how to make reengineering work

8/7/2019 How to make reengineering work

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THE McKINS EY QUARTERLY 1994 NUMBE R 2 107

How to make ree nginee ringreal ly work

Companies often squand er their energies on attractive-looking

projects th at fail to produc e bottom -line resu lts

Euge ne A. Hall, Jam es Ro sen thal, and Ju dy Wade

A study of reengineering projects in over 100 com pan ies reveals how d iffi cu lt

these projects are to plan and im plem ent and, m ore im portant, how often they

fail to achieve real business-unit impact. The study identified two factors –

breadt h and depth – that are critical in translatin g short-term , narrow-focus

process im provem ents into long-term profits. Successful projects a t B an ca d i

America e di Italia, Siemens Nixdorf Service, and AT&T demonstrate how

com pan ies can appropriately mak e their reengineering projects broader and deeper. S uch efforts, however, if poorly m an aged, provoke organ izat ional

resistance. But such opposition can be overcome if committed managers

approach reengineering as a pain ful bu t necessary disrupt ion of the status quo.

I

N ALL TOO MANY COMPANIES, reengineering has been simultaneously a

great success and a great failure. After months, even years, of careful

redesign, these companies achieve dramatic improvements in individual

processes only to wat ch overa ll resu lts decline. By now, par adoxical out comesof this kind have become almost commonplace. A computer company

reen gineer s its fina nce depart men t, redu cing process costs by 34 percent , yet

operating income stalls. An insurer cuts claims-process time by 44 percent,

yet profits dr op. Man agers proclaim a 20 percent cost r eduction, a 50 percent

process-time reduction, a 25 percent quality improvement, yet in the same

period, business-un it costs increase a nd profits decline.

In short, too many companies squander management attention and other

resources on projects that look like winners but fail to produce bottom-lineresults for th e business unit a s a whole.

But why? The promise of reengineering is not empty: it can actually deliver

revolutionary process improvements, and major reengineering efforts are

being conducted around the world. Why then can’t companies convey these

resu lts to the bott om line?

Reprinted from t he

Harvard Bu siness

Review

Au th ors’ note: We would like to tha nk Tom Ander son, Sanjeev Dheer, Stua rt Fla ck, an d BetsyFreema n for their contr ibutions t o this ar ticle.



Three critical elemen ts

Our resear ch examined reengineering projects in more than 100 companies and

included detailed analysis of 20 of these projects. It revealed how difficult

redesigns actua lly are to plan an d implement an d, more import an t, how often

th ey fail to achieve rea l business-un it impact. Our stu dy ident ified two factors

– breadth an d depth – that are critical in

translating short-term, narrow-focus process

improvements into long-term profits. First,

th e process to be redesigned mu st be broadly

based on cost or customer value in orderto improve performance across the entire

bus iness un i t . And the redes ign mus t

penetr at e to a company’s core, fun dam entally

cha nging six cru cial organizat iona l elements. These depth levers include roles

an d r esponsibilities; measurem ents an d incent ives; organ izat iona l str ucture;

inform at ion technology; shared values; an d sk ills.

Successful reengineering projects in diverse industr ies an d locat ions demon-

strate how companies can expand the dimensions of their reengineeringprojects. Senior executives at Banca di America e di Italia (BAI), AT&T, and

Siemens Nixdorf Service, for example, set broad goals, from creating a paper less

ban k a t BAI t o becoming t he m ost cust omer-responsive an d skilled compu ter-

servicing compa ny a t Siemens Nixdorf. They then completely rest ru ctu red a ll

organizat iona l element s – a nyth ing from th e layout of BAI’s bran ch offices t o

th e skills requir ed of AT&T’s sa lespeople – in order to implement th e new

designs successfully.

Ult imately, however, a reengineering project – like an y major cha nge program– can produce lasting results only if senior executives invest their time

and energy. As the experiences of

BAI, AT&T, and Siemens Nixdorf

reveal , large-scale reengineering

exacts extraordinary effort at all levels

of an organization. Without strong

leadership from top man agement , the

psychological and political disruptions

that accompany such radical change can sabotage the project. Inevitably,managers and employees may feel that their turf, jobs, and organizational

equilibrium ar e under a tt ack. But t op-level man agers can overcome opposition

to the new design if th ey approach reengineering as a painful but n ecessary

disru ption of th e sta tu s quo.

Expand ing the dim ensions of reengineering

Performance improvement in 11 of the 20 cases that we examined in detail

measured less than 5 percent, whether evaluated in terms of change in

HOW TO MAKE REE NGINEERING REALLY WORK

108 THE McKINS EY QUARTERLY 1994 NUMBE R 2

To tr an slate short-term , nar row-focus impr ovemen ts in to long-ter m p rofits, th e process to beredesigned mu st be broadly

based on cost or cust omer value

A reen gineer ing project canproduce last ing resu lts only if senior execut ives invest th eir

time and energy



earnings before interest and taxes (EBIT) or in terms of reduction in total

business-unit costs.* Respectable results, but ha rdly th e stu ff of legend. On th e

other hand, ma ny of the sa me cases reduced costs of the r edesigned process by

an impressive 15 to 50 percent . Nar row-process successes like th ese have led

senior executives to expect overall business-unit improvements to follow suit

(see Exhibit 1).

By taking a close look at the 20 detailed cases, we can see why most process

reengineering effort s ha ve in fact ha d litt le measura ble impact on th e overa llbusiness unit. A few common missteps emerge. On the one hand, redesign

projects often aim a t pr ocesses th at ar e too na rr ow, and cha nge only one or two

of the depth levers. On t he other hand, even with sufficient depth, effort s st ill

focus on a process th at is too narrowly defined and therefore h as litt le discernible



* In this article, we chose to report performance improvements primarily by using cost, bothbecau se it is t he eas iest way to compare effort s across indust ries an d becau se reductions in costar e more directly at tr ibuta ble to perform an ce-improvement efforts. However, we also measu redtotal EBIT improvement in a num ber of cases an d found t he resu lts consistent with th e costresults.

