Heatway Case Study

Introduction

In most cases, businesses are operating in an efficient manner and incurring high overheads instead of making profit. The reason is that the business environment is extremely dynamic and the system which is considered good today may be perceived as the worst the following day. Therefore, this means that in order to adjust businesses to such challenges, the management must always respond to ever changing operational needs. In addition, this means that the management must redesign radical and innovative fundamental business processes in order to provide efficient productivity. However, most businesses often face dangerous situations when they start to adopt the new production mechanisms. The reason is that human beings are always skeptical about changes despite the fact that such changes may be beneficial. Similarly, change processes or initiatives are not achieved smoothly, meaning that a collective and consultative process must be established before one contemplates initiating changes. This paper examines the processes or reengineering contemplated in the case Heatway Corporation’s Industrial Products Division. In order to provide effective analysis of this issue, the paper discusses the radical feature of the new design in the order management (PTP) process at Heatway and its improvement objectives. Furthermore, the paper critically examines the barriers Heatway Corporation faces in implementing its new order management process. Lastly, the paper recommends the best options that need to be adopted if the PTP implementation is successful.

Question 1

The business processes at Heatway are currently rather slow and, consequently, very expensive, not only for the organization but for the whole company. Considering the fact that they are involved in the HVAC products and services industry, it is expected that the product sales, customer interactions, design, and maintenance are their main business concerns (Davidson, 2002). However, in the current organizational culture, none of these processes are being reviewed or managed considering their actual importance. This implies that the business is not very successful and, thus, they are likely to suffer from the stiff competition presented by the new entrants in the US HVAC industry.

With the introduction of a new design for the order management process, a lot of changes are expected to occur within the organization. First, the organization intends to improve the execution of all their business processes from proposal to payment. This implies that  from the period a customer is approached with a proposal till the time the product is installed and paid, the company will be search to have a streamlined and improved chain of activities that will entail seamless coordination between all the involved departments (Davidson, 2002). The organization is basically seeking to save time and money while catering to their customers’ needs and expectations by ensuring timely deliveries, correct invoices and billing, and relevant activities within any given process. Thus, it can be appreciated that the improvement objectives of this process include speed, quality, flexibility, accuracy, efficiency, and customer focus.

In order to reach these objectives, the activities undertaken at Heatway can be divided into four main stages, including organizing the project and the teams, understanding and measuring the existing process, considering technology and organizational enablers as well as modeling the cost, benefits, and risks of the process. The HVAC industry is large despite that it is rather cyclical in nature. Heatway as an organization is able to register revenue of up to $4.6 billion in a good year, providing that there is some potential in the industry. It is also a great risk for the organization if they do not embrace technology and the changes in the business world with respect to the customers’ orientation and cost efficiency in operations.

Organizing the project and the teams is a significantly important step in reengineering. The radical nature of the changes required in the PTP project implies that there is need to have a full team of individuals who will not only oversee the planning component but also drive the change within the various departments that will be affected in one way or another. This step is directed toward creating a team that will spearhead the oncoming changes, by taking corresponding decisions in the planning phase and defending the choices when the rest of the employees start asking questions during implementation. The members of the team will be responsible for the project. Thus, it will be easier for them to support it fully and inspire their colleagues to see their perspective during implementation. Consequently, they help in the implementation of the project provide corresponding support, increasing its chances for success.

Understanding and measuring the existing process is also a very basic step in reengineering because it allows the organization to establish their position in their business processes, thus providing corresponding insight regarding the issue how the improvements will be measured and what exact improvements should be considered when designing the project (Dodrajka, 2007). The idea of this process is to evaluate the current state of the organization and define the activities which are really necessary and those which are just time consuming and must thus be streamlined or outsourced. At Heatway, it was found that some stations had up to 200 processes involved in the procedure of delivering their products and services to the consumers, thus explaining the high cost and slow pace at which the transactions were completed. Knowing the current process is important to the implementation process because it provides a backdrop against which the organization will be able to plan the project and evaluate its impact on their operations.

