Business process redesign project success: the role of socio-technical theory Junlian Xiang Norm Archer Brian Detlor

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Business process redesign Business process

redesign project

project success: the role of

success

socio-technical theory

Junlian Xiang

Ted Rogers School of Management, Ryerson University, Toronto, Canada, and Received 26 October 2012

Norm Archer and Brian Detlor

Revised 22 January 2013

DeGroote School of Business, McMaster University, Hamilton, Canada

5 April 2013 28 July 2013 19 September 2013

Abstract

Accepted 21 September 2013 Purpose – The purpose of this paper is to seek to advance business process redesign (BPR) project

research through the generation and testing of a new research model that utilizes formative constructs to model complex BPR project implementation issues. Instead of looking at management principles, the paper examines the activities of improving business processes from the project perspective. Design/methodology/approach – A survey of 145 managers and executives from medium and large-sized USA and Canadian companies was used to validate the model. Findings – The model, based on socio-technical theory, includes three implementation components (change management, process redesign, and information and communication technology infrastructure improvement), and links the effects of these components to BPR project outcomes. The empirical findings indicated that all three implementation components had a significant impact on BPR project success, with change management having the greatest effect. Interestingly, the results also showed that productivity improvement was no longer the main focus of companies carrying out BPR projects; instead, improvement in operational and organizational quality was more important. Research limitations/implications – The main limitation of this study is its generalizability with respect to company size and organizational culture. The sample in this study was drawn from medium- and large-sized companies in Canada and the USA, but small-sized organizations were excluded from this study due to their distinct features (e.g. superior flexibility or ability to reorient themselves quickly). Also, this study controlled the variable of organizational culture by limiting respondents to Canada and US companies. It would be very interesting to investigate BPR project implementations in other countries where the organizational working culture may be different. Practical implications – Based on the findings of this study, BPR practitioners can refer to the three BPR project implementation components and then prioritize and sequence the tasks in a BPR project to achieve their preset BPR goals. Originality/value – This is the first study which utilizes formative constructs to validate the

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) important BPR project components. Keywords Change management, Business process management, Business process redesign,

Information and communication technology infrastructure, Socio-technical theory Paper type Research paper

1. Introduction Business processes have drawn a great deal of attention from industrial practitioners and academic researchers since the 1990s because of their great potential for improving the efficiency and effectiveness of organizations. The roots of business process focussed research can be traced back to business process reengineering, promoted by Hammer

and Davenport et al. (Hammer and Champy, 1993; Davenport, 1993), that described it Business Process Management

Journal Vol. 20 No. 5, 2014 pp. 773-792

This research was supported by a grant from the Social Sciences and Humanities Research r Emerald Group Publishing Limited 1463-7154 Council of Canada.

DOI 10.1108/BPMJ-10-2012-0112

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as a radical redesign of business processes resulting in a singular transformation.

However, researchers soon realized that better results were obtained when organizations started with a revolutionary design phase, followed by actually implementing changes in an evolutionary manner ( Jarvenpaa and Stoddard, 1998). Later on, a more general term business process management (BPM) was widely adopted by many researchers in the business process focussed research context. BPM is defined as an integrated management

philosophy and set of practices that includes incremental change and radical change in business processes, and emphasizes continuous improvement, customer satisfaction, and employee involvement (Hung, 2006; Houy et al., 2010). BPM covers concepts such as total quality management, business process reengineering, business process redesign (BPR), business process improvement, etc.

Usually BPM emphasizes different phases along its life cycle. A complete review of various BPM life cycles has been provided by Houy et al. (2010). The current study examines a specific group of business process focussed projects, i.e. BPR. Instead of looking at management principles, we examine the activities involved in improving business processes from the project implementation perspective. Therefore, the term BPR is used in this study. It is defined as a deliberate (planned) change, typically enabled by information technologies (IT) in an attempt to redesign and implement business processes to achieve performance breakthroughs in quality, speed, customer service, cost, etc. (Grover and Jeong, 1995).

