Georgia Scroll
July 1997
Reprinted by permission from
The Dispatch, the official newsletter of the Virginia Chapter -
Healthcare Financial Management Association - April 1997
Virtually every healthcare organization in the U.S. seems to have a significant cost reduction effort going on. If you aren't reengineering something, you are not in the mainstream, there must be something wrong with you, you are certainly headed for financial disaster and personal embarrassment. Process Reengineering/Redesign is one of the most popular and perhaps most misused terms in healthcare today The term reengineering is used to describe virtually every conceivable form of process improvement known to man. If a step in a process is eliminated as non-value added, you have reengineered that process. If you move the copier across the room to be more convenient to your employees, you have redesigned the process flow Just what is reengineering and does it deserve the considerable attention we are giving it.
Reengineering is the fundamental rethinking and radical design of business processes to achieve dramatic improvements in contemporary (critical) measures of performance, such as cost, quality, service and speed. A business process is a set of linked activities that crosses functional boundaries, addresses the needs and expectations of the marketplace, and drives the organization's capabilities.
A reengineering effort must be driven by an organization's strategy. You must characterize your business processes in terms of their strategic importance and value.
Reengineering is necessary to achieve a competitive advantage when the external environment has changed dramatically. It is often mistakenly viewed as synonymous with Total Quality Management/Continuous Quality Improvement (CQI). Here is what Paul O'Neill, Chairman of the Board of ALCOA, had to say about the difference between reengineering and CQI, "I believe we have made a major mistake in our advocacy of the idea of continuous improvement. Let me explain what I mean- Continuous improvement is exactly the right idea if you are the world leader in everything you do. It is a terrible idea if you are lagging in the world leadership benchmark. It is probably a disastrous idea if you are far behind the world standard...we need rapid, quantum-leap improvement. We cannot be satisfied to lay out a plan that will move w toward the existing world standard over some protracted period of time - because if we accept such a plan, we will never be the world leader." Changes in the healthcare external environment mirror the intensity of those of corporate America. Whatever cost, quality, service or speed improvements are underway, a goal of achieving the performance of your competitors is no longer good enough. Your goal should be to leap past the competition in performance. Only then can you gain a competitive advantage.
A reengineering effort must be driven by an organization's strategy You must characterize your business processes in terms of their strategic importance and value. You must be able to identify the "right process to get right." Another key issue that will determine the success of the reengineering effort is Change Management. In reengineering, some of the most difficult problems come from human and cultural issues. You can design a technically advanced process, but if your human resources and systems are nor aligned to support the process and if your work culture does nor reinforce risk taking, learning and innovation, then genuine, sustained, successful change will not occur.
A reengineering effort generally has three distinct but interrelated phases. The first phase would be an Assessment of Discover phase where the magnitude and complexity of potential reengineering opportunities are identified. The "as is" process is evaluated and mapped and specific customer expectations/requirements are identified. Process "Breakpoints" are identified. A "Breakpoint" is the point at which an improvement in a process produces a disproportionate increase in value to customers. Value is generally viewed from the standpoint of rile four value parameters: cost, quality, service and speed.
The next phase would be a redesign phase where the "future state" process is designed. During this phase, an enterprise-wide vision for the new process is developed. Performance criteria and specifications for the new process are identified. Including technology enablers, job and skill requirements, policy and procedure changes, facility and equipment requirements and management structure. In addition, performance measures needed to evaluate the reengineered process should be identified.
Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in contemporary (critical) measures of performance, such as cost, quality, service and speed.
The last phase is Implementation. During this phase, the appropriate skill mix of personnel needed to fulfill the requirements of the redesigned process are put in place. Appropriate education and training related to the new job requirements are developed and implemented. New policies and procedures for the reengineered process are developed and performance monitoring systems are put in place.
As I hope you can see, reengineering is an enormous undertaking. The results achieved should be commensurate with the effort expended. Reengineering should be undertaken to leapfrog the competition, to achieve a competitive advantage. Ultimately, it will separate the winners form the losers.