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Redesign For Results

Re-engineering can slash costs, and improve productivity, quality, time-to-market, and customer satisfaction. But to be successful, it must be driven and supported by the CEO.

The technological revolution has erased the sights and sounds of the American workplace of the early 1950s. Gone, or nearly so, are clattering type-rotary telephones, and ponderous adding machines.

At many companies, however, business processes remain locked in a twilight zone, with the result that many senior executives raise the question: Can the U.S. compete in the space age while driving an Edsel? One corporate response has been a call to orchestrate a radical organizational redesign, or re-engineering, that will slash costs and improve productivity, quality, time-to-market, and-most important-customer service.

This approach largely eliminates top-heavy bureaucracies, faceless line employees who put little thought into their work, managers who rule by edict, and departmental turf wars. Instead, the re-engineered corporation is organized around results. Innovation, autonomy, energy, diversity, and the ability to work as part of an integrated team become capital assets harnessed to gain an edge over the competition. Process redesign is as important to market leaders as it is to failing enterprises; as important to manufacturers as to service organizations.

Re-engineering isn’t free, nor does it come easy. It generally involves the integration of new technology, retraining, and massive cultural change-all of which must be driven and supported by the chief executive. Nonetheless, the payoff for businesses nationwide, including AT&T Capital and other AT&T operations, has been nothing short of dramatic.

BACK TO THE FUTURE

In truth, re-engineering is more newly recognized than new. A number of companies have customized the concept based on their needs. In “Re-engineering the Corporation: A Manifesto for Business Revolution,” by Michael Hammer and James Champy, case studies detail the efforts of Hallmark, Taco Bell, Capital Holding, and Bell Atlantic.

In the case of Hallmark, the company once needed two to three years to move a line of greeting cards from design to market. A process study by the company revealed that work was handed off 25 times between its origination among creative staffers and production by the printing department. But when Hallmark re-engineered itself, the company grouped together integrated, interdisciplinary teams. These days, Hallmark pushes out greeting-card lines within a year.

General Electric also successfully developed a new organizational model, in which only about 12 people oversee nearly 100 processes. And, DuPont formed a centralized group to organize business units along horizontal lines. At AT&T Network Systems, customer evaluations determine employee bonuses.

Whatever a company’s re-engineering goals, generally it must start from scratch, discarding traditions and completely reinventing the way work is organized. Unfortunately, that means experience gained by one company can’t always be used by another. Nonetheless, some common issues tend to crop up in redesigning a business, including those involving technology investment, the creation of teams, the elimination of functional duplication, and progress and payback bench-marking.

We feel the experience of AT&T Capital and AT&T Credit-Communications Systems-our core business-may be instructive to others. In fact, because of its re-engineering success, AT&T Credit-which provides leasing and financing support to AT&T, its only customer-has become the prototype for the entire AT&T Capital organization. In the company’s other redesign efforts, the problems to be solved and the approach differed, but there was a strong foundation to work from.

INTO THE FRAY

AT&T Credit-CS supports AT&T’s product and service sales capability by customizing lease financing packages for end-user customers who acquire AT&T equipment. The telecommunications equipment includes such items as PBXs, telephone systems, and voice-processing units. AT&T Credit-CS is the world’s largest lessor of telecommunications equipment. Its markets cover the U.S. and include small and medium-sized commercial businesses, government agencies, social and welfare organizations, as well as non-profit groups and new businesses. Employing more than 500 members-as we call our employees-the unit processes about 500 credit and leasing applications every day. Through AT&T Credit-CS, AT&T customers have access to a variety of financial offerings, including standard leases, finance leases, and installment sales.

The company’s market is very competitive, partly because cash purchases are a major customer alternative. Many financial organizations, including commercial banks, vie for business in the telecommunications financing market. Although AT&T Credit-CS is AT&T’s preferred provider for financing its products and service, the company does not have an exclusive agreement with AT&T, and it must compete with other finance organizations for the business. This provided the primary motivation to change our business. Another factor was the duplication of effort by AT&T Credit’s two divisions.

To get rolling on the redesign, we formed an executive steering committee to study the issues and formulate recommendations. The committee decided to consolidate our two divisions into a single group that would show one face to the customer. This new organization would control the lion’s share of the company’s assets and would contribute most of the business’ income and revenue.

In line with a team-oriented operating philosophy, the steering committee next formed a subcommittee of sorts-a design team staffed by personnel from all organizational lines and functions. We asked this team to redesign systems and workflows from the bottom up. If the group did its job well, the only difference the customer would notice would be better service.

As part of the selection process, candidates had to write a short essay about their design ideas. Sixty members applied, and 25 were chosen to be interviewed by the steering committee. Twelve people made the final cut. The steering committee gave support, guidance, and direction to the team-but never orders. The only requirement: Create a fast, accurate, customer-driven business and maximize members’ job satisfaction.

Consultants played an important role walking team members through certain parts of the redesign process. The team also was counseled on how to make complex decisions and resolve conflicts. Team members visited a small local company, taking stock of operational procedures and customer interactions. Such hands-on experience comprised the first stage of training that would continue through the life of the project. Now the real work began.

