Creative Business Reengineering

Certainly Hammer and co-author James Champy, in their classic 1993 business blockbuster Reengineering the Corporation, noted the need for educating workers. But in contrast to their emphasis on information technology (IT) and the philosophical concept behind the redesigning process, the "people" element received short shrift.

One consequence was that, in the minds of some executives who took up the reengineering cause, IT assumed a higher profile than the people meant to use it. Some zealots, perhaps blinded by a few spectacular results from reengineering, assumed IT to be a magic wand that, when waved vigorously enough, would morph the line worker into an empowered decision-maker able to perform any number of higher level jobs.

Another dubious consequence was the phenomenon of downsizing: the flattening of the company and its workforce through the elimination of middle management and of employees who might be performing redundant functions in the new order of things. Downsizing does produce the immediate gain of slashing payroll costs, and it makes companies look "lean and mean." But judging from the wave of layoffs that hit American industries just as the reengineering concept crested, downsizing itself became the primary goal for some corporations. Any other benefits of the process were relegated to the status of a bonus.

Slow and easy
No wonder, then, that reengineering has become synonymous with layoffs. And no wonder reengineering has led to many more reported failures than successes - even by Hammer's own findings.

How different all this is to the Japanese approach to change. Corporations here take a long-term view regarding the introduction of technology and the need for change, as exemplified by the practice of kaizen: continuous, incremental improvement. This may see some Japanese firms running second to more nimble US competitors at times, but Japanese firms appear to have better staying power. Plus, they keep growing stronger, while some of their speedy American rivals just run out of steam.

Contrast this "steady as she goes" approach to Hammer's dictum of "Don't automate, obliterate!" Obliteration, followed by radical reincarnation, can certainly succeed, as his examples of IBM Credit Corp. and Bell Atlantic show. But just one misstep in a complex series of slash and burn moves can easily lead to disappointment, if not disaster.

Besides, obliterating your work force and business processes is necessary only if you have been failing badly to adapt to the changing business environment. Occasionally, of course, calamities like the oil shocks of the 1970s, or the impact of the Internet in the '90s, force everyone to up the tempo of change. Yet, even after the longest business downturn ever in Japan - that following the bursting of the 1980s' economic bubble - Japanese companies, by and large, have not forsaken such basic principles as "no layoffs."

nvesting in people
"The practice of not laying off regular workers has not changed fundamentally," says Robert Ballon, a professor of international business at Sophia University in Tokyo. "It's just talked about more explicitly now. People are still considered a corporate investment: human capital. And they don't throw them away, as we tend to do in the West."

There are many reasons for avoiding layoffs, not the least being that it's plain dumb to fire workers you have invested in, trained, and imbued with the corporate spirit. Layoffs also risk undermining the loyalty and confidence of those remaining. And, in Japan, there is always the social impact to consider, given that corporations are not separate from society, but an important part of it. Note that the Japanese word for "corporation" (kaisha) is written using the same kanji characters, in reverse order, for "society" (shakai). Instead of resorting to mass layoffs during the dark years of this "decade of the doldrums," companies like NEC, Fujitsu, and Hitachi cut back on new hiring and shifted employees from stagnant businesses like mainframes to expanding segments like PCs. Sure, there were also unwanted transfers of workers and management to subsidiaries, and even subcontractors. But as Ballon points out, they still remain "stakeholders" in the overall scheme of things that views linked companies as working together to achieve a common goal.

Consider the options
While US companies may not have such options readily open to them, there are others worth considering. Tokyo-based Kao Corporation, the toiletry and cosmetics giant, for example, used its experience in chemical engineering to start up a computer floppy disk business with its excess employees in the 1980s. Today, the subsidiary has a double-digit share of the world market for floppy disks.

Change is inevitable. But a smarter axiom for corporations than Hammer's deadly dictum might be, "Don't obliterate, create!"

Freelance writer John Boyd is the Tokyo correspondent for InformationWeek and writes the long-running weekly Computer Corner column in the Japan Times. You can risk "fail mail" to contact him at 6840615@mcimail.com.