<1

1

1

14

3

3

4

2

8

6

5

22

20

17

19

1613

3

1

16

25

25

21

34

20

15

31

53

33

1834

36

15

20

20

23

38

2712

Narrow-process improvements don’t yield bottom-line results

B r e a d t h o f p r o c e s s r e d e s i g n e d

S i n g l e f u n c t i o n

B u s i n e s s u n i t

Unidi

mensio

nal

Multidi

mensio

nal

Depth

of bu

siness

chan

g e

A

B

C

D

E

F

G

European retail bank X

European retail bank YUS electron ics manufacturer

US hot el chain

US bank (operating product)

European compu ter manu facturer

UK consumer company

H

I

J

K

L

M

N

UK life insurer

US computer manufactu rerUS retailer

US insurance company

US compu ter processor

Pacif ic-Rim lif e insurer

Pacif ic-Rim indu strial company

O

P

Q

R

S

T

Euro pean in dustrial (US division)

European in dustr ialEuro pean commercial bank X

Euro pean commercial bank Y

US agricult ure company

US inf ormation services company

A

F

D

C

E

I

J

H

G

B

L

K

M

R

S

T

O

Q

N

P

Exhibit 1

Projected cost reduction as a percent of

Tot al business-un it costs Process

Projected cost savings



impact on overall performance. Still more distressing, many managersnever learn that their reengineering effort s do not have measurable impact. They

analyze improvements relat ive to the process being redesigned rather

than the business unit as a whole, or

never develop performance tracking

mechanisms to measure results.

Only six of th e 20 compa nies tha t we

analyzed in detail achieved an average

18 percent reduction in bu siness-un itcosts. Th ese compa nies, import an tly, ha d per form an ce impr ovement s a long

multiple dimensions – typically cost, revenue, time, and quality. Despite

differen ces in indu str y, geographic region, a nd compet itive situa tion, th ese

compan ies des igned and conducted the i r reeng ineer ing p ro jec t s in

strikingly similar ways. For all companies, expanding the dimensions of

the redesign project was critical to success. Only those projects that were

sufficiently broad and sufficiently deep produced widespread and long-lasting

bott om-line r esult s.

Ident ifying breadth levers

Managers must first identify the activities to include in the process being

redesigned that are critical for value creation in the overall business unit.

A process can be as na rr owly defined a s a single activity in a single fun ction

or as broadly defined as the

entire business system for

the business unit. Our st udy

divided cases into quartiles

based on the breadth of theprocess being redesigned. At

one end of th e spectr um were

companies that redesigned

the nar rowes t p rocesses ,

usual ly a s ingle act iv i ty

with in a s ingle funct ion ,

such as accounts-payable

processes. Middle-of-the-road

projects reengineered intrafunctional or cross-functional processes, such asnew product development processes. And at the far end were companies that

redesigned one or more processes tha t compr ised most of th e crit ical activities

in the business unit (see Exhibit 2).

While the reengineering of single activities or functions can be important to

companies with limited problems, a narrow approach to redesign cannot

produce the kin d of widesprea d resu lts t ha t m an y compa nies a re looking for.

Process breadth is important for two reasons. First, if more activities are



Only broad an d deepprojects produce widespread

an d long-last ingbott om-line r esults

Cost reduction as a percent of the business unit

Exhibit 2

Breadth reduces overall business-unit costs

13 2 3 3

8

2022

191617

441 1 1<1

8

3<1%

17

Breadth of process redesignedSingle funct ion Business unit

Business activitiesthat drive

competitiveadvantage

Any one act ivity All act ivit ies

Quart ile 1 Quart ile 2 Quart ile 3 Quart ile 4

Quartile average

6 5

13



included in the process , the improvements are more l ikely to extend

th roughout th e entire business un it. Second, if a pr ocess includes inter relat edactivities, a company may identify incremental opportunities that would

not sur face in single-fun ction per form an ce-impr ovement effort s . Such

opportunities include removing delays and errors in handoffs between

fun ctiona l ar eas, elimina ting pr oblems cau sed upst rea m of an activity, an d,

fina lly, combining steps t ha t span business un its or functions (see insert).

Too br oa d or t oo n a r row ? Man y reen gineer ing effor t s fa i l becau se

of insu ffic ien t p rocess b read th . Cons ider one European commerc ia l

bank’s reengineer ing effor t . By redesign ing some of its ba ck-office processes,th e ban k expected t o redu ce process costs by as much as 23 percent . However,

the actual cost reduction, when measured in terms of total business-unit

costs, was only 5 percent ; EBIT improved by a scan t 3 per cent . The rea son for

such modest results: the bank overlooked many back-office processes in

plan ning t he r edesign; in addition, back-office costs in general r epresen ted

only 40 percent of the ban k’s t ota l costs. Th e pr ocess, in sh ort , ha d been

too narrowly defined to have any significant impact on business-unit

perform an ce as a whole.



FIND UNEXPECTED OPPORTUNITIES FOR REDESIGN

Opportunity

Eliminate problems

caused upstream

of activity

Remove delays

or errors during

handoffs between

functional areas

Combine steps that

span businesses

and/or funcrions

Example

Problem . Errors in order entry at a US computer company were

caused by sales representatives who incorrectly configured systems.

As a result, the cost of the sales and order process was 30 percent

higher than that of competitors, and the error rates for some

products were as high as 100 percent.

Redesign . The cross-functional redesign fixed both the

configuration problems and salesforce skills so that on-time delivery

improved at significant cost savings.

Problem . The processing of a new policy at a UK insurance

company involved ten handoffs and took at least 40 days to

complete.

Redesign . A case-manager approach was implemented so that

only one handoff occurred, and the policy was processed in less

than seven days.

Problem . At a US electronics equipment manufacturer, seven

possible job titles in three different functions were involved in the

nine steps required to provision hardware.

Redesign . All but two job titles were eliminated, leaving one job in

sales and one job in manufacturing.



St ill oth er reen gineer ing effort s fail becau se of a too broad, indiscriminateapproach. Indeed, a diagnostic phase is cr itical t o a company’s ability to

deliver value t o its customers and t he bottom line. The key is to identify which

two or th ree elements compr ise cust omer value, as well as wha t defines the

compan y’s compet itive advant age. The next st ep is to focus on t he pr ocesses

in those areas that fall short of customer

expectations, management aspirations, and

compet itor p erform an ce.

One insur an ce compa ny, for example, th oughtinitially that customers cared about having

a broad portfolio of products and knowledgeable service representatives.

However, in the diagnostic phase, the company conducted a comprehensive

study of customer needs. It found that customers cared more about speedy

claims processing, an area in which the company was underperforming. The

reengineering performance objectives reflected this new information, and

saved the company the wasted effort of redesigning pr ocesses less crucial to its

compet itive advant age.