Although extensive research has been carried out in the BPR area, a recent article has shown a continuing increase in interest in this field (Houy et al., 2010). One of the reasons for this interest is probably that the failure rate of BPR projects still remains high (Zˇabjek and Sˇtemberger, 2009). Furthermore, the increased interest in this field implies that there are limitations in existing research results. For example, studies that do exist tend to be case study reports, making it difficult to generalize findings that yield consistent results (Bradley, 2008). Many previous studies have carefully examined the readiness of an organization to embark on a BPR project (Fenelon, 2002; Abdolvand et al., 2008; Aghdasi et al., 2010). Some have surveyed the best practices of BPR project implementation (Mansar and Reijers, 2007). A few others have started to measure outcomes related to BPR and IT portfolios (Ramirez et al., 2010; Ozcelik, 2010). However, as indicated by a recent literature review, “[ y ] most approaches concentrate on what needs to be done before and after the improvement act, but the act of improving itself still seems to be a black box” (Zellner, 2011, p. 1). Our observations are similar to the results of Zellner’s study; i.e.

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) few studies have focussed on measuring and modeling what organizations should do during project implementation. Therefore, there is a need for more rigorous research in this area, specifically with regard to BPR project implementation, to determine and better understand how BPR project success rates can be improved. Lastly, few published studies have been able to address the complexities of the BPR problem in one research model. One reason is that it is almost impossible to use traditional reflective constructs to model such a complex problem. The appropriate technique to use in these situations is the application of formative constructs, but this has been neglected in the past ( Jarvis et al., 2003; Diamantopoulos et al., 2008; Petter et al., 2007).

The goal of this investigation is to model important BPR project implementation components, as well as to test the impact of these components on BPR project success. Various facets of BPR project outcomes were used in order to examine how BPR project implementation components would bring performance improvements.

To achieve this goal, the researchers began with a review of the BPR literature on Business process project success factors, and then identified one important BPR enabler and three redesign project

implementation components, using socio-technical theory (STT) as a guide. These formed the basis of the study’s research model. The paper continues with the

success

development of the theoretical model and hypotheses. After carefully examining the causal relationships between the BPR project implementation components and their measures, formative constructs were judged to be the appropriate way to model those

components. The research method involved validating the model, through a survey administered to 145 managers and executives from medium and large US and Canadian companies; responses are analyzed using structural equation modeling techniques, involving partial least squares (PLS). Next, the research results are presented and analyzed. Lastly, the implications of the research are discussed.

2. Theoretical model and hypotheses

2.1 STT and BPR project implementation components From the early 1990s to the mid 2000s, few theories were used to inform or guide BPR project research. Rather, most of the literature reported during this period merely listed BPR project success factors identified through case study research (Grover et al., 1998). However, since the mid 2000s, BPR researchers have started to borrow theories from other areas of research and apply these to the BPR context (Newell et al., 2000; Sarker and Lee, 2002; Sarker et al., 2006). As a result, initial frameworks (Grover and Jeong, 1995), models (Ifinedo and Nahar, 2009; Law and Ngai, 2007), and constructs (Guha and Grover, 1997) have been developed. Of these, STT appears to be promising.

STT views the organization as a work system with two interrelated subsystems: the technical system and the social system (Bostrom and Heinen, 1977). The technical system is concerned with the processes, tasks, and technology needed to transform inputs such as raw materials to outputs such as products; the social system is concerned with the relationships among people and their attitudes, skills, and values. The outputs of a work system are a result of the joint interaction between these two subsystems.

A critical important enabler for BPR project success, regarding the social aspect of STT, is top management support (TMS). Top management plays an important role in BPR projects as suggested by STT (Markus, 1983). “This type (supportive) of leadership offers a vision of what could be and gives a sense of purpose and meaning to those who would share that vision. It builds commitment, enthusiasm, and excitement.

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) It creates a hope in the future and a belief that the world is knowable, understandable, and manageable. The collective energy that transforming leadership generates, empowers those who participate in the process [ y ]” (Roberts, 1984, as cited in Lashway, 2006, p. 91). As claimed in project management research, “top management support is the most important critical success factor for project success and is not simply one of many factors” (Young and Jordan, 2008, p. 1). Numerous surveys and case studies have shown that TMS is one of the most highly ranked success factors in BPR project practice (Fui-Hoon Nah et al., 2003; Grover and Jeong, 1995; Herzog et al., 2009). Grover and Jeong (1995) identified the lack of TMS as a serious problem impeding the success of business process reengineering implementations. Strong support from top management is also necessary to resolve any conflicts of interest among the various parties involved (Ahadi, 2004). Therefore, this study hypothesizes that TMS would positively impact BPR project success. However, this study takes a further step to explore what are the important components in the BPR project

