Governing Magazine/February 1994 GOVERNING GUIDE: REENGINEERING REENGINEERING: PART OF YOUR GAME PLAN? A GUIDE FOR PUBLIC MANAGERS By Jerry Mechling The author is Director of Strategic Computing and Telecommunications in the Public Sector, a research program of the Kennedy School of Government, Harvard University. The work reported here was assisted by Tom Fletcher, Megan McLean, and Irene Yarmak. So, you've been told to "reengineer" government. Not to settle for 10 percent improvement when you can get 100 percent or more. To improve with great leaps rather than gradual steps. To "go for the bomb," in football parlance, instead of merely trying for "three yards and a cloud of dust." To do what the leading private companies are doing to improve the way they do business. But what, exactly, IS reengineering? Who's doing it? Will it work for government? Should it be a part of YOUR game plan? WHAT IS REENGINEERING? Reengineering is radical change. It is the fundamental redesign of work processes, often enabled by the aggressive use of information technologies, and intended to bring about rapid improvement. It rarely happens. These days all sorts of projects are called "reengineering." Most of them aren't. True reengineering means: --Fundamental change. --Rapid progress toward radical goals. --Selective use of appropriate information technology. Reengineering involves the fundamental redesign of work processes. A work process is a regular sequence of steps taken to produce a product or service for a customer. It begins with the intake of information and resources from outside the organization, continues as work is handed off from person to person, and ends when the completed product or service is delivered. A process can be any size--large (developing a new automobile) or small (handling routine customer complaints). Typically, a work process cuts across organizational boundaries and reporting relationships. New product development, for example, cuts across the engineering and sales departments. In a fundamental redesign, all steps in the process are subject to redesign; it is not reengineering if only a few steps are changed. The sweeping nature of the change distinguishes reengineering from other organizational change. If your change focuses on a single task or function, but not the full sequence of tasks from inputs to customer, it's not reengineering. If you're focusing on how information is passed vertically up the chain of command, but not horizontally worker to worker, it's not reengineering. Redesigning the organizational chart or implementing a management information system may be valuable, but they are not, by themselves, reengineering, even though reengineering often redraws the organizational chart and develops new management information systems. To be true reengineering, a project must change the horizontal flow of work through the organization. True reengineering has radical goals that it intends to reach rapidly. It seeks dramatic improvement (10-fold, not 10 percent). It is typically pushed forward by leadership rather than pulled forward by consensus. Incremental "fixes" are not reengineering. Reengineering is revolution, not evolution, both in ends and means. Reengineered work flows are now made possible by advances in computing and telecommunications. Networked workstations enable employees to keep track of many more rules to guide their efforts, and to handle broader responsibilities with fewer hand-offs. Networks permit individuals to coordinate their efforts despite their separation by time or distance. In general, modern information technologies enable tasks to be carried out faster by fewer people. WHY DOES REENGINEERING MAKE A DIFFERENCE? So, why can reengineering produce such astoundingly large improvements? Partly it's because there is a lot of room for improvement in most of today's work processes. Inherited from an era when workers were considered able to handle only the narrowest of tasks, most work processes involve highly specialized tasks, several hand-offs, and many layers of coordination and supervision. In addition, most hand-offs proceed sequentially and on paper. The result of all this is tall, high-overhead hierarchies and slow, inefficient work processes. Private-sector success stories prove the potential of reengineering. An insurance company realized that each application was processed by 15 employees over 22 days, although the application was actually worked on for less than 45 minutes. By creating a computer-based expert system to manage the many rules involved in reviewing an application, the company made it possible for a single person to process a typical application, start to finish. More complicated applications were handed off from worker to worker via electronic files and images through the computer network. The redesigned process cut the manpower requirements for each application in half and the time to process it by 90 percent. Customers who previously had to wait 22 days could get answers within two days, or sometimes within hours. As this example shows, successful reengineering can produce dramatic results. It eliminates many steps and hand-offs to create flatter organizations with lower overhead. Reengineered organizations are faster and friendlier in meeting the needs of their customers. PUBLIC-SECTOR REENGINEERING: WHO'S DOING IT? To date, reengineering has been more rhetoric than reality, particularly in the public sector. But while most of the literature about reengineering speaks to the private sector, public leaders are also beginning