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EFFECT OF THE BUSINESS PROCESS RE-ENGINEERING FACTORS AND

INFORMATION TECHNOLOGY CAPABILITY ON ORGANIZATION
PERFORMANCE
Thesis · October 2012
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EFFECT OF THE BUSINESS PROCESS REENGINEERING
FACTORSAND INFORMATION TECHNOLOGY CAPABILITYON
ORGANIZATION PERFORMANCE
By
KABIRU JINJIRI RINGIM
Thesis Submitted to
Othman Yeop Abdullah Graduate School of Business,
Universiti Utara Malaysia,
in Fulfillment of the Requirement for the Degree of Doctor of Philosophy
June 2012

PERMISSION TO USE
In presenting this thesis in partial fulfillment of the requirements for a postgraduate

degree from Universiti Utara Malaysia (UUM), I agree that the Library of this
university may make it freely available for inspection. I further agree that
permission for copying of this thesis in any manner, in whole or in part, for
scholarly purpose may be granted by my supervisor(s) or, in their absence, by the
Dean of Othman Yeop Abdullah Graduate School of Business where I did my
thesis.It is understood that any copying or publication or use of this thesis or parts
of it for financial gain shall not be allowed without my written permission. It is also
understood that due recognition shall be given to me and to the Universiti Utara
Malaysia (UUM) in any scholarly use which may be made of any material in my
thesis.
Request for permission to copy or make other use of materials in this thesis in
whole or in part should be addressed to:
Dean of Othman Yeop Abdullah Graduate School of Business

Universiti Utara Malaysia
06010 UUM Sintok
Kedah Darul Aman
ii

ABSTRACT
The main objective of this study is to examine the effects of the business process
reengineering (BPR) factors on the Nigerian banks organisational performance.
Additionally, this study also investigates the moderating effect of information
technology (IT) capability in the relationship of BPR factors and the organisational
performance. BPR factors are operationalised by change management, BPR
strategy alignment, customer focus, management commitment, IT investment, and
adequate financial resource. The IT capability dimensions include IT knowledge, IT
operations and IT objects. Data was sent and collected through a hand-delivery
method. A proportionate stratified random sampling was used for sample selection.
560 questionnaires were sent to banks’ managers but 417 of them were returned;
giving a response rate of 74%. The findings were as follows: first, the findings
show that fully supported relationships were found between IT capability and
organisation performance. Second, the results showed that BPR factors such as
adequate financial resources and management commitment were significantly
related to overall organisational performance. Specifically, adequate financial
resource's dimension was significantly related to cost reduction, customer service
management and operations efficiency. Next, management commitment was found
to be significantly related to customer service management and operation
efficiency. Meanwhile, IT investment was significantly associated with customer
service management. Other dimensions of BPR factors such as change
management, customer focus, and BPR strategy alignment were found insignificant
to the banks’ performance. Third, upon investigating the moderating effects of IT
capability on the relationship between BPR factors and organisational performance,
the results revealed mixed supports for the interaction effects of IT capability
attributes. The outcome of this study provides important insights to both managers
and researchers for further understanding on the effects of BPR factors and IT
capability on organisational performance. The necessary suggestions on new area
of research were recommended for future researchers.
.
Keywords: Business process reengineering factors, Information technology

capabilities, Organisational performance, Banks, Nigeria.
iii

ABSTRAK
Objektif utama kajian ini ialah untuk mengkaji kesan faktor-faktor perekayasaan
proses perniagaan (BPR) terhadap prestasi organisasi bank-bank Nigeria. Selain itu,
kajian ini juga menyiasat kesan moderator keupayaan teknologi maklumat (IT) di
dalam hubungan antara faktor-faktor BPR dengan prestasi organisasi.Faktor-faktor
BPR dioperasikan melalui pengurusan perubahan, strategi penjajaran BPR,
berfokuskan pelanggan, pengurusan komitmen, pelaburan IT dan sumber kewangan
yang mencukupi.Dimensi keupayaan IT termasuk pengetahuan IT, operasi IT dan
objek IT.Data telah dihantar dan dikumpulkan melalui pendekatan penghantaran
secara serahan tangan.Persampelan rawak strata berkadaran telah digunakan dalam
pemilihan sampel. Sebanyak 560 soal selidik telah dihantar kepada pengurus-
pengurus bank, tetapi hanya 417 yang telah dipulangkan, yang menjadikan kadar
respons sebanyak 74%. Hasil kajian adalah seperti berikut: pertama, keputusan-
keputusan menunjukkan sokongan penuh terhadap hubungan di antara keupayaan
IT dan prestasi organisasi. Kedua, keputusan menunjukkan faktor-faktor BPR
seperti sumber kewangan yang mencukupi dan komitmen pengurusan mempunyai
hubungan yang signifikan kepada prestasi organisasi secara menyeluruh. Secara
terperinci, dimensi sumber kewangan yang mencukupi mempunyai hubungan yang
signifikan terhadap pengurangan kos, pengurusan perkhidmatan pelanggan, dan
kecekapan operasi. Seterusnya, komitmen pengurusan didapati mempunyai
hubungan yang signifikan kepada pengurusan perkhidmatan pelanggan dan
kecekapan operasi.Manakala pelaburan IT didapati mempunyai hubungan yang
signifikan dengan pengurusan perkhidmatan pelanggan. Dimensi-dimensi lain
kepada faktor-faktor BPR seperti pengurusan perubahan, berfokuskan pelanggan,
dan strategi penjajaran BPR adalah tidak signifikan kepada prestasi bank. Ketiga,
setelah meneliti kesan moderator dalam hubungan di antara faktor-faktor BPR
dengan prestasi organisasi, keputusan menunjukkan sokongan yang bercampur
dalam kesan interaksi terhadap sifat-sifat keupayaan IT.Hasil kajian ini dapat
memberikan pandangan penting kepada pengurus dan penyelidik untuk pemahaman
lanjut tentang kesan faktor-faktor BPR dan keupayaan IT terhadap prestasi
organisasi.Cadangan-cadangan yang diperlukan untuk penyelidikan lanjutan telah
diusulkan untuk penyelidik-penyelidik yang di masa akan datang.
Katakunci: Faktor-faktor perekayasaan proses perniagaan, Keupayaan teknologi

maklumat, Prestasi organisasi, Bank-bank, Nigeria
iv

ACKNOWLEDGEMENTS
In the name of Allah, Most Gracious, Most Merciful. Praise and peace be upon His
beloved our Prophet Muhammad (SAW), his family and his companions from
whom, and by the will of God.We escape darkness into enlightenment. It was in
this spirit that I set out to undertake the current study, and the quest for self-
actualization provided the additional push that kept me going and finally sees this
thesis come to its expected conclusion, Alhamdulillah.
I am greatly indebted to so many wonderful people for their contributions and

assistance in so many ways. Specifically, I would like to thank my supervisors Dr.
Mohd Rizal Razalli and Dr. Norlena Hasnan, who had assisted, guided and renders
their best supervisory know how throughout the entire process of completing my
thesis.
I would also like to acknowledge the support and contribution of others who have
contributed directly or indirectly in one way or another, to the completion of this
thesis. I am sorry for not being able to detail them here, butsame, I seek the
magnanimity of Allah to bestow on all of them with His blessing and bountiful -
jazakumullahukhairan kathira.
A special dedication to my wife, Binta Bala and lovely children Ayman

Muhammad, Nana-Aisha and Ummita-Suwaiba and to my brothers and sisters in
Islam for their love, cares, constant assurances, patience and understanding. Last
but not least, I am presenting this thesis as present to my parents' spirits in their
graves. Amin!

TABLE OF CONTENTS
Page
PERMISSION TO USE ii
ABSTRACT iii
ABSTRAK iv
ACKNOWLEDGEMENTS v
TABLE OF CONTENTS vi
LIST OF TABLES xiii
LIST OF FIGURES xvi
LIST OF ABBREVIATIONS xvii
CHAPTER 1 INTRODUCTION 1
1.1 Background of the study 1
1.2 Problem statement 5
1.3 Research questions 8
1.4 Research objectives 8
1.5 Significance of the study 9
1.5.1 Theoretical contributions 9
1.5.2 Practical contributions 10
1.6 Scope of the study 11
1.6.1 Definition of variables 12
1.6.2 Banks and financial institutions 14
1.6.2.1 Commercial bank 14
1.6.2.2 Microfinance bank 15
1.6.2.3 Mortgage bank 15
1.7 Outline of the study 16
CHAPTER 2 LITERATURE REVIEW 19

2.1 Introduction 19
2.2 Organizational performance 19
2.3 Bank performance 20
2.3.1 Overall performance of Nigerian banks 21
2.3.2 Operating cost performance of Nigerian banks 22
2.3.3 Customer service management performance of Nigerian banks 24
2.3.4 Previous studies on bank performance 24
vi

2.3.5 Bank process performance improvement method 30
2.3.6 Suitability of reengineering as radical performance improvement
method 32
2.3.7 Organizational performance measurement 33
2.4 BPR factors 39
2.4.1 Change management 44
2.4.1.1 Reward and motivation 46
2.4.1.2 Effective communication 46
2.4.1.3 Creating effective organizational culture 47
2.4.1.4 Stimulating receptivity to change 48
2.4.1.5 Employee’s empowerment 48
2.4.1.6 Human involvement 48
2.4.1.7 Training and education 49
2.4.2 BPR Project management 49
2.4.3 Top management commitment 50
2.4.4 Customer focus 52
2.4.5 IT infrastructure 52
2.4.6 Process redesigns 53
2.4.7 Financial resources 55
2.4.8 Less bureaucratic (flatter) structure 56
2.5 BPR failure factors 57
2.5.1 Lack of proper strategy 58
2.5.2 Unrealistic objectives 58
2.5.3 No clear concept of a process 59
2.5.4 Wrong scope of process objectives 59
2.5.5 Non recognition of BPR benefit 59
2.5.6 Over dependence on IT systems 60
2.5.7 Opposition and lack of commitment from top management 60
2.5.8 Previous studies on BPR factors and performance in banks 60
2.5.9 Different between this study and previous study on BPR factors
and performance in banking industry settings 70
2.6 IT capabilities 73
vii

2.6.1 Definition and concept of IT capability 73
2.6.2 The role of IT capability in improving performance 75
2.6.3 The contradictory role of IT as an enabler in BPR 77
2.6.4 IT capability measurement 79
2.6.4.1 IT knowledge 79
2.6.4.2 IT operations 80
2.6.5 IT service capability maturity model 85
2.6.6 The key process areas on the IT service capability maturity model
(IT services CMM) 87
2.6.6.1 Initial level 88
2.6.6.2 Repeatable level 88
2.6.6.3 Defined level 91
2.6.6.4 Managed level 96
2.6.6.5 Optimizing level 97
2.6.7 IT capability as the moderating variable 98
2.7 Underlying theories 102
2.7.1 Resource-based view (RBV) theory 103
2.7.2 How the RBV relates to this study 109
2.7.3 IT capability as dynamic capability 110
2.7.4 Complementarity theory 112
2.8 Chapter Summary 112
CHAPTER 3 CONCEPTUAL FRAMEWORK 115

3.1 Introduction 115
3.2 Conceptual framework 115
3.3 BPR factors, IT capability and organizational performance 119
3.4 Statement of hypothesis's development 120
CHAPTER 4 METHODOLOGY 125

4.2 Research design 125
4.2.1 Types of research design 126
4.2.2 Sampling design 127
viii

4.2.3 Sampling techniques 129
4.2.4 Proportionate stratified random sampling 130
4.2.5 Estimating expected response rate 131
4.3 Data collection strategy 131
4.4 Measurement instruments and operationalization of variables 133
4.4.1 BPR factors 135
4.4.1.1 Change management 136
4.4.1.2 BPR project management 137
4.4.1.3 Top management commitment 137
4.4.1.4 Customer focus 138
4.4.1.5 IT infrastructure 139
4.4.1.6 Effective process redesigns. 140
4.4.1.7 Adequate financial resources 140
4.4.1.8 Less bureaucratic (flatter) structure 141
4.4.2 IT capability 142
4.4.2.1 IT knowledge 142
4.4.2.2 IT operations 143
4.4.3 Organizational performance 144
4.4.3.1 Non-financial performance measures 144
4.4.3.2 Financial performance measures 145
4.5 Preliminary investigation on BPR implementation in Nigerian banks 148
4.6 Validity test of instrument measures 149
4.7 Reliability test analysis of construct 151
4.8 Data analysis method 152
4.8.1 Cleaning and screening the data 153
4.8.2 Descriptive analysis 153
4.8.3 Goodness of measure 153
4.8.4 Principal component analysis (PCA) 154
4.8.5 Correlation analysis 154
4.8.6 Multiple regression analysis 154
4.8.7 Hierarchical regression analysis 155
ix

CHAPTER 5 DATA PRESENTATION AND ANALYSIS 157
5.2 Response rate 157
5.3 Respondent and organizational background 159
5.4 Goodness of measures: factor analysis of the research instrument 161
5.4.1 Dependent variable – organization performance (OP) 164
5.4.2 Moderating Variable: IT capability (IT Cap) 166
5.4.3 Independent variables: BPR factors 169
5.4.4 Common method variance (CMV) test 175
5.5 Measuring the reliability of the research instrument 176
5.6 Construct Reliability and Validity 178
5.6.1 Convergent Validity 181
5.6.2 Discriminant Validity 182
5.6.3 Face Validity 182
5.6.4 Nomological Validity 183
5.7 Modified framework and restatement of hypotheses 184
5.8 Preliminary analysis 188
5.8.1 Missing data 189
5.8.2 Assessment of outliers 189
5.8.3 Presentation of descriptive statistics for independent variables 190
5.8.4 Bivariate relationship between BPR factors, IT Capability and
Organizational Performance 192
5.8.5 Multivariate relationship between IT capability and organizational
performance 193
5.8.6 Multivariate relationship between BPR factors and organizational
performance 193
5.9 Multiple regression'sanalysis tests for assumptions 194
5.9.1 Normality 194
5.9.2 Linearity 195
5.9.3 Multicollinearity 196
5.9.4 Homoscedasticity 198
5.10 Results of multiple regression (Hypotheses testing) 199

5.10.1 Multiple regression analysis results and hypotheses test between
BPR factors and overall performance. 200
BPR factors and operations cost reduction performance 201
BPR factors and customer service management performance 203
BPR factors and business operations efficiency performance 205
5.10.5 Multiple regression analysis results between IT capability and
overall performance 209
cost reduction performance 210
customer service management performance 212
business operations efficiency performance 213
5.10.9 Moderating effect of IT capability on relationship between BPR
factors and organizational performance 215
5.10.10 Interacting effects of IT capability attributes with BPR factors on
overall performance of banks 220
operations cost reduction performance of banks 221
customer service management performance of banks 223
business operations efficiency performance of banks 224
CHAPTER 6 DISCUSSION AND CONCLUSION 229

6.2 Recapitulation of study 229
6.3 Overall discussion of findings 231
xi

6.3.1 Relationship between BPR factors and organizational
performance 231
6.3.1.1 BPR factors and overall performance 235
6.3.1.2 BPR factors and operation's cost reduction 241
6.3.1.3 BPR factors and customer service management 242
6.3.1.4 BPR factors and business operation's efficiency 245
6.3.2 Relationship between IT capability and organizational
performance 246
6.3.3 Moderating effects of IT capability 248
6.3.4 BPR factors - IT capability- overall performance 250
6.3.5 BPR factors - IT capability-operations cost reduction
performance. 256
6.3.6 BPR factors - IT capability-customer service management
performance 256
6.3.7 BPR factors - IT capability-business operations efficiency
performance 258
6.4 Implications of the study 260
6.4.1 Managerial implications 260
6.4.2 Theoretical implications 265
6.5 Limitations of the study 270
6.6 Directions for future research 271
6.7 Conclusion 273
REFERENCES 276
APPENDIX 1 QUESTIONNAIRE 299
APPENDIX 2 DEMOGRAPHIC DATA FREQUENCIES 309
APPENDIX 3 RESULTS OF FACTOR ANALYSIS 314
APPENDIX 4 RELIABILITY TEST 330
APPENDIX 5 ASSUMPTION OF NORMALITY 339
APPENDIX 6 BIVARIATE CORRELATION 344
APPENDIX 7 MULTIPLE REGRESSION ANALYSIS 346
APPENDIX 8 HIERARCHICAL REGRESSION IT CAPABILITY –
BPR FACTORS & OVERALL PERFORMANCE 358
APPENDIX 9 POPULATION FRAME OF NIGERIAN BANKS AND
RANDOM SAMPLE SELECTION 367
APPENDIX 10 RESEARCH PROCESS 410
APPENDIX 11 LIST OF PUBLICATION FROM THE WORK 412
xii

LIST OF TABLES
Page
Table 1.1 Definition of Major Variables 13

Table 2.1 Summary of Selected Previous Studies on Bank Financial and Non-
financial Performance 26
Table 2.2 Summary of Selected Studies on Organizational Performance
Dimension 38
Table 2.3 Summary of the BPR Success Factors and Causes of Failure 57
Table 2.4 Summary of Studies on BPR Factors and Performance in Banks and
Financial Services Setting 61
Table 2.5 Summary of Some Selected Previous Studies on BPR in
Organizations from Another Sector 65
Table 2.6 Summary of Some Selected Previous Studies on IT and
performance 82
Table 2.7 Five Levels of the IT Service Capability Maturity Model 87
Table 2.8 Summary of Various Relevant Theories of the Firm Performance
and their Implication 104
Table 3.1 Summary of Statement of Direct Relationship Hypotheses
Development 121
Table 3.2 Summary of Statement of Indirect Relationship Hypotheses
Development 122
Table 4.1 Proportionate stratified random sampling 130
Table 4.2 Summary of Measurement Instrument Variables, Sources, and
Number of Items 146
Table 4.3 Summary of the pilot test reliability analysis of constructs 152
Table 4.4 Summary of data analysis against each research objective 155
Table 5.1 Response Rate of the Questionnaires 158
Table 5.2 Results of the Factor Analysis for Organization Performance 165
Table 5.3 Results of the Factor Analysis for IT Capability 168
xiii

Table 5.4 Results of the Factor Analysis for Business Process Re-engineering
Factors (BPR) 171
Table 5.5 Summary of Reliability Analysis of Major Variables 177
Table 5.6 Constructs Validity and Reliability 179
Table 5.7 Discriminant Validity 183
Table 5.8 Summary of Revised Hypotheses 186
Table 5.9 Descriptive Statistics for Major Variables 191
Table 5.10 Pearson's Correlation between the Constructs 192
Table 5.11 Tolerance and VIF Values 198
Table 5.12 Multiple Regression Result between BPR Factors and Overall
Table 5.13 Multiple Regression Result between BPR Factors and Operations
Cost Reduction Performance 203
Table 5.14 Multiple Regression Result between BPR Factors and Customer
Service Management Performance 205
Table 5.15 Multiple Regression Result between BPR Factors and Business
Operation Efficiency Performance 207
Table 5.16 Summary of hypothesis testing on the direct effect of BPR factors
on organisational performance 207
Table 5.17 Summary of Hypotheses Testing for the Direct Relationship
between BPR Factors, IT Capability and Organisational
Performance 208
Table 5.18 Multiple Regression Result between IT Capability and Overall
Table 5.19 Multiple Regression Result between IT Capability Dimensions
and Operation Cost Reduction 211
and Customer Service Management 213
and Business Operations Efficiency 214
Table 5.22 Summary of hypothesis testing on the direct effect of IT capability
on organisational performance 215
xiv

Table 5.23 Hierarchical Regression Results: the Moderating Effect of IT
Capability on the Relationship between BPR Factors and Overall
Performance 221
Capability on the Relationship between BPR Factors and Cost
Reduction 222
Table 5.25 Hierarchical Regression Results: the Moderating effect of IT
Capability on the Relationship between BPR Factors and
Customer Service Management 224
Capability on the Relationship between BPR Factors and Business
Operations Efficiency 225
Table 5.27 Summary of hypothesis testing on the indirect effect of BPR
factors, IT capability and organisational performance 226
Table 5.28 Summary of Hypotheses Testing for the Interaction between BPR
Factors, IT Capability and Organisational Performance 228
xv

LIST OF FIGURES
Page
Figure 2.1 Model Framework of Khong & Richardson (2003) 72

Figure 2.2 Model Framework of Cheng & Chiu (2008) 72
Figure 2.3 Graphical Presentation of a Moderated model 101
Figure 2.4 Graphical Presentation of a Mediated model 102
Figure 2.5 Conceptual Framework 113
Figure 3.1 Research Model 118
Figure 5.1 The modified research model to the study 185
Figure 5.2 Residual plot – BPR Factors and Organizational Performance 196
Figure 5.3 Framework for identifying Moderator variables (Adopted from
Sharma, Durand & Gur-Arie, 1981) 217
Figure 5.4 The moderators identified for the study based on typology of
specification variables by Sharma et al. (1981) 218
Figure 6.1 The moderating effect of IT capability on the relationship between
management commitment and overall performance 252
customer focus and overall performance 254
change management and overall performance 255
change management and operation's cost reduction Performance 256
IT investment and customer service management performance 257
management commitment and customer service management
performance 258
management commitment and business operations efficiency
performance 259
xvi

LIST OF ABBREVIATIONS
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AFR Adequate Financial Resources
ATM Automatic Teller Machine
BPI Business Process Improvement
BPR Business Process Reengineering
BSC Balance Scorecard
CBN Central Bank of Nigeria
CIMA Chartered Institute of Management Accountant
CIO Chief Information Officer
CM Change Management
CSF Critical Success Factor
CSM Customer Service Management
EAGLE Efficiency, Accountability, Goal orientations, Leadership,
Effectiveness and staff motivation
EPR Effective Process Redesign
EPS Earnings per Share
FOREX Federal Mortgage Bank of Nigeria
GDP Gross Domestic Product
ICT Information and Communication Technology
IS Information System
IT Information Technology
ITC Information Technology Capability
ITSCMM Information Technology Service Capability Maturity Model
KBV Knowledge Based View
KPI Kay Performance Indicator
LAN Local Area Network
LBS Less Bureaucratic Structure
MFB Microfinance Bank
MMPF Multi-Model Performance Framework
NDIC Nigerian Deposit Insurance Corporation
ONFP Organisational Non-Financial Performance
OFR Organisational Financial Performance
OP Organisational Performance
OPS Operations
PMI Primary Mortgage Institution
POS Point of Sale
RBV Resource-based View
ROE Return on Equity
ROI Return on Investment
SLA Service Level Agreement
SMS Short Message Services
SPSS Statistical Package of Social Science
SWIFT Society for Worldwide Interbank Financial Telecommunication
WAN Wide Area Network
xvii