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implementation and to evaluate how TMS affects BPR project success through the

project implementation components. This brings us to our first hypothesis: H1. Stronger TMS will result in a better BPR project implementation procedure. When exploring BPR project implementation components, this study considers both

the technical and the social dimensions, and their interactions. As Grover and Jeong (1995) point out, STT emphasizes the impact of the changes to technical and human resources on altered tasks or processes. As such, technical resources, human resources, and altered tasks/processes are reflected in this study as three implementation components: information and communication technology infrastructure (ICTI) improvement, change management, and process redesign.

ICTI is the technology foundation dealing with the IT capabilities on which processes and humans rely, such as networks, databases, data inter-exchange, etc. for transforming inputs to outputs (Law and Ngai, 2007). The capabilities of ICTI consist of a wide spectrum of components, including ICTI platforms, standards, policies, and different types of service arrangements.

Change management includes the methods through which attitudes, skills, and values of the people in the system are managed and transformed (Huq et al., 2006). Change management is the soft part of the change process since it addresses human resource problems within organizations, such as employee resistance and structural adjustments. It requires effectively balancing forces in favor of change over forces of resistance from organizations, groups, and individuals (Guha and Grover, 1997; Markus, 1983).

Process redesign can be thought of as the interaction of the social and technical aspects of STT. For example, people (such as employees, customers, etc.) work to get expected outputs by following company procedures that implement specific business processes, supported mainly by IT.

When applying STT to BPR project implementations, it is important to understand that, whether companies have fixed process goals (e.g. BPR projects that follow external rules enforced for ERP systems implementations) or they design processes that fit their own requirements, new processes cannot work well unless people issues are resolved and IT support is suitable. In this way, the effects of ICTI improvement and change management are reflected through the redesigned processes. Business processes can never work without both operators (people) and carriers (technical

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implementation) (Davenport, 1993).

Given the above discussion, our first hypothesis can be decomposed into three sub- hypotheses. That is, TMS is hypothesized to positively affect the three implementation components. Hence:

H1 (a, b, c). Stronger TMS will result in better levels of change management, BPR,

and ICTI improvement, respectively.

2.2 BPR Project outcomes and success BPR project success is defined as the advantageous outcomes that a BPR project achieves for an organization. It is improper to use a single financial criterion (e.g. cost reduction itself) to evaluate BPR project outcomes. Grover used two different perspectives: perceived level of success and goal fulfillment, to evaluate BPR success (Grover and Jeong, 1995). The perceived level of success seeks to assess the degree of 2.2 BPR Project outcomes and success BPR project success is defined as the advantageous outcomes that a BPR project achieves for an organization. It is improper to use a single financial criterion (e.g. cost reduction itself) to evaluate BPR project outcomes. Grover used two different perspectives: perceived level of success and goal fulfillment, to evaluate BPR success (Grover and Jeong, 1995). The perceived level of success seeks to assess the degree of

success by attainment of a normative state (Hamilton and Chervany, 1981).

redesign project

The second perspective, goal fulfillment, is based on the commonly emphasized goals of BPR projects. Four categories of outcomes were adopted in our study

success

(Raymond et al., 1998): first, operational quality improvement, or improved quality in goods and services (e.g. customer service and satisfaction); second, organizational quality improvement, or improved quality of organizational coordination and communication

(e.g. lessened managerial hierarchy, improved task enrichment, and reduced bureaucracy); third, cost savings, involving administrative and production cost savings (in terms of return on investment, personnel costs, operational costs, and profits); and fourth, productivity improvements that result from increased productivity of workers and managers (more units produced, fewer delays).

In order to examine the effect of the three implementation components, their impact was tested on each of the four categories of outcomes, hypothesized as follows:

H2 (a, b, c, d). A higher level of change management will result in a higher level of operational quality improvement, organizational quality improvement, cost savings, and productivity, respectively.

H3 (a, b, c, d). A higher level of BPR will result in a higher level of operational quality improvement, organizational quality improvement, cost savings, and productivity, respectively.

H4 (a, b, c, d). A higher level of ICTI improvement will result in a higher level of operational quality, organizational quality, cost savings, and productivity, respectively.

