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ENHANCING ORGANIZATIONAL PERFORMANCE THROUGH BUSINESS PROCESS RE-ENGINEERING (A SURVEY OF SELECTED DRUG MANUFACTURING FIRMS IN SOUTH-EAST, NIGERIA)

Project topic for Business Administration department.

CHAPTER ONE

INTRODUCTION

  •  Background of the Study

The idea of designing businesses has been around for a long time and structured methods of doing this emerged in the 1980’s (Dale, 1994). For many years organizations have not fundamentally changed the way things are done. In some cases changes predated the introduction of computers and in others old processes were simply automated. This has changed as organizations have realized that to maintain their market share and have an edge over their competitors, they have to change and improve their processes. The competitive climate and the pace of change within and without the firm has encouraged a more coordinated and fundamental approach to planning and design of business activities hence a change in the process.

As organizations seek to obtain strategic advantages by redesigning the way they do business, they are finding the process fraught with uncertainty. Put simply, change is difficult. In some instances, the prospect of change is so onerous that the only way to effect change is to liquidate the existing enterprise and start again. A consensus is emerging that successful organizations of the next millennium will be those that embrace continuous change as a business paradigm. Such organizations will be able both to adapt to changes in the marketplace and to lead the market in directions optimal to the organization’s goals by continually adapting their products, processes, and internal structures to changes in the business environment. Hence the development process has been from improvement to radical changes in the process. It was first introduced by Hammer (1990) as a radical redesign of processes in order to gain significant improvements in cost, quality, and services and speed. Drug manufacturing firm’s processes today are obviously different from what they were centuries ago.  In the 1990s, as many as 60 percent of the Fortune 500 companies claimed to either have initiated reengineering efforts, or to have plans to do so. The ratio was down to one out of five; the other four out of the five workers currently produce and deliver intangible products like information and service (Drucker, 1993). In recent days services are dominating the world, the foundation of any organization is the people and processes. If people are motivated and hardworking, but the business processes are not good and remain as non-value-adding activities, organizational performance will be poor (Peter and Sohal, 1999). Invariably if the business process of the organization is unstructured the organizational performance will definitely be poor. For an organization to have a striking increase in efficiency, productivity and profitability, a drastic change in the design of the organization’s processes is required. Many drug manufacturing firms have initiated reengineering efforts.

The concept of re-engineering traces its origin to management theories developed as early as the nineteenth century. The purpose of reengineering is to make all processes the best possible. American efficiency engineer Frederick Winslow Taylor (1856–1915) suggested in the 1880s that managers could discover the best processes for performing work and reengineer them to optimize productivity. Business process re-engineering (BPR) echoes the classical belief that there is one best way to conduct tasks. In Taylor's time, technology was not sufficient to allow large companies to design processes in a cross-functional or cross-departmental manner. Re-engineering became popular in the early 1990s even though the methodology and approach were not fully understood or appreciated. Re-engineering is an effective tool for organizations striving to operate as effectively and efficiently as possible. Much attention is given to "best practices" that are the outcome of re-engineering strategies. Re-engineering refers to discrete initiatives that are intended to achieve radically, designed and improved work processes in a bound time frame. Re-engineering has to do with transformation of business processes. Re-engineering is most commonly defined as the redesign of business processes—and the associated systems and organizational structures—to achieve a dramatic improvement in business performance.

Organizations can enhance their job performance through the application of business process re-engineering (BPR) management techniques.

BPR has been described as a radical new approach to business improvement, with the potential to achieve dramatic improvement in business performance. BPR should not be considered downsizing, restructuring, reorganization, and/or new technology. It is the examination and change of five components of the business: strategy, process, technology, organization, and culture. Many companies continue to experiment with reengineering, even if they have failed in previous attempts. In a paper presented to the annual meeting of the European Group of Public Administration, Parys (2003) states that ‘Business Process Re-engineering emerged in America during the 1980s and early 1990s, first in the private and later in the public sector’. The rise of BPR is often explained by the reality that organizations’ old ways of organizing the divisions of labor do not work anymore (Hammer and Champ, 1993). BPR challenges many of the assumptions which underpin the way organizations have been run for the last two centuries. First, it rejects the idea of reductionism, the fragmentation and breaking down of organizations into the simplest tasks. Second, it encourages organizations to capitalize on substantial developments made in technology. Third, BPR enables organizations to take advantage of the more highly developed educated and capabilities of the staff they employ (Beckford, 1998).