to talk about reengineering, chief among them Vice President Al Gore. In a recent address to federal managers, the vice president talked about reengineering: "Information technology has a critical role to play in better service to the government's customers. In Minnesota, a woman told me how a plastic electronic benefits card lets her get through the grocery line without embarrassment. In California and Iowa, kiosks are providing access to government services in more convenient locations, even during hours when government offices are closed." The vice president's examples show how information technology can add to our ability to serve our customers. That technology, if well thought out and well executed, will do more than just let us do the same job 10 percent better--it will let us reengineer and reinvent how we do the job, so we can do it 10 times or 100 times better. Few public-sector reengineering projects have been around long enough to have much of a track record. Reengineering in the private sector, in contrast, has had a significant impact, particularly in the auto, high technology, and financial services industries. In government, a recent survey showed that only one in four managers interested in reengineering had completed even their first project and that more than nine out of 10 potential reengineering targets in government are yet to be tackled. Keeping in mind that government reengineering is in its infancy, take a look at four examples of what reengineering can accomplish. --Collecting Child Support. Massachusetts has turned its system of collecting child support on its head, and the money is falling out of the pockets of scofflaws and back to the families who need it. Under the old system, a parent who failed to provide required child support went scotfree until the care-giving spouse appealed for help. The ensuing enforcement process was custom-tailored and expensive. "In light of the state's budgeting crisis, we could see that we were headed for disaster if we stayed on the same path," says Robert Melia, director of strategic planning in the state's revenue department. The system was reengineered so that cases with similar characteristics are now grouped together. The rules that determine what enforcement action to take for particular cases are loaded into the computer which then searches various databases and enforces cases without human intervention. "We essentially took the case worker out of the enforcement process," said Melia. "We now use the case worker for post-enforcement complaints rather than pre-enforcement complaints." After two years, 85 percent of collections occur without caseworker involvement. The number of paying cases has increased by 30 percent, and the payment compliance rate, which had been stagnant for two years, has jumped from 59 to 76 percent. Because most enforcement is handled by the computer, staff time can be devoted to obtaining child support orders for families receiving Aid to Families with Dependent Children. The number of orders is up 90 percent so far this year, a satisfying, if unexpected, fringe benefit of reengineering. --Interacting with Info/Cal. This California initiative uses interactive kiosks for government in the same way that banks use Automatic Teller Machines. Based on an idea from Hawaii, the project was initiated in partnership with IBM under a California program to encourage experimentation in government. The kiosks are available 24 hours per day; they are networked so that information can be kept up to date. "The new kiosks broaden the hours of access to government services," says Jim Henderson, the manager in charge of customer development at the California Health and Welfare Data Center. "They also bring the government to me in a way that is convenient. This is the direct benefit of my tax contributions." More than half of all Info/Cal transactions take place during evening or weekend hours; one in five are conducted in Spanish. Citizens put in information and ask questions at the kiosks via a touch screen; responses and answers are provided via text, graphics, voice, full- motion video, and print. Fees and fines may be paid at the kiosk with credit and debit cards. The kiosks can connect residents not only with California state government services but also with those of local governments, nearby states, and the federal government. The most popular service? Job listings by category and geographic area, updated daily. From the customer's viewpoint, Info/Cal makes doing business with the government more convenient, more efficient and more worthwhile. --Determining Welfare Eligibility. Merced County, California, has reengineered the way it processes applications for welfare. Applicants who used to wait four weeks to get to the interview stage after their initial application can now expect an interview in one to three days. Three people do the work that four used to do. Expert system software which assists in applying thousands of changing eligibility rules enables one caseworker to handle all programs for an applicant family, cutting processing time in half. In the reengineered process, 70 percent of the work that was formerly done on mainframes is handled by cheaper and more responsive PC-based workstations. The new process has also cut costs by reducing staff turnover and reducing the time it takes to train workers, by eliminating 400 of 750 preprinted forms, and by increasing the accuracy and consistency of the eligibility determination process. As a result of the reengineered system, productivity increased 