The researchers were also interested in how these categories of outcomes would contribute to the perceived level of project success. Different BPR projects may target different fulfillment goals. It is important to understand what company goals are focussed on through BPR projects because different goals may trigger different emphases in their BPR project implementation components. Thus:

H5 (a, b, c, d). A higher level of operational quality improvement (organizational quality improvement, cost savings, or productivity, respectively)

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) from a BPR project will result in a higher level of perceived BPR project success.

The research model built from this study is summarized in the path model in Figure 1. The model examines how TMS affects BPR project implementation components, which in this study includes change management, process redesign, and ICT infrastructure improvement; the model further examines how these BPR project implementation components would affect BPR project outcomes (operational quality improvement,

H2

BPR Project Implementation

H3 BPR Project Outcomes

Top

H1 Components

H4 - Operational quality improvement

H5 BPR

Management

- Organizational quality improvement - Cost savings

Project

Support

- Change management

Success

Figure 1.

- Process redesign

- ICTI improvement

- Productivity

Research model

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organizational quality improvement, cost savings, and productivity) and ultimately

BPR project success.

3. Research methods and data analysis

3.1 Construct operationalization Three constructs for modeling BPR project implementation were created: change

management, process redesign, and ICTI improvement. Each was modeled as a second-order construct and each of their first-order dimensions was operationalized as

a latent variable. Researchers (e.g. Jarvis et al., 2003; Diamantopoulos et al., 2008; Petter et al., 2007) advocate examining constructs carefully before classifying them into reflective or formative categories. Jarvis et al. (2003) and Petter et al. (2007) proposed criteria and decision rules on how to determine if a construct should be modeled as formative or reflective. All three of these constructs were identified as formative second-order and reflective first order constructs, based on their recommended approach.

The construct of change management aims to assess the extent to which a BPR project utilizes change management practices. Three measures, as suggested in the literature, were developed to assess this construct: first, change management at the organizational level, to assess the impact of change management on organizational culture change and human resources system change (Al-Mashari and Zairi, 1999); second, change management at the employee level, to assess the impact of change management such as empowerment, communication and training on employee resistance (Grover and Jeong, 1995; Al-Mashari and Zairi, 1999); and third, change management at the stakeholder level, to assess the impact of change management on stakeholder resistance and commitment (Oakland and Tanner, 2007; Paper and Chang, 2005). The items for measuring the three dimensions were adapted from previous studies (Ramirez et al., 2010; Al-Mashari and Zairi, 1999; Grover and Jeong, 1995; Oakland and Tanner, 2007; Paper and Chang, 2005), and their dimensions were used as indicators to create the super-ordinate construct. The change management scale is shown in Table I.

The process redesign construct assesses the extent to which process redesign practices were used in a BPR project. This study adopted the two dimensions of process redesign (Attaran, 2003): technical redesign and social redesign. Technical redesign (PR_T) is used to redesign the allocation of the process workload; social redesign (PR_S) is used to redesign the allocation of personnel workloads. The items for measuring the two dimensions were adapted from Mansar and Reijers’ studies

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) (Mansar and Reijers, 2005). The process redesign scale is shown in Table II.

Dimensions

Item ID

Measurement

Organizational level

CM_OL1

Reward/motivation and compensation systems

CM_OL2

Human resource policies

CM_OL3

Organization’s receptivity to change

CM_OL4

An effective culture for organizational change

Communicate the reasons for change to employees Table I.

Employee level

CM_EL1

Empower relevant employees for change Change management

CM_EL2

Provide adequate training for relevant employees construct and

CM_EL3

Communicate vision to stakeholders measurements

Stakeholder level

CM_SL1

CM_SL2

Solicit feedback from stakeholders

Business process redesign project

Dimensions

Item ID

Measurement

Technical redesign

PR_T1

Eliminating unnecessary tasks

success

PR_T2

Combining or dividing tasks

PR_T3

Re-sequencing tasks in processes

PR_T4

Paralleling tasks

PR_T5

Integrating business processes

Social redesign

PR_S1

Empowering workers with more decision-making authority

PR_S2

Assigning workers to perform as many steps as possible for single orders

Table II.