Task-oriented jobs in today’s world of customers, competition and change are obsolete. Instead, companies must organize work around processes (Hammer and Champ, 1993). BPR is known by many names, such as ‘core process redesign new industrial engineering’ or ‘working smarter”. All of them imply the same concept which focuses on integrating both business process redesign and deploying Information Technology (IT) to support the reengineering work. BPR has the scope for application in manufacturing firms and that IT (Information Technology) is an integral part of BPR. Business process re-engineering (BPR) is a business management strategy, originally pioneered in the early 1990s, focusing on the analysis and design of workflows and business processes within an organization. The primary reasons for BPR are increased efficiency (internal) and improved customer service (external), (Chan and Peel 1998). BPR aimed to help organizations, fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors. BPR seeks to help companies radically restructure their organizations by focusing on the ground-up design of their business processes. Business process re-engineering aims to improve the performance by radical changes in the system over the short term (Ardhaldjian and Fahner 1994). According to Davenport (1990) a business process is a set of logically related tasks performed to achieve a defined business outcome. Re-engineering emphasized a holistic focus on business objectives and how processes related to them, encouraging full-scale recreation of processes rather than iterative optimization of sub-processes. Business process reengineering is also known as business process redesign, business transformation, or business process change management.

Generally BPR involves discovering how business processes currently operate, how to redesign these processes to eliminate the wasted or redundant effort and improve efficiency, and how to implement the process changes in order to gain competitiveness. Business process re-engineering ensures that all organizational processes are effective. it focuses more on overall performance improvement rather than any one element or measure of performance. Tharanga (2010) noted that re-engineering allows organization to have a competitive advantage over other firms in the industry. The aim of BPR is “seeking to devise new ways of organizing tasks, organizing people and redesigning IT systems so that the processes support the organization to realize its goals” (Sherwood-Smith, (1994). Davenport (1993), describes ‘business process redesign as the analysis and design of workflows and processes within and between organizations. Business activities should be viewed as more than a collection of individual or even functional tasks; they should be broken down into processes that can be designed for maximum effectiveness, in both manufacturing and service environment as opined by Yih-Chang Chan (2001).

Odede (2013) noted that the changing business environment has necessitated public sector organizations to redefine their objectives, invest in integrated service delivery and focus on customer service. BPR insists on the need to restructure processes prior to structuring institutions and hierarchies, and to structure these processes in different ways than before. This is predicted on the assumption that the potential of IT enables innovative designs of how work is being carried out. At least in theory, BPR thus provides the missing link between the layer of strategy and that of the information system design. Moreover, it recommends a holistic perspective which encourages the bringing of objectives, human resources, organization, IT and culture into a coherent perspective (Lenk, 1997). Some technologies can provide substantial opportunities for the redesign of business processes (Guimaraes, 1993). Again for each technology application, success is far from guaranteed. The manufacturing sector has been called ‘the locomotive that pulls the other sector of the economy along’ (faltermayer, 1993). Regardless of the great importance of manufacturing, its success or failure is far from assured. In spite of having substantial mechanization and automation, the most productive workers in the world, and greater access to natural resources than perhaps any other nation, in the past manufacturing has fallen behind (Miske, 1992). More recently the manufacturing sector is thought to be regaining its ability to become more productive (Howard, 1994), and the importance of manufacturing as a competitive weapon has been recognized by many authors (Ward, Bickford and Leong, 1996; Marcum, 1996). From 1980 to 1990, the productivity of manufacturing workers increased with 4.5 percent per year, (Howard, 1994). Many firms have redefined the nature of their businesses while exploring the basic differences between many manufacturing management approaches and applying a host of new methods and techniques, including the widely discussed business process reengineering (BPR) (Patterson and Harmel, 1992). It is against this background that the researcher wishes to x-ray how to enhance organizational performance through re-engineering using selected drug manufacturing firms in Enugu state.