CHAPTER 1 INTRODUCTION
CHAPTER 1
INTRODUCTION
1.1 Background of the study
The progressive globalization of financial markets requires market participants to
make changes to their operational processes beyond local to global
competitiveness. This trend has led many banks in developing countries to improve
customer service quality, speed, reduce operating costs, and enhance profitability
performance(Randle, 1995). Innovative banking services and personalized portfolio
management are evolving as the market consolidates due to mergers and
acquisitions of up-to-date strategy. As a result, the focus is no longer on cutting
costs alone, but rather on simultaneously improving services to customers. In other
words, the processes must not only be more efficient, but also more customer-
friendly as well. Central Bank of Nigeria (CBN) initiated business process
reengineering (BPR) project tagged EAGLES (Efficiency, Accountability, Goal
orientations, Leadership, Effectiveness and Staff motivation). The objective is to
enhance the operations and quality of banks, which include: industry remedial
programmes to fix the key causes of the crisis; risk-based supervision; reforming
the regulatory framework; enhanced customer protection as well as internal
transformation of the bank (CBN, 2009).
On the internal transformation aspect, the CBN in partnership with
PricewaterhouseCoopers conducted a comprehensive assessment of the bank's core
and non-core operations that required fundamental restructuring. The identified

areas were customer service delivery, regulatory function of the CBN, performance
management & benchmarking, information technology (IT), customer satisfaction,
human resources and administration and communication effectiveness at all
stakeholder levels (CBN, 2009). In doing so, attempts are being made to adopt
approaches in the financial sector that have proven effective in other industries,
particularly those in manufacturing. One of these approaches is known as BPR.
BPR is a major management approach that focuses on doing things in a better way
that is clearer and easier to achieve a radical improvement on quality, speed,
customer service, and reduction in cost (Goll & Cordovano, 1993). Allen (1994)
argued that, the focus of reengineering is on the process of redesign, which relates
to doing things better and clearer. One of the primary goals of the financial service
industry is to enhance processes and customer service performance through the
management approach of cost reduction, improving quality, speed, and customer
service for profit maximization. Therefore, management scholars argue that
organizations can become proactive in operation by adopting the BPR to achieve a
remarkable improvement in organizational performance (Davenport & Short, 1990;
Hammer, 1990).
BPR is a popular management tool for dealing with rapid technological and
business changes (Ranganathan & Dhaliwal, 2001). It was introduced by Hammer,
as radical redesigns of processes in order to gain significant improvements in cost,
quality, and services(Ozcelik, 2010).BPR creates changes in people (behaviour and
culture), processes and technology (Al-Mashari & Zairi, 2000).It does not seek to
alter or fix existing processes, but forces companies to ask whether or not a process
is necessary, and then seeks to find a better way to do it(Siha & Saad, 2008).BPR

integrates all departments into a complete process that has been designed to fulfil a
specific business goal (Cheng, Tsai & Xiano, 2006).Successful implementation of
BPR enables organizations to achieve dramatic gains in business performance(Shin
& Jemella, 2002).
BPR helps banks to deal with new economic challenges and change the traditional
processes to improve their customers' satisfaction. BPR(Herzog, Polajnar &
Tonchia, 2007) is a management discipline for analyzing and redesigning current
business processes and their components in terms of efficiency, effectiveness and
added value to the objectives of the business. The conduct of the BPR steps is
planned to gather and process business requirements in support of a modernization
effort for a defined area. The BPR starts with planning activities that include the
creation of a BPR team, the development of a BPR scope document and an
examination of the proposal that relates to a given area, examines the existing and
future business process and improves it accordingly. The successful implementation
of BPR depends on how the project fits to the organization cultural norms, and IT
(Ahmad, Francis, & Zairi, 2007; Al-Mashari & Zairi, 1999, Attaran, 2004, Bhatt,
2000; Davenport & Short, 1990; Hammer & Champy, 1993; Khong & Richardson,
2003; Murray & Lynn, 1997).
Reengineering of operational processes undertaken in the bank should be handled
by the project management expertise within the IT department. The IT capability
includes both the technical and managerial expertise required to provide reliable
physical services and extensive electronic connectivity within and outside the firm.
IT increases the market share of the bank through offering a product or service that

is not offered by others, e.g., those customers who prefer private/personalized
services or use of debit cards have become the focus of retail and investment in
banking (Dos-Santos, 1995). Therefore, this study uses the resource-based view
(RBV) of the firm, dynamic capability's theory and complementarity theory to
explain the relationship between BPR factors and organizational performance under
the influence of IT capability. The application of IT capability is to enhance the
service-delivery process, produce new products, processes, strategy, and work
faster, eliminate all communication barriers within the organization, and empower
workers to link up with customers and suppliers to achieve the competitive
advantage (Davenport & Short, 1990; Hammer, 1990; Teng, Grover & Fielder,
1994). In Nigeria, liberalization of the banking sector and high-technology
capability has brought revolutionary changes in customer relationship's
management(Aregbeyen, 2011).
IT in banking sector is an important tool that helped to streamline the back-office
operations by improving both efficiency and cost reduction (David-West, 2005).
Advances in technology also influence the way banks’ services are delivered with
the aim of making them more convenient for customers. For example, many banks
in Nigeria have their branches connected online real time (24/7). Some banks have
ATMs to make cash available to their customers 24/7. Nigerian bank's practice e-
banking, telephone, and mobileservices, Money transfer services through
MoneyGramme, and Western Union Money transfer. These enabled the Nigerian in
Diaspora to send money to their families (CBN, 2008). Moreover, the IT capability
(IT operations and IT knowledge) makes Nigerian banks participate more
effectively in the financial service arena. For instance, some organization can

access international banking networks for efficient fund transfers, open, amend, and
negotiate letters of credit, and retrieve up to date status of customer transactions
between the banks that joined the Society for Worldwide Inter-bank Financial
Telecommunication (SWIFT).
1.2 Problem statement
As the world becomes technologically advanced with increased in global
competition in financial service industry, banks are left with no choice but to look
beyond local competition (Randle, 1995).In Nigeria, liberalization of the banking
sector has changed the form of competitive advantage for the industry. New
generation banks emerged. The old generation banks consolidate operations either
by merger, acquisition, raised up capitalization based and reengineer their
operations in order to be able to improve their performance and compete
effectively. The consequences of merger and consolidation of operational process
and an intensified foreign competition in the financial service industry through
liberalization and globalization faced by the organizations led to radical changes in
operations, and services that resulted in conflicting performance Wei & Nair,
2006). Customer focus became a key factor in determining the success as an
organization (Idris, 2011). The bank that has the largest customer base and the
highest customer retention rate is the market leader in the industry. Hence, the
quality of customer service becomes a driving force in ascertaining business
survival in the banking industry (Tang &Zairi, 1998). To survive and excel in this
type of business environment, organisational performances become the main

concern for the banks in Nigerian. Implementation of the BPR alone cannot fully
result to sustainable performance of bank’s operating in turbulent business
environment.
Previous studies that examined the BPR factor performance relationships such as
those conducted by Cheng and Chiu, (2008); Khong and Richardson, (2003) have
ignored the specific nature of IT capability, and, also, have not fully considered
important environmental conditions that influence the relationships. The literature
in BPR implementation is widespread with lack of thorough empirical evidence of
BPR impact on performance. Hence, there is a need to relate factors that may
contribute to organizational performance within the context of other variables that
also affect performance (Devaraj & Kohli, 2000).
Using resources based view (RBV) of firm performance; the theory explains the
relationship between organization resources and sustaining competitive advantage
for superior performance relative to competitors (Barney, 1991; Fahy, 2000). The
dynamic capability in form of IT capability was introduced to address the
theoretical limitation of RBV on issues of having sustainable performance in
turbulent business environment (Paulous, 2004). The complementarity theory is
also mentioned to address the inadequacy of RBV for isolation of resources in
creating or sustaining competitive advantage (Dedrick, Gurbaxani, & Kraemer,
2003; Kohli & Devaraj, 2003; Melville et al., 2004). This research is aimed to study
the moderating effect of IT capability attributes to the relationship between BPR
factors and organizational performance of Nigerian banks using survey
questionnaires. When examining the relationship between the reengineering factors

such as resources and performance, it was posited that some key moderating
variables that are important issues for the research may exist (Wade & Hulland,
2004). The moderating variable of great interest is the organizations’ IT capability
and its influence on the resources (BPR factors) such as performance, BPR &IT
relationships(Liu, Liu & Hu, 2008).
IT capability is more that of a moderator than a mediator, since definition of IT
capability is the ability to mobilise and deploy IT based resources in combination
with other resources and capabilities (Bharadwaj, 2000). Therefore, a moderator
variable is introduced to see whether the relationship changes strengthen/weaken
with the presence of the moderator. Previous studies such as Yongmei, Hongjian,
and Junhua, (2008); Said, Hui, Taylor and Othman, (2009); Shao, Feng, Choudrie,
and Liu, (2010) used IT capability as a moderating variable.However, the
relationship and influence have not been explicitly been explained. The financial
service industry is one of the early adopters of new information technologies
thatmean the effect of IT capability on firm performance is inconclusive in the
sector in general unlike in the manufacturing sector (Brynjolfsson, 1993).Hence,
there is a need to understand the effect of the IT capability attributes to the
relationship between BPR factors and performance, particularlyof Nigerian
banks.In view of the research problem that are presented above, specifically in the
Nigerian context as none of the existing studies to the knowledge of the researcher
provide integration between BPR factors and IT capability, this study seeks to
address the following research questions.

1.3 Research questions
Based on above discussions on the research problem, the following questions are
going to be addressed accordingly by the research:
1. To what extent does the BPR factors relate to the organizational performance
of Nigerian banks?
2. To what extent does IT capability affect the organizational performance of
Nigerian banks?
3. To what extent does the level of IT capability moderates the relationship
between the BPR factors and the organizational performance of Nigerian
banks?
1.4 Research objectives
The purpose of the research is to study the effect of BPR factors on the
organizational performance of Nigerian banks with IT capability as the moderating
factor. Thus, the objectives of this study are derived from the above research
questions that this study seeks to answer as follows:
1. To examine the relationship between the BPR factors and the organizational
performance of Nigerian banks.
2. To determine the effect of IT capability attributes on the organizational

3. To examine the moderating effect of IT capability on the relationship between
BPR factors and the organizational performance of Nigerian banks.
1.5 Significance of the study
1.5.1 Theoretical contributions
First, the study contributes to the existing body of knowledge by integrating IT
capability and BPR factors in the banking performance relationship in one study.
These two concepts (BPR factors and IT capability) represent the two main
independent research streams. Previous studies independently investigated the link
between BPR and performance (Cheng& Chiu, 2008; Sidikat & Ayanda 2008;
Khong &Richardson, 2003; Terziovski et al., 2003). IT capability and performance
studies (Armstrong & Sambamurthy, 1999; Bharadwaj, Bharadwaj & Konsynski,
1999; Bou-Wen, 2007; Brynjolfsson, 1993; Chan, 2000; Chun & Mooney, 2009;
Gatian, Brown & Hicks, 1995; Gottschalk, 2002; Huang et al., 2009; Lin, 2007; Liu
et al., 2008; Mata, Fuerst & Barney, 1995; Ross & Feeny, 1999; Santhanam &
Hartono, 2003; Sinan & Peter, 2007; Szanto, 2005; Wu, Chen & Sambamurthy,
2008; Yongmei et al., 2008). Thus, this study adds to the existing knowledge of
Management studies of the combined effect of BPR factors and IT capability and
its impact on organizational performance. This research adds value to the
Operations and Management field in that BPR factors to relate directly to business
performance and indirectly through the moderating effects of IT capability
attributes.

Second, this study has examined the specific linkages between IT capability
attributes and dimensions of organizational performance. In other words, BPR
factors were examined with regard to the moderating effect of IT capability in
relation to cost reduction, customer service management and business operations
efficiency. Previous research only studied the linkages between BPR and
performance; or, IT capability and performance in general without examining the
specific issues of cost reduction, customer service management and business
operation efficiency performances. Therefore, this study contributes further to the
current body of knowledge by investigating the effects of IT capability on BPR
factors with regard to the dimensions of organizational performance.
Third, this study extends the existing body of knowledge by improving the
understanding of BPR factors and IT capability issues of banking and financial
organizations in Nigeria. Studies on BPR and IT capability are scanty in developing
countries as most research has been conducted in the developed countries such as
the United States and European countries (Al-Mashari, Irani & Zairi, 2001;
Brandon, Bransford, Guimaraes & Tor, 1999; Currie & Willcocks, 1996; Shin &
Jemella, 2002). Thus, this study further extends the current knowledge of the
Operations Management in financial and banking organizations of developing
countries, generally, and Nigeria, specifically.
1.5.2 Practical contributions
This study provides empirical evidence on the relationship between the BPR factors
in the banking business in Nigeria and the moderating effect of IT capability on
10

organizational performance. Thus, the present study will benefit managers, business
practitioners, the Nigerian government and academics by enhancing their
knowledge and understanding concerning the influence of IT capability on the BPR
performance of banking and financial organizations in Nigeria. Both BPR factors
and IT capability are regarded as sources of competitive advantage. The outcome
from this study justifies further investigation and investment on IT.
1.6 Scope of the study
The study focuses on the BPR factors, IT capability and organizational performance
of banks and financial institutions in Nigeria. The adapted BPR factors in banking
are: 1) Change management; 2) Management commitment; 3) Project management;
4) Less bureaucratic structure; 5) Customer focus; 6) Effective process redesign; 7)
Adequate financial resource; 8) IT infrastructure (Salimifard, et al., 2010). The
moderating variable IT capability attribute in this study was adapted from study
conducted by Tippins & Sohi, (2003).
In respect of the organizational performance, this study considers multiple
measurement of performance (Financial performance,non-financialperformance).
The financial performance indicators consist of profit, profit growth performance
target and sales growth. The non-financial performance indicators include: response
to competition, future outlook, and success rate in new-product launch,
organizational performance, customer service management, market research,
customer relationship management, customer satisfaction, operational performance,
11

speed, quality service and process improvement indicators (Sidikat & Ayanda,
2008; Tennat& Wu, 2005; Terziovski et al., 2003; Wei, 2006).
The scope of the organizations surveyed includes commercial banks,
microfinancebanks and mortgage finance institutions in Nigeria. The study focuses
on the organisational level from the management perception of BPR factors, IT
capability and organisational performance. Thus, the sample was limited to the
managers or senior executives within the organization. The study could not identify
the view in the organization from the customer’s perspectives as the management
are in a better position concerning the operations, services, planning and decision-
making process of the organizations. Nigeria was selected, first, because it is a
developing economy that is striving to catch up with other developing nations like
Malaysia, Singapore, and South Africa. In Nigeria, the banking sector’s
contribution to GDP from 2004 to 2009 ranged from 8.0% to 10.5% (CBN, 2009).
The financial service industry is competitive in the Nigerian environment, with
each bank requiring IT and the strategic management approach to improve its
organizational performance (Idowu, Alu & Adagunodo, 2002).
1.6.1 Definition of variables
Three major variables are involved in the study: BPR factors in banking, IT
capability and organizational performance. The operational definitions of these
variables are briefly discussed at Table 1.1.
12

Table 1.1
Definition of Major Variables
Variable Operational Definition
A. BPR factors in This study defines BPR factors as the extent of the few reengineering
banking factors that lead to successful outcomes for reengineering projects.
1. Change This study defines change management as the extent of all human,
Management social related changes and cultural adjustment technique needed by
management to facilitate the introduction of newly designed
processes and structures of the systems, working and to deal
effectively without resistance.
2. Top This study defines management commitment as the extent of top

Management management commitment to ensure that employees contribute
Commitment towards the successful achievement and remarkable improvement in
the organizational performance of the bank.
3. Project This study defines project management as the extent of alignment of

Management strategy with corporate strategy, effective use of consultant, planning
and project management techniques and adequate identification of
project values and bank performance measurement.
4. Effective Process This study defines the process redesign as the extent of the
Redesign organization to create or redesign processes that have a direct impact
on customer value and cost on the operational system of a bank.
5. Customer Focus This study defines customer focus as the extent of research conducted
on customer related to their requirements, value, satisfaction,
competitive analysis and benchmarking for improvement of
performance of organization.
6. Adequate This study defines adequate financial resources as the extent of

Financial monetary resources available to meet the budgetary allocation for
Resources successful implementation of projects for improvement over the
performance of a bank.
7. Less This study defines a flatter structure as the extent of organizational

Bureaucratic structure that encourages creativity and innovativeness. The less
Structure (Flatter bureaucratic and more participative organization the better, which
Structure) would avoid failure of BPR implementation.
8. IT infrastructure This study defines IT infrastructure as the extent of the organization’s

expenditure incurred on IT infrastructure, IT personnel training, IT
consulting, IS maintenance, computers and software, effective
alignment of IT infrastructure and building an IT infrastructure,
proper IS integration, reengineering of legacy IS, increasing IT
function as competency, and use of software tools.
B. IT Capability This study defines IT capability attributesasthe extent to which

cumulatively the IT knowledge, IT operations and IT object's
dimensions of IT competency represent co-specializedresources that
provide an indication of the organization’s ability to understand and
utilize IT tools and processes that are needed to manage market and
customer information.
13

Table 1.1 (Continued)
Variable Operational Definition
1. IT knowledge IT knowledge is referred as the extent to which a firm possesses a
body of technical knowledge about objects such as computer-based
systems.
2. IT operations IT operations refer to the extent to which a firm utilises IT to
manage market and customer information.
3. IT objects IT objects refer to computer-based hardware, software and support

personnel.
C. Organizational This study defines organizational performance asthe level of bank

Performance performance (increase/decrease) in terms of both financial and non-
financial performance indicators."
Organisational performance refers to the organisational
effectiveness and represents the results of the organization’s
activities or focuses on the achievement of objectives (Hammer &
Champy, 1993; Henri, 2004).
1.6.2 Banks and financial institutions
A bank is a financial institution that acts as a financial intermediary for collecting
deposits and channels those deposits into lending activities. Banks mediate between
those customers with surplus capital and those with a deficit. Banks play a critical
role in the financial system and economy by allocating funds from savers to
borrowers, which enables the overall economy to function in an effective and
efficient manner. Brief discussions on the types of the bank focused upon in the
research are outlined below.
1.6.2.1 Commercial bank
A commercial bank is a financial institution that facilitates daily business
transactions and serves as an intermediary channels surplus fund to the
entrepreneurs who need the funds for productive purposes in the economy. Banks
accept deposits from the public, lend money to those who are in need at a premium
14

called interest, and allow depositors to withdraw using cheques, counter tellers and
electronic cards. Banks help in the remittance of funds from one place to another.
Other functions as a bank include issuing credit instruments, such as letters of
credit, traveller’s cheques to customers, underwriting capital issues, safe custody of
valuables, advice and information, ATM and credit cards.
1.6.2.2 Microfinance bank
Microfinance banks in Nigeria can be described as the financial services institution
for poor and household low-income earners. It is a unit banking system that acts as
linkage between the informal forms of rural savings, called ASUSU, commonly
practiced by rural and some urban petty traders, as well as small and medium
businesses. Abdulkadir (1989) stated that microfinance banks were formed in order
to improve the banking habit of the rural populist. Microfinance banks extend credit
facilities to rural farmers, artisans and craftsmen within the locality based on their
self-recognition, credit worthiness and guarantees from their social clubs,
cooperatives and societies. This method of lending, practices placing emphasis on
adequate collateral security before such loans are given.
1.6.2.3 Mortgage bank
Primary mortgage institutions (PMIs) were considered as retail mortgage banks
operating under the operational and supervisory regulations of the Federal
Mortgage Bank of Nigeria (FMBN). PMIs were motivated to encourage individuals
to open accounts with them and deposit regularly to save towards home purchase
15

and the mortgage of property. However, some Nigerian PMIs were engaged in
direct construction and the sale of houses in order to enhance their profit margin.
Many PMIs were further involved in the consummation of larger transactions
meant for the commercial and investment banking. This, coupled with other
challenges, exposed the PMI’s to severe risk, which led to the non-performance of
the institutions. Nubi (2006) confirmed this in his study findings in that over 80%
of PMIs were engaged in direct construction and outright sales to buyers, 70% of
the risk asset portfolio was short-term facility granted to commercial traders and
local purchase order financing (LPO) to contractors of government agencies. The
high default rate of risky financing, tight liquidity position in the financial service
sector contributed to the dismal performance of the PMIs in the country.
Generally, the primary functions as a bank (commercial, microfinanceor mortgage)
are collecting deposits from surplus customers and lending out to deficit clients.
The products/services for the bank include cheque and savings accounts, debit and
credit cards. The secondary functions as a bank include receiving payment for bills,
money transfer (local and foreign), FOREX, financial advisory services, issuance of
letter of credit, custodianship services, hire purchase and leasing, underwriting,
demand drafts, payment orders, customer’s bank reference letters, instrument
clearing and settlement.
1.7 Outline of the study
This thesis is presented in six chapters. Chapter one generally introduces the whole
work. The chapter is made up of the background of the study; problem statement;
16

research objectives and research questions about the study; significance to the
study; scope in the study; finally, the outline on the study.
Chapter two basically discusses the literature review relating to the concepts of the
three (3) major constructs: organisational performance, BPR factors and IT
capability. The chapter discusses the organisational performance of bank and
review of performance trend in Nigerian banking industry. This section highlighted
the summary of the previous studies on organisational performance banks and bank
process performance improvement methods. Furthermore, the organisational
performance measurements of financial and nonfinancial were discussed. On the
BPR factors, the concept of BPR as strategic management initiative, success and
failure factors were explained. In addition, previous studies of BPR and
organisational performance of banks and financial settings were discussed.
Moreover, the IT capability concept, measurement, model and moderating role of
IT capability were discussed. The relevance ofRBV, dynamic capability and
complementarity perspectives that supports theorganisation performance in
turbulent environment was explained.
Chapter three discusses the conceptual framework to the study, which arises from a
review from the literature, the direct and indirect relationship between the key
constructs and proposed hypotheses of the research.
Chapter four discusses the research methodology employed for the study. It
explains the research settings, sampling technique, strategy and method of data
17

collection, instrument measures, validity and reliability of the data analysis of the
study.
Chapter five presentedthe empirical result, testedhypotheses of the
studyanddescribekey findings of the study. Finally, chapter six provides discussion,
conclusion, limitations to the study and suggestions for future research.
18