PR_S3

Making human resources more specialized or more generalized Process redesign construct

PR_S4

Minimizing the number of departments, groups, and persons

and measurements

In this study, ICTI improvement assessed the extent to which a company’s ICTI capabilities have been improved through a BPR project. The four dimensions of ICTI improvement (network communications, data integration, training, and, facilities and management) and their corresponding items as proposed by Law and Ngai (2007) were adopted to create the super-ordinate construct. The ICTI improvement scale is shown in Table III.

TMS, a well developed construct in the IS literature, was operationalized as the extent to which top management provided support and commitment to a BPR project. Five items were chosen and minor modifications were made to fit the context of BPR projects (see Appendix 1), including top management’s understanding and support of the BPR project, as well as top management’s funding and communication support (Grover and Jeong, 1995).

BPR project success was measured from two perspectives. The first perspective was an overall perception of success (Grover and Jeong, 1995). A two-item scale was used to assess this perspective of success regarding to the achievements from a BPR project (see Appendix 1). The second was a goal-specific perception (Altinkemer, 2011; Raymond et al., 1998). The four facets of BPR project outcomes adopted from (Raymond et al., 1998) were used to measure goal-specific success in this study because it is relevant to this study. These included operational quality improvement (OpQI), organizational quality improvement (OrQI), cost savings (CS), and productivity (PROD).

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) Dimensions

Item ID

Measurement

Network communications

ICTII_NC1 Improving networks linked with suppliers ICTII_NC2 Improving networks linked with customers

Data integration

ICTII_DI1 Improving data sharing across the company ICTII_DI2 Reducing/eliminating data duplication ICTII_DI3 Improving standardization of data element definitions

Training

ICTII_TR1 Improving IT training programs ICTII_TR2 Improving user training ICTII_TR3 Improving IT personnel training

IT facilities and management ICTII_FM1 Increasing capacity of servers

ICTII_FM2 Reducing regular preventive maintenance down time

Table III.

ICTII_FM3 Increasing expertise to manage IT facilities

ICTI improvement

ICTII_FM4 Increasing satisfaction with IT services

construct and ICTII_FM5 Improving IT administration standards and procedures

measurements

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The measurements for TMS and BPR project success, as well as for the three BPR

project implementation components, are listed in the questionnaire that was used (see Appendix 1).

3.2 Content validity test before data collection Before data collection, two steps were taken to ensure content validity. The first

step was a Q-Sorting test on the three formative constructs. The goal of Q-sorting was to verify the dimensions or categories of the items that were drawn from the literature. Hence, a one-round Q-Sort was sufficient for this purpose. Five participants knowledgeable in the IS area, but with no prior knowledge of this study, were asked to examine a series of descriptive items that would be used for each of the constructs and to place each of them into one of several categories composed of the formative constructs. The measures and constructs theoretically identified by the researchers fully matched the results of the Q-sort, after clarifying a misunderstanding of the only unmatched category (social-based process redesign).

The second step used an expert panel. The instrument was examined by one academic researcher and two industrial experts for its content validity and was improved according to their opinions.

3.3 Data collection methods The data collection process was approved by the Research Ethics Board of a major university. Considering that small-sized companies may not have well-defined business processes or their business processes may not heavily rely on IT or ICTI solutions, data collection was limited to medium and large companies (each with 100 or more employees) in the USA and Canada that had undertaken a BPR project in the past three years. All respondents had participated in at least one such BPR project.

The researchers used an internet panel of potential respondents, chosen from the existing database of a commercial survey agency. In total, 21 percent of the targeted business professionals (294 out of 1,481) qualified under the requirements indicated above. Among the 294 qualified business professionals, 155 completed the survey, yielding an overall response rate of 52 percent. Ten of the 155 cases were dropped because participants failed to complete a number of the scales. For missing data in the remaining 145 cases, Little’s MCAR test (Little and Rubin, 2002) showed that these

values were missing completely at random (Little’s MCAR test: w 2 ¼ 7.358, Sig. ¼

0.393). The missing data were replaced by mean values.

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) Table IV provides demographics of industry distributions and respondent department

distributions.

3.4 Analysis method SmartPLS 2.0 (Ringle et al., 2005) was used to analyze the data, as it allows latent constructs to be modeled either as formative or reflective indicators as was the case with this study’s data, and it is appropriate for exploratory studies (Chin, 1998). Because the model contains three second-order variables, the researchers created super-ordinate second-order constructs using factor scores for the first-order construct (Chin et al., 2003).

