ABC is in Construction Business based in the country of ABC-Land. ABC is the largest Construction company involved mainly in construction projects related to Non-residential and Infrastructure Construction. Some of the major Infrastructure related projects include public works such as roads, bridges, canals, water and sewerage systems, pipelines.

ABC has been in business for more than 70 years and there is a strong sense of tradition and appreciation of craft skills in the workforce. The average time which an employee has worked for the firm is 18 years. This has led to a bureaucratic culture; for example, the companys information systems are heavily paper based. In addition, and in line with this traditional culture, the organisation is divided into a set of functional departments, such as Project & purchasing, human resources, marketing and finance.

In order to drive down costs, the chief executive officer (CEO) decided to re-engineer the processes at ABC. She decided that there should be a small pilot project to demonstrate the potential of business process re-engineering (BPR) to benefit ABC and she selected the Materials receiving activity in the companys warehousing operations for this.

The CEO has asked you as a performance management expert to complete the post-implementation review of the pilot project by assessing what it has delivered in financial terms. The project identified that 10 of the warehouse staff spend about half of their time matching goods delivered documents to purchase orders and dealing with subsequent problems. It was noted that 25% of all such matches failed and the staff then had to identify the issue and liaise with the purchasing department in order to get the goods returned to the supplier and a suitable credit note issued. The project introduced a new information system to replace the existing paper-based system. The new system allowed purchase orders to be entered by the purchasing department and then checked online to the goods delivered as they arrived at the warehouse. This allowed warehouse staff to reject incorrect deliveries immediately.

The following are further details provided in relation to the project:

Notes relating to old system:

1- Average staff wage in warehouse Rs. 25,000 p.m.

2- Purchasing staff time in handling delivery queries 8.5 days per week

3- Average staff wage in purchasing is Rs. 32,000 p.m. for working a 5-day week

Notes relating to new system: New IT system costs:

Rs.

4-

Hardware for warehouse and purchasing depts.

2,200,000

5-

Software total cost

2,750,000

6-

On-going servicing cost (p.a.)

220,500

7-

It is expected that the new system will last for eight years.

The CEO now plans to apply BPR across ABC and as well as completing the post-implementation review, she also needs to know how BPR will change the accounting information systems and the culture at ABC. ABCs current accounting system is a traditional one of overhead absorption based on labour hours with variances to budget used as control indicators. She has heard that an activity-based approach using enterprise resource planning (ERP) systems is fairly common and wants to know how these ideas might link to BPR at ABC.

The CEO is concerned that middle management unrest may be a problem at ABC. For example, the warehouse manager was uncomfortable with the cultural change required in the BPR project and decided to take early retirement before the project ABCan. As a result, a temporary manager was put in place to run the warehouse during the project.

The CEO has also ABCun to reconsider the human resources system at ABC and she wants your advice on how the staff appraisal process can improve performance in the company. The existing system of manager appraisal is for the staff member to have an annual meeting with their line superior to review the previous years work and discuss generally how to improve their efforts. Over the years, it has become common for these meetings to be informal and held over lunch at the companys expense. The CEO wants to understand the purpose of a staff appraisal system and how the process can improve the performance of the company. She also wants comments on the appropriate balance between control and staff development as this impacts on staff appraisal at ABC.

Required:

a) Assess impact of BPR proposal on operational performance of ABC and whether this is feasible for ABC or not. (15 marks)

b) Evaluate appraisal process as advised by CEO of ABC. (5 marks)

c) One of the director is of the opinion that instead of opting BPR, ABC should consider integration of processes. Please comment how integration of processes is different from BRP. (5 marks)