CHAPTER 2 LITERATURE REVIEW
CHAPTER 2
LITERATURE REVIEW
2.1 Introduction
The purpose of this chapter is to provide an extensive review from the literature
relevant to the key construct of the study. The first section within the chapter
focuses on the organisational performance which provides an outline of bank
performance, and review of previous studies on bank performance. The different
performance measurement, performance improvement methods and organisational
performance dimensions were reviewed. In addition, the BPR concept and factors
were examined. The chapter next considers IT capability, definition, moderating
role, model, the relationship between IT capability and organizational performance
based on the theory of the RBV. Finally, the chapter provides the reasons for
choosing RBV, dynamic capability and complementarity perspectives as the
underlying theory for the study.
2.2 Organizational performance
The challenges for globalization of financial markets required changes on the part
of the market participants to move beyond local-level to achieve international
competitiveness. The entire banking industry is focusing on major process
performance enhancements and gains in the domestic market share as a catalyst for
successful diversification. Banks are concentrating their efforts on market segments
offering the potential for growth and enhancing performance, resulting in a
19

redirection within the overall financial services' sector.Organizational performance
comprises the actual output of an organization as measured against its inputs.
Performance measures allow companies to focus attention on areas that need
improvement by assessing how well work is done.
2.3 Bank performance
Organization is a structured entity that consists of physical, human, and financial
resources formed to achieve specific goals. Business organization is formed to offer
a variety of products and services for profit motive. Banks like every other
organizationtry to enhance its overall performance by assessing and comparing its
efficiency and effectiveness over a period of time. There are various criteria to
evaluate the performance of banks for successful survival in the period of
globalization and competition. Key indicators to measure organizational
performance includes: profitability, liquidity, management performance, leverage,
market share, productivity, innovation, quality of goods and services, human
resources (Dess & Robinson, 1984). Banks are concentrating their efforts on market
segments offering the potential for growth and enhancing performance, resulting in
a redirection within the overall financial services' sector. Innovative banking
services and processes were evolved as the market consolidates due to mergers and
acquisitions. This dual trend towards specialization and consolidation is forging
banks that will be able to compete in international and global markets. Performance
enhancement efforts are aimed at a complete realignment of internal processes. In
addition to cost containment strategies, focus is now on improving customer service
20

delivery. Organization processes must be efficient, and be more customer-friendly.
Attempts are being made to transfer approaches like process reengineering
initiatives that have proven effective in other industries, particularly manufacturing,
to the financial sector.
2.3.1 Overall performance of Nigerian banks
The history of the Nigeria banking system is complete with growth and burst cycles
in the number of operating banks and their branches. The total asset of all the banks
operating in Nigeria increased within a year after consolidation. An assessment of
the level of capitalization, intermediation activities improved significantly and the
leverage ratio decline (CBN, 2008; Somoye, 2008). However, the profit
efficiency/asset utilization has not been impressive, the industry return on equity
(ROE), and asset utilization ratios declined. Thus, the consolidation has improved
the structure of banks in terms of asset size, deposit base and capital adequacy.
Conversely, the profit efficiency performance has not been impressive. The banks
will need to be more efficient in terms of their ability to generate enough return to
justify the increase in equity base as well as investment in other resources.
The decline in the performance efficiency of Nigerian banks in terms of return on
assets, equity and operating cost requires urgent attention of the banks to re-
strategies for process performance improvement (CBN/BSD, 2008). Sanusi (2010)
argued that the poor performance indices of Nigerian financial institutions were due
to inadequate and inflexible operational processes. This was part of the revelations
of the special audit for all the Nigerian banks conducted jointly by the Central Bank
21

of Nigeria (CBN) and the Nigeria deposit insurance corporation (NDIC) in July
2009, for Commercial banks and in February 2010, for Microfinance banks. Vetiva
Research (2010) reported a quarterly performance of stocks on the Nigerian Stock
Exchange Market for the quarter ended September 2010, which indicated a negative
performance of (-2.49%) for the banking industry stocks compared to another
sector. The weak operational processes of banking services are responsible for the
decimal performance of the sector in Nigeria (Ibenta, 2010; Okpara, 2009).
2.3.2 Operating costperformance ofNigerian banks
The Chartered Institute of Management Accountants CIMA (1982) defines a cost as
the amount of expenditure (actual or notional) incurred on, or attributable to, a
specified activity. The implication of this definition is that when cost is incurred,
the intention is to derive a benefit. If the benefit is immediate, the cost translates
into expenditure, if, however, the benefit is for future, the cost translates into an
asset. This explains the difference between cost control and expenditure control in
Management. Banks in Nigeria incur two broad types of costs: interest expense and
operating cost (Madubueze, 2007). This is as a result of the financial intermediation
nature of business in banking. Interest expense represents the amount banks paid
for borrowing money from various customers, especially depositors. Many factors
determine the quantum of interest expense. These include the quantity of money in
supply, the demand for money, regulatory policy, competition for deposits and even
the length of time a bank is going to keep or utilize the money it is borrowing. It is
the rate of interest in the economy that determines the interest expense of the bank.
22

Operating cost is made up of other costs that exclude finance charges or interest
costs: expenses, such as staff or personnel salaries, depreciation, fees, and
administrative costs, such as repairs and maintenance, rent and rates, traveling and
insurance expenses.The operating cost for Nigerian banks is driven by a
combination of factors, such as the state of infrastructure in the economy; the level
of inflation into the economy, insufficient skilled and competent human capital,
adoption of new modern technologies for banking operations and insecurity across
the country. The effect of the increasing cost of doing business in Nigerian banks is
high (Ogubunka, 2010). Ogubunka (2010) reported that a cost trend in the Nigerian
banking industry isa reflection of the cost pressure on the economy. He argued that
it is evident bank costswere essentially on a growth path signifying banks must
have operated under cost pressure. The bank’s operating cost rose by an average of
37.6% between 2004 and 2008. Noteworthy, under operating cost, is the quantum
rise of 142% in 2007, as against a decline of 9% in 2006.
The average income growth of 43.8% compared with the total cost growth of 37%
evidenced that bank’s income, like their costs showed a pattern with an increase.
While the average growth rate in interest income of 46.4% compared with an
interest cost average of 58.2% indicated that the costs incurred by Nigerian banks
was more bullish than the income (Okpara, 2009).Therefore, for Nigerian banks to
operate efficiently, costs must be minimal. It is necessary to manage the costs to the
economy to reduce its obvious pressure in the cost trend. Reduced cost pressure in
the banking industry will moderate lending rates and operating cost to produce
salutary effects on the economy as a whole (Ogubunka, 2010).
23

2.3.3 Customer service management performance of Nigerian banks
Customer service entails proper and adequate treatment of customers in such a way
that they feel satisfied and fulfilled (Kotler, 2003; Knock, 1992). Before the
commencement of ebanking services by the Nigerian bank, customersspent hours in
long queues to make a transaction of either cash withdraw or deposit into their
account, as the transactions were manually processed (Ojeka& Ikpefan, 2011). The
old generation banks that are the market leaders dictated the pace of product and
services. However, the emergence of Internate and ebanking services as a result of
globalization and deregulation of the Nigerian banking sector by the Central bank
of Nigeria. New generation banks emerged with technological capabilities that
revolutionized the Nigerian banking sector (Agboola, 2008). Different ebanking
channels of services such as Internate banking, mobile banking, and ATM card
transactions were introduced (Agboola, 2008). The development of online banking
services offers opportunities for the banks to reduce the operational costs, retained
and expanded customer base, enjoy customer’s loyalty for convenient shopping,
enhanced competitive advantage, reduce the number of branches and right size the
operational staff (Agboola, 2007).
2.3.4 Previous studies on bank performance
Assessment of bank performance is essential for bank managers, regulators and
customer (depositors and investors). In a turbulent financial environment, bank
performance provides information for the investors and depositors to either retain
or withdraw their investment from the bank. Managers are constantly challenged to
24

improve their deposit or loan activities in order to enhance the profitability
performance of their organization. Tvorik and McGivern (1997) investigated
performance by comparing economic and organizational factors. They concluded
that organisational factors influenced the profitability more than that of the
economic factors. The performance of organizations could be assessed by RBV, as
explored by a number of researchers (Wernerfelt, 1984; Barney, 1986; Prahalad &
Hamel, 1990). Organizational performance could be linked with market orientation,
organization learning, human-resource productivity, quality improvement or any
other component (Day, 1994; Banker & Sinkula, 1999; Santos-Vijande et al.,
2005).
Generally, organizational performance is assessed by the application of financial or
both financial and non-financial measures. There are a number of studies on the
literature that used non-financial measures to evaluate the effectiveness and
performance of organization (Quinn & Rohrbaugh, 1983; Venkatraman &
Ramanujam, 1986). It is suggested that four models, i.e. human relations; internal
process; open system and rationale goal model could represent the organizational
performance (Quinn & Rohrbaugh, 1983). Wheelen and Hunger (1998) argued that
appropriate performance measures depend on the organizations and their objectives,
i.e. profitability, market share and cost reduction.
Financial indicators, such as return on investment (ROI), earnings per share (EPS)
and ROE are used by the number of organizations to measure their progress. ROI is
used to reflect the profitability while corporate performance was measured by
operating cash flows and ROI capital (Hasnan, 2006; Sorenson, 2002). Rashid et
25

al., (2003) measured firm's financial performance using the financial indicators,
such as return on assets, ROI and current ratios. Financial ratios reflect the financial
performance of the organization by an examination of financial statements, as
indicated by profitability, liquidity, leverage, asset utilization and growth ratios (Ho
& Wu, 2006). In today's global, dynamic and competitive environment, banks
should improve and diversify their products and services to meet changing
customers' demands to enhance their performance for successful survival. Table
2.1provides a summary of recent selected studies on bank's performance.
Table 2.1
Summary of Selected Previous Studies on Bank Financial and Non-financial
Performance
Type of Research &
Authors Measurement (DV) Findings
BPR Factors (IV)
Kim, Cha, Empirical survey of The results showed that board
Cichy, Kim data collected in a web- members involvement in strategy
& Tkach, based survey of COOs and the size of the board of
(2011) and GMs directors have a positive
influence on a private club’s
financial performance.
(Khong & Empirical Survey Perceived measure Market research, customer
Nair, (2006) Customer service of business satisfaction, and handling as the
management performance by important key drivers towards
Bontis (1998) successful implementation of
customer service management
Durkin & Literature review and The study indicates the worrying
Bennett, empirical research findings that employees show
(1999) unexpectedly low levels of
internalized commitment.
Farooq Review various studies The measurement The result indicates the absence
(2003) that analyse the indicators of of a competitive environment
structure and inequality include: among the banks, because, all the
performance of Lorenz's curve, variables (deposit, asset, equity,
commercial bank's Gini coefficient, advances, employment
frame work of and Herfindahl distribution) are highly skewed.
organization. index and The profitability performance of
concentration ratio. the banks deteriorated.
26

Table 2.1 (continued)
Type of Research &
BPR Factors (IV)
Smith & Empirical survey The product The study found no significant
Chang, carried out in Taiwan quality, customer difference on the implementation
(2010) public companies. The service, advert, of CRM system among
CRM implementation awareness Taiwanese industries.
impact on: generation, service
Customer satisfaction quality,
Customer loyalty responsiveness
Degree of customer reliability, empathy
focus and technology
Customer-related items measure the
strategies DV.
Akinlolu & Empirical Survey Assessing the level Investment in IT in the bank is
Oyesola, Banking operations of activities, ATM, important for the effective and
(2008) processes Cash's transactions, efficient service delivery,
efficiency of ICT, payment system and other
intensity of appropriate transactions that
customer's traffic in enhance the organizational
a banking hall, etc. performance.
Agboola, Empirical survey on Measurement of The study found that fundamental

(2007) Nigerian bank's DV based on changes in quality of banking
adoption of ICT innovative operation services occurred from
Implementation of IT: technologies, 1990 to 2005. Since then, other
degree of utilization electronic card products,
and impact of IT on transfers, telephone banking,
bank's operation. continued to increase.
Technology became the driving
force for competition and that
greatly improved customer
service management, operation's
efficiency and overall
performance.
Akhtar Using data Measurement of The study found an improvement
(2010) envelopment analysis change in total in the average productivity of
(DEA) efficiency and factors of banks as a result of technological
productivity indices of productivity to changes relative to efficiency.
banks in Saudi Arabia reflect performance
over time
Idris (2011) Total quality Measure The results showed that the
management (TQM) performance using relationship between the element
and sustainable self-reported of leadership, best practices,
company performance: manager’s productivity, customer, employee
Examining the perceptions in terms and community focus and
relationship in of profitability, company performances is
Malaysian firms financial, significantly supported.
productivity and
level of market
share.
27

Table 2.1(continued)
Type of Research &
BPR Factors (IV)
Nura & A toolkit on effective Measurement of The study revealed that majority
Osman decision making effective decision in of decision made from 18th to 19th
(2012) measurement in organization using century were not measured.
organizations qualitative and While the period between 20th
quantitative and 21st century organization
perspectives decisions were measured based
on qualitative or quantitative
measurement strategy.
Nura & A toolkit on effective Measurement of The study revealed that majority
Osman decision making effective decision in of decision made from 18th to 19th
(2012) measurement in organization using century were not measured.
organizations qualitative and While the period between 20th
quantitative and 21st century organization
perspectives decisions were measured based
on qualitative or quantitative
measurement strategy.
Dick (2006) examined the service quality and bank performance in the United
States. Deregulation increased the branch network of banks to attract more and
more customers who resulted into more profits with increased risks due to changing
demographics. Findings showed that improved service quality resulted in increased
service fee, and risk could be reduced by geographical diversification and hedging.
It is reported that two principal paths can improve financial performance of banks,
i.e., by improving operational efficiency base on time, quality, customer or
improvement in customer services (Duncan &Elliott, 2004; Hasnan, 2006). Dick
(2006) reported that market concentration was not affected by its size. Dominant
banks have almost similar influence on markets of different size. The study found
that service quality is enhanced and focused by dominant banks.
Performance evaluation provides sufficient information to take better and informed
business decisions. Better decisions result in greater profitability and improved
performance in the institution and its shareholders (Crider, 2007). Farooq(2003)
reported that the performance of privately owned banks is better than that of state-
28

owned banks. Hence, more customers were attracted by the high-quality service,
adequate capital base and sound management of private banks.
Furthermore, Chowdhury and Kashfia (2009) reported that analysis on the growth
and development achieved of selected private banks in terms of stable growth of
branches, employees, deposit, loans and advances, net income, earnings per shareis
better compared to the state-owned banks. In addition, Calomiris (1999) argued that
the merger and consolidation of bank operation's results for the improvement of
efficiency that is associated with operating cost reduction and enlargement of bank
customer relationships. Adolphus (2007) examined the financial indicators in
Nigerian banks. He found that the capital adequacy ratio significantly correlates
negatively with bank solvency. The cash reserve ratio correlates negatively and
significantly with the proportion of non-performing loans. The total loans to
deposits correlate negatively significant with bank solvency. The productivities of
commercial banks in Saudi Arabia were found be enhanced as a result of
technological changes that improved their operational efficiency (Akhtar, 2010).
In a similar vein, technology became the driving force for competition that greatly
improved customer service management, operation's efficiency and overall
performance of Nigerian banks (Agboola, 2007).Investment in IT in the bank is
important for the effective and efficient service delivery, payment system and other
appropriate transactions that enhance performance (Akinlolu & Oyesola, 2008).
Similarly, Organizational performance in other service sectors such as a hotel
reflects an organization's understanding and knowledge regarding customer needs
29

and expectations (Slater & Narver, 1995). Razalli (2008) found that performance of
a company operating in the service industry could be improved through good
leadership practice and provision of customized service design for select clientele
in the service sector. Kim et al. (2011) argued that size of the board of director and
involvement in company’s strategy and size of directors of its directors have
positive influence on the private club financial performance.
Furthermore, Idris (2011) showed that the relationship between the element of
leadership best practices, productivity, customer, employee, community focus and
performance are significantly related. However, empirical survey of public
companies in Taiwan regarding customer relationship management implementation
impact on customer satisfaction, customer loyalty, degree of customer focus and
related strategies found no significant difference among Taiwanese industries.
Therefore, organization should strive to maximize their customer satisfaction for
better profitability, increased sales volume,which ultimately improves overall
performance for the long-term benefit (Baker & Sinkula, 1999).
2.3.5 Bank process performance improvement method
Business process improvement is an approach to keep pace with the changing
business environment, persistent technological, political and organizational changes
to increase the effectiveness and efficiency of business processes that provide
output to internal and external customers (Harrington, 1991). Since the BPR has
become a part of the mainstream of business improvement (Baines, 1996), many
different terms in the literature are related to the improvement of business processes
(Siha & Saad, 2008; Zairi & Sinclair, 1995).
30

Examples are: business process improvement (BPI) (Yavas & Yasin, 2001;
Harrington, 1991); business process redesigns (Davenport & Short, 1990; Carr,
1993); business (process) reengineering (BPR) (Hammer, 1990; Al-Mashari &
Zairi, 2000); core process redesigns (Heygate, 1993; Hagel, 1993); business
restructuring (Tanswell, 1993; Talwar, 1993); continuous improvement process or
Kaizen (Imai, 1986; Juran, 1991; Juran &Gryna, 1993; Deming, 1986; Deming,
2000). Six-sigmais a quality improvement methodology for organisation
performance (Pande et al., 2000; Breyfogle, 2003; Harry & Schroeder, 2006).
Depending on the degree of improvement (radical or incremental), the two areas
BPR and BPI can be distinguished, whereas reengineering (BPR) is synonymous
with radical improvement (Hammer, 1990; Hammer & Champy, 1993) and process
improvement (BPI) to incremental improvement (see Harrington, 1991; Coskun et
al., 2008). Both areas can be seen as a subset of redesign (Valiris & Glykas, 1999).
Shin and Jemella (2002) added another degree of improvement called quick hits,
which focuses on the immediate payback through process improvement within a
few months, whereas BPR and BPI focus, on the long run. Even though the
philosophy and procedure of the above-mentioned approaches are different they all
have been one-goal – the redesign (radical or incremental) and improvement of
business processes.
Hammer (1990) defines performance improvement as a structured approach to
performance improvement that caters for the disciplined design and careful
execution of a company's end-to-end business process. However, not all
31

performance improvement efforts are successful. As reported on the literature, 50-
70 percent of the BPR as performance improvement initiatives fail to achieve their
objectives (Hammer&Champy, 1993). Thereasons behind the failure of
performance improvement efforts include: a focus on the tactical issues not on the
issues that affect the entire business, and the lack of knowledge transferability of
BPR projects. Lapre and Wassenhove (2002), performed an extensive study of
European manufacturers and found that both operational and conceptual learning
are important for knowledge transferability, and, consequently, for both
productivity and profit improvement.
2.3.6 Suitability of reengineering as radical performance improvement

method
The suitability of the reengineering method for process improvement to the
organizational context is of great significance. Although the process reengineering
could benefit manufacturing and service firms, there is a distinction in its
implementation to suit the unique situation of the firm (Shin & Jemella, 2002). The
main causes of failure in reengineering practice are: Negligence of the work
environment aspects to the design process; the rigidity to the infrastructure system;
and consideration of human factors, such as costs that need to be reduced, rather
than a resource to be developed. As to the reengineering success factors, it is
noticed that reengineering efforts are behind many positive outcomes, such as:
reduce a cost, increase productivity, reduce time, improve quality, reduce business
cycle, increase profit, and decrease response time. Therefore, based on the above
empirical evidence, clearly the key drivers for reengineering success comprise:
32

questioning the fundamental assumptions of a process, drastic improvement of this
process, alignment with corporate strategy, and effective use of information and
communication technologies.
2.3.7 Organizational performance measurement
The organisational performance measurement has become increasingly necessary
for the continued survival of organizations. There are various literatures on
performance measurement, and issues concerning organizational performance. In
the past, performance measurement was based on quantitative financial measures,
while less emphasis has been placed on the qualitative components of performance
measurement. Measurement systems consist of multiple measures that can either be
objective or subjective, financial or non-financial (Nura & Osman,2012). Hence,
Maskell (1992) suggested that in addition to financial measures, a non-financial
performance measurement technique should also be used by organizations, as,
overtime, the company needs changing. It is also important to involve qualitative
indicators, such as customer service and satisfaction, product quality, learning and
innovation (Kaplan & Norton, 1996; Neely, 2002; Neely et al., 2002).
According to Waggoner et al. (1999), performance measures within an organization
can be designed based on six different approaches:
a. The engineering approach, which measures the input/output ratio;
b. The system approach which sets objectives for each work unit and measures
the achievement of these objectives;
33

c. The management accounting approach measuring the achievement of financial
results;
d. The statistical approach, which extends the engineering approach by providing
empirical tested information about input/output processes;
e. The consumer marketing approach, which measures consumer satisfaction,
conformity with product attributes and service delivery system.
In order to achieve business excellence, it is necessary to an organization to develop
a system for performance measurement. To address this issue, an interdisciplinary
review of organisational performance measurement frameworks is adopted in both
the academic literature and business press (Waggoner et al., 1999; Kuwaiti & Kay,
2000; Lin & Chen, 2007). One cannot evaluate organisational performance without
taking organizational goals into consideration. The modern business environment
demands a multi-goal orientation.
Today’s business environment is characterized by the increasing importance and
strength of various stakeholder groups. It has become quite obvious that all
stakeholders need to be taken into account when assessing the performance of
modern companies. This is the main idea of Freeman’s stakeholder theory
(Freeman, 1984). The stakeholder view maintains that firms are accountable for
stakeholders and not just shareholders. The view that the corporation has
obligations only to its stockholders is replaced by the notion that there are other
groups to whom the firm is also responsible. Groups with a stake in the firm include
shareholders, employees, customers, suppliers, lenders, the government, and society
34

(Berman et al., 1999; Harrison & Freeman, 1999; Hillman & Keim, 2001; Riahi-
Belkaoui, 2003).One important notion revealed in many studies is that building
better relations with primary stakeholders like employees, customers and suppliers
could lead to increased shareholder’s wealth. A sustainable organizational
advantage may be built with implicit assets that derive from developing
relationships with key stakeholders (Hillman & Keim, 2001). When studying the
relationship between stakeholder management and a firm’s financial performance,
Berman et al. (1999) found that fostering positive connections with key
stakeholders (customers and employees) can help a firm’s profitability.
Therefore, due to the significance of various stakeholders, organisational
performance should not be solely assessed by financial indicators. There are several
approaches to organisational performance measurement that encompass different
stakeholder’s perspectives (Tangem, 2004; Hasnan, 2006). The balanced scorecard
(BSC) (Kaplan & Norton, 1992, 1993, 1996) is the most established and commonly
used (Neely, 2005; Razalli, 2008), but certainly not the only one. The multi-model
performance framework (MMPF) model by Weerakoon (1996) is also very
interesting and has been four-dimensions, including employee motivation, market
performance, productivity performance, and societal impact, and covers the
satisfaction of various stakeholders, such as customers, investors, employees,
suppliers, and society. Prism conceptual performance framework suggests that a
performance measurement system should be organized around five distinct
dimensions such as stakeholders, customer, productivity, motivation and efficiency
linked to perspectives of performance (Hasnan, 2006; Tangem, 2004).
35