PLS works well with smaller sample sizes. The most frequently used rule for minimum sample size in PLS was proposed by Chin (1998, p. 311): “one simply has to look at the arrow scheme and find the largest of two possibilities: (a) the block with the largest number of formative indicators (i.e. largest measurement equation); or (b) the

% Business process redesign project

Industry

Department

success

Financial

7 4.8 Healthcare and Pharmaceutical

23 15.8 Human resources

42 29.0 Manufacturing

17 11.7 Information Technology/systems

24 16.6 Government

16 11.0 Sales and/or marketing

15 10.3 Production and/or manufacturing

Entertainment and others

20 13.8 IT

12 8.3 Customer services

14 9.7 Telecommunication

10 6.9 Finance

9 6.2 Retail and Wholesale

Table IV. Other

18 12.6 Industry distribution and Total

100 respondents’ department dependent LV with the largest number of independent LVs impacting it (i.e. largest

structural equation) [ y ] the sample size requirement would be 10 times either (a) or (b), whichever is the greater.”

The research model in this study involves three formative constructs: change management, process redesign, and ICTI improvement, which have 3, 2, and 4 formative indicators, respectively. As for the structural equation, the dependent LV with the largest number of independent LVs impacting it is overall success, which has four paths leading into it. Therefore, the minimum sample size requirement for this

Another rule that should be considered for sample size is that there is a need for doing a principal components factor analysis on the indicators for all the constructs for an exploratory study such as this. Everitt (1975) recommended that the proper case-to-indicator ratio range for PCA should be at least 10. The largest construct considered, i.e. ICTI improvement, has 13 indicators, although they are divided into four dimensions. Therefore, according to this rule, the minimum sample size

this criterion.

4. Analysis and results Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT)

4.1 Validity and reliability tests For reflective constructs, their convergent validity, discriminant validity, and reliability were examined through the measurement model.

Convergent validity for reflective constructs is assumed when the loadings of their items are above 0.7 and are significant at the 0.05 level (Gefen and Straub, 2005). The results showed that all the item loadings were above 0.7, except for two items: OpQI1 from the operational quality improvement construct (0.668) and CS4 from the cost savings construct (0.655). These two items were removed from further analysis and PLS was rerun. Once done, the item loadings were all above 0.7 and significant at the 0.001 level. It can be concluded that convergent validity for the reflective constructs was shown.

To test discriminant validity, we examined the table of item loadings and cross loadings (see Appendix 2) and the table of correlations among constructs (see Table V). The results showed that all item loadings for the constructs they were intended to

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measure were above 0.7, and that they loaded less on the other constructs. The square

roots of the average variance extracted (AVE) are shown as shaded results on the diagonal of Table V for all the reflective constructs. These results were all above 0.7 (note that AVE is not applicable for the formative constructs), and exceeded that construct’s correlations with other constructs. Hence, the constructs were shown to have adequate discriminant validity.

Composite reliability coefficients for all the reflective constructs in the PLS model were above 0.7 (see the reliability column in Table V). Hence, they passed the reliability test (Gefen and Straub, 2005).

For the three formative constructs, the researchers first tested their validity by examining their item weightings. As shown in Table VI, all the item weights, except for ICTII_FM, were significant. A decision to remove this dimension (i.e. IT facilities and management) from the ICTI improvement construct was made because its original literature source (Law and Ngai, 2007) was not very clear about this dimension in any case. After removing this dimension, PLS was rerun.

Second, multicollinearity was checked in the measures of the formative constructs, and the variance inflation factors (VIF) values for all the formative indicators ranged from 1.408 to 3.119, below the strict cut-off threshold of 3.3 (Petter et al., 2007). Correlations among the formative indicators were then examined for reliability. Correlations between the formative indicators of ICTI improvement were 0.314, 0.325, 0.480 ( po0.01 in each case); those for change management were 0.548, 0.712, 0.674 ( po0.01 in each case); and for process redesign it was 0.587 ( po0.01). The results

(1) Top management support

(2) Operational quality improvement

(3) Organizational quality improvement 0.886 0.449*** 0.452

(4) Cost savings

0.981 0.626*** 0.620** 0.667*** 0.791*** 0.616 0.981 Table V.

