Do You Really Need to "Reengineer?" (Includes Related Articles on Community Bank Data Processing and How to Reengineer Statement Rendering)

If an organism isn't growing or changing in some way, it's probably dead. The same is true of industries and businesses. Growth and change--change for the better, of course--are obvious fundamentals. But a new twist has gained prominence recently: the idea of completely rethinking a business process to sustain dramatic improvement. This idea goes by the name "reengineering," or its more formal version, business process reengineering. The concept, credited to McKinsey & Company, helps define projects that streamline or redesign basic business functions. For banks, reengineering can mean overhauling an automated customer service system, reconfiguring the check reading and sorting process, or even changing the way loan decisions are made. This article concentrates on its application to backoffice support systems. COMMON MISTAKES. Some consultants who have been working with banks to improve back-office functions observe that reengineering is no panacea. On the one hand, significant savings in time and human resources can be realized by reengineering a process correctly. On the other hand, pitfalls abound. "We've found that 60% to 70% of reengineering efforts we hear about don't meet their original expectations," says Ira Feinberg, who manages the New York office of Nolan, Norton & Co., a Cambridge, Mass.-based consulting firm. "They don't totally fail, but they don't meet their expectations." Most problems stem from launching too large a reengineering effort. Typical mistakes in that regard, explains reinberg, include forming dozens of teams charged with leading dozens of reengineering efforts. Each team ends up accomplishing, say, 25% of their intended goal, and none get completed as originally intended. "They attack every process as if it was of the same value to the business," points out reinberg. Another pitfall is when an organization is intimidated by the reengineering process, and so chooses a relatively meaningless task to reengineer. Resources are devoted to a function that has little if any business value. Feinberg suggests picking one or two core processes, such as order fulfillment or risk management, which really matter to the organization. Other candidates for reengineering, he adds, are processes with high revenues associated with them and frequent customer contact. "If a [corporate] customer receives multiple statements and notices for services received from the same bank," suggests Feinberg, "the bank may want to reengineer its information delivery processes, so that they cut across products and functions. That has a high perceived value to the customer." REENGINEERING AT BARNETT. When there is money to be made by invoking the name of the latest business buzz word into a sales pitch, it is perhaps inevitable that new strategies tend to expand well beyond their original scope. "Outsourcing" offers a good example of this and the same applies to "reengineering." In other words, buyer beware. "It's not necessary to reengineer the back office in all cases," notes Jerry Maher, director of technology at Barnett Technologies, Inc., the retail servicing subsidiary of Barnett Banks, Inc., Jacksonville. "Where you have antiquated processes requiring more labor than is needed to accomplish a task--that, to me, is where reengineering is needed." Case in point: Barnett is reengineering its adjustments and customer service operation with the help of Earnings Performance Group (EPG), a consulting and software firm based in Short Hills, N.J. The project involves automating a set of processes and procedures for correcting retail account discrepancies that until now have been largely manual, according to Maher. Here's how the old process worked: When a customer comes into one of Barnett's 735 branches with a question relating to a transaction that took place three months ago, a branch employee records the request on paper and sends it to one of three off-site research departments. …