Organisational performance in this study refers to the level of bank performance
(increase/decrease) in terms of both financial and non-financial performance
indicators. Organisational effectiveness represents the outcome of organisational
activities (Henri, 2004). Empirically,organisational effectiveness is the ultimate
dependent variable in research on organizations(Cameron, 1986). The perception of
organizational performance is linked to the continued success and achievement of
an organization. Although there is wide-ranging literature on performance, there is
still no consensus definition of the term performance (Johannessen, Olaisen, &
Olsen, 1999). Murphy, Trailer and Hill (1996) found the use of the term
performance to include 71 different measures of performance categorized into eight
(8) dimensions of both financial and non-financial measures.
The majority of the previous studies used financial and non-financial indicators to
measure performance (Johannessen et al., 1999; Murphy et al., 1996). The debate
on what performance measurement to use continues, as not all the criteria apply to
all settings (Cameron, 1986).A review from the literature for the evaluation of
performance in the organisational context by Gomes, Yasin and Lisboa (2004),
reveals the different emphasis on the performance measurement depending on the
objective of the organization in that particular situation. There are many possible
benefits from reengineering that translate into improved organisationalperformance.
However, because of the wide possibility of benefit from company innovativeness
on performance, a multiple dimensional scale of performance measurement offers
more comprehensive operationalization of organizational performance than the uni-
dimensional approach. Table 2.2 provides a summary of previous performance
measures on financial and non-financial performance from various studies.
36

Examples on some financial performance indicators employed in previous studies
are: profitability, the success rate of new service (product) introduction, after-tax
ROI, sales growth, and after-tax return on assets. Examples of non-financial
performance indicators include: customer satisfaction, customer focus, market
research, and customer relationship management, quality and process improvement.
Therefore, based on the previous studies, this study considers multiple
measurements of performance (Financial performance and Customer service
management performance). The financial and non-financial performance indicators
consist of: profit, profit growth performance target, sales growth, response to
competition, future outlook, and success rate in new-product launch, overall
business performance, customer service management, market research, customer
relationship management, customer satisfaction, operational performance, speed,
quality service and process improvement.In this study, the perceived measures of
the financial and non-financial performance within the organization are used
because subjective measures were found to be correlated with the objective
measure of performance (Dess & Robinson, 1984). In addition, the previous studies
(Lyles & Salk, 1998; Hansen & Wernerfelt, 1989; Bart et al., 2001) confirmed that
the reliability and correlation between objective measures and perceived measures
are strong. Similarly, previous studies conducted by Bontis (1998), Bontis et al.
(2000), Idris (2011) and Nura and Osman (2012) revealed that the subjective
measure of performance (financial and non-financial) is feasible.
37

Table 2.2
Summary of Selected Studies on Organizational Performance Dimension
Indicators Studies
1. Speed/delivery Hammer & Champy (1993); Ascari, Rock,
a. Time reduction & Dutta (1995); MacDonald (1995); Kamal
b. Cycle time & Agrawal (1997); Newman (1997);
2. Lower costs Sohmen (1998).
3. Quality
a. Few mistakes
b. Reduced error
4. Service
a. Customer service
b. Customer satisfaction
5. Process improvement Childe et al. (1994); Kamal & Agrawal
a. Reduce the number of activities (1997); Sohmen (1998).
6. Productivity Childe et al. (1994); Ascari, Rock, & Dutta
a. Improved financial strength (1995); MacDonald (1995); Riddle (1995);
b. Decrease in staff turnover Stainton (1995); Jelinek et al.
(1999);Ascari, Rock, & Dutta (1995);
MacDonald (1995).
7. Customer satisfaction Sun (2000)
8. Financial profitability
9. Competitive advantage
10. Employee's satisfaction
11. Environmental protection
12. Financial performance Bontis (1998); Bontis (2000); Bontis &
a. Industry leadership, Future outlook Fitz-enz (2002); Bontis, Chua & Richardson
b. Profit, Profit growth, sales growth (2000)
c. After-tax return on assets
d. After-tax return on sales
e. Overall response to competition
f. Success rate in a new-product launch
g. Overall business performance
13. Customer service performance Khong and Richardson (2003); Hammer &
a. Market research, Customer focus Stanton (1995); Cateora & Graham (1999);
b. Customer relationship management Hammer & Champy (1993)
The above performance measurement indicators were similar to those of Hammer
& Champy (1993) who suggested cost, quality, service and speed as performance
measurement. Therefore, based on previous studies, this study considers multiple
measurements of performance (Financial performance and Customer service
management performance). The financial and non-financial performance indicators
consist of profit, profit growth performance target, sales growth, response to
competition, future outlook, and success rate in new-product launch, overall
38

business performance, customer service management, market research, customer
relationship management, customer satisfaction, operational performance, speed,
quality service and process improvement.
2.4 BPR factors
The globalization and deregulation of the Nigerian banking sectorhas necessitated
small and medium banks to enhance their professional capability by engaging in-
process change and reengineering to bring about efficiency and accuracy to meet
the needs of the customer. In addition to these challenges, banks in Nigeria operate
in a turbulent environment, as there were over 1,023 registered banks (Commercial
banks, Microfinance and Primary mortgage finance) as in December 2009 (CBN,
2009). To survive and excel in this type of business environment is a major concern
for the Nigerian banking industry. BPR is a management concept that seeks to split
away from the old-fashioned and traditional processes to new ways of organizing
people, processes and the use of IT to achieve better resultsthat are of help to the
banks. Reengineering is the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in a critical quantum leap
ofcontemporary measures of performance, such as cost, quality, service, and speed
(Hammer & Champy, 1993).Thisdefinition comprises four keywords: fundamental,
radical, and dramatic and processes.
BPR seeks to split away from the old and current processes to come up with new
ways of doing things/tasks, organizing people and making use of IT systems so that
the resulting processes would better support the goals of the organization. The basic
39

operation in a business is the first and important priority to reengineering. The
essential question of how an organization should be run should be asked by the
business owners, the answers to these questions always lead to an understanding of
the fundamental operations of the company and rationale behind any existing
assumption. Re-engineering starts with no assumption and companies that
implement reengineering must guard against such assumptions, take nothing for
granted and must determine what a company needs and how effectively it can be
done.Radical redesigning is the second keyword to reengineering, which means
abandoning all existing arrangement and methods and creating a completely new
contemporary system of achieving a task. This means that reengineering is all about
beginning with a new process with no assumption or modification. Therefore,
business processes are re-innovated.The third keyword in the BPR concept is
dramatic improvement, reengineering, which involves achieving greater
performance unlike making incremental improvement. Marginal improvement
requires re-adjustment while dramatic improvement demands doing away with an
existing process and replacing it with something new and contemporary. The fourth
keyword in defining BPR is processes. This is the paramount concept in
reengineering. The division of labour approach, which is wholly applied in classic
business structure, should be transformed to the process-based approach to ensure
the effectiveness and efficiency of processes.
The advocates of BPR claim that if the concept is correctly implemented,
organizations would achieve a quantum leap of improvement in cost reduction,
speed, productivity and profitability (Hammer & Champy, 1993). BPR is a method
for improving the performance of an organization with the objective of finding a
40

new way to organize people, and redesign processes with the aid of IT to achieve
organisational goals. When restructuring the business process, the content of jobs
and organisational structure changes for all employees to bring about radical
changes in values and beliefs. As a result, reengineering is not complete until all
elements of the business system, i.e., business processes, jobs and structures,
changes because people, jobs, managers and values are linked together (Hammer &
Champy, 1993).
There is considerable literature on CSFs of BPR implementation with evidence
concerning the performance effect; hence, there is a need to examine the success
factors in relation to performance (Devaraj & Kohli, 2000). The importance of BPR
implementation in the Nigerian financial service industry was understood by the
bank manager as a tool to achieve competitive advantage, and many do not fully
understand the success factors that drive the implementation (Ringim, Razalli, &
Hasnan, 2011). No doubt reengineering in the present-day globalize economy is not
only a necessity but important as the prerequisite for success of any financial
institution. BPR factors are strongly related to the mission and strategic goals of the
business or project. Whereas the mission and goals focus on the aims and what is to
be achieved, BPR factors focus on the most important factors and get to the very
heart of what is to be achieved and how to achieve it.
The BPR factors are those important factors for success. They were originally
developed to align planning with the strategic direction of an organization. It is only
when the most important factors have been identified that practitioners have a
chance of organizational success. Various BPR factors were developed and
41

validated by authors from studies in organizations operating in different industries
such as manufacturing, education, and services. The BPR factor is aptly chosen to
represent the factors that are important for the achievement of the desired outcome
of organizational performance. BPR factors are of importance in that these key
areas of activity should receive constant and careful attention from management.
BPR factorscertainly differ according to the industry and environment as the
company’s position within the industry changes. It is important to understand what
factors of BPR in the implementation and related to organizational performance
improvement.
The literature review on BPR studies shows that the opinion of scholars on the
subject matter can be classified into two (Herzog, Polajnar, & Tonchia, 2007). The
first group includes the scholars who agree that BPR is a panacea to turbulent
market changes, customer demand and competition (Davenport & Short, 1990;
Hammer, 1990, Terziovski, Fitzpatrick, & O’Neill, 2003), while the second group
holds the opposing view claiming that BPR has failed to meet its expectations
(Mumford, 1995; Biazzo, 2002). According to Al-Mashari, Irani and Zairi (2001),
the average success rate achievement of implementing BPR in developed countries,
Multi National Corporation was 55 percent, being 61 percent achieved in the USA
and 49 percent in Europe. The majority of studies on BPR have focused on the
importance of the various factors for successful implementation in the
manufacturing industry, while relatively few studies have been conducted in the
banking industry. Therefore, it is risky to generalize the BPR success rate, because
the evaluation is subjective as cross national differences (such as cultural belief,
norms and values) may exist. Reengineering is a painful process because the whole
42

set of values and beliefs in the organization are being challenged (Hammer &
Champy, 1993).
The lack of empirical study on BPR covering a wide range of issues with rigorous
methodology has been confirmed by various authors (Motwani et al., 1998; Al-
Mashari et al., 2001; Tenant & Wu, 2005). From the available survey, we can
briefly discuss the following previous studies of BPR factors.Guimaraes and Bond
(1996) identified six organisational BPR factors for implementation. These include:
process change, goals and objective's accomplishment, implementation problems,
derived benefits and organisational performance. The study further indicated the
success factors for implementation to include external, employee empowerment,
operational, communication, method and tools and leadership. Terziovski et al.
(2003) reported six predictors for BPR: strategy, management commitment, IT,
customer focus, continues improvement and performance outcomes. Maull et al.
(2003) presented ten dimensions in which BPR can be measured in five themes:
strategic approach, performance measurement, creating business process
architecture, human and organizational factors, and role of IT. Herzog et al. (2007)
suggested seven factors based on a synthesis of the literature and previously
performed surveys. The seven success factors are top management commitment,
education and training, teamwork, project of BPR, employee cooperation, IT
support, levers and results. Ahmad et al. (2007) found seven success factors to be
essential to BPR implementation in higher educational organizations. These
include: teamwork, quality culture, quality management system, rewards, change
management, less bureaucratic and participatory management, and adequate
financial resources.
43

The BPR studies that examined lessons learned from BPR approaches were case
studies (Broadbent, Weill, & Clair, 1999; Caron, Jarvenpaa, & Stoddard, 1994;
Clemons, Thatcher, & Row, 1995; Davenport & Beers, 1995; Earl, Sampler, &
Short, 1995; Sarker, Sarker, & Sidorobo, 2006; Stoddard & Jarvenpaa, 1995;
Ahmad et al., 2007; Salimifard, et al., 2010). AL-Mashari and Zairi (1999)
classified the CSFs of BPR implementation into five dimensions, with each
construct having items that measured it. The five latent constructs are
changemanagement, management competence, organizational structure, BPR
project management and IT infrastructure.
Therefore, BPR factors in the present study have been adapted based on the scope
of study and fit to the banking industry, which isin line with the previous studies
(Al-Mashari & Zairi, 1999; Ahmad et al., 2007; Salimifard, et al., 2010). BPR
factors are the independent variables, which include 1) Change Management, 2)
Management Commitment, 3) Less bureaucratic and flatter organizational structure,
4) Project Management, 5) Customer Focus; sixeffective process redesign, 7)
Adequate financial resources, and 8) IT infrastructure. These eight BPR factors are
essential elements to the successful transformation process. Each of these factors is
discussed in detail below:
2.4.1 Change management
One of the most overlooked obstacles to successful project implementation is
resistance from those whom implementers believe will benefit. Most projects
underestimate the cultural impact of the major process and structural change, and,
44

as a result, do not achieve the full potential of their change effort. Change is not an
event, despite the many attempts to call people together and have a meeting to
make a change happen. Change management is the discipline of managing change
as a process, with due consideration that we are people, not programmable
machines. It is about leadership with open, honest and frequent communication. It
must be okay to show resistance, to voice issues, and to be afraid of change.
Organizations do not change. People change, one at a time. The better one manages
the change, the less pain one will have during the transition, and the impact on
work productivity will be minimized. Reengineering is not downsizing,
restructuring or automation. Reengineering eliminates works, not jobs or people. It
is concerned with how work is done not how organizationsare re-structured.
Reengineering enables process design, rather than providing a new mechanism for
performing old ones, and it is revolutionary.
Change Management can be referred to as a process for restructuring and
redesigning the organizational activities in order to keep abreast of challenges and
for meeting the needs ofcustomers (Moran & Brightman, 2000). Changes in
organization are being managed by the leader or manager for the organization by
incorporating the employees into the process to achieve a positive goal.Radical
changes in organizations are being achieved through effective communication,
involvement of employees, reward and motivation, socio-cultural adjustment need
to overcome resistance and facilitate the acceptance of the desired procedures or
policy (Tower, 1996; Zairi & Sinclair, 1995). The factors that relate to change
management in organizations include:
45

2.4.1.1 Reward and motivation
Organizations motivate employees through various means.The method of
motivation can be in a form of addressing the hygienic or motivating factors. The
hygienic factors include inducement by increasing salary, and bonuses. The
motivating factors encompass job enlargement, job enrichment, job rotation,
promotion, offering higher responsibility, and acknowledgement of higher-
performance achievement of employees. The organization reward system should be
revised as part of the motivation process for the BPR effort (Jackson, 1997). An
effective motivation package for an organization has to be wide spread and give
equal chances and opportunities for all employees (Towers, 1994). Job's
enlargement through the introduction of new job titles can be considered as an
example of motivation and encouragement of people to endorse the reengineering
programmewithout fear.
2.4.1.2 Effective communication
Communication is another important change management tool perceived as very
critical in facilitating BPR (Hammer & Stanton, 1995). However, it is also
considered by some organizations to be the most difficult part of BPR. Davenport,
(1993) emphasizes the need for communication throughout the change process for
all levels and for all individuals, and stresses that, it should occur regularly between
the top management and the subordinate. The communication should discuss issues
related to sensitive issues such as employee’s right sizing, downsizing openly and
honestly, business strategies, vision, mission, customers and competitors. Effective
46

communication in organizationkeeps employees up-to-date with related changes in
policies and procedures. Communication in organizationsavoids rumourmongering
and filters noise.Communication should be open, honest and clear, especially when
discussing sensitive issues relating to change, such as personnel reductions
(Davenport, 1993; Janson, 1992).
2.4.1.3 Creating effective organizational culture
An effective organizational culture exhibits the professionalism of its employees to
work as a team for achievement of the desired objectives. BPR encourages
integration; teamwork; cooperation; coordination; empowerment of employees in
the reengineered work environment; createeffective organization’sculture norms
and valueacceptable to the employees. However, trust and honesty among team
members are also needed, as well as within the organization as a whole (Dixon,
Arnold, Heineken, Kim, Mulligan, 1994; Jackson 1997). Organisational culture is
an important factor in successful BPR implementation. Cooperation, coordination,
and empowerment of employees are the standard characteristics of an innovative
organisational environment. Aclassless culture supports these attitudes (Ahadi,
2004). An egalitarian culture should be developed within the organization to enable
the successful implementation of any organizational change. It also avoids stress
and resistance to change among employees, which is acknowledged as being a
fundamental barrier to change (Abdolvand et al., 2008).
47

2.4.1.4 Stimulating receptivity to change
Stimulating Receptivity to Changemeasures the extent of the organizations
influence on its employees to accept the new changes introduced for overall
organisational improvement. The organisational influence requires top management
interaction with subordinate and various teams within the organization to achieve
positive results (Hall, Rosenthal, & Wade, 1993; Guha, Kettinger & Teng, 1993).
2.4.1.5 Employee’s empowerment
Employee’s empowerment is an effective factor leading to the success of BPR
implantation. Empowerment gives a chance to its employees to contribute
positively to the organization by making decisions without reference to their
supervisor, at the same time, deciding on how work should be tackled or the right
technology/tools to be used in achieving the organizational objectives. As BPR
results in a top-down approach, decisions are being pushed down to lower levels,
and empowerment of both individuals and teams become a critical factor for
successful BPR efforts (Thomas, 1994; Cooper & Markus, 1995; Hinterhuber,
1995; Dawe, 1996). It establishes a culture in which staff from all levels feels more
responsibly accountable (Rohm, 1993) and promotes a self-management and
collaborative teamwork culture (Mumford, 1995).
2.4.1.6 Human involvement
Human involvement in an organisationalproject decision process facilitates
achievement of its objectives (Jackson, 1997). Human involvement is a powerful
48

instrument for organisational culture that encourages employee’s motivation and
loyalty to the organization. The culture of experimentation is an essential part of a
successfully reengineered organization. Therefore, people involved or affected by
BPR must be prepared to endure errors while reengineering is taking place.
2.4.1.7 Training and education
Training and Education refers to the extent of the organization’s activities that
increase job involvement and facilitate updating the skills of employees in
implementing BPR. Many researchers consider training and education to be an
important component of successful BPR implementation (Zairi & Sinclair, 1995).
Business managers, line managers,Information system managers and other staff in
the front-line are the people who benefit most from education and training activities
of BPR (Tower, 1994). New processes may require training, technology and data
availability. The change to the business and job environment, and the availability of
a supportive infrastructure should be considered.
2.4.2 BPR Project management
As effective Project management is considered as the critical factor of change
management. A pilot project indicates failures and risks that provide the
opportunity to make appropriate changes to the efforts, thus promoting success and
preventing possible disasters. BPR project management refers to the extent of the
alignment of project strategy with the corporate strategy, effective use of
consultants, effective planning and project management techniques and adequate
49

identification of values and performance measures of the project (Hammer, 1990).
Successful project implementation is highly dependent on effective project
management. New processes would be created to define jobs and responsibilities
across the existing organisational functions (Davenport & Short, 1990). There is a
clear need to create a new organisational structure that determines how project
teams are going to work, how human resources is integrated, and how the new jobs
and responsibilities are going to be formalized. Project management is important in
order to plan and manage the BPR to be correctly implemented (Al-Mashari &
Zairi, 2000). Ahmad et al. (2007) posited that employees should be adequately
trained to get the required skills in doing tasks assigned to them. The reengineering
strategy should be closely aligned with, and tied to the corporate strategy and core
competencies that are critical to the organization's success.
2.4.3 Top management commitment
It is the most evident managerial practice that directly affects the success of the
organization (Hammer & Stanton, 1995; Holland & Kumar, 1995; Guimaraes &
Bond, 1996). Top management commitment ensures that employees contribute
towards the successful achievement in remarkable organizational performance as a
result of the implementation of projects in the organization. A lack of commitment
in organizations mayresult in a lack of resources and funding that terminates
redesigning of the processes. Top management: the real involvement of top
management in the organizational performance. It should be effective, real, active
and clear to involve all employees. Top management leaders should have a clear
50

knowledge about the company’s situation.In addition, they should have enough
knowledge of the project and a realisticexpectation of the results. Top management
is responsible for each activity on all levels within the organization (Singh & Kant,
2008). They should provide a clear direction or vision in order to help BPR team
members to be directed towards the desired results (Sung & Gibson, 1998).
Major business process change typically affects processes, technology, job roles
and culture in the workplace. Significant changes to even one of these areas require
resources, money, and leadership. Changing them simultaneously is an
extraordinary task. If top management does not provide strong and consistent
support, most likely, one of these three elements (money, resources, or leadership)
will not be present over the life of the project and severely cripple the chances for
success. It may be true that consultants and reengineering managers give this topic
a lot of attention, as most current models of re-designing business processes use
staff functions and consultants as change agents, and often the targeted
organizations are not inviting the change. Without top management sponsorship,
implementation efforts can be strongly resisted and ineffective.
Top management support for large companies with corporate staff organizations
has another dimension. If the top management within the line organization and staff
organization do not partner and become equal stakeholders in the change, and only
have staff management support, the organization is most likely ill-prepared for a
successful reengineering project (line management in this context includes the top
managers of the operation who are ultimately accountable for business performance
P&L, and customer service, etc.). Projects that result in a major change in an
51

organization rarely succeed without management support for the line organization.
Top management commitment is the highest level of management where the top
officials determine the strategic direction of the organization. In order to have
successful BPR, top management should communicate with employees in order to
motivate the movement, and control the BPR users (Abdolvand et al., 2008).
2.4.4 Customer focus
Customer focuses on the external orientation are based on customer research,
competitive analysis, analysis of customer requirements on products/services, and
firms that are able to meet customer demand to achieve a competitive advantage
over their competitors (Chen & Chiu, 2008). Customer requirements and
expectations should be defined and measured, and processes should be defined
broadly in terms of customer values. Benchmarking allows learning from the
experience of other organizations as well as from one reengineering process to
another in the same organization. Electronic banking (e-Banking) is an innovative
way of doing business in an information environment. An innovative organizational
requires customer involvement during BPR (Zirger & Maidique, 1990).
Organizations should gather information from their customers to drive the BPR
projects. This helps them to recognize their customers' needs (Ahadi, 2004).
2.4.5 IT infrastructure
This study defines IT infrastructure as the extent of the organization’s expenditure
on IT infrastructure, IT personnel training, IT consulting, IS maintenance,
52

computers and software, effective alignment of IT infrastructure and building an
effective IT infrastructure, proper IS integration, effective reengineering of legacy
IS, increase IT competency, and effective use of software tools, which are the most
important factors that contribute to the improvement of operational performance of
a bank. IT is the automation of processes, controls, and information production
using computers, telecommunications, software and ancillary equipment, such as
automated teller machines and debit cards (Khalifa, 2000). It is a term that
generally covers the harnessing of electronic technology for the information needs
of a business at all levels.
Irechukwu (2000) lists some banking services that have been revolutionized
through the use of ICT as including account opening, customer account mandate,
and transaction processing and recording. Information and Communication
Technology have provided self-service facilities (Automated customer service
machines) from where prospective customers can complete their account opening
documents direct online. It assists customers to validate their account numbers and
receive instruction on when and how to receive their chequebooks, credit and debit
cards. Communication Technology deals with the physical devices and software
that link various computer hardware components and transfer data from one
physical location to another (Laudon & Laudon, 2001).
2.4.6 Process redesigns
Sheehy (1997) viewed the effective process redesign as the ability of finding a new
way of adding value to customers. Similarly, Hall et al. (1993) argued that for BPR
53

to be successful, the redesign effort must be concentrated on areas that have the
most direct impact on customer value and cost. Firms that are able to meet
customer demands for new products and services can achieve a competitive
advantage over their competitors.The key processes of the organization should be
effectively redesigned so that the resulting performance enhancement would extend
throughout the entire business organization. The effect of the new improved process
on the employees should not be neglected. They need to know how it is going to
affect their future job and what is in it for them. Moreover, ensure the use of the
right people in the right project.
Process redesigns of the organization process orientation includes: appropriate level
of process knowledge, documentation of existing processes, appropriate selection
of core processes and use of prototypes are critical to process redesign. The
redesign processes should have a direct impact on customer value and cost. The
redesign processes perform a work activity in a radically new way of adding value
to customers. It starts with a relatively clean slate with creativity to produce a
specified output for a customer or particular market. Adequate identification of
process gaps and the evaluation of effectiveness of the current processes by making
use of appropriate software tools to visualize and analyses them (El-Sawy &
Bowles, 1997; Tower, 1994). Identifying process owners is also important for
project implementation (Boyle, 1995). The redesign process must have a direct
impact on customer value and cost.
54

