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Federal agencies are being challenged to reduce the cost of government while improving their performance. As noted in GAO's executive guide on strategic information management (see note 2), achieving major levels of cost savings and performance improvement nearly always requires that agencies redesign the business processes they use to accomplish their work. Many of the largest federal agencies find themselves encumbered with structures and processes rooted in the past, aimed at the demands of earlier times, and designed before modern information and communications technology came into being. These agencies are poorly positioned to fulfill their mission and meet their strategic goals. They need to consider replacing outmoded work processes with streamlined ones that more effectively serve the needs of the American public.
The need for agencies to reassess their business processes was recognized in the Clinger-Cohen Act of 1996. Among the provisions of this landmark information management reform, agencies are required to determine whether their administrative and mission-related business processes should be improved before investing in major information systems to support them. In addition, the Office of Management and Budget (OMB) has reinforced this by requiring that investments in major information systems proposed for funding in the President's budget should, among other things, support work processes that have been simplified or otherwise redesigned to reduce costs and improve performance (see note 3). This recent legislation builds on other general management reforms. The Government Performance and Results Act of 1993 provides the framework for defining and measuring how well an agency is meeting its mission goals. And the Chief Financial Officers Act of 1990 addresses the need for agencies to have accurate financial information to understand and manage their operations.
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Business process reengineering is one approach for redesigning the way work is done to better support the organization's mission and reduce costs. Reengineering starts with a high-level assessment of the organization's mission, strategic goals, and customer needs. Basic questions are asked, such as "Does our mission need to be redefined? Are our strategic goals aligned with our mission? Who are our customers?" An organization may find that it is operating on questionable assumptions, particularly in terms of the wants and needs of its customers. Only after the organization rethinks what it should be doing, does it go on to decide how best to do it.
Within the framework of this basic assessment of mission and goals, reengineering focuses on the organization's business processes--the steps and procedures that govern how resources are used to create products and services that meet the needs of particular customers or markets. As a structured ordering of work steps across time and place, a business process can be decomposed into specific activities, measured, modeled, and improved. It can also be completely redesigned or eliminated altogether. Reengineering identifies, analyzes, and redesigns an organization's core business processes with the aim of achieving dramatic improvements in critical performance measures, such as cost, quality, service, and speed.
Reengineering recognizes that an organization's business processes are usually fragmented into subprocesses and tasks that are carried out by several specialized functional areas within the organization. Often, no one is responsible for the overall performance of the entire process. Reengineering maintains that optimizing the performance of subprocesses can result in some benefits, but cannot yield dramatic improvements if the process itself is fundamentally inefficient and outmoded. For that reason, reengineering focuses on redesigning the process as a whole in order to achieve the greatest possible benefits to the organization and their customers. This drive for realizing dramatic improvements by fundamentally rethinking how the organization's work should be done distinguishes reengineering from process improvement efforts that focus on functional or incremental improvement.
As will be emphasized in this guide, reengineering is not a panacea. There are occasions when functional or incremental improvements are the method of choice, as when a process is basically sound or when the organization is not prepared to undergo dramatic change. But given the need to achieve "order of magnitude" improvements in many areas of government, agencies should consider whether they have areas where reengineering might be appropriate. The first three assessment issues in this guide focus on this very issue.
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Our guide is a distillation of elements typically emphasized in process redesign and reengineering methodologies. The assessment questions deal with issues and activities that reengineering practitioners have found to be critical in defining reengineering opportunities and goals, ensuring that reengineering projects are well managed, maximizing the return on resources invested in reengineering (including information systems), and managing the many changes needed to implement a redesigned work process.
To develop these assessment questions, we consulted with outside experts in the area of public and private sector process redesign and reengineering to define the key concepts and general approaches that were being taken to develop and implement new business processes. We supplemented these discussions by reviewing the growing body of literature and methodologies on process redesign and reengineering that have been published by consulting firms and individual practitioners. Within GAO, we consulted with staff having experience and expertise in areas germane to this subject, including government results and performance issues, strategic information management, performance measurement and benchmarking, and information systems design and implementation. A draft of this guide was reviewed by reengineering practitioners, listed in appendix III, from the private sector and state and federal agencies
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The guide has nine assessment issues that are grouped into three major areas. The first area, Part A: Assessing the Agency's Decision to Pursue Reengineering, focuses on strategic and general management issues that need to be resolved before an agency (see note 4) embarks on a reengineering project. It includes the following assessment issues:
Assessment Issue 1: Has the Agency Reassessed Its Mission and Strategic Goals?
Assessment Issue 2: Has the Agency Identified Performance Problems and Set Improvement Goals?
Assessment Issue 3: Should the Agency Engage in Reengineering?
Part B: Assessing the New Process' Development picks up at the point where the agency has decided to begin a reengineering project. The assessment issues focus on the management of the reengineering team, the team's process redesign activities, and the business case it develops to support a decision to begin implementing the new design:
Assessment Issue 4: Is the Reengineering Project Appropriately Managed?
Assessment Issue 5: Has the Project Team Analyzed the Target Process and Developed Feasible Alternatives?
Assessment Issue 6: Has the Project Team Completed a Sound Business Case for Implementing the New Process?
The last section, Part C: Assessing Project Implementation and Results, deals with the problems involved in piloting and deploying a new business process. Both the human and technical issues surrounding implementation are touched on, along with the need to evaluate the performance and results of the new process:
Assessment Issue 7: Is the Agency Following a Comprehensive Implementation Plan?