148 percent in 10 months. --Reengineering the Big Apple. New York City was the first government to initiate a jurisdiction-wide reengineering program, starting a year in advance of the National Performance Review. "The city was responding to a fiscal environment that absolutely required us to consider streamlining city services," says Marian Krauskopf of the New York City personnel department. The Executive Development Program, led by the mayor, focused on the ways in which reengineering could create a more cost-efficient government. Reengineering was an explicit and government-wide initiative in which individual managers were encouraged to reengineer their own departments. It was risky to go public with such a sweeping goal, but so far the risk seems to be paying off. One example: the Department of Probation is reengineering its system for supervising 80,000 probationers, a function that costs $24 million a year. It is replacing voluminous paper files with automated case folders, using local- and wide-area networks to track probationers, capitalizing on automatic interconnections with other databases, and using interactive kiosks for self-reporting by 20,000 low-risk probationers. Such changes have made it possible for the agency to keep up with the probation workload while absorbing a 33 percent reduction in probation officers and saving $3.3 million a year. Moreover, the time saved by reengineering can be used by probation officers to focus on high-risk, violent offenders. The public sector is just getting started with reengineering projects like these, but even the early projects are instructive. Here's a look at what have we learned to date about reengineering in the public sector. WHAT SHOULD BE REENGINEERED? If you are going to reengineer, where are the greatest returns? Research suggests three prime targets: customer service, program integration and overhead. CUSTOMER SERVICE. Start with the question: From the customer's perspective, how can service be more convenient, effective and efficient? Private corporations have been responding to this question with computer networks that allow 24-hour service delivery to and from virtually any location. For example, there has been explosive growth in the use of ATM machines in banks and supermarkets and telephone hotlines for credit card companies and catalog sales. Customers are beginning to expect immediate and better service, and it's essential for government to respond. Virtually all today's reengineering has a strong customer service focus. The electronic benefits card which allows the Minnesota welfare recipient to maintain her dignity in the grocery store, Massachusetts' effort to guarantee child support payments, the Info/Cal kiosks, the streamlined welfare eligibility process in Merced County, and the self-service convenience of probation reporting in New York City each enhances government's service to its customers. While government must be concerned with compliance and equity as well as service per se, customer service opportunities are a prime target for reengineering. PROGRAM INTEGRATION. Government services often suffer "death by hand- off." Too often something or someone falls through the cracks when a case or a task is passed from one individual or program to another. When eligibility information about applicants for human services programs is not shared among workers, poor service, misinformation and even fraud can occur. Police investigating a crime in one city, for example, often lack access to clues collected in another city. Reengineering can improve coordination and cooperation when work is handed off from program to program, agency to agency, or jurisdiction to jurisdiction. Information technology can bridge the gaps that make these hand-offs risky. Computer networks allow pharmacists to check whether a prescription from doctor X will interact dangerously with an earlier prescription from doctor Y. A California citizen who needs a Montana fishing license will be able to get it from a local Info/Cal kiosk; furthermore, if she has moved, her new address can be put in the system once and automatically shared with other department databases. Cross-program initiatives are often difficult to implement. Issuance of an electronic benefits card that will work for food stamps, cash, and medical services and benefits requires cooperation by the U.S. Departments of Agriculture and Health and Human Services with state and local agencies. But despite the complexities, the benefits of bridging these gaps make them a priority target for reengineering. LOWERING OVERHEAD. Information networks permit government to flatten itself, reducing the number of "hand-offs," by eliminating links and whole levels in the chain of command. When Massachusetts reengineered its child support collection, the amount of supervision required was significantly reduced. It takes fewer managers to oversee the Info/Cal kiosks than to supervise all the people who answered those questions in the different departments and agencies involved. But more than technology is required to negotiate this reengineering change. There must also be a change in philosophy and management culture. Middle managers must become "coaches," not supervisors. Reengineering demands a totally new structure that eliminates old domains, familiar power bases and usual work products. Structured, routine transactions must be separated out; they can operate with significantly less supervision than complex, less structured transactions. As the U.S. Internal Revenue Service adopts its new $8 