2.4.7 Financial resources
The recapitalization of Nigerian banks was aimed at ensuring adequate financial
resources for the banks to conduct their business effectively. The weak capital base
cannot adequately provide a cushion for the risk of lending to entrepreneurs without
collateral. BPR is normally an expensive project and requires a huge amount of
money (Ahmad et al., 2007). In order for BPR to happen successfully, the
organization needs to have an adequate amount of funding, sufficient to implement
change and to back up unpredictable circumstances.
Madubueze (2007) reported that Nigerian banks were directed by the Central Bank
to have a minimum capitalization of N25 billion (or about $200 million) from Naira
2 billion formeeting the international standard, become players on an international
scale, and help to make Nigeria a financial capital of Africa. The recapitalization
and consolidation will improve the profitability and operational efficiency of banks;
expand the shareholding base of Nigerian banks. Thus, eliminating the phenomenon
of family banks and the tendency for poor corporate governance, the Nigeria
economy will be stronger and better capitalized to finance the long-term
development projects in different spheres of the economy and businesses and banks
will also invest in infrastructure development, good business enterprises, and,
moreover, support entrepreneurship (Osubo, 2005). The average capital base of
Nigeria's banks is US$10 million, which is very low compared to that of banks in
other developing countries like Malaysia where the capital base of the smallest
bank is US$526million. Similarly, the aggregate capitalizationof the Nigerian
banking system at 311million naira (US$2.4million) is extremely low in relation to
55

the size of the Nigerian economy and in relation to the capital base of
US$688billion for a single banking group in France and US$541billion for a bank
in Germany (CBN, 2005).
2.4.8 Less bureaucratic (flatter) structure
The organizational structure should be flatter to enable BPR in terms of it
encouraging creativity and innovativeness in the organization, as well as the need
for less bureaucracy, and more participation and empowerment in the organization.
The general view is that BPR means a flatter, cross-functional and less bureaucratic
structure. However, since innovativeness is essential for BPR to happen
successfully, McAdam (2003) suggested that organizations could implement less
bureaucracy to encourage innovativeness. Therefore, organizational structure
should be flexible in order to avoid the failure of BPR implementation, as discussed
in Aggarwal (1998), and Ranganathan and Dhaliwal (2001). Additionally, several
authors that worked on BPR research, such as Davenport and Short (1990), stressed
the importance of process integration in organisation structure in order to achieve
desirable business outcomes. Hall et al. (1993), and Peppard and Fitzgerald (1997)
suggested ways to achieve successful results in BPR implementation by
significantly changing the organization’s structure, with emphasis on cross-
functional work teams. This suggests that the top management should re-evaluate
their organizational structure to determine whether it is appropriate for the situation,
with the rapid changing environment and tight competition in the market. Bank
branches, units and departments should be empowered to operate within their
56

budget allocation. This kind of organisational structure eliminates a delay in
decision-making and enables the bank to be more responsive to its customers.
Thomas (1994) and Peppard and Fitzgerald (1997) argued that employee’s
empowerment would make organizations respond faster to customer needs, and,
hence, improve the organisational performance. Having discussed the BPR factors,
the summary of the success and failure factors of BPR are listed inTable 2.3.
Table 2.3
Summary of the BPR Success Factors and Causes of Failure
Method BPR success factors Failure factors
Business 1. Questioning the fundamental 1) Negligence of the work

Process assumptions of the process of environment aspects of the
Reengineering integration of BPR with the corporate design process
strategy 2) The importance of BPR
2. Total commitment of the leadership projects
3. Strong communication among the 3) The rigidity of the
participating team infrastructure system
4. The ambitious goals of the 4) Consideration of human
reengineering process factors as costs that need to
5. Deployment of the most talented, be reduced, rather than a
competent and creative people in the resource to be developed.
project
6. The process chosen for reengineering
should be in
the center of the organization for the
improvement to be felt
7. The effective use of information and
communication technology
2.5 BPR failure factors
The detailed explanations on the summary of critical success and failure factors of
BPR in Table 2.3 had been discussed in literature extensively by Al-Mashari and
Zairi, (1999). Chan and Choi (1997) reported some of the reasons for BPR failure
as lack of understanding and inability to perform BPR. An estimate of 70% of the
57

companies that involved in BPR failed to achieve any benefit from implementation
efforts (Hammer & Champy, 1993). The subsequent sections discuss the summary
of the different reasons attributed to the high failure rate of BPR effort.
2.5.1 Lack of proper strategy
One of the reasons given for the high failure rates of BPR efforts is that most of the
BPR project has not been connected to the goals (Wu, 2002). Tomasko (1993) said
that reengineering was about operations and that only strategy can show what
operations matter. Therefore, understanding the existing process should be the
focus of reengineering. Gateway Management Consulting Incorporated conducted a
survey on understanding of BPR initiatives among the company's senior executive
management. The study found that 54% of the respondent had incorrect
understanding of reengineering (Manganelli, 1993).
2.5.2 Unrealistic objectives
Many managers have a great expectation on BPR performance outcome (Millman,
1994). They target unachievable goals for the BPR projects (Manganelli, 1993).
Unfortunately, at the end, when the results do not meet the unrealistic goals, they
concluded that the BPR project has failed. The unrealistic expectation reduces the
commitment and confidence of management to BPR. BPR aims at dramatic
improvement, the gain should be conditioned upon realistic situations (Klein,
1994).
58

2.5.3 No clear concept of a process
Reengineering calls for multi-perspective and creative thinking. People with
inadequate exposure and a misunderstanding of the operational processes may not
be able to adequately handle the reengineering techniques. This is true, particularly
with the capability to value evolving information technologies in an organization
(Rai & Paper, 1994).
2.5.4 Wrong scope of process objectives
Some managers may target restructuring rather than the reengineering process,
which is not a problem to operations, since the downsizing process adds value or
results in a better situation after reengineering.An incorrectly defined business
objective result in reengineering process failure as the contribution of BPR is
reduced to negative (Mathews, 1995).
2.5.5 Non recognition of BPR benefit
The inability of an organization to recognize the benefits of BPR or realizethe
positive performancemay be as a result of inadequate vision for dramatic
improvement of customer satisfaction and effective process operations (Rai &
Paper, 1994).
59

2.5.6 Over dependence on IT systems
Many managers over-rely on IT solutions. They forget to investigate the business
process and attempt instead to simply automate an ineffective process (Anonymous,
1994).
2.5.7 Opposition and lack of commitment from top management
To achieve satisfactory results of BPR, it requires top management commitment
(Bashein, 1994). Membersof top management need commitment in order to endorse
the change and direct the changes of operations and culture (Klein, 1994).
BPR failure factors related to change management and culture include problems in
communication as a result of hiding uncertainties in communication, a poor
communication link between BPR team and personnel, lack of motivation and
reward. The organizationalresistance to change may result from a fear of job
security, job loss, and lack of adequate planning for resistance to change, and lack
of optimism about the BPR result. Therefore, BPR is a strategy that organizations
implement to deliver value to customers.It is one of the topics for practitioners and
academicians, as the process constitutes the core of how to advance.
2.5.8 Previous studies on BPR factors and performance in banks
Table 2.4summarise the previous empirical and case studies that were conducted in
the financial services industry regarding BPR and performance improvement in
60

organizations. The empirical study’s independent variable is the BPR factors while
the dependent variable is organizational performance. BPR is the performance
improvement indicator for financial and non-financial, as shown by some authors in
the table. Terziovski, Fitzpatrick & O'Neill (2003) argued that the key challenges
for successful implementation of reengineering projects are changing attitudes and
culture, ensuring extensive communication and dealing with resistance to change
from middle management. Brandon et al. (1999) argued that the extent to which
benefits are derived is related to the company performance and that the level of the
potential problems encountered during reengineering is inversely related to the
extent to which project goals/objectives were accomplished to derive benefit and
favourable impact on company performance.
Table 2.4
Summary of Studies on BPR Factors and Performance in Banks and Financial
Services Setting
Type of Research & BPR
Factors (I.V)
Cheng & Empirical Survey Perceived measure Customer focus is the only
Chiu, Strategic alignment of overall quality; factor that is significantly
(2008) Management commitment Value for money; related to performance. Other
Change management Customer BPR factors such as change
Customer focus satisfaction; management, IT is not
BPR Project management Customer retention; significant with performance.
Use of IT Market share; Sales
growth and
Profitability
Khong & Empirical Survey Perceived measure Change management system
Richardson, Change management and of financial and culture, management of
(2003) culture performance and risk and BPR Project
Management competence customer service management are found to be
Organizational structure management significantly correlated to
BPR project management performance customer service management
IT infrastructure performance of Malaysian
banks and finance houses.
61

Table 2.4(Continued)
Type of Research &
BPR Factors (I.V)
Terziovski, Empirical Survey Performance The study identified:
Fitzpatrick BPR strategy factors measurement indicators BPR strategy and customer
& O'Neill, Top management includes: ROE, Cost, focus as the most significant
(2003) commitment and income ratios. predictors, while other is not.
Use of IT
Process redesigns
Customer focus
BPR as part of
continuous
improvement culture
Shin & Qualitative - Case e-fund, ATM debit The organization achieved
Jemella, study approach card, disbursement and successful reengineering
(2002) service charge efforts that led to business
transformation, improvement
in new product, services and
customer service's
management.
Sidikat & Longitudinal Case Assesses the impact of The study revealed that the
Ayanda, study approach BPR implementation of First bank of Nigeria
(2008) the business reengineering project had a
organization significant effect on
performance of First organizational performance
bank Plc. improvement and use of ATM
facilitated cash withdrawal
and improved customer
service management.
Siyanbola Empirical Survey Profitability The study revealed that UBA
(2011) Use of IT Increase market share & UBN adopted a mixture of
Change management Operational efficiency management strategies (BPR
and advanced use of IT). Use
of IT was found to be at the
advanced level unlike other
banks. Furthermore, the
change management tools by
the bank were employed.
Anayo, Case Assess the overall The study revealed that

(2005) study/Longitudinal impact of reengineering adoption of BPR improved the
approach in terms of financial performance of STB
profitability, customer limited, now United Bank for
service delivery and Africa Plc.
sustained customer The study concluded that
banker'srelationship. implementation of BPR would
result in the achievement of
remarkable success whereas
adoption of other management
tools does not yield in
dramatic outcomes.
Bob, Case Assessing the impact of The banks operational
(2004) study/Longitudinal BPR on performance of performance greatly was
approach banks in Nigeria. Case improved in terms of
study of UBA, First profitability, efficiency and
bank, Zenith bank, and effectiveness.
Standard Trust bank.
62

Therefore, reengineering has become the weapon for corporate organizations that
are seeking for improvement in their performance and intent on achieving cost
leadership strategy in its operating industry and environment. Moreover, the
suitability of the reengineering method to the organizational context is of great
significance. While the process reengineering could benefit manufacturing and
service firms, there should be a distinction in its implementation to suit the unique
situation of the firm (Shin & Jemella, 2002). They argued that organizations
achieved successful reengineering efforts that led to business transformation,
improvement in new products, services and customer services and flow of
information as a result of the process reengineering efforts. Sidikat and Ayanda
(2008) argued that the reengineering process remains an effective performance
improvement method for organizations striving to operate as effectively and
efficiently as possible in the short run, while achieving the strategy for
organizational growth and performance in the long run. Bob (2004); Anayo (2005)
found that banks operational performance has greatly improved in terms of cost
reduction, profitability, efficiency and effectiveness of service delivery. Khong and
Nair (2006) argued that the driving factors for customer service management,
which are significantly related to perceived business performance, are market
research, customer satisfaction, customer survey, service delivery and handling.
This shows that customers in the advanced countries are more enlightened about
their rights and sophistication (consumerism), hence, for the banks and financial
institutions to be competitive, attention should be given to the customer's service
research, management, operations and marketing (Chen, 1999).
63

Khong and Richardson (2003) argued that CSFs of BPR in terms of change
management and culture, management of risk and BPR project have a positive
effect on customer service's management and business performance. IT
infrastructure has a positive effect on customer service but no effect on business
performance. The change management system and culture have no effect on
customer service but customer service management has a positive effect on
business performance. A change management and culture can provide a good
setting for fundamental change as a result of BPR implementation through the
active involvement of people in redesigning the process for change (Dawe, 1996;
Jarrar & Aspinwall, 1999). In addition, the management of risk asset and BPR
project management have positive effect on customer service management. Banks
and Financial service firms in USA have reported that reengineering had led to an
improvement in customer service (Wood, 1996).
Cheng and Chiu, (2008) argued customer focus has a relationship with performance
of commercial banks in Hong Kong. However, they observed that project
management and IT usage appeared to be less important in banking than the
manufacturing industry. This may be because the service industry requires heavy
investment in people and technology. Project management skills and adequate IT
infrastructures are the basic requirement in the smooth operation of banks. Unlike
in the manufacturing field, project management is a core skill for workers in the
service industry to handle their work. In a service-driven industry, customer focus
is the only factor that is significantly related to firm performance.
64

In a similar situation, Terziovski et al., (2003) advocated customer focus to be the
focal point in process innovations in banks. Process innovation in terms of
redesigning of redesigning core customer focused business processes and using
customer feedback is significantly related to the organization'sability to satisfy
customers. Organizations were also more likely being able to satisfy customers if
BPR had been implemented in a proactive manner. There was, however, a
statistically significant relationship between cycle time reduction and focusing to
redesign efforts on core-customer focused on business processes. This indicated
that IT in BPR acts as an enabler (Attaran, 2004; Terziovski, et al., 2003; Bhatt,
2000).
In addition, previous studies on BPR factors and performance in another setting
have been reviewed and summary of the previous studies on BPR factors and
performance in organization of other sectors is presented inTable 2.5.
Table 2.5
Summary of Some Selected Previous Studies on BPR in Organizations from another
Sector
Type of Research
Authors & BPR Factors Measurement (DV) Findings
(I.V)
Wang, Empirical Study: The supply-chain The outcome can assist in
Chan & Combining BPR operation’s reference implementation of
Pauleen, and SCM (SCOR) model is the multinational supply chain
(2010) disciplines. framework developed projects by identifying the
by experts and gaps and linking them to the
explains the SCM channel of entities.
practice and BPR.
Zellner Review of Overview of business The study found that BPI

(2011) literature on process improvement approaches usually do not
Business Process approaches and their actually state the level of
Improvement actual improvement improvement, and some do
contribution not have a methodological
structure for re-application.
65

Type of Research &
BPR Factors (I.V)
Willmott Review of BPR The study highlighted BPR
(1994) literature cursory treatment of the
human dimension in radical
organization change and
reviewed issues that are not
clearly linked with
reengineering of work
processes.
Chamberlin A case study of BPR The study found that the

(2009) implementation in organizations are not ready
Local Government for a radical change. The
organization in UK senior managers do not
understand the BPR concept
and its implications.
Currie & Qualitative Case Process redesigns Reengineer core processes to

Willcocks, study and innovation by be heavily dependent on IT
(1996) using IT as an to deliver the anticipated
enabler large-scale improvement in
financial performance.
Ozcelik, Longitudinal ROA; ROE, firm Firm size, IT budget, advert

(2009) approach: BPR size, market share expenditure, and market
Project management share are positively
associated with all four
performance measures.
Abdolvand, Empirical Survey Positive and Leadership, collaborative

Albadvi & Leadership, Negative BPR working environment, top
Ferdowsi, Collaborative readiness indicators management commitment,
(2008) working were assessed. supportive management and
Top management use of IT have positive
commitment relationship with readiness
Change management while, resistance to change
Use of IT as a negative factor
decreases the readiness.
Brandon, Longitudinal Impact of BPR in Business process changes to

Brans ford, Approach terms of ROE, the greatest extent; customer
Guimaraes Sales growth profit, cost satisfaction, time reduction,
& Tor, Market share reduction improve employee morale,
(1999) Profit and service quality.
Personnel
development
Political/Public
affairs
Product development
66

Type of Research
Authors & BPR Factors Measurement (DV) Findings
(IV)
Ahmad, A case study The study found seven
Francis & research on BPR factors to be critical to BPR
Zairi, critical success implementation success. The
(2007) factors in higher factors are team work and
education. quality culture, quality
management system, reward,
change management, less
bureaucratic and
participative, IT/IS, effective
project management and
adequate financial resources
Tennant & Case study To achieve a Strategic approach, company

Wu, (2005) research focused maximum benefit of target, continuous
on Warwick BPR for long-term improvement, motivation
Manufacturing and short-term
Group. benefits, all elements
such as organization
structure,
empowerment
training, and IT
system should be
considered.
Devaraj & A mixed method A Triangulation The study posited that

Kohli, of qualitative and analysis using three drivers of IT impact are not
(2003) quantitative study measures of IT usage on IT investment, but the
longitudinal IT usage is actual usage of IT. This is
approach in health significantly related to attested in a longitudinal
care revenue and quality in setting of a healthcare
health, but the effect system.
occurs after time lags.
Chen & A case study to To address the theoretical

Tsai, demonstrate the gaps between BPR and OR
(2008) effectiveness of in organisational change,
the Process process re-engineering-
oriented organisational
change exploratory
simulation System’ (process)
was proposed.
67

Type of Research & BPR Measurement
Authors Findings
Factors (IV) (DV)
Philipp, Literature review: The study provides over 300
Susanne Analysing the degree of techniques from various
&Gregory, BPI techniques. improvement methods.
(1991). Furthermore, an evaluation
scheme was developed to
analyse the usability of BPI
techniques and gives
suggestions on how to select
a suitable technique for
certain improvement over
the situation.
Tsai, Chen, Review of literature on The study found that some

Hwang & BPI supported by BPI approaches do not have
Hsu, qualitative content a methodological structure to
(2010) analysis. describe the act of
improvement.
Neghab, This paper is an attempt to The study provided a

Sharif & study an organisational quantitative model to
Imani, condition for BPR and evaluate the organizational
(2009) analyses the collected capability for BPR with
information by presenting respect to organisational
a model on the culture.
relationship between
organisational culture and
BPR.
Devaraj & A longitudinal study The study outlines future

Kohli, conducted on IT in research direction on BPR
(2000) healthcare organisations. and commented: The
literature in BPR
implementation is rife
with anecdotal evidence
and short on rigorous
empirical evidence of
performance impact of
BPR. There is a definite
need to better measure
BPR implementations
through objective
measures, and to relate
BPR to organizational
performance in the context
of other variables that also
affect performance
68