In a less financially successful reengineering effort, another insurance

company decided to reengineer its personal-insurance lines. Top-level

managers, however, found the plan too risky because at first it included

nearly $1 billion in insurance payouts. During the diagnostic phase, they

decided instead to reengineer a claim-settlement process that amounted

to a m ere 3 t o 4 percent of th e business-unit cost base. Becau se th e compa ny

want ed to minimize disrupt ion an d opted for th e quick fix, the r eengineering

project will most likely have a negligible effect on the performance of the

business un it as a whole.

Manipulating depth levers

The successful redesign of a broad process requires the complete restructuring

of th e key drivers of behavior so tha t actu al resu lts measure up to the r edesign

plan on paper. By depth we mean how many an d how much the six depth levers

referred to previously change as a

resu lt of reen gineer ing.

Our s tudy d iv ided the cases in toquartiles based on how many of the

depth levers t he r edesign changed. In

order to isolate depth from breadth,

we measured cost reductions as a

percent of the pr ocess being redesigned inst ead of as a percent of the bus iness

unit as a whole. The conclusion: companies that manipulate all six depth

levers t o bring about behaviora l cha nge show the most dr am at ic process-cost

redu ction (see Exh ibit 3).



Compan ies that man ipulatea ll six “depth levers” to

bring about beha viora l cha ngeshow the most dra ma ticprocess-cost reduction

A diagn ost ic phase iscrit ica l to a company’s a bility

to deliver valu e



One US electronics equip-ment manufacturer realized

the hard way how cr i t i ca l

addressing all the important

depth levers can be to improv-

ing perform an ce. Man agers

knew tha t one o f the key

perform an ce pr oblems was

the la rge sa les d i scoun ts

given to the company’s biggestcustomers. The redesign team

felt that the solution lay in

changing the existing revenue-

based scheme to a profit-

based one.

However, the company did not

initia lly include compen sation

for i ts account executivesin the redesign. As a result,

despite n ew job aids and n egotiat ion tr aining, managers saw litt le improvement

in discount levels. When the company eventually switched to a profit-based

compensation plan, discount levels fell from 29 to 20 percent off the list

price within a matter of weeks. The company has now projected an overall

improvement in EBIT of 25 percent.

An effective transformation of all six depth levers requires a clean-slate

approach to process redesign. Only then can companies avoid the classicreengineering pitfall trying to fix the status quo. If the redesign plans are

sufficiently broad, all the old support systems will become obsolete – from IT

systems to employee skills. Starting

from scrat ch, companies can plan an d

build th e new infra stru ctur e required

to realize the n ew design.

This new infrastructure should include

progra ms like comprehensive tra iningan d skill-development plans th at require years, not merely months, for success;

performance-measurement systems that track how well the organization is

meeting its targets and how employees should be rewarded based on those

objectives; communication programs that help employees understand why

an d how th eir behavior m ust cha nge; IT development plans th at capt ure the

benefits of new technology at a minimal investment while, at the same time,

long-term st ru ctu ra l cha nges are being made; an d, fina lly, pilots t ha t t est and

refine t he r edesign as well as its implementa tion.



Cost reductio n as a percent of the process

Depth of business changeUnidimensional Mult idimensional

19%

2523

35

Exhibit 3

Depth reduces specific process costs

12

2723

20

3836

2018

15

34

16

25

31

53

34

25

Str ucture

Skills

IT systems

Roles

Measurements/ incentives

Shared values

Any one depth lever All depth levers

Quart ile 1 Quart ile 2 Quart ile 3 Quart ile 4

Quartile average

20

15

21

33

If redesign plans ar esufficiently broad, a ll theold support systems will

become obsolete



Com m itting leadership to changeEven with sufficient breadth and depth, a reengineering project will fail

without th e full comm itment of senior execut ives. In nine of th e cases stu died,

we evaluated the disparity between actual and projected impact of fully or

almost fully implemented projects (see Exhibit 4). Five of these efforts have

achieved their projected impact. And, interestingly enough, in four of these five

successes, new chief execu-

tives were brought in before

or during the projects. These

senior execut ives u nder stoodhow to lead an organization

through a period of radical

change – they combined a

tenac ious pursu i t o f the

performance objectives with a

flair for building consen sus at

all organizational levels.

BAI, for example, broughtin new management to make

th e ban k compet i t ive with

other European banks. The

new CEO demonstrated his

s t rong commitment to the

reengineering project by

placing his best people on

the redesign team, making

s ign ifican t inves tmen ts ininformation technology and

new skill tr aining, man aging

by decree when necessary,

and giving the team adequate

time to effect fundamental change. On th e other ha nd, the management of a US

insura nce compa ny did not aggressively sponsor it s redesign project, leaving it

to the r edesign team t o sell the package to the front line. Man agement refused

to enlist its top people. As a r esult, th e team did not comm an d respect in the

field, and th e project failed.

In the most successful redesigns the study examined, managers made few

compr omises an d were generous with r esources. They saw implement at ion not

as a once-and-for-all effort but as a series of waves washing over the organization

for a period of years, leaving a system for continuous improvement in place.

Most import an tly, these execut ives invested th eir own t ime in th e project. In t he

six reengineering projects that had significant business-cost reductions, top

execut ives spent between 20 an d 60 percent of th eir time on t he project.



Exhibit 4

Committed top managers help the redesign pay off

Euro

pean

retail ba

nk: Y

High commitment Low commitment

US electronics m

anufac

turer

Europe

an re

tail ba

nk: X

†

Euro

pean

compu

ter m

anufac

turer

Euro

pean

indu

stria

l ( US

divi

sion)

US co

mpu

ter m

anuf

actu

rer

US in

form

ation service

s com

pany

US in

suranc

e co

mpa

ny

US com

puter p

roce

ssor

Europe

an re

tail ba

nk: X

†

NANA

$500

150

275

22

20

0

Projected impact Actual impact US$ Impact in millions

60%

50

40

30

20

10

0

Cost reduction as a percent of the process

* Same company, two redesign effo rt s. Top management in t he fir st eff ort d idnot implement the new design and eventually resigned; two years later, newmanagement i mplemented the f ull design.

New management



In contrast, a manager at a less successful company described the leadershipof its pr ocess r edesign a s ha ving “th e nomina l sponsors hip of someone t wo

layers down in t he organ izat ion, but in a ctu ality, it was dr iven by someone

four layers down. The ultimate redesign ended up focusing on narrow

cont ra ct a nd ba ck-office sales processes an d never r eally went an ywhere in

ter ms of implement at ion.”

The following profiles of BAI, AT&T, and Siemens Nixdorf Service provide

detailed examples of companies that have undergone the difficult , but

ult imat ely rewardin g, process of reen gineer ing. All thr ee have developed thedepth, breadt h, and leadersh ip th at have ensu red t heir pr ojects’ success.

