Management fads come and go. Several years ago "total quality management" (TQM) was the major buzz phrase and was promoted as the solution for all of a company's problems. While TQM offered much to senior management, in the past 12 to 18 months emphasis has shifted to make "reengineering" the most touted business concept.
Now, some senior managers appear to be shifting their focus away from reengineering and toward "growth." For example, Thomas E. Jones, executive vice president of Citicorp recently told security analysts than revenue growth "is the issue we are dealing with," now that his bank's asset quality and expense base have improved.
We think that executives should continue to promote the value of reengineering in their banks and the role it plays in supporting and encouraging growth.
Bluntly put, senior managers need to be careful that an increased emphasis on growth does not lessen their bank's commitment to reducing its cost base and rethinking its traditional approach to business. Despite better bottom-line numbers, banks simply do not have the luxury of returning to a business-as-usual approach.
A constant vigilance on managing costs and simplifying processes is a necessary and important part of the foundation for growth. Unfortunately, given frequent misstatements concerning what reengineering stands for, some managers may view it as the enemy of growth, that is, as cost cutting and little more. In fact, nothing could be further from the truth.
At many banks reengineering is a precondition for growth, an approach that can both revitalize a company and prepare it for the future. How does reengineering lead to revenue and profit growth? At least four linkages can be forged:
*First, reengineering fosters increased customer responsiveness. Reengineering should result in a company that better understands and anticipates its customers' needs. It requires managers to identify and structure their company's internal processes from the customer's perspective of access rather than around traditional functions.
For example, banks need to excel at product development to gain a greater share of each attractive customer's wallet. That remains the case whether new product offerings are created internally or through alliances with other companies.
*Second, successful reengineering changes or eliminates unnecessary or cumbersome internal processes. Michael Hammer & James Champy in their best seller "Reengineering the Corporation" refer to the need for companies to "delinearize" their processes. By this they mean that hierarchical organizations should be flattened and that more decisions need to be made by employees other than management.
For instance, in the case of one corporate lending area, work flow analysis revealed that loan approvals followed a "loop" from customer to lending officer to credit department to bank credit department head to credit department to lending officer to customer and, often, back around again.
This inefficient communications process continued even after the loan had been approved because the loan officer was not empowered to negotiate terms and conditions, even within limited parameters.
Two reengineering changes improved that situation. First, the communications process between credit and the line was streamlined; long delays were eliminated and each area was given enough background to understand the concerns and requirements of the other group. Second, job responsibilities were reexamined. After increased training and the creation of a clear set of guidelines, the line bankers were granted added responsibility for making those decisions that had previously been passed on to others.
*Third, reengineering empowers employees to become more productive while maintaining strong controls. This result of reengineering is one of its most noteworthy paybacks. Employee empowerment develops in a work force where individuals better understand their responsibilities and have greater impact on newly simplified and integrated processes.
Improved controls follow from empowerment and streamlined processes. In Hammer and Champy's words, because reengineered processes "involve fewer people, assigning responsibility for them and monitoring them is easier."
*Fourth, the process of reengineering can redefine a company's goals, leadership and culture for the future. Reengineering should serve to revitalize and reenergize a company and allow management to set its goals for the future.
Reengineering does test the leadership of a company. The process requires commitment and creativity, if it is to achieve maximum results. No matter how experienced they are, the senior management of a company will grow wiser during this process, as they shake off the cobwebs of tradition. If they can preserve the key strengths of the institution while scratching away the barnacles that have grown over the years, there will be a companywide renewal. Mr. Wendel, a vice president at Mercer, is the author of "The Middle Market."