Currie and Willcocks (1996) observed that globalization led to intense competition
that became a threat from new entrants into the financial service market. He added
that the existing financial institutions became pushy for superior performance.
Tennant and Wu (2005) argued that the main reasons for organizations to apply for
the reengineering technique were external competitive pressure, internal cost
reduction, and productivity improvement. They further highlighted the potential
problem area during reengineering implementation to include the people issues and
over-reliance on IT based technology hence, Neghab et al., (2009) provided a
quantitative model to evaluate the organizational capability for BPR with respect to
organizational culture.
Brandon, Bransford, Guimaraes and Tor (1999), asserted that absence of
established BPR theory capable of producing a result significant for business
practice has led to a model based on developed constructs. They added that
organizations were not emphasizing some of the most important goals and
objectives recommended in reengineering literature. They argued that the lack of
organizational emphasis to achieve the desired objectives is the major reason for
many reengineering projects not having been fully accomplished.
Therefore, reengineering has become the weapon for corporate organizations that
are seeking for improvement in their performance and intent on achieving cost
leadership strategy in its operating industry and environment. Ozcelik (2009) found
69

that functionally focused reengineering projects, onaverage; contribute more to
performance than those with broader cross-functional scope.
2.5.9 Different between this study and previous study on BPR factors and
performance in banking industry settings
The present study differs from previous studies in financial setting based on the
following:
1. The focus of the study is on the organizational performance, unlike the
above,which gives much attention to implementation of BPR and the
effectiveness of the technique.
2. The independent variables of the proposed study totalled eight (8) as against
five (5) and six (6) for the previous studies, respectively.
3. The eight (8) independent variables BPR factors are: 1) Change management,
2) Project Management, 3) Management commitment, 4) Customer focus, 5) IT
infrastructure, 6) Effective process redesign, 7) Adequate financial resources,
and 8) Less bureaucratic structure. This shows that three (3) variables (Effective
process redesigns, adequate financial adequacy and less bureaucratic structure)
in this study are different from the previous research. The additional variables
were adapted from Salimifard et al., (2010), Ahmad et al. (2007).
4. This study considers IT capability (IT knowledge and Operations) as the
moderating variable between the predictor and outcome. Empirical studies have
shown that IT capabilities enhance performance through the elimination of
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inefficiency, reduction of long-term cost, improving service reliability and
reduced transaction errors (Tippins & Sohi, 2003). In addition, Yongmei,
Hongjian and Junhua, (2008) argued that IT investment affects firm
performance indirectly through IT infrastructure. Huang et al. (2009) argued
that empirical evidence of Italian banks suggests that the development of IT
capability, such as creating an intranet to serve as a repository and
communication tool, can support the redefinition of the overall strategy of the
bank. Furthermore, cultural integration of the branch network and a life-long
training process has been conducted to sustain the banks' large-scale network
(Canato & Corrocher 2004). Although the financial service industry is one of
the early adopters of new IT, the effect of IT capability on firm performance is
inconclusive in the service sector in general, which is contrary to its
manufacturing counterpart (Brynjolfsson, 1993). The data analysis of Huang et
al. (2009) confirmed the reliability and validity of the construct of IT capability.
Hence, the proposed study examines the impact of IT capability in moderating
the BPRfactors performance relationships.
5. The study’srespondents compriseof organisations, i.e., the commercial banks,
microfinancebanks and primary mortgage finance.
6. The study research model is an advancement of the previous model that limits
the establishment of a direct relationship between the independent variable with
the dependent variable as shown inFigure 2.1 and Figure 2.2.
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Change Management
construct
Management Competence
construct Customer Service
Management
Organizational Structure
construct
Business
BPR Project Management Performance
IT infrastructure construct
Figure 2.1
Model Framework of Khong & Richardson (2003)
Strategic Alignment
Management
Commitment
Performance:
Change Management
1. Customer
Satisfaction
Customer Focus
2. Profitability
BPR Project
Management
Use of IT
Figure 2.2
Model Framework of Cheng & Chiu (2008)
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2.6 IT capabilities
This part provides a review of IT capability literature starting with the IT capability
concept and measurement; role of IT capability in business process operations of
banks, IT capability as moderating variable, dynamic capability, RBV perspectives
and relationship in this study. Among the IT dimensions of IT capabilityare IT
knowledge and IT operation (Bhatt & Grover, 2005; Tippins & Sohi, 2003).
2.6.1 Definition and concept of IT capability
The concept of IT capability was introduced by Ross, Beath and Goodhue (1996),
who defined IT capability as the firm’s ability to assemble, integrate and deploy IT
based resources. Heijden (2000) pointed out that the measurement of IT capability
covers relationships in theIT department with the rest from the business. Bharadwaj
(2000) broadened the explanation of the accepted views of organizationalIT
capabilities to an organization’s IT function. Bharadwaj (2000) defined IT
capability as the ability of a firm to mobilize and deploy IT based resources in
combination with other resources and capabilities. Those IT-based resources is IT
enabled resources (consist of technical and managerial IT skills); intangible IT-
enabled resources (such as knowledge, assets, customer orientation) and synergy –
the sharing of resources and capabilities across organizational divisions. Therefore,
capabilities reflect the ability of the firms to combine resources to promote superior
performance (Amit & Schoemaker, 1993).
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Tippins and Sohi (2003) defined IT capabilities as the extent to which an
organization is equipped with IT objects, IT knowledge as well as effective IT
operations. A high level of IT knowledge enables the smooth implementation of the
organization’s strategy, develops reliable and cost effective systems within the
organization, and anticipates customer needs (Bhatt & Grover, 2005). Clark (1997)
noted that IT experienced in combination with other IT elements directly
determines an organization’s ability to rapidly develop and deploy more innovative
techniques to enhance performance.
Researchers and practitioners have addressed a variety of IT-related variables. For
example, Li et al. (2006), and Tippins and Sohi (2003) classified IT capability into
three dimensions: IT knowledge, IT operations and IT objects. A highly skilled
project team should be much better equipped to manage the project of knowledge
management. Human IT resources include technical IT knowledge. IT knowledge
concerns the extent to which a firm possesses a body of technical knowledge about
objects, such as computer-based systems (Tippins & Sohi, 2003). IT knowledge
encompasses professional qualification, expertise and skills, such as programming,
systems analysis and design, and competencies in emerging technologies. IT
operations include IT functions, coordination and interaction with user community.
Hence, IT operations were conceptualized as the extent to which an organization
utilizes IT to manage market and customer information. The computer-based
hardware, software and support staff is referred to as the objects.
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2.6.2 The role of IT capability in improving performance
The role of IT capabilities in enhancing organizational performance is well
established in the literature. Various IT studies suggested thatIT capabilities
provide a basis of gaining competitive advantage and enhancing organizational
performance (e.g., Santhanam & Hartono, 2003; Bhatt & Grover, 2005). An
extensive body of IT capability's literature agrees that IT capabilities are resources
to facilitate an effective collection and utilization of information (e.g., Bharadwaj,
2000). Floyd et al., (1990) contend that IT capabilities enhance service reliability,
reduce transaction errors and increase consistency in performance. Further
contentions are that capabilities can contribute to enhancing service quality through
better customized or individualized services, and in creating knowledge links for
identifying and sharing organizational expertise (Quinn et al., 1994).
Tippins and Sohi (2003) argued that an IT capability, which isin a form of
ITcompetency, enhances performance through an elimination of inefficiency,
reduction of long-term cost, improve service reliability and reduce transaction
errors. Bharadwaj (2000); Ross, Beath and Goodhue (1996); Li, Chen and Huang
(2006) focus on the importance of IT capability as well as the relationship between
IT spending (IT investment) and productivity/performance with the moderating
effect of IT capability. IT capabilities by themselves are ineffective at providing a
basis for sustainable competitive advantage because the capabilities can be
duplicated. Thus, the impact of IT on firm’s performance cannot be measured
directly, but can only be quantified by examining the indirect effect.
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In this study, the term IT capability is adapted from the study conducted by Tippins
and Sohi (2003). The study used IT knowledge, ITobjects andIT operations among
the dimensions of measuring IT capability. The BPR factors encompass both
tangible and intangible elements of resources. Therefore, this study usesIT
knowledge and IT operation as the main components of measuring IT capability.
The third component ITobject was taken care in IT infrastructure is part of BPR
factors as an intangible resource. These dimensions demonstrate co-specialized
resources in that firms cannot utilize the IT architecture effectively without
sufficient knowledge and operations.
Therefore,IT capability can provide the ability to understand the existing
operations. It is also one of the most considered in bringing changes into the
business process. Michael Hammer recommends companies to redefine their
process first and then automate. IT can play a critical role in the development of
BPR efforts, as follows:
1. IT makes it possible to use new ideas and higher standards of technology in
order to develop a strategic vision and help to make the business process better
before it is designed.
2. The communication technology through IT capabilities helps in breaking down
geographical and organizational barriers that make the acceptance of process
change and provide a useful understanding of a company’s strengths,
weaknesses, opportunities and threats. IT also helps to track information.
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3. For a firm to manage a process that can be adapted from other company's
practices outside its industry. The company should combine its team members
experience to set a standard that other companies can be compared with.
4. IT staff needs to broaden their knowledge in non-technical areas to
achieveeffective teamwork in an organization.
5. In order to have a flexible organisational design the firms existing difficult
structures must be changed to ensure the operation of BPR cross-functional
teams against departmental activities.
6. To gain market share and achieve a competitive advantage, the agreement
between companies and collaboration between suppliers and distributors takes
place at the initial stage of BPR before process design.
2.6.3 The contradictory role of IT as an enabler in BPR
One of the most straightforward assertions about BPR is that IT is a key enabler of
the process redesign. It is IT that permits companies to re-engineer business
processes; a company that cannot change the way it thinks about IT cannot re-
engineer (Hammer & Champy, 1993). Most other BPR proponents also adopt an
essentially technical model of organizational change in which IT basically drives
the re-engineering effort (Grey & Mitev, 1995; Jones, 1994). These arguments
acknowledge the technological determinism inherent to BPR; technology
determines not only the work structure, but also the organizational structure,
culture, management styles, and beliefs (Grey & Mitev, 1995).Thus, out of
fashion,organizational designs can be changed through the use of advanced,
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enabling technologies that support new business processes that respond to changing
market needs.
However reasonable and straightforward this argument seems; it has also become a
source of controversy. Rather than being a simple enabler of new organizational
processes. IT canalso disable an organization’s ability to change. When an
organization revises its basic business processes using IT, it introduces a new
structure that may become even more difficult to change in the future. Since the
technical backbone of automated processes exists as software routines, a later
change in the process will require a reconstruction of the software application and
its various links to other systems. While all changes require reprogramming of
some sort, either to human or machine components, software programs are often
virtually inaccessible to the persons nearest to the application.
Given the inevitability of business change, hard-wired business processes that are
built today may seriously constrain later efforts to redesign them.BPR may have
already produced the organizational structures and processes that will be considered
old-fashioned tomorrow, and those processes may be more difficult to change
because today’s software conventions will probably also be considered out of
fashion tomorrow. Lucas and Olson (1994) provided a clear analysis of this in-
consistency in their examination of IT’s effects on organizational flexibility. They
argued that technology provides the capability for more flexible organizational
structures by allowing a greater variety at the time and place of work while
increasing the speed of response.
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However, they note that IT also constrains flexibility by embedding routines into
software programs that are not easy to change. Resolving the contradiction of IT as
an enabler or not in BPR is not easy. Gill (1995) argued that managers should not
over program their organizations in search of dramatic productivity gains but to
ensure greater flexibility. Lucas (1996) recommends a commitment to continuous
investment in new technology, thereby keeping any programmed routines from
becoming hardened in the organization.
2.6.4 IT capability measurement
The measurement of the IT capability in this study is based on IT knowledge
(skills) and IT operations (Tippins & Sohi, 2003). The measurement concepts are
defined as follows:
2.6.4.1 ITknowledge
Knowledge is information combined with experience, context, interpretation, and
reflection that an organisation possesses that is difficult to be measured (Davenport,
De Long, & Beers, 1998). IT Knowledge is defined as a set of principles and
techniques useful to bring about change towards desired goals. In this study, IT
knowledge is referred as the extent to which organisation acquires a body of
technical knowledge about infrastructure or objects such as a computer-based
system. Technical knowledge could be expressed as contextually based know how.
IT knowledge is distinguishable as a subset of the more general conception of
knowledge.
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Additionally, employees can be encouraged to adapt to the new IT, assimilate IT
knowledge and apply it in their daily routine, which is beneficial to the
improvement of organizational performance (Shao et al., 2008). According to the
knowledge-based view (KBV), systems of knowing refer to structures of interaction
among team members for sharing their perspectives, pooling of knowledge, and
development of shared understanding. It is suggested that systems of knowing
provide forums for top management team memberswho exchange their strategic IT
and business knowledge, and blend themtogether to foster higher levels of IT
diffusion within the organization. In this study, IT knowledge was measured based
on: 1) IT knowledge among the operation's staff, 2) the staff of IT department are
qualified for the job, 3) professional qualification of the IT network engineers, 4)
the calibre of computer expertise hired as an organization consultant, 5) the
proactiveness of the IT staff for innovation and product development, 6) the IT staff
attends training courses regularly.
2.6.4.2 IToperations
Technical operations, or techniques, made of activities that are undertaken in order
to achieve a particular goal. Technical operations are a manifestation of technical
knowledge that results in technical operations or skills. For this study,IT Operations
are the extent of activities within the organization that utilizes IT to manage market
and customer information required to meet goals. These activities are underpinned
by skills that encapsulate the knowledge within the firm. When IT operations are
able to monitor and manage IT resources and services from a real-time business
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outcome perspective, it can align IT operations with business priorities. As a result,
IT operations can streamline business processes and optimize resources to help
manage costs, increase efficiency to manage productivity and increase revenue, and
help ensure service availability to enhance customer satisfaction, rather than simply
focus on technology.
IT operations can translate raw IT monitoring data into a useful business impact
analysis. IT operations should be able to: 1) link branch's operation through WAN
to the central office; 2) the organisation technology based links via LAN is efficient
24/7; 3) Measure the effectiveness of service's providers for availability network
connection link and minimal down time on the system such as payment processing
response time); 4) the organization has computerise all operational processes 5) the
IT policy is in line with regulatory guideline and 6) The organization IT operations
monitor customer activities.Table 2.6 provides a summary of some selected
previous studies of the relationship between IT and organisational performance.
IT has been studied for its role in creating both initial competitive advantage and
long-term sustained competitive advantage (e.g. Barney, 1991; Feeny & Ives,
1990). Powell and Dent-Micallef (1997) found that IT alone cannot produce
sustained competitive advantage, but to leverage on other intangible,
complementary human and business resource to gain sustained competitive
advantage. From RBV perspective, IT-related advantages may result from
development of capabilities that other competitors find difficult to copy.
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Table 2.6
Summary of Some Selected Previous Studies on IT and performance
Authors Input Output Findings
Aral & Weill IT investment Market valuation, IT investments only lead to
(2007) allocation Profitability, cost performance if IT investments are
innovation consistent with the firm's strategy.
Furthermore, firm's IT capabilities
enhance the effect of IT assets and
broaden the impact.
Bartel, IT investment Productivity growth Service Assurance in a valve

Ichniowski, & (operational efficiency in manufacturing plant, IT investment
Shaw (2007) Manufacturing plant), leads to increase in performance of
number of customized. the great number of products.
products Furthermore, the IT related new
machines required labor with
higher skill levels of specialization.
Barua et al. IT capital Measures of operational IT investments affect intermediate

(1995) Performance (Capacity measures such as inventory
utilization, inventory turnover but there is no evidence as
turnover, inferior quality, to the benefits for the firm
relative price, ROA and performance as measured by ROA.
market share
Bharadwaj IT capital ROA, ROE, Increasing IT capability increases a

(2000) COGS/Sales, firm's competitive advantage. High
SG&A/Sales, IT capable firms have higher
OPEXP/Sales profitability ratios and lower
OPEXP/Sales in all four years that
the study covered. COGS/Sales
were found to be lower in two out
of four years.
Bharadwaj et Market The ratio of the market The coefficient on IT spending

al. (1999) valuation of IT value of a firm's assets to ranges between 1.7 to10.3 in five,
investment the replacement cost of single year regressions.
those assets.
Market value of a firm's
Bresnahan, Labor, IT Sales-material billed The combination of three related

Brynjolfsson, Capital, Non- innovations- 1) information
& IT capital technology (IT), 2) complementary
Hitt, (2002 workplace reorganization,
and 3) new products and services-
constitute a significant
Skill-based technical change
affecting labor demand in the
United States.
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Brynjolfsson IT investment Labor productivity, IT investment increases both labour
and Hitt, MFP growth productivity and MFP growth.
(2000) Specifically, the impact of IT
investment on MFP growth is
maximized after a lag of 4 to seven
years.
Brynjolfsson& Market value Market capitalization One dollar of computer capital is

Yang, (1999) of computer valued at ten times one dollar of
capital conventional capital.
Brynjolfsson IT investment Market capitalization Spending on IT brings about the

et al. (2000) increase in the market value of the
firm. Market valuation effects are
greatest for firms that have high
levels of investment in both IT and
organizational capital.
Brynjolfsson& IT Stock MFP and output In short-run, the returns on

Hitt, (2003) contribution in short- computer investment are
term and long-term years comparable to the cost, while in
long-run the return is not only the
output but also the MFP.
Chari, IT investment Performance IT investment enhances the firm's

Devaraj, (Tobin's q) performance related to
& David, international diversification.
(2007
Chatterjee, IT investments Stock returns and. Investments in IT infrastructure are
Pacini, & in IT investment more likely to capture a
Sambamurthy, infrastructure announcement competitive advantage over the
(2001) IT firm compared to the investments
applications in IT applications.
Chatterjee, IT investment Share price reaction There are significant abnormal

Pacini, & announcement returns on stock value and trading
Sambamurthy volume associated with IT
(2002) investment announcement.
Devaraj & IT investment Firm performance IT investment coupled with the
Kohli (2002) BPR positively and significantly
impacts performance.
Letwongsatien The effect of Firm performance The effect of capabilities on the
(2001) IT higher level of firm competencies
management which are directs responsible for
firm performance.
Santhanam & IT capability The study confirms Bharadwaj
Hartono, on firm (2000). Furthermore, found that
(2003) Performance firm with superior IT capability
shows superior firm performance.
Wade & The resource- IT capability and Literature review on application of
Hulland based view organizational RBV in information system
(2004) and performance research
information
systems
research
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Nakata & Zhu IT customer IT capabilities and The study found that IT capability
(2006) orientation customer orientation can help firm to be more
customersfocused.
Song, Capabilities IT capability and The study found that IT capability

Benedetto & and financial financial performance increase financial performance.
Nason (2007) performance:
the
moderating
effect of
strategic type
Table 2.6shows the recent studies on IT capabilities performed on the basis of RBV
both direct (e.g., Bhatt & Grover, 2005; Powell & Dent-Micallef, 1977). In a valve
manufacturing plant, IT investment leads to increased productivity of products.
Furthermore, the IT related new machines required labor with higher skill levels
and specialization (Bartel, Ichniowski, & Shaw 2007). IT investments only lead to
performance if IT investments are consistent with the firm's strategy. Firm's IT
capabilities enhance the effect of IT assets and broaden the impact (Aral & Weill,
2007). IT investments affect intermediate measures such as inventory turnover but
there is no evidence as to the benefits for the firm performance as measured by
ROA (Barua et al. (1995). IT investment increases both labour productivity and
MFP growth. Specifically, the impact of IT investment on MFP growth is
maximized after a lag of four to seven years (Brynjolfsson and Hitt, 2000). IT
investment enhances the firm's performance related to diversification (Chari, et al.,
2007). Investments in IT infrastructure are more likely to capture a competitive
advantage to the firm compared to the investments in IT applications Chatterjee, et
al., 2001). There are significant abnormal returns on stock value and trading
volume associated with the IT investment announcement Chatterjee, et al., 2002).
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On the indirect relationship between IT capability and firm performance Pavlou &
El-Sawy, (2006); Tippins & Sohi, (2003) views the linkage between IT capabilities
and firm performance increasing. IT capability increases as a firm's competitive
advantage improved. High IT capable firms have higher profitability ratios and
lower operational cost (Bharadwaj, 2000). The effects of capabilities on the higher
level of firm competencies are directs,responsible for firm performance
(Letwongsatien (2001). The study confirms Bharadwaj (2000). Also, found that
firm with superior IT capability shows superior firm performance (Santhanam &
Hartono, (2003). IT capability can help firm to be more customers focused (Nakata
& Zhu 2006) and increase financial performance Song et al., 2007).
2.6.5 IT service capability maturity model
According to Niessink, Clerc and Vliet (2004), the IT Service capability maturity
model consists of five (5) maturity levels, which contain key process areas. For an
organization to reside on a certain maturity level, it needs to implement all the key
processes for that level and lower levels. The main focus is the maturity of the
service organization, not the maturity of individual services, projects or
organizational units. The model covers the service-delivery process with primary
objectives:
1. To enable IT service providers to assess their capabilities with respect to the
delivery of IT services.
2. To provide IT service providers with direction and steps and further
improvement of their service delivery.
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The IT Service CMM fulfills the above objectives by measuring the capability of
the IT service processes of organizations on a five level ordinal scale. Each level
prescribes certain key processes that have to be in place before an organization
resides on that level. Key processes implement a set of related activities that, when
performed collectively, achieve a set of goals considered important for enhancing
service process capability. Hence, organizations can improve their service
capability by implementing these key processes. More formally, we define the IT
service process capabilityas the range of expected results that can be achieved by
following a service process. IT service process performance represents the actual
results achieved by following an IT service process. The IT service process
maturityis the extent to which a specific process is explicitly defined, managed,
measured, controlled and effective. The IT Service CMM focuses on measuring and
improving the IT service process maturity of IT service organizations. An
organization that scores high IT Service CMM scale will be able to:
1. Deliver quality IT services, tailored for the needs of its customers.
2. Do so in a predictable, cost-effective way
3. Combine and integrate different services, possibly by different service
providers, into a consistent service package.
4. Continually improve service quality in a customer-focused way.
In order to understandIT S-CMM, it is necessary to see the definitions of the
various levels and to understand the structured nature of these definitions. The five
levels of the IT Service CMM are shown inTable 2.7.
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Table 2.7
Five Levels of the IT Service Capability Maturity Model
Level Management Enabling Delivery
Optimizing Process Change Technology Change Problem
Management Management Prevention
Managed Quantitative Process Service
Management Quality
Management
Financial Service
Management
Defined Integrated Service Organization Process Focus Service

Management Organization Service Definition Delivery
Organization Process Definition
Training Programme
Intergroup Coordination
Resource Management
Problem Management
Repeatable Service Commitment Configuration Management

