The advantages of risk and evidence based reengineering

Posted on Categories Stream of Consciousness

I’ve expanded on a post I wrote for my old reengineering blog in 2010. Enjoy!

I’ve seen a lot of failed reengineering attempts. There are a lot of reasons why reengineering exercises fail and it’s not the purpose of this blog post to evaluate all possible reasons. What I do want to discuss, briefly, is why evidence based reengineering is a relevant, different and I believe more successful approach.

Reengineering 101

Traditionally, the top line activities in reengineering are executed according to the following pattern:

  1. the assessment of the current, or as-is situation
  2. the establishment of a wanted, future, or to-be situation
  3. the analysis of the differences between what is now and where we want to be, or the gap analysis
  4. the development and execution of an action plan to change the current into the wanted, future situation.

For anyone who has ever looked in awe at a consultant, well, this is pretty much what reengineering experts do. They’ll tell you it’s much more complex than this, but in essence, this is what it really boils down to.

Reengineering failures

Among the reasons why a project potentially goes awry is the very blatant one of starting from the wrong assessment of the as is.

How is that possible? Lack of validation is likely to be one, but a more likely one is a situation where the findings were validated by the management, but ultimately proved to be wrong anyway, because management did not have all information or was not aware of certain issues. After all, management is not deity (although behaviorally, this tends to be assumed in some cases) and therefore management can fail.

This is exactly where evidence enter the picture.

What is reengineering evidence and how do you use it?

Evidence is most certainly not interviews, especially not internal interviews. Most as is assessments are based on interviews with management and close collaborators of management. Consultants often assume that this information is complete, accurate, relevant and timely, but often this is anything but. Especially interviews with internal collaborators tend to confirm whatever it is that the collaborator thinks his management thinks or wants to hear.

Now, any auditor can tell you that internal evidence is the weakest of all evidence material, and reengineering interviews confirm this. Therefore, if interviews are the only information source, execute interviews with multiple independent sources with a clear view on the actual situation of the enterprise. Think clients, suppliers … even competition.

Oh, by the way, interviewing competitors to learn better practices under the guise of “research” is a common practice among some of the better known consulting organisations.

Relevant evidence

Better yet, start gathering hard data. Payroll data, other direct and indirect cost data, information from internal systems but also information gathered from banks, other lenders or financiers when it concerns financial information.

Go outside to clients and suppliers. A supplier will tell you if there are payment delays. A client will inform you of quality issues with products or services, of delay in delivery, of issues with execution … former clients are often a source of highly relevant information.

I remember a reengineering project I was involved in a couple of years ago where, in response to a simple request for information on payment terms and reasons for late payment by the specific client, we received an envelope full of evidence on very operational and quality issues. Following up with this third party, we finally understood what management was reluctant to share with us: significant quality control issues after a production line moved to a new location with lower labor cost and more manual interaction in the production process. None of the managers, afraid for the resulting backlash, was willing to share this.

Risk models as a basis for evidence gathering

A good means to structure the work is around risk models. I am a very big fan of risk based reengineering, and using risk models as a basis for reengineering is a good way to approach this exercise. Risk models allow for structuring of potential exposures in an organization, and will result in targeted exercises where the cost of reengineering is balanced as compared to the added benefit it entails.