(6) BPR project success

Correlations among Notes: The italic numbers in the diagonal row are square roots of the average variance extracted. constructs

*po0.05; **po0.01; ***po0.001

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT)

t-value p-value

Change management

CM_EL

CM_OL

CM_SL

Process redesign

ICTI improvement

ICTII_NC

4.340 *** Table VI.

ICTII_DI

5.143 *** Weights of the indicator

ICTII_TR

0.0397 ns variables for formative

ICTII_FM

constructs

Notes: ns, not significant. *po0.05; **po0.01; ***po0.001 Notes: ns, not significant. *po0.05; **po0.01; ***po0.001

they do not need to be correlated with one another (Pavlou and Sawy, 2006).

redesign project

success

4.2 Structural model assessment

At the same time as PLS analysis estimates the measurement model, it also provides estimates of the structural model, i.e. the relationships between constructs or path coefficients. In order to interpret their significance, bootstrapping was run with 500

re-samples. The estimates of the resulting structural model are shown in Figure 2. The results show that most of the paths hypothesized (15 out of 19) were statistically validated. Only four of them were not supported (as denoted in the dashed lines in Figure 2).

It is evident from Figure 2 that the model demonstrated moderate to high explanatory power. The R 2 value for the BPR project success construct was 0.697 (i.e. it explained

69.7 percent of the variance in BPR project success). This is a relatively good result for an exploratory study such as this. The R 2 values for the other endogenous constructs ranged from 0.167 to 0.511.

5. Discussion

5.1 Impact As mentioned earlier, BPR project implementation itself has previously seemed to be regarded as a black box and few studies have focussed on measuring and modeling what organizations should do during project implementation (Zellner, 2011, p. 1). This study tries to open this black box and to explore inside the BPR project implementation process. By identifying three important BPR project implementation components based on the STT, this study has created a multivariate research model

R 2 = 0.374

R 2 = 0.443 Change

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Project Success

0.500*** Cost savings

Path model with PLS

analysis results *p < 0.05; **p < 0.01; ***p < 0.001

Notes:

R 2 = 0.458

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using formative construct techniques, and successfully tested the three components.

The analysis results are discussed in the following.

This study provides conclusive evidence that change management significantly affects all four facets of BPR project outcomes (operational quality improvement, organizational quality improvement, cost savings, and productivity). This means that no matter which of these project outcomes are goals set by managers, change

management is a significant determinant in achieving these goals. This finding is especially useful for companies who undertake BPR projects, for example, during the implementation of ERP systems. Many ERP implementers find themselves having to re-engineer their existing processes to fit the software they are implementing. At the same time, because of the major impact of change management on BPR project success, they should avoid overlooking change management issues while implementing specific systems, if they wish to achieve truly successful change (Huq et al., 2006).

The empirical results from this study also indicate that process redesign has a significant impact on organizational quality improvement, cost savings, and productivity, but not on operational quality improvement. The reason for this may be that operational quality emphasizes product quality and/or customer service quality, while process redesign practices aim to improve business processes through task elimination or combination, or downsizing by removing unnecessary people, groups, or departments from business processes.

Of interest, this study showed that ICTI improvement was significantly associated with operational and organizational quality improvements. This is probably because ICTI improvement builds a convenient and fast communication bridge among employees, and between companies and customers, yielding improved customer satisfaction and better cooperation among employees (Bhatt, 2000; Law and Ngai, 2007).

The non-significant influence of ICTI improvement on productivity and cost savings is perhaps not surprising. One study conducted by Terziovski et al. (2003) also found that there was no significant relationship between the increased use of information technology and process cycle time reduction. One implication from this result is that managers must reengineer their core processes from a customer perspective (Terziovski et al., 2003). Three more implications concerning productivity and cost savings can be suggested as a result of this study. First, emphasizing productivity and cost savings through IT does not appear to be the focus of recent BPR projects; instead, IT development seems more focussed on improving organizational quality and operational

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) quality within organizations and with customers. Second, it may be that companies are willing to spend money on ICTI for improving the quality of customer service and the quality of employee working life, but not necessarily for improving productivity or reducing costs. Third, there may be a time lag before the effects of BPR projects could be felt or seen. The reason of this point can be understood from the results of a recent study which show that some of the firm performance measures (e.g. labor productivity, financial ratios, and operational performance) improve in a decreasing manner after change implementation, and peak within two to ten years in general (Altinkemer, 2011).