Management
Service Delivery Planning Service Request and Incident
Management
Service Tracking and Service Quality Assurance
Oversight
Subcontract Management
Initial Ad-hoc processes
The key process areas are grouped under three process categories:
1. The first group concerns the management of services.
2. The second category deals with enabling the delivery process by support
processes and standardization of processes.
3. The third category consists of the processes that result in the consistent,
efficient delivery of services according to the appropriate quality levels.
2.6.6 The key process areas on the IT service capability maturity model (IT
services CMM)
For an organization to reside on a certain maturity level, it needs to implement all
key processes for that maturity level – and those for lower levels. The term key
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process merely means that these processes are seen as the key to reach a certain
maturity level. There might be more – non-key – processes, but these are not
strictly necessary to reach the next maturity level. Below we present the key
process areas for each of the maturity levels of the IT Service CMM:
2.6.6.1 Initial level
The IT service delivery process is characterized as ad-hoc and occasionally even
chaotic. Few processes are defined, and success depends on individual efforts or
heroics.
2.6.6.2 Repeatable level
The basic service management processes are established. The necessary discipline
is in place to repeat earlier successes on a similar service with similar service
levels. The seven key process areas of the S-CMM at the Repeatable level are:
1. Service commitment management
The main purpose of Service Commitment Management is to ensure that the
service commitments between the service provider and customer, and, hence,
the actual services delivered, are baseduponthe IT service needs of the
customer. The service commitments specify (among other things) the results
from the services to be delivered. These results should contribute to fulfill (parts
of) the IT service needs of the customer. The activities within this key process
area are targeted at ensuring that the service commitments are based on the IT
service needs, and stay in line with possibly changing IT service needs. This is
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enforced by periodic and event-driven evaluations of the service commitments
with respect for the IT service needs, and by periodic and event-driven
evaluations of the actual services delivered.
2. Service delivery planning
The key process area Service Delivery Planning has as its main purpose to plan
the delivery of services specified in the service commitments. The service-
delivery planning includes the planning of service delivery activities and other
service-related activities, estimation of resources needed, expected workload,
effort and costs; the service-delivery schedule; identification of risks, and plans
for service facilities and support tools. In addition, planning data needs to be
recorded so that it can be used in the planning of future services.
3. Service tracking and oversight
The main purpose of the Service Tracking and Oversight key process area is to
provide information about the actual service delivery. This information is to be
used to report actual service levels to the customer and to monitor the actual
service delivery and take corrective actions as soon as possible.
4. Subcontract management
The key process area Subcontract Management describes the activities that a
service provider – the prime contractor– should implement when (part of) a
service, to be delivered to a customer of the prime contractor, is subcontracted
to a third party – the service subcontractor. The prime contractor and the
service subcontractor negotiate service commitments between each other. The
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prime contractor remains responsible for the service to be delivered to the
customer.
5. Configuration management
The main purpose of the Configuration Management key process area is to
establish control over all IT components that are needed to deliver the services.
6. Service request and incident management
The main purpose of the key process area Service Request and Incident
Management is to identify record, track, analyses, and resolve service requests
and incidents that occur during service delivery. Both service requests and
incidents are events that – if not resolved – eventually will cause the IT service
provider to break its service commitments. Service requests are requests by the
customer for certain service activities to be performed. Note that these activities
should fall within the bounds of the service commitments.
For example, the customer asks for an extra workplace to be installed. Incidents
are events that need to be resolved in order to meet the service commitments.
For example, if a system goes down it has to be restarted before the maximum
downtime is exceeded. Service requests and incidents are always concerned
with one or more IT components.
7. Service quality assurance
The main purpose of the key process area Service Quality Assurance is to
provide management with the appropriate visibility into the processes being
used, and the services delivered. The independent service quality assurance
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group reviews and audits working procedures, standards, and service delivery
activities to see that they comply with the applicable procedures and standards.
The results of these reviews and audits are reported to the involved groups and
individuals and to senior management. Senior management is responsible for
acting upon the results from the service quality assurance activities.
2.6.6.3 Defined level
The IT service processes are documented, standardized, and integrated into
standard service processes. All services are delivered using approved, tailored
versions of the organization’s standard service processes. At level three, an
organization standardizes its processes and uses tailored versions of these standard
processes to deliver the IT services. This results in more predictable performance of
the processes, and, hence, it increases the ability of the organization to draw up
realistic service level agreements. Each of the levels three key process areas fall
into one of the three process categories: management, enabling or delivery.
The first category – service management – is concerned with the tailoring of the
standard service processes to the customer and the service level agreement at hand.
Furthermore, the actual service processes need to be integrated with each other and
with the third party service processes (Integrated Service Management).
The second category – enabling – deals with making standard processes available
and usable. The organization develops a set of standard services and describes these
services in the service catalogue (Organization Service Definition). The
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organization develops and maintains standard processes for each of these standard
services. Usually, organizations will provide several services to one customer at the
same time. Hence, not only the service processes them, but also the integration of
these processes has to be standardized as much as is feasible (Organization Process
Definition). To coordinate process efforts across services and organizational units
and over time, organizational support is institutionalized (Organization Process
Focus).
In addition, to teach people how to perform their roles and how to work with the
standards, a training program needs to be put in place (Training Programme).
Furthermore, means are established for the different groups involved in the service
delivery to communicate efficiently and effectively (Intergroup Coordination). The
underlying problems of events occurring during different service deliveries are
analysed (Problem Management) and resources are negotiated before making
service commitments, and monitored during the service-delivery resources
management. The third category – service delivery – concerns the actual delivery of
the services from the customer using the tailored service processes (Service
Delivery). The level three key process areas are described as follows:
1. Organization service definition
Purpose: Develop and maintain a set of standard services in the organization
and collect information related to the delivery of these standard services. The
description of the standard services is called a service catalogue. This service
catalogue contains a specification of the services in terms of benefits for the
customer. The service catalogue also includes the service levels that the
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provider can guarantee and the price of the services. The decision as to what
service to include in the catalogue is based on issues external to the IT Service
CMM, such as marketing research or contractual obligations (in case of in-
house IT service providers). The service catalogue is continuously updated with
experience from the actual delivery of services.
2. Organization process definition
Purpose: Develop and maintain a usable set of service process assets that
improve the process performance across services, and provide a basis for
cumulative, long-term benefits to the organization. This key process area
covers the actual development and maintenance of the standard process used to
deliver the services defined in the service catalogue.
3. Organization process focus
Purpose: Establish organizational responsibility for service process activities
that improve the organization’s overall service process capability. This key
process area covers the activities needed to assess, develop, maintain and
improve the organization’s service processes, which are resources and
coordinated across current and future services. A process improvement group is
established to coordinate the service process activities.
4. Integrated service management
Purpose: Integrate the service and management activities into a coherent,
defined service process that is derived from the organization’s standard service
process. The service planning is based on this tailored service process and
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describes how its activities will be implemented and managed. The service
planning takes the organization-wide capacity and availability of resources into
account. Cooperation is planned with third parties that also deliver IT services
or products to the customer. Note that these third parties can be external
providers or organizational units of the customer itself.An example of this
could be the customer having their own helpdesk, which relays reports of
hardware failure to the service provider. Procedures need to be put in place
concerning how these reports will be delivered to the service provider and
whether the helpdesk or the service provider will inform the user of the status
of the report. An example that involves coordination with third parties that
deliver products to the customer is software development. Suppose a third party
is developing software to the customer who is to be managed and maintained
by the service provider. Involvement of the service provider in the development
process can ensure that maintenance and management of the software is being
sufficiently taken into account during development.
5. Service delivery
Purpose: Consistently perform a well-defined service delivery process that
integrates all service-delivery activities to deliver correct, consistent IT services
effectively and efficiently. Service Delivery involves the performing of service
delivery activities using a tailored version of the services defined service
processes (which is the output of the Integrated Service Management key
process area). Because the service activities depend on the particular services
being provided, there is no fixed list of activities to be performed.
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However, all services should perform the activities as defined as the level two
key process areas. The list of activities will be filled in depending on the
services at hand. For example, in the case of software maintenance, the general
service activities will be extended with the software engineering tasks
mentioned in the key process area Software Product Engineering of the
Software CMM.
6. Inter group coordination
Purpose: Establish means for communication between the different groups
involved in delivering the service to the customer.
7. Training program
Purpose: Develop the skills and knowledge of individuals, so they can perform
their roles effectively and efficiently. Because a level three organizations use
standard processes, it is necessary to train employees to perform their roles.
This is impossible at level two, since standard organization-wide processes are
not yet in place.
8. Resource management
Purpose: Control of the resources (hardware and software) needed to deliver
the services is maintained. Before commitments are made to customers,
resources are checked. If not enough resources are available, either the
commitments are adapted or extra resources are installed.
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9. Problem management
Purpose: Remove problems from the IT that is managed, maintained or
operated by the service provider. This key process area implements the
organization-wide investigation of events and weak spots that occur during
service delivery. Practices like root-cause analysis are used to determine
underlying problems. Problems are solved by changing the infrastructure, the
processes or the training.
2.6.6.4 Managed level
Detailed measurements on the IT service delivery process and service quality are
collected. Both the service processes and the delivered services are quantitatively
understood and controlled. At a level four, organizations gain a quantitative
understanding of their standard processes by taking detailed measures of service
performance and service quality (Quantitative Process Management) and by using
these quantitative data to control the quality of the delivered services (Service
Quality Management). There are two levels and four key process areas:
1. Quantitative Process Management
Purpose: Control the process performance and costs of the service delivery
quantitatively.
2. Service Quality Management
Purpose: Develop a quantitative understanding of the quality of the services
delivered and achieve specific quality goals.
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2.6.6.5 Optimizing level
Continuous process improvement is enabled by quantitative feedback from the
processes and from piloting ideas and technologies. At level five, service providers
learn to change their processes to increase service quality and service process
performance (Process Change Management). Changes in the processes are triggered
by improvement goals, new technologies or problems that need to be resolved.
New technologies are evaluated and introduced into the organization when feasible
(Technology Change Management). Problems that occur are prevented from
recurring by changing the processes (Problem Prevention). The level five key
process areas are:
1. Process Change Management
Purpose: Continually improve the service processes used throughout the
organization with the intent of improving service quality and increasing
productivity.
2. Technology Change Management
Purpose: Identify new technologies and inject them into the organization in an
orderly manner.
3. Problem Prevention
Purpose: Identify the cause of problems and prevent them from recurring by
making the necessary changes to the processes.
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2.6.7 IT capability as the moderating variable
A moderator is a subjective (e.g., level of reward) or objective (e.g., sex, race,
class) variable that affects the direction and/or strengthens the relationship between
an independent or predictor variable and a dependent or criterion variable (Baron &
Kenny, 1986). Understanding the moderating effect of the relationship between
CSFs of BPR and organisational performance is critical. In
organisationalperformance-related studies, several moderating variables were
examined such as time period, industry type, and firm size (Lim, Richardson, &
Robert, 2004). Various studies, such as Bharadwaj, (2000); Bhatt and Grover,
(2005); Santhanam and Hartono, (2003) argued that IT capabilities enhance
organizational performance by providing a basis of gaining competitive advantage.
Furthermore, the study of Lim et al. (2004) viewed IT capability as the ability to
mobilize and deploy IT based resources that are not directly affected by the
investment.
Similarly, Yongmei, Hongjian and Junhua, (2008) argued that, to some extent, the
influence of IT investment on tangible and intangible IT resources that affect firm
performance is moderated by ITcapability. This means no matter amount spent by a
firm on IT. Remarkable performance can only be achieved by evolving IT
capability. IT capability serves to moderate the relationship between IT resources
(human and IT enabled intangible's resources) independent variables and
performance. Lin, (2007) argued that IT capability forms the basis of competition
for firms in information-intensive industries like retailing, banking and high-tech
manufacturing. These results confirm the RBV that firms compete based on
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distinctive core competencies and resources that are valuable, rare, difficult to
imitate, and non-substitutable by other resources.
The review ofprevious studies that focus on a direct relationship between IT, and
organizational performance fail to consider those intervening firm capabilities that
are improved by IT and, which are true facilitators of performance improvement
(Tippins & Sohi, 2003). Other studies have relied on the erroneous assumption that
adoption of IT would improve performance (Dewett & Jones, 2001). While IT can
improve efficiency, it may not provide the competitive advantages, because the
same technology could be adopted by competing organizations. Therefore, Tippins
and Sohi (2003) proposed that IT-related benefit can only be realized when the
organization develops IT competency and then uses it as a set of co-specialized
resources to leverage other complementary resources. Empirical studies include
Yongmei, Hongjian and Junhua (2008) who suggested that IT capability was an
important moderating variable linking IT investments to firm performance. The
model and hypotheses are verified by sample data from leading IT firms in China.
Similarly, said, et al., (2009) found that IT capability moderates the relationship
between customer-focused strategies and organizational performance by providing
a justification for LGAs to invest in terms of resources and commitment, in
adopting CF-strategies and IT.
In addition, Shao, Feng, Choudrie and Liu (2010) examined the moderating effect
of chief information officers’ (CIO’s) competence on IT investment and
organization performance. The study re-conceptualized CIO’s competence into six
sub-dimensions (includes interpersonal communicative ability, political skills,
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dynamic leadership, strategic IT knowledge, business knowledge and IT
management experience) based on RBV and KBV to explain the phenomenon of
the IT productivity paradox. Moreover, Huang et al. (2009) argued that the
empirical evidence of Italian banks suggests that the development of IT capability,
such as creating an Intranet to serve as a repository and communication tool, can
support the redefinition of the overall strategy of the bank. Furthermore, cultural
integration of the branch network and a life-long training process can be conducted
to sustain the banks' large-scale network (Canato & Corrocher, 2004). Although
the financial service industry is one of the early adopters of new information
technologies, the effect of IT capability on firm performance is inconclusive in the
service sector in general, which is contrary to its manufacturing counterpart
(Brynjolfsson, 1993).
Previous studies that examined the relationship between resources (tangible and
intangible) and performance includes: e.g., Weber & Pliskin, (1996); Bharadwaj,
Bharadwaj, Konsynski, (1999); Terziovski et al., (2003); Szanto, (2005), while,
competitive advantage of IT capability was examined by authors like Banker &
Kauffman(1991); Bharadwaj, (2000); Floyd & Woolridge, (1990); Mahmood,
(1993); Mahmood & Mann, (1993); Brynjolfsson, (1993); Chan, (2000) who
reviewed some literature for the study of the effect of IT capability on productivity.
They posited that little evidence was available regarding the payoff from IT
capability in terms of performance or other related outcomes and produced some
inconsistent results. Such inconsistent findings could be further understood with the
introduction of a moderator variable. In the same vain, Li et al., (2004) argued that
IT capability is a moderator than mediator based on RBV theory of firm
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performance, since the definition of IT capability means the ability to mobilise and
deploy IT based resources which is not directly affected by IT investment. The
effect of IT capability on firm performance has been verified in many studies
(Bharadwaj, 2000; Bharadwaj et al., 1999; Santhanam & Hartono, 2003).
According to Baron and Kenny (1986), moderators are often introduced when the
relationship between the predictor and outcome is unexpectedly weak or
inconsistent. The relationship can be demonstrated as shown in Figure 2.3.
IV DV
Moderator
Variable
Figure 2.3
Graphical Presentation of a Moderated model
In this study, IT capability is introduced as a moderating variable in order to
examine the form and/or magnitude of the relationship between BPR factors and
organizational performance of Nigerian banks. Hence, this gives way to validate the
model in the banking sector.
However, a mediator specifies how a given effect occurs. Sekaran (2003) stated that
an intervening variable is one that surface between the time the independent
variables operate to influence the dependent variable and their impact on the
dependent variable. The relationship can be presented as shown in Figure 2.4.
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Mediator
IV DV
Variable
Figure 2.4
Graphical Presentation of a Mediated model
Baron and Kenny (1986) and Judd and Kenny (1981) have discussed four steps in
establishing mediation:
Step 1: Regressing the mediator on the independent variable (the independent
variable must affect the mediator.
Step 2: Regressing the dependent variable on the independent variable (the
independent variable must be shown to affect the dependent variable.
Step 3: Regressing the dependent variable on both the independent variable and on
the mediator (the mediator must affect the dependent variable.
Step 4: To establish that the mediator completely mediates the independent (X) –
dependent (Y) relationship, the effect of the independent variables on the dependent
variable controlling for the mediator should be zero (full mediation) or become
significantly smaller (partial mediation). The effects in both steps 3 and 4 are
estimated in the same regression equation.
2.7 Underlying theories
There are numbered of theoretical approaches for examining firm resources and
business values (performances). The principal theories are transaction cost
economics (Williamson 1971, 1981, 1986), the RBV (Wernerfelt 1984; Barney
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1986, 1991; Deirickx and Cool 1989) and the relational view (Dyer and Singh
1998) of the firm. In addition, the concepts of dynamic capabilities (Teece and
Pisano 1994; Teece et al. 1997), absorptive capacity (Cohen and Levinthal 1990),
complementary (Teece 1986) and strategic assets (Amit and Schoemaker 1993),
and value chain analysis (Porter 1985) as well as Teece’s (1986) analyses of the
appropriability regime are all helpful.
2.7.1 Resource-based view (RBV) theory
RBV asserts that organizations can outperform their competitors through
developing resources that are unique and diversely distributed (Barney, 1991).
These differences lead to variations in firm performance among firms in similar
industries (Peteraf, 1993). However, the RBV is void of a single definition of the
term resource (Wade &Hulland, 2004). Many researchers use the term's resources
and capabilities interchangeably (Christensen & Overdorf, 2000; Gold et al., 2001).
RBV defines resources as assets, processes, and capabilities. Barney (1991)
asserted that firms achieve sustained performance advantages by securing rare
resources of economic value that competitors cannot easily copy, imitate, or
substitute. As such, firms with these rare resources should be able to leverage them
for their own unique firm benefit. A more complete definition of resources is
offered by Amit and Schoemaker (1993), who suggested that resources were assets
that are possessed by a firm through ownership or control, while capabilities refer
to an organization's capability to combine resources and adequately exploit them,
such as leverage skilled staff and organizational practices to create a uniquely
innovative work culture where employees outperform their competitors.
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Table 2.8summaries, the relevant theories and their implications for the innovative
firm with respect to each of the functions as the model defined by Chesbrough and
Rosenbloom. There is no single one for one mapping of the theories about the
model functions. Rather, there is a good deal of overlap between the key theories
and the functions.
Table 2.8
Summary of Various Relevant Theories of the Firm Performance and their
Implication
Model Relevant Theories Implications
Value proposition RBV Offering based on value derived from
strategic assets/ core competences.
Relational view/appropriability Value proposition designed to avoid
regime appropriability problems.
Market segment RBV Market segment chosen follows the
and revenue model value proposition to gain maximum
value from strategic assets.
Relational view Revenue model designed to gain
economic share of relational rents.
Value chain Transaction cost economics Optimise level of vertical integration
RBV Identify a need for complementary assets
Comparative efficiency of individual
Value chain analysis activities
Cost structure and Relational view Profit dependents on share of value
profit potential
Value chain analysis Comparative efficiency of individual
activities
Value network Transaction cost economics Cost and risk reasons for alliance
formation
RBV Access complementary assets
Dynamic capability Adjust (build/acquire) internal and
external competences to dynamic
environments.
Absorptive capacity Increase's capacity withinthe firm to gain
from alliances
Competitive RBV Development of strategic assets
strategy
Appropriability regime Decision to access or acquire
complementary assets.
Relational view Preserve adequate share of relational
rents
Transaction cost economics Considerations of transaction integration