1.2 Statement of the Problem

Many successful business process-reengineering cases have been presented both in management and scientific journals. It has been repeatedly claimed that business process re-engineering has on one hand resulted to dramatic improvements in performance while on the other there have been many complete failures. However, studies on the drivers of BPR initiatives and reasons for success and failure have been scarce. Not all the drug manufacturing firms have benefitted substantially from business process re-engineering.

Many drug manufacturing firms have found that even dramatic level of process re-engineering and improvements often do not translate into better business performance, while many have based their application of business process re-engineering on faulty methods and assumptions that tend to undermine quality products, good service delivery, competitive prices, customers’ satisfaction and retention. Many organizations that have adopted it lack project management re-orientation and are unaware of the organization resistance to change.

 It is therefore crucial that patients get affordable essential drugs in the country. The focus is on government intervention to ensure that the essential drugs are affordable and accessible to all. What does this therefore do to the Pharmaceutical Manufacturers in Enugu state; it implies that those who have not looked at their processes are thus forced to relook into them with a view of enhancing efficiency and improve productivity. This implies that processes that are not value adding will have to be done away with or changed completely hence setting up a business process reengineering as best practices and tools across the enterprise and also need to ensure increased efficiency and shared  services to back up growth. There are many opportunities making business process re-engineering of great importance to the drug manufacturing firms: Due to liberalization of the economy, drug manufacturing firms, which used to operate in a controlled economy, are now facing competition from foreign products. Therefore these firms have to adapt to change to survive. It is wise to note that the cost of essential drugs is exorbitantly high in the developing countries as compared to the cost of the same in developed countries. In order to systematically study business process re-engineering as a management tool, the researcher is yet to carry out a survey in selected drug manufacturing firms in Enugu State.

The researcher wants to find, as it relates to drug manufacturing firms in Enugu State, the inevitable consequences of lack of re-engineering in drug manufacturing firms due to lack of phenomenon under study. If there is no re-engineering, the cost of production will be high, low speed, poor service delivery, low productivity, etc. It is against this that the researcher needs to ascertain the effect of business process re-engineering on drug manufacturing firms in Enugu state.

1.3 Objectives of the Study

The broad objective of the study will be to examine the effect of business process re-engineering on organizational performance of selected drug manufacturing firms in Enugu State while the specific objectives will be to:

  • Ascertain the extent to which re-engineering enhance the development of innovative products in the company.
  • Ascertain how re-engineering can improve more efficient production systems.
  • Ascertain the impact of re-engineering on increase in customers’ satisfaction.
  • Ascertain the effect of re-engineering on effective distribution systems.

1.4 Research Question

The following research questions are designed in an attempt to achieve the objective of the study. They are:-

  • To what extent does re-engineering enhance the development of innovative products in the company?
  • To what extent does re-engineering improve more efficient production systems?
  • To what extent does re-engineering enhance increase in customers’ satisfaction?
  • To what extent does re-engineering improve effective distribution systems?

1.5 Formulation of Research Hypotheses

In order to solve the problem and achieve the purpose of this study, hypotheses were formulated and shall be tested.

  • Re-engineering does not significantly enhance the development of innovative products in drug manufacturing firms
  • Re-engineering has not significantly improved efficiency in the production system of the selected drug firms in Enugu State.
  • Re-engineering has not significantly enhanced increase in customers’ satisfaction in the organizations.
  • Re-engineering has not significantly improved effective distribution systems in the selected drug manufacturing firms.

1.6 Significance of the Study

The significance of the study is so great that it is believed that the study will go a long way towards identifying the importance of business process re-engineering on organizational performance of drug manufacturing firms in Enugu State. Every country requires vibrant, functioning and efficient drug firms. This is because the lives of people are dependent on the products produced from this industry. The environment in which the drug manufacturing firms in Enugu State is operating under is putting challenges to the industry. This implies that the drug Manufacturing firms in Enugu State have no choice but to look at their systems and processes if they have to compete in the global world. It is in the light of the above that this study is of importance. Secondly, studies on business process re-engineering have been carried out in the developed world and it would be interesting to see if the drivers, scope, implementation and success or failures of the changes hold in Enugu State as in the developed world. The results of this research will benefit:

1    Scholars who wish to do further research into the Pharmaceutical industry;

The public since accessibility to good quality Pharmaceutical products that are cheap is a matter of great public interest;

The organizations and their employees by learning how to apply the best and most effective and adequate industrial relation strategies to increase, manage and solve whatever kind of organizational problem that may likely occur in their environments, that is, assisting business managers know the trends of change in the industry

Investors as it will provide them with an overview of the changes in the Industry and hence facilitate well-informed decisions.

