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December 1995 Reengineering the Corporation: A Manifesto for Business Revolution Why would a newsletter about performance management feature a book review on reengineering? Because performance management is directly affected by reengineering efforts. In their book Reengineering the Corporation, Michael Hammer and James Champy present a way of improving organizational, team, and individual performance by first looking at the "big picture" of how work gets done. They observe: "Reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed." Organizational Reengineering. Hammer and Champy describe steps to reengineer organizations. They also give examples of successful reengineering efforts in private organizations. The steps they describe are applicable to government agencies because they focus on customer satisfaction and work processes. Perhaps the most useful information to performance managers is found in the chapter on the new world of work. The authors describe a process they call "the business system diamond." When business or work processes are reengineered, jobs and organizational structures change. This in turn affects the way management and measurement systems should be designed. The adapted management and measurement systems will shape the values and beliefs of employees. Hammer and Champy observe, "The management systems how people are paid, the measures by which their performance is evaluated, and so forth are the primary shapers of employees' values and beliefs." They conclude that the reigning values and beliefs in an organization must support the performance of its process designs. All four points on the diamond have to fit together or the organization will be flawed and misshapen.
Compensation in a Reengineered Organization. The book further explains that the focus of performance measures and compensation in a reengineered organization shifts from activity to results. Since an employee's performance in a reengineered job this year does not guarantee anything about his or her performance in the years to come, base salaries would tend to remain relatively flat after adjustment for inflation. Substantial rewards for outstanding performance would take the form of bonuses, not pay raises.
Linking Individual Performance and Organizational Performance. Although written about a different subject, this book gives a message similar to the Geary A. Rummler and Alan P. Brache book (reviewed in our April 1994 issue), Improving Performance: How to Manage the White Space on the Organization Chart . Both books give the important message that a big picture perspective should be taken when trying to improve organizational performance. Improving performance management systems without improving the work processes in which people operate probably will not improve overall performance, and vice versa. Both books stress the importance of the links between organizational goals, work processes and individual performance. Those responsible for redesigning performance management programs need to be aware of these critical links.
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