Maintain ing strateg ic position at Ban ca di Ame rica e di Italia

Picture this: a customer walks into a branch of a midsize Italian bank. In

front of her is a small airy office where the securities officer sits, ready to

assist her in m ak ing investment decisions. There ar e no oth er offices or “back-

stage” spaces. Instead, a single line feeds to

th e thr ee tellers; th e man ager sits at a n opendesk directly facing the line.

The customer fills out a deposit slip with h er

name, account number, total sum of the five

checks she is depositing, an d th e amoun t t o be

withdra wn. No one is stan ding in line, so she st eps up t o th e closest t eller. The

teller t ypes in th e account num ber an d total am oun t of th e deposit an d th en

feeds the checks through a scann er. While he’s wait ing the two or t hr ee seconds

for the checks to be recorded in the system and for the correspondent bank to benotified electr onically, he calls up t he cust omer ’s profile and sees t ha t she

looks like an excellent candidate for a certificate of deposit (CD). As a receipt

containing detailed information about the five checks prints out, the teller

ask s th e cust omer if she’s inter ested in a CD.

Meanwhile, a help screen on his terminal provides him with detailed informat ion

about CDs: their benefits and common customer objections and responses.

After the discussion, he hands her the deposit receipt and some promotional

ma terial on CDs. The tr an saction has t aken 30 seconds, and t he checks h avealready been debited an d credited t o the a ppropriat e par ties. The t eller will

handle the checks only once more: when he coun ts t he t ota l number at the end

of th e day an d reconciles tha t t ota l to th e one on his compu ter. And because of

this new process, the teller doesn’t need any back-office support.

As futur istic as th is scenar io may sound, this is the Ban ca di America e di Ita lia

today. Owned by Deut sche Ban k, BAI has undergone a r adical tran sform at ion.

The CEO recalls, “We had very few strategic strengths, a very dispersed



A help screen on th e teller’ster mina l provides him

with det ailed inform at ionabout CDs



network, and a very high operating-cost structure. We had to find a way to growrapidly, while reducing the cost-per-branch and improving customer service.”

BAI’s tr an sform at ion st ar ted with th e CEO’s obsession t o st ren gth en

th e ban k’s st ra tegic posit ion by creat ing a “pap erless” ban k ba sed on

just-in-time ma nufactur ing principles. The CEO immediat ely signed on Andrea

Giochet ta – cur rent ly BAI’s chief informa tion officer – who sha red the CE O’s

drive and had th e technological know-

how to creat e a pa perless ban k.

Th e two s e t o u t t o r ed es ig n t h e

bra nches , focus in g on impr ov ing

customer-service levels as well as

front-office efficiency and effectiveness. In this way, they could reduce the

nu mber of people per bran ch and open n ew branches. To reach this goal, th ey

had to redesign all retail-branch transactions from scratch. With 80 to 85

per cent of BAI’s reven ue a nd cost s comin g from r etail ban king, th e wide-

spread bran ch r edesign ensur ed th at th e project would be broad enough to

produce bott om-line resu lts.

Diagnosis and clean -slate redesign: October 1988

At BAI, two team s system at ically diagnosed processes an d th en r edesigned

them without considering the constraints of the current organization.

As a result, the teams came up with innovative new approaches to retail

bank ing. First, t he organization t eam, whose members came from all over th e

organization, broke down all transactions into ten “families”: payments,

deposits, with drawals, money orders, bills, consu mer credit, foreign exchange,

credit cards (merchant and card holder), sourcing, and end-of-the-daybranch processes (the stocks, bonds, and securities process was included

lat er). The t eam car efully docum ent ed t he flow of a specific process with in

one of th e fam ilies – depositing a check drawn from a corr esponden t bank into

a cust omer ’s accoun t for insta nce. The ana lysis was pa inst ak ingly extens ive,

covering accounting flow, all relevant forms

used by both customers and the bank, and

controls for maintaining financial security

an d integr ity.

With a detailed pictu re of a tr an saction, th e

team could effect ively redes ign i t f rom

scratch. The check-deposit transaction, for

example, previously required 64 activities, nine forms, and 14 accounts.

After redesign, it needed only 25 activities, two forms, and two accounts.

This redesigned process then became the prototype for restructuring all

tr an sactions with in th at fam ily. Finally, the organizat ion t eam ha nded off th e

prototype to the technology team, charged with thinking through the IT



To rea ch its goal, th e ban k ha d to redesign all reta il-bra nch

tr an sactions from scra tch

The t echn ology team work edindependent ly of th e

organ izat ion t eam so th atcur rent system limita tions didnot influen ce the redesign



implications. Giochetta explains that “We had the technology team work independently of th e organ izat ion t eam so th at cur ren t system limita tions did

not influ ence the organ izat ion t eam ’s r edesign.”

The technology team focused on how to store data at the maximum level of

deta il. The bank’s single-tier ma infram e, with rea l-time conn ections to th e

branches, was already reaching full capa city during peak tr an saction t imes. To

minimize the load on the central mainframes, the team developed a client-

server architecture for prioritizing data – what information was needed for

opera ting support and what da ta was needed for decision support , for example.

Preparing for change: April 1989

With a redesigned prototype for each transaction family, the organization

team began redesigning all processes in each transaction family, some 300

processes in all. The team then began to think about depth , ident ifying th e key

organizational drivers that would determine the success of the redesign:

What kind of back-office a nd front -office st aff cha nges wer e n ecessary? What

new skills or positions were required? What

kind of physical layout would complementth e new design?

Mean while, th e technology team set t o work

tu rn ing the prototype and IT pr inciples into a

rea l system. The tea m worked meth odically, one t ra nsa ction at a time, and

met r egular ly with ma na gement to ensur e tha t th e project didn’t str ay

off course. Branch managers and tellers helped design screen displays,

guar an teeing tha t bra nch staff would have an accessible screen a nd th at th e

system would h ave well-tr ain ed cha mpions. Fina lly, in less th an 15 month s,th e tea m r olled out th e software for t he firs t family of tr an sactions.

Rollout: February 1990

The softwar e was rolled out as each tr an saction r edesign becam e available: in

oth er words, when th e Verona branch went on-line, it r eceived th e system for

only th e first product family, while the 50th branch brought on-line received all

of the family redesigns at once. Tellers underwent a five-day t ra ining period. In

addition, branches were restructured to eliminate all back-office space, and

the manager was placed directly out in front of the customer. Finally, a newsecur ities-officer position was crea ted, so th at BAI could increa se its sha re of

securities transactions. As a result, securities customers increased 306 percent

from 1987 to 1991.