Assessment Issue 8: Are Agency Executives Addressing Change Management Issues?
Assessment Issue 9: Is the New Process Achieving the Desired Results?
Under each of the nine issues, we list several "key activities" that the agency typically should do to develop the information, manage the risks, and make the decisions needed at that point. For each of the key activities, we provide a short discussion highlighting its significance, along with a list of "key assessment questions" that evaluators can use to probe how well the organization has addressed the issue. Because reengineering is very situational, these questions are framed at a high level, delineating the general line of inquiry that evaluators should pursue. Evaluators will need to augment these high-level questions with specific subquestions of their own that are designed to explore the agency's specific circumstances.
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Many of the issues in this guide are reflected in recent management reform legislation, particularly the Government Performance and Results Act of 1993 (GPRA), the Chief Financial Officers Act of 1990 (CFO), the Paperwork Reduction Act of 1995 (PRA), and the Clinger-Cohen Act of 1996.
Reengineering starts at the same place as GPRA, by calling for a careful reassessment and (if necessary) a redefinition of an organization's mission, goals, customers, and performance outcomes. GPRA requires agencies to anchor performance improvement in sound strategic planning (see note 5). Federal agencies are to develop a strategic plan that includes a comprehensive mission statement, outcome-related strategic goals, and a description of how the agency intends to achieve those goals. In doing this, agencies are to consult with their customers and stakeholders, as well as the Congress, and take into account other factors in the general environment that affect their ability to accomplish their missions. As mentioned earlier, agencies need to define their strategic direction (where they need to go and what they need to accomplish) before expending time and resources on improving how they do their work. Only then can an agency be in a position to assess whether its activities, business processes, and resources are properly aligned to support its mission and achieve desired outcomes.
The CFO Act focuses on the need to significantly improve the government's financial management and reporting practices. Having appropriate financial systems with accurate data is critical to measuring performance and reducing the costs of agency operations.
The PRA and the Clinger-Cohen Act emphasize achieving program benefits and meeting agency goals through the effective use of information technology. For example, the Clinger-Cohen Act explicitly requires agency heads to analyze the missions of their organizations, benchmark and assess the performance of their business processes and, based on this analysis, redesign their mission-related and administrative processes (as appropriate) before making significant investments in information technology to support those missions. In plain terms, agencies should maximize the potential of technology to improve performance, rather than simply automating inefficient processes.
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Given this legislation, a key assessment issue for evaluators is determining whether major agency investments in information technology will in fact support a redesigned business process. The issues in this guide provide a framework for determining whether an agency is, in fact, engaged in reengineering a process.
As indicated in figure 1, work processes, information needs, and technology are interdependent. When a reengineering project leads to new information requirements, it may be necessary to acquire new technology to support those requirements. It is important to bear in mind, however, that acquiring new information technology does not constitute reengineering. Technology is an enabler of process reengineering, not a substitute for it. Acquiring technology in the belief that its mere presence will somehow lead to process innovation is a root cause of bad investments in information systems. The Clinger-Cohen Act seeks to remedy this by insisting that process redesign drive the acquisition of information technology, and not the other way around.
Figure 1: Relationship of Mission and Work Processes to Information Technology
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Further guidance on the relationship between process reengineering and technology investment decision-making can be found in Information Technology Investment: Agencies Can Improve Performance, Reduce Costs, and Minimize Risks (GAO/AIMD-96-64, September 30, 1996) and in Assessing Risks and Returns: A Guide for Evaluating Federal Agencies' IT Investment Decision-Making, Version 1 (GAO/AIMD-10.1.13, February 1997).
As illustrated in figure 2, reengineering a business process drives changes in other aspects of the organization that support and control the process.
Figure 2: Reengineering Drives Many Changes
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Because so many issues are interconnected in reengineering, evaluators need to scope their assessments broadly and take a holistic view of the effort. For example, an agency that is in the midst of designing a new process should have previously laid a solid foundation for change by clarifying its mission, identifying customer and stakeholder needs, assessing performance problems, setting new performance goals, and determining that reengineering is an appropriate approach to take. Even implementation issues need to be considered in the early stages of the project, so that executives can begin preparing the agency for changes in goals, values, and responsibilities.
Furthermore, although the nine issues in this guide are presented in a sequence, many of them include activities that should be occurring throughout the reengineering effort. For example, strong executive leadership in leading the effort and managing change (issue 3) should be a constant force from start to finish. Without it, even the best process design may fail to be accepted and implemented. Similarly, the business case for reengineering (issues 3 and 6) should be a dynamic document that is periodically updated to reflect changes in costs, benefits, risks, customer needs, agency priorities, and other key factors.
One final caveat. Evaluators should keep in mind that this guide provides a general framework for assessing key reengineering issues. It is not intended to be a compliance-oriented checklist or to prescribe a specific, rigid set of steps for conducting a reengineering project. Reengineering is far too situational for such a rigid approach. Evaluators will need to use good judgment in applying this guide to an agency's specific circumstances. The overall aim should be to help the agency understand the issues, problems, and risks that are encountered in reengineering, so that the agency can manage them effectively and bring its project to a successful conclusion.
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The bibliography in appendix II provides sources for more information on reengineering. Detailed information on any topic in this guide can be found in many of the books and articles listed.
In addition, information on related topics, such as strategic information management, systems development, information management, and financial management is available in the following GAO guides and methodologies:
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