Through interviews with AT&T Capital’s customers, end-users, and “members,” the team began to restructure the guts of the business. The group studied work flows, personal interactions, customer relation ships, measurements, technical support, turnaround time for credit approval, and a host of other functions key to the lease finance business. During the process, team members could call in suggestions on a hotline, and progress reports circulated in both a special publication and the company newspaper.

TIME FOR REFLECTION

After nine months, team members gathered for a week in Lake George, NY, to review what they had learned. “As a team member, I felt challenged,” said one retreat participant. “I felt ownership in the company.” Said another: “Senior management took a risk. It let us do what management traditionally has done itself.”

One year after its creation, the team turned in its recommendations to the steering committee. A 20-member transition team then moved to execute the redesign-a formidable task indeed. The transition team had to redesign new facilities, re-engineer systems, and resolve telecommunications issues. It also had to define and fill new jobs, determine compensation and rewards, select furniture, and initiate training.

In less than a year, the transition team launched a pilot program to evaluate combined operations within four geographically based profit-and-loss centers. Based on the evaluation, AT&T Credit adopted the design. The company placed 20 fully integrated, customer-focused teams across the four centers, representing sales, sales support, credit, contracts, collections, customer service, and end-of-lease activity. In addition, three specialty units with national customer bases-such as federal systems-began serving the AT&T client. Also, process-management and improvement teams sized up our overall progress. Feedback from members and customers is part of the continuous improvement necessary to successful re-engineering. Members must continue learning the business, ensuring that choices made about what work is done        and how it is done-are linked.

Our results also are monitored by strategic committees and process-management teams, and through the use of competitive benchmarking, client/customer surveys, and member feedback. All operational, financial, and market results are published daily in a “Daily Management Report.” This review and management of data ensures that members are focused on customer-related and operational-performance issues. Customer data regarding product and service improvements are reviewed by the marketing organization, communicated to the organization through member newspapers and forums, and acted upon by the appropriate process-management or quality-improvement team.

WHAT’S THE PAYOFF?

All told, the redesign affected 200 jobs and more than 600 members, who were given an opportunity to apply for their job preferences. Members with special technical expertise were assigned to provide others with on-the-job training.

The redesign virtually eliminated errors by decreasing the number of handoffs of work between members, saving the company several million dollars. Response time was greatly improved, as was overall customer service. Conflicts between salespeople and those who approve the credit for a transaction were reduced by placing both types of employee on the same team, working for the same bonus. Salespeople now shared the responsibility if they pushed for credit on a marginal account, and the account became delinquent.

In effect, the new design set up mini-businesses, in which members are responsible for supporting their customers from start to finish. This kind of structure helps build and maintain relationships rather than focusing on transactions. Customers with special concerns can turn to the same members they do business with on a daily, weekly, or monthly basis. Members, in turn, can more intelligently help solve customer problems and contribute ideas to the business.

Ultimately, the redesign succeeded, because it drove accountability, responsibility, and decision-making further down into our organization. It set us irrevocably on the road to giving members a greater role in running the business and in creating an environment in which they can be productive and happy.

THE CEO’S ROLE

As a CEO, you must accept that the way you do business may be outdated. You must ask such difficult questions as: Are we competing in the right way? Are we working smart? What are we afraid to find out? Does the market care? Do we suffer from winners’ curse? In other words, are we still listening and learning?

The answers to some of these questions may be found through an environmental scan, a periodic method used to understand the current and future need’s of customers, employees, shareholders, and other outside influences, such as competitors, suppliers, government, and local communities. The scan is also an invaluable tool for making decisions on people, information technology, structure, and reward systems.

In addition to the environmental scan, social and technical analyses also may be necessary. The social analysis helps in understanding the interaction of internal networks, individual needs, work climate, and cultural impacts. The technical analysis examines process flow to identify value-adding tasks and steps for continuous organizational improvement.

Keep in mind: The CEO is the chief architect of re-engineering-not the builder, the carpenter, or the plumber. Your job is to communicate-communicate direction, communicate reality, communicate excitement. Create a discomfort with the status quo, while conveying attractive alternate possibilities that are reachable. Develop your vision and your values and your operating principles and ensure everyone understands them. From this foundation, you can make choices about people-about the tools you must give them, about the environment you want them to be in, about the span of their jobs-based upon those values, the vision, the operating principles. In this way, you will begin to build an integrated structure. Piecemeal re-engineering simply doesn’t work.

Of course, the success of your effort depends on people. There are really only two people philosophies: “Control them, because they’ll do wrong, or free them, because they’ll do right.”

Choose wisely. The success of your business hangs in the balance. And once you get started, don’t look back. To quote an old adage: “If you start dancing with the bear, you can’t stop when you’re tired.”


Thomas C. Wajnert is chairman and CEO of Morristown, NJ-based AT&T Capital Corp., the largest publicly owned equipment leasing and finance company in the U.S. He is also a director of AT&T Universal Card Services Corp., the credit card subsidiary of AT&T.

About thomas c. wajnert