Today, BAI customers are not the only beneficiar ies of the st reamlined branches.

The bank has added 50 new bra nches without an y increase in personnel an d

with minimal investment in systems development. The average number of

personnel per branch has dropped from seven or nine to three or four. Daily



What organ izat iona ldrivers will determ ine th e

success of a redesign?



cashier closing time has shrunk from over two hours to ten minutes. Andrevenue has doubled from 1987 to 1992 (24 percent of that increase has

been attributed to the reengineering effort). But Gianni Testoni, CEO for

Deutsche Ban k Group-Italy, has ident ified new areas for impr ovement , namely

str engthening BAI’s ret ail bran ch configura tion a nd t argeting new – and m ore

profitable – customers. Because of its successful redesign, BAI is in a good

position to meet th ese cha llenges.

Improving performanc e at AT&T

Since th e mid-1980s, AT&T’s execut ive comm itt ee had been t rying to improve

the lackluster performance of Global Business Communications Systems

(GBCS), th e $4 billion un it t ha t sells business t elephone syst ems (PBXs). By

ear ly 1989, fru str at ion h ad set in. Despite credible progress, the business un it

seemed to have hit a wall. According t o GBCS President Jack Bucter, while each

year the business unit met h igher performance

targets for individual functions, its overall

perform an ce did not improve.

Believing that only radical change would

invigorate performance, Bucter decided to

assemble teams t o redesign the business’s core pr ocesses. Glenn Hazard, an

11-year veteran of AT&T known for building a top-performing sales branch

from scrat ch, was enlisted a s t eam leader t o reengineer th e process for selling

and installing PBXs. Bucter also assigned full-time team members from a

wide range of functions: sales, services, product management, Bell Labs,

manufacturing, materials management, information systems, and training.

Bucter was candid about the stakes of the project. If performance continued tosta gnat e, th e PBX business would be sold or liquidat ed.

Diagnostic: J une 1989–February 1990

The team took a wide-lens approach, surveying process steps from initial

customer contact through to the collection of funds, including a range of

system sizes, geographic ar eas, and cust omer s. By int erviewing em ployees

and customers and fo l lowing paper t ra i ls , the team reconstructed 24

cases wh ich became t he basis for th e

diagnostic. The tea m t hen pored overthe cases, identifying every person

involved, their activities, and how

their time was spent.

The team found several areas for

improvement . First was t he pr oblem

of rework. Too many handoffs between functions and a lack of clearly defined

roles and responsibilities resulted in significant inefficiencies. An account



Assign full-t ime t eammembers from a wide ra nge

of functions

Too ma ny ha ndoffs betweenfunctions a nd a la ck of clear ly

defined roles andresponsibilities r esult insignificant inefficiencies



executive negotiated the sale; a system consultant determined the specificationsfor the system; and a system technician installed the hardware. In all, 16

ha ndoffs were requ ired t o complete a

system, and no one took responsibility

for t he ent ire tr an saction.

The ma nufactu ring and delivery cycle

also generated excess ive rework.

Fina l inst allation often cam e months

or even year s after th e cust omer an d accoun t execut ive negotiat ed a deal. Inth e meant ime, if the customer’s n eeds cha nged dra ma tically, th e system t ha t

ha d been agreed to earlier frequen tly cam e up sh ort . The price of this delay

was h eavy: dissatisfied customers a nd substa nt ial write-offs.

In addition, the team found that front-line employees were insensitive

to profitability, largely because they lacked information. Marketing was

often focusing on the least profitable customers, while sales concentrated

on maximizing revenues, often to the detriment of the profitability of the

deals th ey negotiat ed.

Finally, indirect expenses were excessive. The case studies revealed that

headquarters and centralized support groups were not critical to selling

and installing most of the systems, but the

services of both were employed on virtually

every system .

But a still thornier issue hid beneath these

problems. Critical line functions – namely,sales and m anu facturing – did not report to

the head of GBCS. At the time, AT&T had a

single sa lesforce t ha t sold PBXs, long-dista nce comm un icat ions services, an d

oth er pr oducts t o lar ger businesses. Given th e size and dem an ds of th e long-

distance business, salespeople often neglected the smaller PBX business.

Moreover, becau se t hey sold so man y complex products, t hey often ha d only

superficial familiarity with the products they were selling. But customers

expected salespeople to have in-depth technical knowledge about these

products, an d AT&T’s compet itors, whose sa lesforces specialized in a singleproduct, could provide th eir customer s with t ha t h igh level of expert ise.

Bucter was certain that creating a dedicated PBX salesforce was essential

for success. Only th en would th e redesign be broad en ough t o include a ll the

fun ctions critical t o selling and inst alling PBXs. This t ask , however, went far

beyond t he origina l scope of th e project a nd could not be u nder ta ken without

th e inpu t of AT&T’s execut ive comm itt ee. Fort un at ely, the oth er bu siness

units sharing the salesforce were coming to the same conclusion.



Front-line employeesar e often insensit ive to

profitability – lar gely becau seth ey lack in form at ion

When salespeople sellma ny complex products, th ey

often ha ve only superficialfam iliarit y with th e products

th ey ar e selling



Clean-slate redesign: March 1990–March 1991The execut ive comm ittee a greed to the a ut onomous sa lesforce and tu rn ed to

Pat Russo, a nine-year veteran of AT&T in a variety of sales and service

roles, to build and run the new PBX salesforce. With Russo on board,

Ha zar d’s r edesign t eam set t o work

i n e a r n e s t . O n e k e y t a r g e t w a s

minimizing the t ime between sale

an d final insta llat ion.

The t eam cut th e nu mber of projecth an d o f f s f ro m 1 2 to t h ree an d

created a new position, project manager, to oversee sales transactions

from incept ion to complet ion . Sales and ins ta l la t ion act iv i t ies were

integrated at the local branch level, and centralized sales support was

great ly reduced. Fina lly, th e t eam ra n compu ter simulat ions of the effects of

the redesigns on cost, cycle times, and error rates. The predictions were

heartening: for a typical small system, cycle time would drop from three

months to three weeks; total costs would drop by about one-third; and

errors would approach zero.

