BPR was often perceived (incorrectly)
as a single, once-for-all cost-cutting exercise. In reality, it is
not primarily
Disadvantages of BPRconcerned with cost cutting (though cost
reductions often result), and should be regarded as on-going rather
than once-for-all. This misconception often creates hostility in
the minds of staff who see the exercise as a threat to their
security.BPR requires a far-reaching and long-term commitment by
management and staff. Securing this is not an easy task, and many
organizations have rejected the whole idea as not worth the
effort.
Disadvantages of BPRIn many cases business processes were not
redesigned but merely automated.In some cases the efficiency of one
department was improved at the expense of the overall process. To
make BPR work requires a focus on integrated processes that often
involves obliterating existing processes and creating new ones.
Disadvantages of BPRSome companies became so focused on
improving internal processes that they failed to keep up with
competitors' activities in the market.Most companies are now more
likely to talk about 'business process redesign' instead.
FindingsThe objective of this qualitative study was to determine
factors that contribute towards successful implementation of
business process reengineering and also examine the impact of BPR
on organizational performance. Data collected by using interviewing
from top management of banks that applied BPR process. Results
revealed that business process reengineering has strong positive
and significance effect on organizational performance.
FindingsIT capabilities also positively and significantly
association with banks performance. Results also indicated that
banks in Pakistan have been implementing BPR in different
operational processes. Most of the banks implemented e-banking
services e.g. operational transactions of cheques or cash, received
and payments through POS, ATM and other operations. Findings showed
that banks restructured, reprocesses and improved their operations
processes which enhance the effectiveness an efficiency of banking
services
Critical Success Factors
Following are some critical factors that contribute to the
successful implementation of business process reengineering in
banking sector. We found these factors during interviews. Following
factors presenting clear picture of practically. We highlighted our
study results in form of point.Change Management & Culture (i)
Communication Expertise (ii) Effective motivation and reward
mechanism (iii) Employees Empowerment (iv) Training &
Development (v)Collaborative working environment
Critical Success FactorsManagement Competency & Support (i)
Strong leadership & Commitment (ii) Risk Management (iii) Top
management commitment and Support.
Critical Success FactorsOrganizational Structure (i) Efficient
teams for BPR implementation (ii)Appropriate job definitions and
allocation of responsibilitiesBPR Process (i) Alignment between BPR
Strategies and Corporate Strategies (ii)Effective planning and
Efficient use of project management techniques. (iii)Effective
usage of methodology (iv)Effective Consultancy (v)Developing BPR
Vision
Critical Success Factors
IT Capabilities (i) Infrastructure. (ii)Effective I.T
Infrastructure (iii) Increasing the IT Functions Competency
(iv)Alignment of BPR Strategies with I.T Infrastructure.
Critical Success Factors
Effect On Organizational Performance. IT capabilities also have
positive and significance association with banks performance. These
findings also highly supported by previous research studies
(Guimaraes,1999; Attaran, 2003; Reijers & Mansar, 2003; Dennis
et al.,2003; Salimifard et al.,2010; Lal & Chavan, 2012).
Results also indicated that banks in Pakistan have been
implementing BPR in different operational processes. Most of the
banks implemented e-banking services e.g. operational transactions
of cheques or cash, received and payments through POS, ATM and
other operations. Banks restructured, reprocesses and improved
their operations processes which enhance the effectiveness and
efficiency of banking services. We concluded that informational
technology and IT capacities are enabler of BPR and IT makes it
possible for having improvement in business process
reengineering.
Critical Success Factors
Future DirectionsIn future researchers can expand this concept
by adding some more valuable dimensions of BPR and can produce more
refined results. In future researchers can do research on following
areas. (i) Explore relationship among BPR, organizational
objectives and organizational change management mechanism.
(ii)Researchers can explore that how effective BPR process can be
linked up with organizational strategies and organizational
performance.
Critical Success Factors
(iii) Relationship of BPR with organizational structure and tom
management commitment. (iv) How total quality management can
facilitate the successful implementation of BPR within the
organization. (v) Researcher can study the role of suppliers,
customers and process owners in effective BPR implementation. (vi)
Risk Management tools and techniques during pre-implementation and
post implementation phases
Conclusion
The objective of this research study is to measure the impact of
business process re-engineering on the performance of banks in
Pakistan. It is clear from the above results and discussion that
banks in Pakistan are implementing the business process
re-engineering in their different operations and results are
significant.
ConclusionInnovation, information technology use and Change of
management have increased the performance; attitude and
effectiveness of the banks in Pakistan. Efficiency and performance
of the banks have been increased due to implementation of the
business process re-engineering. In future this research study can
further be explored in other sectors of Pakistan as well.
Annex(Hammer & Champy, 1993) Define the business process
re-engineering(Davenport, 1993) Give the concept of BPR(Michael
Hammer's 1990 & James Champy)(Guimaraes,1999; Attaran, 2003;
Reijers & Mansar, 2003; Dennis et al.,2003; Salimifard et
al.,2010; Lal & Chavan, 2012) Analyze the BPR on performance of
the organization
