The most successful business book of the last decade, Reengineering the Corporation is the pioneering work on the most important topic in business today: achieving dramatic performance improvements. This book leads readers through the radical redesign of a company's processes, organization, and culture to achieve a quantum leap in performance. Michael Hammer and James Champy have updated and revised their milestone work for the New Economy they helped to create -- promising to help corporations save hundreds of millions of dollars more, raise their customer satisfaction still higher, and grow ever more nimble in the years to come.

Prologue: Reengineering for the Twenty-first Century	p. 1
The Crisis That Will Not Go Away	p. 9
Reengineering: The Path to Change	p. 34
Rethinking Business Processes	p. 53
The New World of Work	p. 69
The Enabling Role of Information Technology	p. 87
Who Will Reengineer?	p. 106
The Hunt for Reengineering Opportunites	p. 122
The Experience of Process Redesign	p. 139
Embarking on Reengineering	p. 153
One Company's Experience: Duke Power	p. 165
One Company's Experience: IBM	p. 185
One Company's Experience: Deere	p. 202
Succeeding at Reengineering	p. 221
Epilogue	p. 235
Frequently Asked Questions (FAQs)	p. 237
Index	p. 247
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Reengineering the Corporation
A Manifesto for Business Revolution

Chapter One

The Crisis That Will Not Go Away

Not a company exists whose management doesn't say, at least forpublic consumption, that it wants an organization flexible enoughto adjust quickly to changing market conditions, lean enough tobeat any competitor's price, innovative enough to keep its productsand services technologically fresh, and dedicated enough to delivermaximum quality and customer service.

So, if managements want companies that are lean, nimble, flexible,responsive, competitive, innovative, efficient, customer-focused,and profitable, why are so many businesses bloated,clumsy, rigid, sluggish, noncompetitive, uncreative, inefficient, disdainfulof customer needs, and losing money? The answers lie inhow these companies do their work and why they do it that way.The results companies achieve are often very different from theresults that their managements desire, as these examples illustrate.

• A manufacturer we visited has, like many other companies, set agoal of filling customer orders quickly, but this goal is proving elusive. Like most companies in its industry, this company uses a multi-tiereddistribution system. That is, factories send finished goods to acentral distribution center (CDC). The CDC in turn ships the productsto regional distribution centers (RDCs), smaller warehousesthat receive and fill customer orders. One of the RDCs covers thegeographical area in which the CDC is located. In fact, the twooccupy the same building. Often and inevitably RDCs do not havethe goods they need to fill customers' orders. This particular RDC,however, should be able to get missing products quickly from theCDC located across the hall, but it doesn't work out that way. That'sbecause even on a rush/expedite order, the process takes eleven days:one day for the RDC to notify the CDC that it needs parts; five daysfor the CDC to check, pick, and dispatch the order; and five days forthe RDC to officially receive and shelve the goods, and then pick andpack the customer's order. One reason the process takes so long isthat RDCs are rated by the amount of time they take to respond tocustomer orders, but CDCs are not. Their performance is judged onother factors: inventory costs, inventory turns, and labor costs. Hurryingto fill an RDC's rush order will hurt the CDC's own performancerating. Consequently, the RDC does not even attempt to obtainrush goods from the CDC located across the hall. Instead, it hasthem air-shipped overnight from another RDC. The costs? Airfreight bills alone run into millions of dollars annually; each RDChas a unit that does nothing but work with other RDCs looking forgoods; and the same goods are moved and handled more times thangood sense would dictate. The RDCs and the CDC are doing theirjobs, but the overall system just doesn't work.

• Often the efficiency of a company's parts comes at the expenseof the efficiency of its whole. A plane belonging to a major U.S. airlinewas grounded one afternoon for repairs at airport A, but thenearest mechanic qualified to perform the repairs worked at airportB. The manager at airport B refused to send the mechanic to airportA that afternoon, because after completing the repairs the mechanicwould have had to stay overnight at a hotel and the hotel bill would come out of manager B's budget. Instead, the mechanic was dispatchedto airport A early the following morning; this enabled himto fix the plane and return home the same day. A multimillion dollaraircraft sat idle, and the airline lost hundreds of thousands of dollarsin revenue, but manager B's budget wasn't hit for a $100 hotel bill.Manager B was neither foolish nor careless. He was doing exactlywhat he was supposed to be doing: controlling and minimizing hisexpenses.

• Work that requires the cooperation and coordination of severaldifferent departments within a company is often a source of trouble.When retailers return unsold goods for credit to a consumer productsmanufacturer we know, thirteen separate departments areinvolved. Receiving accepts the goods, the warehouse returns themto stock, inventory management updates records to reflect theirreturn, promotions determines at what price the goods were actuallysold, sales accounting adjusts commissions, general accountingupdates the financial records, and so on. Yet no single department orindividual is in charge of handling returns. For each of the departmentsinvolved, returns are a low-priority distraction. Not surprisingly,mistakes often occur. Returned goods end up "lost" in thewarehouse. The company pays sales commissions on unsold goods.Worse, retailers do not get the credit that they expect, and theybecome angry, which effectively undoes all of sales and marketing'sefforts. Unhappy retailers are less likely to promote the manufacturer'snew products. They also delay paying their bills, and oftenpay only what they think they owe after deducting the value of thereturns. This throws the manufacturer's accounts receivable departmentinto turmoil, since the customer's check doesn't match themanufacturer's invoice. Eventually, the manufacturer simply givesup, unable to trace what really happened. Its own estimate of theannual costs and lost revenues from returns and related problemsruns to nine figures. From time to time, management attempts totighten up the disjointed returns process, but it no sooner gets somedepartments working well than new problems crop up in others.

• Even when the work involved could have a major impact onthe bottom line, companies often have no one in charge. As part ofthe government's approval process for a major new drug, forinstance, a pharmaceutical company needed field study results onthirty different patients who took the medicine for one week.Obtaining this information took the company two years.

Reengineering the Corporation
A Manifesto for Business Revolution. Copyright © by Michael Hammer. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.

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