Steps forward

Bouncing back from his controversial re-engineering theory of late 1980s, Dr
Michael Hammer revisits business strategy with a nine-step plan for the 21st
century

Dr Michael Hammer, one of the world’s foremost business strategists over the
past 15 years, has had some apologising to do. Ever since he convinced the
world of the merits of business re-engineering, he has watched a stream of
companies embark on costly, damaging and often futile projects in his name.
When the concept of "radical re-engineering" really turned sour in
the 1990s, it was Hammer who, by default, took much of the flak.

He is bouncing back, though, armed with a set of theories about the reality of
business in the 21st century. Having accepted some responsibility for mistaken
emphasis in his original thinking and the way his theories have been
misapplied, Hammer has turned the practices of some of the world’s major
organisations into a nine-step programme for building a business strategy.

In his latest book The Agenda he begins with the well-established principle
that the customer is king, argues that fundamental change is required both
within and between organisations, and sets out a vision of a business landscape
defined by collaboration. Central to his theories lie some of his favoured
topics – not least his obsession with business process – as well as a
recognition that effective human capital management lies at the heart of
corporate success. If HR is looking to define its own future, it has another
world-recognised flag-waver on its side.

Before tackling today’s arguments, however, the question on most people’s
lips when they meet Hammer is what went wrong last time around? His initial
response is defensive. To start, he insists that more companies he has met
succeeded in re-engineering than failed. Moreover, many of those that ran into
problems did so because they simply slapped a re-engineering label on
activities that amounted to little more than downsizing or the introduction of
new technology.

He does concede, however, that his views have evolved. "I still stand
by what I wrote 10 years ago. Re-engineering is just as valid today as it was
then. What I’ve learned is that re-engineering [alone] is not nearly
sufficient. It needs to be complemented with a whole set of other changes –
measurement, culture, organisational structure…You don’t need a silver
bullet, you need a magnum of bullets."

The Agenda takes his redefinition a subtle step further. "The
re-engineering movement that I started in the late 1980s was all about making
fundamental change in how companies conducted business, about rethinking
everything from the ground up…I felt that ‘radical’ was the key word in the
definition of re-engineering… I was wrong." Process, he argues, is the
essential factor. Traditional organisations are structured around departments,
focused on individual tasks. To succeed, they need to align their facilities,
compensation schemes and structure around enterprise-wide processes, and
develop a culture of shared responsibility.

From that platform, Hammer argues that companies need to reassess the way
they do business in a number of areas. High among them is performance
measurement. Rather than having individual teams working towards different
targets, which often results in the key business goal – customer satisfaction –
being forgotten, organisations need to measure against corporate objectives –
again, from a process perspective. Just as important, they need to ensure that
rather than measuring for its own sake – a common business mistake – data is
channelled back into the organisation to improve performance.

Of all the points in Hammer’s nine-step agenda, the biggest challenge
organisations face is at the collaborative level. Much of the business thinking
in collaborative commerce revolves around companies such as Dell and Cisco,
which have redefined the rules of partner management by treating third-party
suppliers as extensions of their own organisations. Hammer revisits the same
companies as he urges companies to build collaborative relationships with their
partners, redesign inter-enterprise processes to cut duplicated costs, share
data openly, and relocate work so that it is carried out by whoever can do it
best.

The fact that several companies used as examples in the book – including
Hewlett-Packard and Cisco – have recently faltered doesn’t faze him. "Even
the smooth- est running collaborative programme will fail if it is driven by
unrealistic projections of demand," he says. "When your market
collapses as fast as Cisco’s did, someone is going to be left holding the
bag."

As Hammer concedes, the cultural challenges here are enormous. In a dream
scenario for the HR manager, he suggests companies follow one rule of thumb in
these kinds of projects, "Spend one-third of the budget on the design and
implementation of the change, one-third on its supporting technology, and
one-third on people issues… You lowball them at your peril." People
issues, he writes, include training, education, communications and change
management. And companies are better off overestimating rather than
underestimating their true costs.

This human capital management theme permeates the final chapters of The
Agenda, which includes a six-point action plan to turn business theories into
practice. Hammer recommends a 20/60/20 rule to manage change initiatives.
Twenty per cent of people will typically receive a new initiative
enthusiastically and should be harnessed as evangelists for the project.
Another 20 per cent – often concentrated in management – will resist it.

"This 20 per cent or so of the population is incorrigible," he
writes. Organisations should be "inflexible and unambiguous" about
the proposed change, spell out the repercussions and accept that many of these
doubters will quit. "Some who leave will be among the best performers –
best, that is, in the old ways of working. You must not flinch at this point.
It is better to let a new generation of stars emerge than to hold on to the old
ones at the cost of jeopardising the agenda for change."

Crucially, while many executives focus on these top and bottom tiers, it is
the remaining 60 per cent who will make or break the project, and it is here
that change management techniques should be focused. "The top 20 per cent
does not need to be convinced, and the bottom 20 per cent cannot be. Save your
energies for where they matter."

The Agenda: What every business must do to dominate the decade is due to be
published on 4 October, price £20, ISBN 0 7126 1456 7

www.randomhouse.com

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