billion information technology system, it will not simply automate its present 15-layer hierarchy; it must instead reengineer to streamline its work processes, reduce its overhead and empower the front-line worker. IMPLEMENTATION: HOW AND WHEN? So, are you ready to go? Or are you nervous? If so, you have a lot of company. Most managers are rightfully cautious. Even in the private sector, as many as 70 percent of reengineering projects reportedly fail. In the public sector, there's less motivation to change, and many more structural impediments. What does that mean for you and the government you manage? In some cases it may mean that you move slowly with reengineering. "In government, initiatives are normally approved only for a fiscal year, dictating that processes evolve rather than change abruptly," says Rita Kidd, a consultant for the Merced County project. "The object is that same 10-fold increase, but it may have to come over two or three years. That certainly was the case in Merced County." In government the safest and even the fastest progress may often be made through small steps, rather than through reengineering. The revolutionary ENDS of reengineering are almost always valuable, but in government the risks of revolutionary MEANS may be too high. The guidelines are simple: do it, try it, fix it. Each step should offer feedback and produce results to motivate supporters to take another step. Taken together, small steps can result in large changes. For example, the Massachusetts child support system achieved its radical goal step-by-step. First, it set up a program to screen all applicants for unemployment compensation to see if they owed child support. "I picked an area where I thought I could have an easy win," says Robert Melia. "It was our first major hit. The amount of money collected immediately tripled, going from $5 million to $15 million dollars. With that success behind us, we had a nucleus of people who supported the program." Next the state increased its commitment to change. It stopped buying computers to support the old system; workers had to switch to the new system. To encourage participation, front-line workers and managers were enlisted to design the new procedures. "People were more enthusiastic when we gave them challenging projects," says Melia. There's no question but that great leaps of change are very risky for public sector managers, but at times that risk is worth taking. A situation may reach a state of crisis before the need for change can be translated into action. Once crisis opens the door, radical and rapid change can proceed. In much of government today, financial pressures are reaching crisis levels. Reengineering is quite different from the traditional way that government responds to budget cuts. "In the past, reducing costs in government meant reducing quality," says Kidd. "But customer service expectations say that reengineering should focus on how to reduce administrative costs while improving service to the public." As governments continue to face falling real revenues and rising public expectations for service, reengineering may not only become realistic but perhaps even the preferred method of change. To reengineer, you have to mobilize support for the sweeping changes required. This "concept curve" illustrates the judgment calls involved. This curve shows opposition rising with the size of the change: the greater the change, the greater the opposition. Opposition comes primarily from people who pay close attention to the operations of the reform target: employees, clients, or other "insiders" whose lives will be affected. In contrast, supporters for proposed change tend to come from two distinct groups. The first to support a proposed change are again insiders who, like the insider opponents, are paying close attention to agency operations. The second and larger group, however, is composed of people who don't normally pay close attention. These "outside" supporters get involved only if they think there is an important issue to be resolved. They may not even notice small changes. Putting the opposition and support curves together identifies two relatively "safe" zones for change. At one end the proposed changes are small enough that inside supporters can build a sizable consensus over inside opponents. This represents the Total Quality Management arena of small consensus-oriented changes. At the other end, there is a workable, but not nearly as safe, zone created when outside supporters mobilize to support the program and are able to overpower the inside opposition. Here successful reengineering can occur. But don't get caught in the middle. Beware the proposal that is radical enough to upset the insiders but not exciting enough to bring outside supporters into the fray on a sustained basis. An example of that unhappy situation is the police department that hopes to reassign police officers now working in two-person patrol teams into single- person patrols. Such a proposal certainly will be noticed, and probably opposed, by the police union. It may not, however, mobilize public support sufficient to outweigh the union's opposition. The judgment call is to know when it's possible to implement such a significant change. Such a call must be made by senior management and political leaders. It cannot be made by information specialists on their own. Once you decide to implement a radical change, speed is essential. The classic approach is described as "slow trigger, fast bullet." Take your time to assess the situation and build readiness for a