The industry as it will help them know the trends of change in relation to Reengineering.

The employees will benefit in terms of improved interpersonal relationship, mutual understanding and acceptance of each other regardless of various differences.

The researcher also stands to benefit from this study, because this work is a partial fulfillment of the award of M.Sc to the researcher.

Generally, it is more significant because the world is going towards the global competition. In this scenario, all the people try to understand the effect of re-engineering on different variables like cost, quality, services and speed.

1.7 Scope of the Study

The scope of the study will focus mainly on enhancing organizational performance through business process re-engineering of selected drug manufacturing firms in Enugu State. It will focus on the effect of business process re-engineering on organizational performance with reference to organizational performance measurement as it relates to the objectives of the study: To ascertain the relationships between Re-engineering and development of innovative products

in the company; To determine how Re-engineering can improve more efficient production systems; To ascertain the impact of Re-engineering on increase in customers’ satisfaction; To ascertain the effect of Re-engineering on effective distribution systems. Business Action theory amongst various theories of re-engineering will be used as an approach to describing the nature of re-engineering in the study.

1.8 Limitations of the Study

It has been proved that business and investigations strive to employ scientific tools and methods in getting data that they need but research of this nature was bedeviled by various kinds of problems which limited the level of accuracy and reliability that the researcher was able to achieve in this work. Some of the limitations of the study include:

  • Financial constraint: the huge cost involved in carrying out a complete study of a whole organization was a challenging one. But the researcher was able to overcome through special saving.
  • Time constraint: The time required for this dissertation was not enough to visit most manufacturing industries in south east of Nigeria. The researcher chose to study only three out of many drug manufacturing firms in south east of Nigeria and devoted time and made frequent visit to their sites.
  • Negative attitude of some corporate bodies. Some corporate bodies have not fully developed the culture of providing relevant information on their activities for research purpose. Officials that would have given relevant details and information was not forth coming because of their attitudinal disposition to research work. Also some of the questionnaire distributed was not properly filled while some was not filled at all. These made the researcher create more time and print more questionnaire as to getting what he wants from the respondents.
  • Dearth of materials: Though the topic is not a new one in the broad area of management, getting recent textbooks and other research materials like journals and periodicals that addresses the issue was extremely difficult. Extra carefulness was taken as to selecting the relevant ones.

1.9 Operational Definition of Terms

1. Engineering: This is the activity which involves the application of scientific to the design, building and control of machines as to achieve a productive output.

2. Enhancing: This has to do with improving the quality of work or product in an organization.

3. Group learning:  This is the process whereby groups in the organization put their ideas together as to learn from each other on the way to improve organizational output.

4. Individual learns: This can be defined as the ability of one developing himself as to improve in his skills of work.

5. Inter-organizational learning: This has to do with organizations sending their workers out to

go and undergo a special training from the other organization as to understand a particular skill

of operation for improvement on its product.

6. Market share: This is the number of customers that the organizations product and service was able to attract. These customers equally buy and consume the product as against the similar products and services in the same market from other organization in the sane industry.

7. Organization: This can be defined as a special configuration of structure, people task and

techniques.

8. Organizational learning: This can be defined as a process whereby employees learn from the      

organizations activity for organizational transformation, where the entire processes and

organization climate and organization structure are changed.

9. Organizational productivity: These are the outputs of the organization resulting out of the

inputs of the various resources of man, money materials and machine put together by the

organization.

10. Profitability: his is gain made by the organization after deducting its cost of inputs and tax

elements as regards products and services of the organization.

11. Technology: This can be defined as the collection of techniques, methods or processes used

in the production of goods or services or in the accomplishment of objectives.


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