The team then turned i ts at tention to the organizational ramifications

of th e r edes ign . Th e r adical ly d ifferen t job r esponsib i l it ies an d sk i ll

r e d e s i g n s p o s e d a n i m m e n s e h u m a n -

resource challenge. The staff would need

train ing and job support to unders tand

their new roles and the new emphasis on

cus tomer s an d profits. For example, before

redesign, account executives focused onre l a t i o n s h ip s r a th e r t h an o n t ech n ica l

expertise t o sell their pr oduct. The r edesign

team creat ed a progra m t ha t t aught account executives th e required new

skills, while at the same time convincing them that increased technical

know-how would only make them better salespeople.

The team also began to modify technical systems to support the redesign.

Using PCs and off-the-shelf software, existing systems were simplified, and

new systems were designed t o redu ce cycle times and pr ovide accur at e profitestimating and tracking on each job. In September, Hazard and the team

tested their work in a pilot program and got results strikingly similar to

th ose th ey had forecasted.

To direct addi t ional senior management a t tent ion to the new design ,

Bucter a sked Bar ry Kar afin, t hen hea d of R&D, to oversee th e project on a

full-time basis. Kar afin t ur ned his immediat e att ention t o ensur ing th at all

cond itions necessar y for s uccessful implemen ta tion were in place.



The team ran comput ersimu lat ions of th e effects of th eredesigns on cost , cycle t imes,

an d error rat es

The redesign t eamconvinced accoun t executives

th at increased t echn icalkn ow-how would mak e th em

bett er sa lespeople



Rollout: April 1991–April 1992As the pilot neared completion, Russo, Karafin, and Hazard faced another

complicat ion. Bucter, who had sta rt ed and cont inuously support ed th e redesign

effort, was transferred, and a new president, Jerre Stead, was brought in.

What could have been a devasta ting setback became instead a vindicat ion of the

tea m’s effort s. In fact, St ead was so impr essed by the r edesign pr oject t ha t he

made it cent ra l to his program for th e business.

And with good cause: admittedly, as the business accumulates experience,

some job descriptions have been changed and some hastily assembled ITsystems refined, but all in all, th e results of th e redesign h ave been dra ma tic

and extensive. Customer willingness to repurchase has climbed from 53 to

82 percent; adjustmen ts have dropped from 4 t o 0.6 percent of revenues; bills

paid with in 30 days of inst allat ion in crea sed from 31 to 71 percent ; an d 88

percent of cust omers ra te t he pr oject ma na gement of their system sa le and

inst allat ion as “excellent .” Russo has a lso noted a new pr ofit a nd cust omer

focus. The process changes a t GBCS ar e su ccessfully producing a n an alogous

cha nge in corpora te cultur e.

Retaining service levels at Siemen s Nixdorf

With 3.4 DM ($2.1 billion) in revenu es an d a hea lthy pr ofit mar gin, Siemens

Nixdorf Service – which installs, services, maintains, and networks the

compu ter software and har dware sold by two recent ly merged high-tech giant s

– ha rdly seemed a candidat e for a ra dical redesign. But , in fact, by late 1990,

th e 12,900-person compa ny was poised on t he br ink of crisis. With a shr inking

volume of cont ra ctu al maint enance and increasing manpower costs, the service

organization would inevitably start to lose money by 1995 or 1996. In theface of increas ing compet ition, Siemens Nixdorf ’s gener al ma na ger for service,

Gerha rd Radtke, decided to assemble a t en-person project t eam t o rest ru ctu re

headquarters, with the goal of reducing HQ

personnel by 50 percent .

Diagnostic: Septem ber–Decem ber 1991

Radtke encour aged th e redesign team t o look

at th e entire business, not just HQ overh ead,

in the crucial diagnostic phase. The redesignteam confirmed that from 1995 to 1996 the

service business would sta rt to lose money as a r esult of declining pr ices from

increased competition. Moreover, the team concluded that the proposal to

redu ce HQ per sonn el cost s was n ot su fficiently broad to stem futu re losses.

The t eam was, however, able to ident ify a broad a rea for r eengineering: the

servicing process in th e 11,400-person field-servicing orga niza tion. The goal

of the redesign was to create the most highly skilled, cost-effective, and

customer -responsive servicing company possible.



The goal of th e redesignwas to crea te t he m ost h ighly

skilled, cost-effective, andcustomer-responsive servicing

company possible



Siemens Nixdorf operat ed th rough 30 support center s in Germ an y and oth erinternational locations, with more than 20 customer call points in Germany

alone. After a customer called the nearest service branch, a reporting technician

would be dispa tched t o diagnose th e problem

and, in most cases, would return to the bran ch

to get t he pa rt s needed for an y major repair.

Although most equipmen t could be r epaired

within a day or two, the system was generally

inefficient. Each service branch was fullysta ffed with specialists cont inuously available

for telephone inqu iries. For insta nce, each ha d its own BS 2000 ma infra me-

computer specialist, though few BS 2000 inquiries came in each day. In

addition, only 10 to 12 percent of service problems were solved over the

telephone. And repair technicians often had to make two trips to a customer to

complet e a job – th e first for diagnosis, the second for repa ir.

The redesign team predicted that restructuring this cumbersome servicing

process would increa se service efficiency by 20 percent an d, at th e same t ime,improve customer responsiveness.

Clean-slate redesign: Janu ary–June 1992

The redesign team proceeded to reconfigure the service center. It reduced

the number of support centers from 30 to five and established a regional

ma na gement str uctu re. At t hese center s, the compa ny’s t op specialists from

various bra nches and h eadquar ters would work together for t he first time.

Most import an t, t he t eam intr oduced an ent irely new level of efficiency intothe servicing process, aiming at performing a high percentage of repairs

remotely. In approximately 80 percent of the inquiries, an expert could

diagnose th e problem over th e telephone a nd deliver t he n eeded part s to th e

customer th e following morn ing via a ser vice techn ician ’s car or overnigh t

air freight . As a result, most r epairs

co u ld b e t ak en ca re o f a f t e r t h e

customer ’s fir st ser vice ca ll.

However, the restructuring of theorganizat ion’s depth levers exten ded

far beyond t he r eduction of cust omer

service call points and the new support centers. The team also reduced the

ma na gement h ierar chy by two levels, crea ted a n ew team str uctur e for field

technician s, and esta blished a new su pervisory t echn ician position to provide

additiona l on-site customer support . Then th e team restructu red headquart ers,

reducing personnel from 1,600 to 800 in order to place expertise out in the field

an d in direct cont act with th e cust omer.