major shift, but, once you start to implement, move fast. The advantage in radical change goes to the attacker. Consensus will typically be impossible; success comes to those who mobilize support and keep the opposition off balance. A second, less disruptive, avenue to great change relies on entrepreneurial start-ups. It's often possible to avoid unnecessary fights with an entrenched bureaucracy by creating a new, smaller organization of enthusiasts. The Info/Cal project is a good example. As service demand grows at the kiosks, demand will presumably subside at the original service outlets, encouraging further reengineering. Jim Henderson believes that Info/Cal also encourages the exchange of ideas between participating agencies. "This project may lead to reengineering through cooperation among different levels of government," says Henderson. "The existence of the kiosks will encourage them to share information and integrate the way they do things, eliminating redundancies that were previously necessary." True reengineering projects are like jumping a chasm: success does not come an inch at a time. Projects, once begun, must be implemented quickly and completely. The Massachusetts child support project can again serve as an example. Once an early success made the reform effort credible, and once the decision was made to collect the money up front and automatically, Revenue Commissioner Mitchell Adams pulled the best workers off the old system and assigned them to design the new system. It became obvious to everyone in the department that the old system was, in effect, being burned. The department burned its bridges to preclude any alternative; by making the burning visible they enlisted all parties in making the new system effective. Its leaders feel that much of their success was generated by their willingness to take risks, even to appear "irrational" in order to implement the new system quickly. HOW DO I GET READY FOR REENGINEERING? Reengineering may be risky, but it also may be unavoidable. Meanwhile, there is much to be done to prepare the ground and reduce the long- term risks. Preparation includes: --Shaping a vision and infrastructure. --Educating managers. --Finding creative sources of funding. --Benchmarking performance. DEVELOP A VISION AND THE INFRASTRUCTURE TO SUPPORT IT. Reengineering requires a leap from the well-understood status quo. Proposals to reengineer will not gain adequate support unless people can share a motivating vision of success. As a nation, we need to develop a clearer sense of what is possible for our reengineered economy and also for a reengineered system of public services. We need to brainstorm: What might a one-stop/non-stop government look like? How might education be organized if we reengineered existing processes and institutions? We need to develop radical visions of new possibilities, along with plans for the data and network infrastructures on which reengineered work processes can be built. Developing a vision and strategic direction is a low-cost, low-risk and absolutely necessary precondition for reengineering. Even when the time is not yet right for reengineering, a strategic vision and plan are needed to coordinate incremental investments. Nothing adds value if it is not aligned with an appropriate long-term strategy. EDUCATE MANAGERS ON THE OPPORTUNITIES AND PROCESS OF REENGINEERING. Reengineering requires cooperation between information technology managers, program managers and senior leadership. There are often serious gaps between these groups. Technology people, in general, need to understand much more than they presently do about policy issues and agency operations. Operational managers need to have enough technical and political insight to participate effectively in rapid change projects. Senior leaders need to understand more about reengineering and the enabling role played by information technologies. Educating these managers and building cooperative relationships among them is an essential part of building the infrastructure for successful reengineering. FIND CREATIVE SOURCES OF FUNDING. Several decades ago governments had discretionary money, which is long gone today. Funding projects in reengineering can be a large issue. But there are solutions to this problem. Consider: --Sharing productivity savings with those that produce them, thus creating incentives for innovation. New York City's probation department is sharing $1.1 million in annual reengineering savings with the probation officers' union. --Assessing user fees to create a funding source for services that customers value. Info/Cal kiosks which today charge the agencies that supply the data and the services, may soon charge the residents that use the kiosks a "convenience fee" for making certain services available on a 24-hour basis. --Using capital budgets or set-asides in mandated spending, such as toxic waste funds, for the information systems required for reengineering. --Developing public/private shared ownership agreements, especially for pilot projects or systems that create a downstream market value. Info/Cal's initial kiosks were funded through such a creative procurement process, with IBM paying half the development costs. BENCHMARK PERFORMANCE AND MAKE THE MEASURES VISIBLE. In government, we do little to measure service performance, especially its downstream impact on customer needs and satisfaction. Governments rarely benchmark themselves against world-class performers. We need to. The costs would be modest and the potential for leverage high. A recent Executive