The results obtained from this study can provide useful recommendations for BPR practitioners. First, TMS plays an important role in realizing all three BPR project implementation components (i.e. change management, process redesign, and ICTI improvement).

Second, change management must be seriously planned and comprehensively carried out in order to achieve BPR project success. Change management involves Second, change management must be seriously planned and comprehensively carried out in order to achieve BPR project success. Change management involves

compensation systems should be properly reviewed and revised. An effective culture for organizational change should be created to increase the likelihood of success. With

success

respect to the employee level of change management, it is essential to deal effectively with employee resistance, through improved communication, employee empowerment, or effective training. The stakeholder level of change management requires adequate

communication with stakeholders to solicit their opinions on BPR projects. Third, managers need to carefully define BPR project goals: does this project aim at cost savings, productivity, or other goals? Starting from the defined project goal, the implementation components can then be assigned appropriate priorities. This is especially important in planning a project with limited project resources.

5.2 Limitations and future research The main limitation of this study is its generalizability with respect to company size and organizational culture. The sample in this study was drawn from medium- and large-sized companies in Canada and the USA. Small organizations have their own distinct features such as superior flexibility, ability to reorient themselves quickly, capacity for rapid decision making, and proximity to their markets (Raymond et al., 1998). Company size needs to be considered in the explanation of such a study. As for organizational culture, this study controlled this variable by limiting respondents to Canada and US companies. A recent literature review of BPM shows that culture is still

a widely under-researched topic in BPM ( Jan vom and Theresa, 2011). Therefore, it would

be very interesting to investigate BPR project implementations in other countries where the organizational working culture may be different (Martinsons et al., 2009). This study is the first BPR project implementation study to use formative constructs to measure relevant factors. A diligent literature search screened feasible methods to build and validate the three formative constructs. However, more studies are needed in order to improve our understanding of these constructs. For example, the ICTI construct needs to be improved. Law’s study (Law and Ngai, 2007) added dimensions of facilities and management (as defined in Section 3.1) to ICTI improvement, but this study showed this dimension was not an important contributor to ICTI improvement. Hence, this dimension of ICTI should be retested in future studies, so that the domain specification for ICTI improvement can be refined. Relevant studies in defining and validating dimensions of ICTI have been published recently (Fink and Neumann, 2009; Sobol and

Downloaded by UNIVERSITY OF INDONESIA At 20:27 19 March 2017 (PT) Klein, 2009), providing a better foundation for refining this multidimensional construct. Another limitation of this study concerns the sample size. Although the sample collected in this study was sufficient for PLS analysis, a larger sample set would likely generate more solid results.

6. Conclusions The conclusions from our study are first, that STT has been validated in the BPR project implementation research context. The establishment of the BPR project implementation model was based on the well-known aspects of STT, and included the development of three BPR project implementation components (i.e. change management, process redesign, and ICTI improvement). The results from analyzing the research model showed that the great majority of the variance in BPR project measures of success (69.7 percent) was explained through factors based on STT. This provides a foundation for utilizing STT in future BPR project research.

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Second, to the best of the researchers’ knowledge, this is the first study to model

certain activities related to BPR project implementation as formative constructs, rather than with traditional reflective constructs. As such, this study significantly advances BPR project research. Formative indicators are often neglected despite their appropriateness in many instances, and a high percentage of latent constructs have therefore been found to be incorrectly modeled in many research areas (e.g. marketing,

management information systems, organizational behavior, etc.) ( Jarvis et al., 2003; Petter et al., 2007; Diamantopoulos et al., 2008). This exploratory study successfully built and validated three formative constructs for BPR project implementation components (i.e. change management, process redesign, and ICTI improvement), following existing guidelines for formative construct development ( Jarvis et al., 2003; Petter et al., 2007; Diamantopoulos et al., 2008).

Finally, a major achievement from this study is its contribution to modeling BPR project implementation components, based on various dimensions that have been identified from the existing literature, and the development and validation of sound constructs that could be used in structural equation modeling (SEM) methodologies. By achieving this, progress in BPR project research has advanced significantly in the utilization of quantitative methodologies to validate appropriate research models in this field, and to offer better generalizability of results than that found in the existing literature.

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