Considering technology and organizational enablers is the third step that was undertaken by Heatway. In their case, they had settled for SAP until they decided to outsource the information systems function in order to decrease the costs and ensure that they follow the process correspondingly. SAP at the time was a rather expensive system for the organization and the need to outsource is considered as a rational move in their case.

Modeling the cost, benefits, and risks of the process implies planning the future to ensure that the entire project is not a fantasy but can be actualized to benefit the organization in the long term (Dodrajka, 2007). The major concern for any radical change is its sustainability, especially considering the fact that it is very expensive undertaking for the company and those involved. In Heatway’s case, they had to ensure that the changes would not have a negative impact on their customers or stakeholders and that they would actually benefit from it in the long term. In order to implement this intention, the company’s future-state team conducted a lot of research on other companies reviewing their way to manage reengineering of their business processes and the kinds of technology they have used. Further, they used the gathered information to project the costs, benefits and risks as well as outcomes of the process.

This step enables the organization not only to plan adequately the reengineering process and the corresponding funds and training of their personnel, but also to embrace the expected changes, especially if the organizational culture is expected to change significantly after implementation of the new business process. If this stage is overlooked, the company would be starting a reengineering process without full understanding of the specific needs and possible failures during implementation. Modeling of the cost and benefits as well as risks is thus a crucial preparatory step that must be executed if implementation is provided successfully.

Question 2

The PTP is a very noble idea for this organization and it has required much time to be approved and implemented. The reason is that the organization has to face a lot of challenges that continue to limit their ability to actualize the process. Although there may be many underlying factors that are currently limiting the organization in this case, there are mainly three possible significant barriers that Heatway has to overcome in order to implement successfully the PTP. These include lack of funding, reorganization to suit the new organizational process, and resistance on the part of the Operating Committee.

Lack of Funding

Initially, Bob Hemphill had the support of the most important people in the organization, including Don Kacher, Allan Firestone and Ralph Salada among others. This means that there was a possibility for searching the required funds and supporting the project at all costs. Based on the meeting in which Mr. Hemphill presents his budget of $35 million and is only offered $15 million for the year 1995, it is clear that the project has the political support within the organization although it lacks funding. Moreover, Mr. Firestone is willing to implement the permanent revision of the company’s finances in order he can ascertain that there are no savings that can be spared and added to the available cash.

There are to consequences to the project connected with the limited funding. First, it implies that if the implementation must commence then it will have to be respectively divided into smaller phases with very low budgets. However, a new order management process, which is radical in nature, cannot be implemented in phases. The idea of its radical nature is to create an overhaul in organizational systems in order the changes can be felt and embraced immediately. On one hand, this creates many changes within the organization, thus increasing the risk factors exponentially. On the other hand, the radical concept ensures that any process improvements that are experienced are translated into significant business improvements (Champy, 2009).

The limited funding also implies that if the process must be implemented, the organization will have to stop some of its current processes for a longer period, thus inconveniencing the stakeholders. If the total funding is availed, the company could be able to ensure all the required implementation steps simultaneously, but with the limited funding it is impossible to follow such program. Consequently, it will imply that the company will be either obliged to wait until they have sufficient funding or search ways to obtain the full amount of cash required from any possible source. In this case, waiting is not an option considering that the foreign competitors are already gaining profit on market presence and customer base.

Reorganization

The initial composition of the organization’s top management was in full support of the process and seemingly willing to put all possible effort in order to seek the additional funding that was needed to actualize the project. Considering the Kacher’s exit and Firestone’s removal from the non-US business units, there is a serious possibility that the support initially enjoyed by PTP would dwindle. The organization has a new CEO who is unwilling to commit the required $35 million to the reengineering process and even recommends a budget reduction by the available $15 million as well as seeks suggestions regarding the issue of slowing down the process implementation in its entirety. This means that the reorganization has drastically reduced the support of the process along with its chances of being actualized and embraced across the organization’s operations in the US and beyond. The company may be unable to reverse the reorganization but they can find a way to employ the new management team members. This is a rather difficult task, especially considering the fact that the new staff members are involved at a time when the planning stages have been already completed.