Order by President Clinton requires all federal agencies to measure customer satisfaction and to benchmark these measures against best private-sector practice. State and local governments should consider doing likewise. REENGINEERING'S ROLE Reengineering is both a destination and an approach. Given that we can use information technology to organize work more efficiently, we should. Reengineering as a destination is right for the times. Those organizations and societies that reengineer will be more successful than those that do not. There are many paths, however, to the fundamental redesign of work. In some settings, great speed and large steps are the right way to go. In other settings, especially in government, a more incremental approach may work better. Actually, a strategic reengineering plan can permit many processes to be in the mill at once, some of which will be effective immediately, while others will be more gradual. In this season of the Super Bowl, it may be useful to make the analogy between football and government. In both we seek progress. In both we normally like steps that bring moderate progress at low risk. In government such steps are the typical range of productivity improvement efforts. In football such steps are short yardage plays, typically running plays. Occasionally, however, in government we invest in higher risk opportunities such as reengineering, just as, in football, we occasionally try the long pass or "the bomb," a play which seeks lots of yardage all at once. The long pass is a risky play, especially for the team not experienced and well-disciplined in its execution. Successful teams don't call for a long pass on every play. They reserve it for desperate circumstances or times when the returns are worth it and the risks can be managed: second down, short yardage, close game. Success with the long passing game in football requires an effective infrastructure of skills: linemen with specialized blocking skills, receivers with the ability to run disciplined patterns and catch the ball, and a quarterback able to read the developing play under pressure and pass the ball to the right place at the right time. When executed well, the long pass can be extremely effective. A team with the ability to pass as well as to run is typically a strong and successful team. As the long pass is to football, so reengineering is to government. Reengineering requires an infrastructure of skills to be nurtured and developed. Reengineering may not be the approach for every problem. Nevertheless, global competition will eventually require the reengineering of nearly all institutions of American society--both public and private. As a government manager, you need to get ready for that. Reengineering should be part of YOUR game plan. THE REENGINEERS Frank Domurad, Deputy Commissioner, New York City Department of Probation, 115 Leonard St., Room 2C, New York, NY 10013. Phone: 212- 374-5681. Fax: 212-374-3263. Jim Henderson, Customer Development, Health and Welfare Agency Data Center, 1651 Alhambra Blvd., Sacramento, CA 95816-7092. Phone: 916- 739-7732. Fax: 916-739-7820. Rita C. Kidd, Consultant to Merced County, 2380 Old Highway, Cathey's Valley, CA 95306. Phone: 209-966-3212. Marian Krauskopf, Deputy Director for Personnel Development, Department of Personnel, 2 Washington St., 21st Floor, New York, NY 10004. Phone: 212-487-5600. Fax: 212-487-5720. Robert Melia, Director of Strategic Planning, Massachusetts Department of Revenue, 100 Cambridge St., Room 800, Boston, MA 02204. Phone: 617-727-4201. Fax: 617-727-0379. A REENGINEERING CRIB SHEET WHAT IS REENGINEERING? --Fundamental redesign of work processes --Radical and rapid performance improvement --Enabled by information technology WHAT SHOULD BE REENGINEERED? --Customer service (one-stop government) --Cross-program integration (sharing information across turf boundaries) --Overhead and administration (flatter organizations, empowered workers) WHEN AND HOW TO REENGINEER? --When outside support can be mobilized --Slow trigger, fast bullet --Entrepreneurial start-up HOW DO I GET READY? --Develop a vision, a plan and an infrastructure --Educate managers --Find creative funding --Measure performance and make results visible READING ABOUT REENGINEERING Here are some of the most significant and informative books and articles that have been written about reengineering in the last few years: "Business Process Improvement: The Breakthrough Strategy for Total Quality, Productivity, and Competitiveness." H. James Harrington, 1991. "Creating a Government that Works Better & Costs Less: Report of the National Performance Review." U.S. Government Printing Office, September 1993. "The Leadership Challenge of Reengineering," James Champy and Donald Arnoudse, Insights Quarterly, Fall 1992. "The New Industrial Engineering: Information Technology and Business Process Redesign," Sloan Management Review, Summer 1990. "Process Innovation: Reengineering Work through Information Technology." Thomas H. Davenport, 1993. "Reengineering the Corporation: A Manifesto for Business Revolution." Michael Hammer and James Champy, 1993. "Reengineering Government," John Martin, GOVERNING, March 1993. "Reengineering Work: Don't Automate, Obliterate," Michael Hammer, Harvard Business Review, July-August 1990. ---------------------------------------------------------------------- Copyright 1994, Congressional Quarterly, Inc. Reproduction in any form without the written permission of the publisher is prohibited. 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