Restructur ing a cum bersomeservicing pr ocess would increa seser vice efficiency by 20 per centan d, at t he sam e time, improve

cust omer responsiveness

In appr oxima tely80 percent of th e inqu iries, an

expert could diagnose th eproblem over t he t elephone



But the rest ru ctu ring didn’t stop there. The inform at ion-technology system hadto be modified to tr ack cust omer-service requests a nd t o support th e logistics

of the new replacement-part delivery system. In addition, measurements

an d incent ives were cha nged to focus on qu ick customer problem resolut ion,

and a new ongoing survey tracked customer satisfaction. Finally, a major

comm un icat ions progra m was designed for employees a s well as customers to

un derscore th e n ew customer-service cultur e.

Preparing for change: August–October 1992

In order t o test the redesign and build support for change, Radtke launched onepilot of the redesign in Frankfurt and another joint-international pilot in

Brussels and Paris. The pilots produced a 35

percent reduction in personnel and an increase

in service-techn ician productivity from two to

four cust omer calls a day. Retu rn tr ips to the

regional office were largely eliminated by

loading the cars each night with the parts

needed for the next day, and the percentage

of problems solved remotely rose from 10 percent to over 25 percent. Mostimport an t, t he pilots rea ched t he redesign t eam ’s goal of redu cing overall

costs by 20 percent an d increasing customer sa tisfaction.

Rollout: N ovem ber 1992–Decem ber 1993

Because the redesign team did not limit its scope to the relatively narrow

headqua rt ers functions initially tar geted in t he diagnostic phase a nd instea d

restructured all the depth levers to support the redesign, the effort produced

profit and cost improvements in excess of 10 percent. The redesign project

reduced employee head count by approximately 20 percent through exit andseverance packages and voluntary retirement. Radtke anticipates that the

flexible service business infrastructure created by the reengineering project will

enable the company to service a range of products beyond their own equipment:

from equipment manu factured by oth er compan ies to periphera ls.

Championing the new design

The r eengineer ing effort s at BAI, Siemens Nixdorf Service, and AT&T were led

by committed CEOs and sen ior m an agers. But th e long – and often ar duous –process of reengineering can be very delicate politically, and each company

weath ered disru ptions t o varying degrees.

Convin cing the skeptics

At BAI, dedicated senior executives shared a common vision and desire to

succeed. They in tu rn assembled a str ong tea m of top perform ers with diverse

experiences a nd skills. BAI’s CE O u nder stood t he necessity of unfalter ing

leadersh ip. While he listened to mana gement’s concerns about t he chan ges in



The pilots produced a 35percent r eduction in personnel

an d a n increase in service-technician productivity



th e system a nd t he n ew teller r oles, he was dedicat ed to doing what ever it

took t o implement th e full redesign an d ma ke BAI compet itive. In addition,

he h ad a well-form ed idea of his own pa rt in t he p rocess: “My role was to act

as a defender, so th at daily urgencies didn’t get in t he way of th e tea m’s

work. At the same time, I kept the tension up by calling frequently and by

wandering a round.”

But not everyone was as convinced of the project’s success, at least not a t first .

Felice Parente, who was brought on board to manage the technology team,

was initially skeptical of the new design. Only when the prototype was

declared a success could Parente, bolstered by his newly-won assurance,

sta rt to persu ade his tea m of th eir fut ur e success.

Still, test ing the prototype was only th e first step in winning t he confidence of

middle ma na gers and front -line employees. Giochet ta believes tha t in volving

front-line employees in the design of the new system helped to createchampions for the project in the field. And training and communications

programs – like basic-skills training and brochures – also contributed to

boost ing employee confidence in the n eed for cha nge.

Powers of persuasion

Radtke ha d a s lightly more cha llenging political situ at ion a t Siemens Nixdorf

Service. To ensure the breadth and depth of the redesign project, Radtke had to

ma rsha l all his powers of persu asion. He needed t o convince the board of th e



FIVE WAYS TO REDESIGN SUCCESSFULLY. . .

The following five factors common

to successful reengineering efforts

emerged from our study:

1. Set an aggressive reengineering

performance target. The target must span

the entire business unit to ensure sufficient

breadth. For example, aim for a $250 millionpretax profit increase to result from a 15

percent cost reduction and a 5 percent

revenue increase measured across the

business unit as a whole.

2. Commit 20 percent to 50 percent of

the chief executive’s time to the project.

The time commitment may begin at 20

percent and grow to 50 percent during

implementation stage. For example, schedule

weekly meetings that inform the topmanager of the project’s status.

3. Conduct a comprehensive review of

customer needs, economic leverage

points, and market trends. For example,

customer interviews and visits, competitor

benchmarking, analysis of best practices in

other industries, and economic modeling of

the business.

4. Assign an additional senior executive

to be responsible for implementation.

The manager should spend at least 50

percent of his or her time on the project

during the critical implementation stage.

5. Conduct a comprehensive pilot of

the new design. The pilot should test

the design’s overall impact as well as

the implementation process, while at the

same time building enthusiasm for fullimplementation.



urgent need for dramatic change throughout the service business; service

mana gers of the ur gent need to speed up t he implementa tion of th e redesign;

and country managers and the Metal and Steelworkers Union of the urgent

need t o disru pt th e status quo. Radtke recalls, “Because of the no-layoff cultu re

an d th e organ ization’s decent ra lized nat ur e, th e most difficult cha llenge was

convincing the coun tr y mana gers a nd th e union t ha t t he need was t here and

th at cha nges would produce something bett er.”

Given the potent ial for r esistance, Radtke an d his tea m focused on comm un i-

cating openly and honestly with the organization as a whole. They told

employees how much they would have to reduce head count and why,

emph asizing the facts t hey ha d un covered dur ing the diagnostic pha se. Two

brochu res about th e new Siemen s Nixdorf were pr int ed, one for employees

and one for cus tomers ; meet ings were set up for managers and their

employees; an d basic skills tra ining progra ms were begun .



. . . AND FOUR WAYS TO FAIL

There are any number of ways that a

reengineering project can fail. However,

our study uncovered the following four

particularly damaging practices:

1. Assign average performers. Companies

tend to enlist average performers – most

often from headquarters – for the project.Why? They reason that performance in the

business unit will falter if they assign top

performers to the redesign full time. For

example, one company assigned a mediocre

sales manager to head the project because he

wouldn’t be missed in the field. But because

this manager lacked the credibility and skills

to lead, the project ultimately failed.

2. Measure only the plan. Though most

companies invest a lot of resources in esti-mating the effects of a redesign on cost,

quality, and time before implementation,

they rarely follow through with a com-

prehensive measurement system that can

track the new process’s performance as it

is actually being rolled out. Without this kind

of measurement system, it is impossible to

tell if and why implementation is succeeding

or failing. A good tracking system

should measure location-specific results and

individual employee performance.