Resistance

The Operations Committee is a group of division heads and senior executives within the organization’s departments. After the implementation of the incremental approach from the European side of the organization, this committee was disappointed with the results despite the high investment they had had to commit with the consultant for both the European and US business units (Champy, 2009). This means that they are currently rather cautious about their commitment regarding the issue of funding the reengineering process. The Operations Committee is mostly interested in improving the business aspect of the company’s operations. Therefore, it is not willing to embrace any uncertainty.

The PTP requires the use of a customizable IT component which may not necessarily be SAP considering its rigidity and limitations. However, the Operations Committee would be more comfortable if the organization enlisted the services of another IT entity that had some experience in handling the SAP. This means that the Operations Committee is not really resisting the process but rather being cautious about the fact that they may decelerate the whole process (Michael & Champy, 2003). However, from a positive viewpoint, finding a company that will handle their Information Systems function is not too difficult, and with the right budget, Heatway will be able to provide that their IT systems are handled effectively by the experts specializing in the corresponding sphere of work.

Another possible barrier is the isolation from the European business units as a result of the reorganization. Initially, it was easy for the organization to establish the idea and raise the funding with the intention of using the process across the board in order to improve the European side of business. With Mr. Firestone being limited to the US only, there is a real chance that the European side will prefer to remain with their slow process that will then create problems in the event of collaboration between the two sides. This may be a problem because Heatway depends on their good reputation to make sales and attract the new clients, and if they are known in Europe for bad customer service and slow delivery in general, they are unlikely to prevail in the US over their new competitors. Consequently, this makes the whole process irrelevant and needlessly expensive for the entire organization (Dey, 2004). Thus, unless the European division is willing to join the process and comply with the radical changes, the implementation is likely to be generally avoided.

Question 3

At this point, it may be noted that the reengineering process at Heatway is at a critical stage. The company has neither the funding nor the support of the project, and many changes have been introduced since the time of the strategic planning to the present period. Other than the restructured top management, the company was also initially counting on the European side in order to implement the process for seamless collaboration on the international market (Mohapatra, 2012). This means that the company, for which the plan was initiated, is not exactly the same organization as Heatway at present.

In order to ensure successful implementation of the PTP, the first step will be to bring the current management on board. This will require holding numerous meetings with the new CEO and head of the business units both in the US and in Europe. The non-US business divisions are currently under the office of the Vice President, and Bob Hemphill could simply wait until the incumbent is named before starting his crusade to promote the corresponding process. This option may be easier than being obliged to go to Europe and to convince the managers in the success of this process. The aim is to involve many people who can understand the significance of the reengineering process as well as to explain why it is so expensive and the reasons for which it cannot be decelerated as suggested by the new CEO (Mohapatra, 2012). The company needs to be able to implement the project across the entire organization. Moreover, due to its entirety they need the full support of the whole management team.

Another important step is in redefining the plan to include outsourcing of the Information Systems function. The initial plan required by the organization to use a consultant and the SAP but with the Operations Committee’s recommendation outsourcing will be the proper option to undertake. This means that as part of the plan, Bob Hemphill’s team will have to check the possible candidates for the outsourcing, before choosing any, and including them in the discussions about the required information technology support they need for the implementation of their new process.

At this point, it must be admitted that all the relevant stakeholders of the reengineering process need to be on board from the planning phase. Therefore, it is rather difficult to convince the new CEO to approve $35 million for a project that he does not fully understand, or to engage the non-US business units in adapting the process at its implementation phase when they were not included in the planning. The strategic planning component here is rather important, not only due to the detail that can be captured with respect to expectations and monitoring criteria as well as costs and benefits, but also with respect to involving all the people that will support the initiative from the very beginning (Dey, 2004).

Conclusion

As demonstrated in the Heatway Corporation case, the process of implementing the new designs or the other processes is often replete with many obstacles. However, there are situations that may complicate the process, namely that some of these challenges appear within the respective organization. This means that reengineering, as a process, is complex and must be approached cautiously. The corresponding process, such as the PTP implementation, may be stifled from within because either some executives do not appreciate its values to the business or simply consider it expensive. At the same time, the entire reengineering processes must be conceived and implemented with full support of all the stakeholders. In this case, the needs of the customers and of the business must supersede any other need.

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