3. Settle for the status quo. Companies

generally strive to develop redesigns that are

radically new. But, more often than not, they

never translate their aspirations into reality.

Most companies have a difficult time

thinking outside their own skill level, organi-

zational structures, or system constraints.Moreover, companies that do come up with

innovative approaches find them watered

down by political infighting during the imple-

mentation stage. Incentives and information

technology, in particular, can be politically

sensitive areas.

4. Overlook communication. Companies

always underestimate the level of com-

munication that must occur during the

implementation stage. They tend to use onlyone method of communication, like memos,

speeches, or PR videos. More often than not,

they neglect the more time-consuming, but

effective, small-group format in which

employees can give feedback and air

their concerns. It is essential to create a

comprehensive communications program

that uses a variety of methods of communi-

cation. It helps to assign a top-level manager

to develop and implement an ongoing

communications program.



Although pockets of resistan ce existed in th e field and t he u nion was initiallyagains t change, Radtke and the project team maintained their s t rong

commitment to implementation of the new vision. “The redesign was not

someth ing we were doing because we wan ted to do it ,” Radt ke explain s. “We

had to do it. We also knew that if we worked with people at all levels to

convince them that this could work,

we would ha ve their su pport .”

Radtke’s willingn ess t o keep lines of

communication open was critical todefusing th e political r esistan ce th at

might have developed. Another key

factor was h is un failing investm ent of time. “For th e last two year s, I ha ve

spent 60 percent of my time on t he r edesign pr oject, const an tly ta lking to

individual managers and to union leaders, as well as meeting with the

pr oject tea m every t wo weeks,” he explains. Rad tk e’s comm un icat ion

progra m quickly circulated critical inform at ion. At t he sa me t ime, Radt ke

says, “We have consciously built the morale of our workforce by defining a

clear vision of the more professional, more efficient, and more successfulcompany that we are becoming.”

S oothin g ruffled feathers

Like Radtke, AT&T’s Ha zar d resolved to dedicate his total effort to the project.

But he was equa lly aware – and war y – of th e risks, saying, “I did not wan t t o

be a cru sader who never came back from th e crusades.” When, for example, the

PBX man agement team began to understand

the radical nature of the redesign, it got cold

feet. Many managers could not believe thatimproved service levels could be delivered with

so large a reduction in resources. They were

worr ied tha t t he t eam ’s design would not

work; becau se of the breadth an d depth of the

project, the business might collapse if the new process were implemented.

Indeed, more than a few feathers were ruffled by the proposed changes.

Functional managers, for example, found their areas changing and the balance

of power shifting. Na tu ra lly, some resist ed the cha nges.

In th e end, th e cour age t o go forwa rd cam e from AT&T’s execut ive comm itt ee,

who made it clear tha t the PBX business had to improve. The pilot h ad proven,

after a ll, tha t th e redesign h ad th e potent ial to improve perform an ce great ly.

Pat Russo brought her senior managers together and made sure that they

understood that implementation would proceed immediately. While at times

privately fearful that the plan might not work, she publicly gave her

unequ ivoca l suppor t to the new approach , and she made success fu l

implement at ion a key measurem ent for h er field man agers.



“The r edesign was notsomet hing we were doing

becau se we wan ted t o.We had to”

Definin g a clear visionof a more pr ofessional, more

efficient , and more su ccessfulcompa ny can build morale



The radical changes of the reengineering project were initially met withresistance by the managers and employees who would have to make the

changes work. The clear comm itment of the leadership t eam was centr al t o

developing the necessary depth of commitment throughout all levels of

the organization. And the assignment of Karafin to oversee implementation

was an essential element in ma inta ining the commitm ent to the project. His

full-time at ten tion to th e r edesign project signa led the seriousness with which

th e business as a wh ole appr oached the reengineering project.

Becau se he was a n es t abl ished member of th e business u ni t ’s seniormanagement team, Karafin was able to garner and shore up support for the

project. And while Hazard was focusing on the day-to-day running of the

reengineering team and Russo was concentrating on the day-to-day running of

the salesforce, Karafin could concentrate on the broader issue of identifying

roadblocks t o successful implementat ion. With leadersh ip at all levels of the

organ ization comm itted to th e redesign, t he pr oject’s success was guar an teed.

Two-way communication

In any redesign project, senior executives must overcome resistance andconvince employees of the n eed for cha nge. Ignored or ill handled, th e politics

of redesign can doom a n oth erwise su ccessful pr oject. Th ink about wha t can

happen during a reengineering effort of sufficient breadth and depth: the

execut ive comm ittee ha s not rea lly bought into th e new design; employees do

not recognize the need for change; organizational rumors create anxiety and

affect productivity; employees feel disempowered and confused about how

their behavior will have to change; and valuable people begin to circulate

their r ésumés.

Once top-level managers have resisted the temptation to stick with the

sta tu s quo an d have dedicat ed themselves an d th eir best perform ers to the

project, they must take a final – and crucial – step. By communicating

openly, using a var iety of methods, man agers will encour age frank discussion,

build consensus and commitment, ensure a

common understa nding of the need for change,

foster part icipat ive problem solving, celebrate

and reinforce accomplishments, and make

cont inuous impr ovement a compa ny value.

The problem is that most executives think

that they can accomplish al l th is wi th a

mem o an d a slick video of the CE O ta lking about th e need for cha nge. But

this is only the beginning. Managers must approach communication as an

interpersonal activity. To memos and videos add a half-day off-site followed by

a casua l lun ch, sma ll group meet ings of employees an d th eir ma na gers, an d

town-hall meet ings with s enior execut ives. Man ager s mu st give employees



The clear comm itmen t of th eleadersh ip team was centr al to

developing th e necessary dept hof comm itmen t t hr oughout alllevels of th e orga nizat ion



sound reasons for and explanations of the new design, a forum for voicingconcern s, and feedback t o show th ose concern s a re being hea rd .

This k ind of two-way comm un icat ion will do far more t ha n a ny memo or video

can. It will help create champions of the new design throughout all levels of the

organization. And those champions are the final key to making long-lasting,

widespread impr ovement s a rea lity.

J im R osenthal is a principal an d Ju dy Wade a consult an t in McKinsey’s New

York office, and Gene Hall is a principal in t he St am ford office. This ar ticle is

reprinted here by special permission from the November–December 1993

issue of the Harvard Business Review . Copyright © 1993 by the President

and Fellows of Harvard College. All rights reserved.


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