versus contract or alliance
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The RBV suggests that the value proposition would be based on the most costly
offering that the firm can make in accordance with its crucial assets. The relational
view suggests that the offering will not be the product of a single firm but be a joint
product developed by the alliance or value network. Any relational rents generated
will need to be shared between the participants of the alliance or network. The
market segment is substantially decided by the value proposition which targets the
firm’s offering to a particular group of consumers.
On the other hand, transaction cost economics would be concerned with
opportunism and asset specificity in predicting whether such assets would be
accessed through alliances or integrated. Value chain analysis would suggest that
the efficiency of activities in the value chain would deliver competitive advantage
through lower cost structure and therefore, higher profit potential.
The empirical test of RBV theory started in the field of strategic management (e.g.,
Mahoney & Pandian, 1992) and was followed by studies in other management
disciplines (e.g., Barney, 2001; Fahy & Smith, 1999; Foss, 1998; Priem & Bulter,
2001) including information systems (e.g., Bharadwaj et al., 1998; Ray et al., 2004;
Ravichandran & Lertwongstien, 2002; Santhanam & Hartono, 2003). Bhatt and
Grover, (2005); Tippins and Sohi, (2003) started to include IT capabilities in their
IT studies and explored the link between various dimensions of IT, such as IT
capability, IT infrastructure and IT business experience on organizational
performance. The findings from their study showed that IT capabilities enhance
organizational performance (e.g., Bhatt & Grover, 2005; Powell & Dent-Micallef,
1997; Santhanam & Hartono, 2003). In addition, findings from IT study conducted
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by researchers, such as (Adam, 1993; Bharadwaj, 2000; Floyd & Wooldridge,
1990; Quinn et al., 1994; Santhanam & Hartono, 2003) revealed that IT capabilities
provided a basis of gaining competitive advantage and enhance organizational
performance.
The RBV literature points out that firms could obtain a sustainable competitive
advantage as the basis of unique corporate resources that are valuable, rare, difficult
to imitate, and non-substitutable by other resources (Barney, 1991; Conner, 1991).
RBV also recognizes that while some resources may lead to performance
enhancements, others do not, and that the combination may differ across industries
and firms. As such, a key challenge for firms is to identify and leverage those
resources that directly impact on organizational performance (Wade & Hulland,
2004; Zack et al., 2009). Researchers and practitioners have addressed a variety of
IT-related variables. For example, (Li et al., 2006; Tippins & Sohi, 2003) classified
IT capability into three dimensions: IT knowledge, IT operations and IT
infrastructure. Wixom and Watson (2001) incorporate human IT resources for the
following reasons: 1) People are important when implementing a system and can
directly affect its success or failure; 2) The skills of the knowledge management
development team have a major influence over the outcomes from the project; and
3) Only a competent team can identify the requirements of complex projects.
Therefore, a highly skilled project team should be much better equipped to manage
the project of knowledge management (Wixom & Watson, 2001). Human IT
resources include technical IT skills as well as managerial IT skills. IT skills
concern the skills, such as programming, systems analysis and design, and
competencies in emerging technologies. The managerial IT skills include abilities
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such as the effective management of IT functions, coordination and interaction with
the user community, and project management and leadership skills (Bharadwaj,
2000).
According to RBV, firms with strong human IT resources are able to integrate the
IT and business planning processes more effectively, develop reliable and cost
effective applications that support the business needs of the firm, communicate with
business units efficiently, anticipate the future business needs of the firm and
innovates valuable new-product features before competitors (Bharadwaj, 2000).
Previous studies and researchers have developed many theories concerning the
competitive advantage of firms. However, the RBV emerged as the perspective that
facilitated the explanation for the existence of firm specific assets and capabilities
that are important in the preparation of firm strategy (Abu Bakar, Hashim, Ahmad,
Isa, Dzakaria, 2009).
The RBV is the underlying theory for this study, which explains the relationship
between organizational resources and sustaining a competitive advantage for
superior organizational performance relative to competitors (Barney, 1991; Fahy,
2000). The RBV perspective views organizations as rent seeking units that develop
and deploy resources (assets and capabilities) to realize a competitive advantage
(Greenaway & Chan, 2005). Resources have been identified and categorized by
various researchers to pursue competitive advantage. For example, Mills, Platts and
Bourne (2003) argued that resources are classified as follows: 1) tangible resource,
such as financial, organizational, physical and technological resources; 2)
knowledge resources, such as skill and experience; 3) system and procedural
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resources; 4) cultural values and resources; 5) network resources and resources with
potential dynamic capability; 6) intangible resources such as innovation, human,
and reputation resources. Furthermore, Fahy (2000) classified resources into three
categories: tangible, intangible and capabilities. RBV focuses on the organization's
ability to develop and deploy its internal resources (Hitt et al., 2001). Resources are
input into a firm’s production processes to improve competitiveness and
performance.
Similarly, Meyer and Utterback (1992) highlighted the role of technology, R&D,
production, manufacturing capacity and marketing capability. Leonard-Barton
(1992) pointed out the importance of knowledge and considers organizational
capabilities to include employees’ skill, learning, technology system, managerial
system and the value system within the firm. Capabilities are the firm’s ability to
develop and deploy integrated resources for the objective of achieving a targeted
goal. Examples of capabilities include: teamwork, organizational culture, trust
between management and workers, and IT. Fowler, Wilcox, Marsh and Victor
(2000) argued that three types of capabilities exist: information technological
capabilities, market driven and integration capabilities. IT capability relates to the
operational aspects of firm business processes. Mills et al. (2003) noted that
research still found that resources are interrelated and sticky bundles even though
an effort was made to identify, classify and categorize them accordingly. In a
turbulent business environment, it was suggested that firms could establish resource
competence rather than focus on the product market (Menor et al., 2001).
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2.7.2 How the RBV relates to this study
An organization’s resources are identified, classified and categorized by various
researchers, such as Fahy (2000) into: tangible, intangible and capability. The study
focuses’ on intangible resources (BPR factors) and technological capabilities (IT
capability) to realize superior organizational performance and the competitive
advantage position on the bank. BPR factors are placed in the context of the RBV
of the firm by examining how banks can apply IT capability and resources to
pursue better performance. As the RBV is an appropriate theoretical framework for
addressing performance shortcomings, this study suggests that BPR factors –
change management, management commitment, adequate financial resources,
customer focus, project management, process redesigns, less bureaucratic structure,
and IT infrastructures – are intangible resources, while the organisational
technological competence is considered as IT capability measured by IT
knowledge, IT operations and IT objects (Tippins & Sohi, 2003).
The RBV perspective has the advantage to facilitate classification of resources,
enable comparison and provide strategic measurement of resources. Banks superior
performance depends on the resources within the organization, such as BPR factors.
In relation to that, this study seeks to identify the specific BPR factors that would
lead to superior performance. In spite of the importance of RBV in relation to this
study, the theory suffers from two major theoretical deficiencies. One is that the
RBV, like the industrial economics view, implicitly assumes static equilibrium,
without addressing the requirements for continued success in a volatileenvironment
(Mahoney, 1995; Teece et al., 1997). Second, the RBV focuses only on the
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difficulties and barriers in competing firms imitating, substituting or taking away
resources rather than on the complementarities of resources (Amit & Schoemaker,
1993; Mueller, 1996; Powell, 1995).
To address these theoretical gaps, several researchers (Grant, 1996; Teece, 1998;
Teece et al., 1997) have suggested that sustainability of competitive advantage by
organisation can be tackled by: First, in coping with changing business
environment, there is a need to renew, reallocate, continuously identify, upgrade,
rejuvenate, reinvent and redefine resources.Hence,the presence of dynamic
capability theory is to support RBV. Second, the need to have the ability to create
an environment in which they can be self-reinforcing and enhancing in value and
strength, thus causing sustained major cost disadvantages to imitating firms.
2.7.3 ITcapability as dynamic capability
Teece, Pisano and Shuen (1997); Eisenhardt and Martin (2000); and Pavlou (2004)
is the originating authors of the dynamic capabilities (DC) theory concept,which
arose from a key shortcoming of the RBV of the firm. DC’s theory further
emphasizes the importance of resources, competence configuration, coordination,
integration and transformation in generating value for the business, especially when
the path to achieving success is not yet clear. The RBV has been criticized for
ignoring factors surrounding resources, instead of assuming that they simply exist.
Considerations such as how resources are developed, how they are integrated
within the firm and how they are released have been under-explored in the
literature. The RBV of the firm has been used for many research studies to explore
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the relationship between capabilities and performance. Investment in IT is very
important because it is a source of competitive advantage in the short-term, and
then turned to a source of sustained competitive advantage over time (Barney,
1991).
The concept of dynamic capabilities is derived from the RBV, and focuses on
resource's reconfiguration and renewal, while RBV focuses on the selection of
resources. This study adopts the dynamic capability's theory and conceptualizes IT
capability to address the sustainability issues of performance in a turbulent
environment. IT capability would help to bridge these gaps by adopting a process
approach and act as a buffer between firm resources and the changing business
environment. The dynamic resources help a firm adjust its resource mix and
thereby maintain the sustainability of the firm’s competitive advantage, which
otherwise might be quickly eroded. Therefore, while the RBV emphasizes the
resource choice or the selection of appropriate resources, dynamic capabilities
emphasize resource development and renewal. Wade and Hulland, (2004) argued
that IT resources can acquire several characteristics of dynamic capabilities that are
helpful to organizations operating in a turbulent environment. Consequently, IT
resources would directly lead to the achievement of the remarkable competitive
advantage position within an organization. Peppard and Ward, (2004) argued that
interrelated attribute of IT capabilities is a union of business knowledge with IT
knowledge that is an open IT platform for the effective use of process, technology
and working with information.
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2.7.4 Complementarity theory
Barua, Lee and Whinston (1996) proposed the theory of business value based on
the complementarity theory originally from economics literature. The
complementarity theory focuses on factors or resources that are mutually
complementary to each other, and the impact of any of the factors or resources
would result in a greater increase in the desired outcome. Milgrom and Roberts
(1995) proposed that some organizational activities and practices are mutually
complementary and so tend to be adopted together, with each enhancing the
contribution of the other. Therefore, the impact on a system of complementary
practices will be greater than the sum of its parts because of the synergistic effects
of bundling practices together. For example, in the context of reengineering, IT
allows for the innovative business process for competitive advantage (Brynjolfsson
& Hitt, 2003). Adopting the complementarity theory for this study may address the
first shortcoming of RBV – isolation of resources. RBV fails to adequately consider
the fact that resources hardly act alone in creating or sustaining competitive
advantage (Chan et al., 2004; Wade & Hulland, 2004). Drawing on the above
theories, a research model is proposed to examine the relationship between
Dynamic IT Capability, BPR factors and organizational performance as shown in
Figure 2.5.
2.8 Chapter Summary
This chapter provide an extensive review of the literature on BPR factors, IT
capabilities and organisational performance. This chapter also discusses the RBV to
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govern the proposed theoretical framework. BPR factors are more of an intangible
resource within the organization that would be used with the influence of IT
capability to achieve a remarkable performance. IT capabilities enhance
performance through the elimination of inefficiency, reduction of long-term cost,
improving service reliability and reduced transaction errors (Tippins & Sohi, 2003).
H1
H1
Organizational
Organization
2 BPR Factors
BPR Factors H2
H3 Performance
Performance
2.I.T
I.TCapability
Capability
Figure 2.5
Conceptual Framework
The chapter also discusses the adoption ofdynamic capabilitiestheory and
complementarity theory to address the deficiency of RBV.In addition, findings
from previousstudy indicated that organisation survival in turbulent business
environment became a concern. These and many other reasons have made authors
to called for an empirical study that can thoroughly relate BPR factors to
organisational performance in the context of other variables that also affect
performance. This study investigates the relationship between BPR factors and
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organisation performance dimensions such as operations cost reduction, customer
service management, business operations efficiency and overall performance. The
review of the literature in this chapter provides a foundation for theoretical
framework of the study, which is discussed in the next chapter.
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CHAPTER 3 CONCEPTUAL FRAMEWORK
CHAPTER 3
CONCEPTUAL FRAMEWORK
3.1 Introduction
This chapter provides the framework for the study based upon the background for
the research discussion in the literature review chapter. The main purpose of this
research is to investigate the relationship among three variables: BPR factors, IT
capability, and organizational performance. Thus, the aim of the chapter is to
propose a conceptual framework model of study and to suggest hypotheses based
upon the foundation of the related theory discussed throughout the literature review
chapter. The chapter is divided into three (3) sections as follows: first, the research
proposed conceptual framework; second, the overall relationships between
variables – BPR factors, IT capability and organizational performance; third, the
research proposition (hypotheses development) for the study.
3.2 Conceptual framework
Following the discussions throughout the literature review chapter, a framework
was developed to examine the BPR factors and the moderating effect of IT
capability on organizational reengineering performance of banks and financial
institutions. Research framework is the basic foundation upon which other research
structures extend the frontier of knowledge (Sekaran, 2003). Therefore, this
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framework is derived from a review of the model, concepts and the BPR factors, IT
capability and organizational reengineering performance.
The dependent variable in this study is the organizational performance. This refers
to the bank's effectiveness of activity's outcomes in terms of financial and non-
financial. This study considers multi-dimensional performance measures as they
offer more complete measurement than the uni-dimensional approach. Examples on
some performance indicators used in previous studies are: profitability, success rate
of new service (product) introduction, after-tax ROI, sales growth, after-tax return
on assets, customer satisfaction, customer focus, market research, customer
relationship management, quality and process improvement. The measures of
performance were adapted from previous studies by various scholars (e.g., Hammer
& Champy, 1993; Sun, 2000; Bontis, Chua, & Richardson, 2000).
The independent variables of this study comprise the BPR factors (change
management, management commitment, less bureaucratic (flatter) structure, project
management, customer focus. Effective process redesigns, and adequate financial
resources and IT infrastructure). In reengineering the main area of concern is to
identify the factors that correlate with performance. It is only when the most
important factors have been identified that practitioners have a chance of success
when implementing reengineering projects. The measure of BPR factors was
adapted from previous studies (Al-Mashari & Zairi, 1999; Cheng & Chiu, 2008).
The moderating variable is IT capability. Ross, Beath and Goodhue (1996) defined
IT capability as a firm’s ability to assemble, integrate and deploy IT based
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resources. Heijden (2000) pointed out that the measurement of IT capability covers
the relationships in the IT department with the rest from the business. Bharadwaj
(2000) defined IT capability as the ability of a firm to mobilize and deploy IT based
resources in combination with other resources and capabilities. Those IT-based
resources are IT enabled resources (consisting of technical and managerial IT
skills); intangible IT-enabled resources (such as knowledge, assets, customer
orientation and synergy – the sharing of resources and capabilities across the
organizational divisions. The measure of IT capability was adapted from previous
studies (Tippins & Sohi, 2003). The study proposes two dimensions of IT capability
– IT knowledge and IT operations. Having defined the conceptual variables, the
conceptual framework in the study is shown in Figure 3.1.
The model shows the framework for the analysis of the relationship between BPR
factors, IT capability and organizational performance. The independent variable in
the framework is BPR factors. The dependent variable is organizational
performance. IT capability attribute was considered to moderate the variable
between the BPR factors and organizational performance. The BPR factors consist
of eight variables: 1) Change management, 2) Management commitment, 3) Less
bureaucratic, 4) Project management, 5) Customer focus, 6) Effective process
redesign, 7) Adequate financial resources, and 8) IT infrastructure while IT
capability consists of two dimensions: a) IT knowledge; b) IT operations; and
Organizational performance is the financial and non-financial dimension. The
relationship is based on the RBV that suggests the performance of a firm is
influenced by internal resources. A firm obtains better performance by making
more effective use of its internal resources than its competitors. IT capability is a
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dynamic capability, and this capability would eventually influence the
organizational performance.
ChangeManagement
policy CM)
BPR
ProjectManagement
(PM)
Top
ManagementCommitme
nt (MC)
Customer focus (CF) Organizational

performance
IT Infrastructure (IT
Infra)
Process Redesign
(EPR)
Financial Resource
(FR)
Bureaucratic Structure
(BS)
Information
Technology
Capability: (ITC)
Figure 3.1
Research Model
The discussionson the relationships between BPR factors, IT capability and
organizational performance are provided in the next sections.
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3.3 BPR factors, IT capability and organizational performance
Following the review of previous studies in chapter two, BPR factors in this study
were adopted as the basis of fit with the environment, according to the proposition
suggested by Al-Mashari and Zairi, (1999) and Salimifard, et al. (2010). The study
of Khong and Richardson (2003) on BPR in Malaysian banks and finance
companies found that the change management system and culture had a positive
effect on customer service management. A change in management and culture can
provide a good setting for fundamental change as a result of BPR through people
involvement in redesigning the process for change (Dawe, 1996; Jarrar &
Aspinwall, 1999). In addition, the management of risk and BPR project
management have a positive effect on customer service management. Banks and
financial service firms in the USA reported that reengineering improves customer
service (Wood, 1996). This agreed with many other researchers who found
improved customer services as a result of BPR initiatives (Hoffman, 1993; Ryan,
1995; Verespej, 1995; Gianni & Grupe, 1997; Gritzuk, 2000).
Cheng and Chiu (2008) asserted that customer focus has a relationship with
performance. This finding is in line with previous studies by Scherr (1993) and
Terziovski et al. (2003) who asserted that the customer must be the focal point in
the process innovations of BPR initiatives. Hall and Wade (1993) argued that for
BPR to be successful, redesigning efforts must be pointed to the area that had the
most direct impact on customer value and cost.
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Similarly, Terziovski et al. (2003) agreed that process innovation in terms of
redesigning core-customer focused business processes and using customer feedback
is significantly related to an organization’s ability to satisfy customers.
Organizations were also more likely to be able to satisfy customers if BPR had been
implemented in a proactive manner. There was, however, a statistically significant
relationship between cycle time reduction and focusing to redesign efforts on core-
customer focused business processes. This is in line with the literature on
successful reengineering put forward by Hall et al. (1993). However, there is no
apparent relationship between increased use of IT and cycle time reduction of
reengineered processes (Terziovski et al. 2003; Bhatt, 2000; Attaran, 2004)
3.4 Statement of hypothesis's development
This part provides the research propositions based on the relationships between
BPR factors, IT capability and organizational performance. Table 3.1 shows the
hypotheses of this study:
H1: The extent of BPR factors are significantly related to the organizational
performance.
H2: The extent of the IT capability attributes related to the organizational
H3: The level of IT capability attribute moderates the relationship between BPR
factors and the organizational performance of banks in Nigeria.
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Table 3.1
Summary of Statement of Direct Relationship Hypotheses Development
Hypotheses Statement
H1 The extent of BPR factors aresignificantly related to the
organizational performance of Nigerian banks.
H1a The extent of change management (CM) is significantly related to overall
performance of organization (OP).
H1b The extent of change management (CM) is significantlyrelated to non-
financial performance of organization (ONFP).
H1c The extent of change management (CM) significantlyrelated to financial
performance of organization (OFP).
H1d The extent of Project management (PM) is significantly related to overall
H1e The extent of Project management (PM) is significantlyrelated to non-
H1f The extent of Project management (PM) is significantlyrelated to financial
H1g The extent of management commitment (MC) is significantlyrelated to
overall performance of organization (OP).
H1h The extent of management commitment (MC) issignificantly related to non-
H1i The extent of management commitment (MC) is significantlyrelated to
financial performance of organization (OFP).
H1j The extent of customer focus (CF) is significantlyrelated to overall
H1k The extent of customer focus (CF) issignificantly related to non-financial
performance of organization (ONFP).
H1l The extent of customer focus (CF) is significantlyrelated to financial
H1m The extent of information technology infrastructure (IT infra) is
significantlyrelated to overall performance of organization (ONFP).
H1n The extent of information technology infrastructure (IT infra)
issignificantlyrelatedto non-financial performance of organization (ONFP).
H1o The extent of information technology infrastructure (IT infra) issignificantly
relatedto financial performance of organization (OFP).
H1p The extent of the effective process redesigns (EPR) is significantlyrelated to
H1q The extent of the effective process redesigns (EPR) is significantlyrelated to
non-financial performance of organization (ONFP).
H1r The extent of the effective process redesigns (EPR) is significantlyrelated to
H1s The extent of adequate financial resources (AFR) is significantlyrelated to
H1t The extent of adequate financial resources (AFR) issignificantly related to
non-financial performance of organization (ONFP).
H1u The extent of adequate financial resource (AFR) is significantlyrelated to
H1v The extent of less bureaucratic structure (LBS) is significantlyrelated to
H1w The extent of less bureaucratic structure (LBS) is significantlyrelated to non-
H1x The extent of less bureaucratic structure (LBS) is significantlyrelated to
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H2: The extent of the IT capability attributes related to the
organizational performance of Nigerian banks
H2a. To what extent is the IT capability (ITC) attributes related to the overall
performance of Nigerian banks?
H2b. To what extent is the IT capability (ITC) attributes related to the non-
financial performance of Nigerian banks?
H2c. To what extent is the IT capability (ITC) attributes related to the financial
performance of Nigerian banks?
The hypotheses state the relationships between each independent variable of BPR
factors and organizational performance. The organizational performance is
enhanced when BPR factors are implemented. Table 3.2shows the hypotheses that
postulate the moderating effect of IT capability indicators of the relationship
between BPR factors in the banking process performance relationship.
Table 3.2
Summary of Statement of Indirect Relationship Hypotheses Development
H3 The level of Information Technology (IT) capability attribute
moderates the relationship between BPR factors and the
organizational performance of Nigerian banks.
H3a The level of IT capability attribute moderates the relationship between
change management (CM) and overall organizational performance (OP).
H3b The level of Information Technology (IT) capability attribute moderates
the relationship between change management (CM) and non-financial
H3c The level of Information Technology (IT) capability attribute moderates
the relationship between change management (CM) and financial
H3d The level of Information Technology (IT) capability attribute moderates
the relationship between Project management (PM) and overall
H3e The level of Information Technology (IT) capability attribute moderates
the relationship between Project management (PM) and non-financial
H3f The level of Information Technology (IT) capability attribute moderates
the relationship between Project management (PM) and financial
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H3g The level of Information Technology (IT) capability attribute moderates
the relationship between management commitment (MC) and overall
H3h The level of Information Technology (IT) capability attribute moderates
the relationship between management commitment (MC) and non-
financial non-performance of organization (ONFP).
H3i The level of Information Technology (IT) capability attribute moderates
the relationship between management commitment (MC) and financial
H3j The level of Information Technology (IT) capability attribute moderates
the relationship between customer focus and overall performance of
organization (OP).
H3k The level of Information Technology (IT) capability attribute moderates
the relationship between customer focus and non-financial performance of
organization (ONFP).
H3l The level of Information Technology (IT) capability attribute moderates
the relationship between customer focus and financial performance of
organization (OFP).
H3m The level of Information Technology (IT) capability attribute moderates
the relationship between information technology infrastructure and overall
H3n The level of Information Technology (IT) capability attribute moderates
the relationship between information technology infrastructure and non-
H3o The level of Information Technology (IT) capability attribute moderates
the relationship between information technology infrastructure and
H3p The level of Information Technology (IT) capability attribute moderates
the relationship between effective process redesign and overall
H3q The level of Information Technology (IT) capability attribute moderates
the relationship between effective process redesign and non-financial
H3r The level of Information Technology (IT) capability attribute moderates
the relationship between effective process redesign and financial
H3s The level of Information Technology (IT) capability attribute moderates
the relationship between adequate financial resources and overall
H3t The level of Information Technology (IT) capability attribute moderates
the relationship between adequate financial resources and non-financial
performance of organization (ONFP)
H3u The level of Information Technology (IT) capability attribute moderates
the relationship between adequate resource and financial performance of
organization (OFP).
H3v The level of Information Technology (IT) capability attribute moderates
the relationship between of less bureaucratic structure and overall
performance of organization (OP)
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H3w The level of Information Technology (IT) capability attribute moderates
the relationship between less bureaucratic structure and non-financial
H3x The level of Information Technology (IT) capability attribute moderates
the relationship between less bureaucratic structure and non-financial
Therefore, based on the literature review of the related theories (RBV, DC and
complementarity) and model discussed in the previous chapter, this study proposes
an overall conceptual framework. The main purpose to the study is to examine the
relationship of the three variables: BPR factors, IT capability, and organizational
performance.
3.5 Chapter Summary
This chapter extensively described the hypothesised research model that was
empirically investigated in this study. The chapter argued for the need to determine
the effect of BPR factors and organisational performance. Each of the six
components in the research framework was discussed to ascertain their relation
upon which 24 direct and indirect relationships each were hypotheses. This study
has primarily examines the relationship between BPR factors and organisational
performance constructs. In addition, the study has investigated the moderating
effect of IT capability on the relationship between BPR Factor and performance
dimensions such as operations cost reduction, customer service management and
business operation efficiency performance.Next to this chapter is chapter 4 which
extensively discussed the methodology that was adopted to answer the research
questions.
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CHAPTER 4 METHODOLOGY
CHAPTER 4
METHODOLOGY
4.1 Introduction
This chapter discusses the research methodology in achieving the objective. The
chapter is divided into six sections, namely, the research design, sample and
sampling procedure, data collection, instrument, data analysis, and summary.
4.2 Research design
Zikmund, (2000) described the research design as a master plan specifying the
methods and procedures for collecting and analyzing the needed information.
Furthermore, Zikmund, (2000), and Sekaran, (2003) identified three (3) types of
business research documented from the literature: 1) Exploratory, 2) Descriptive,
and 3) Causal/Hypothesis testing. The decision to select the type to be used depends
on the understanding and clearness of the research problem. Exploratory research is
carried out to shed more light on the problem but does not provide conclusive
evidence. In this case, the research is required to understand the problem before
developing any model (Zikmund, 2000; Sekaran 2003). Descriptive research is
conducted when there is some understanding of the nature of the problem; such
research study is used to provide a more specific description of the problem
(Zikmund, 2000; Sekaran, 2003). Causal research or hypothesis testing further
describes the nature of the relationships among the variables being investigated
(Zikmund, 2000; Sekaran, 2003).
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This study focuses on descriptive and causal research (hypothesis testing), since the
objective of the study is to examine the relationships between the BPR factors, IT
capability and organizational performance. Descriptive research is undertaken for
this study to identify the characteristics as the population, such as respondents
(commercial bank, microfinancebank and mortgage finance) variability and
organizational characteristics. The causal research or hypothesis testing and the
correlation approach are conducted in the study to explain the relationship between
the variables and the variance of the dependent variables.
The research setting was a cross-sectional study design. It involves gathering the
data only once or at one point in time to meet the research objectives (Cavana,
Dalahaye, & Sekaran, 2001). The advantage of using a cross-sectional study is that
it is economical and does not take time like a longitudinal study. The majority of
the previous studies on BPR used case study descriptive research design (O’Neil &
Sohal, 1999).
4.2.1 Types of research design
Zikmund, (2000) classified research design into three (3) categories: 1) survey or
non-experimental design consisting of interviews and questionnaires, 2)
experimental design conducted at the laboratory and field study, and 3) historical
design, which explores the usage of secondary data and observation study. This
study uses non-experimental design, where the researcher does not have control
over the independent variables that determine their effect on the dependent variable.
The researcher can only control the measurement for the study but does not
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interfere with the research settings. The researcher is only interested in gathering
the information from the banks and financial institution's performance outcome of
implementation of the BPR factors, and, specifically, to examine the relationship of
BPR factors, IT capability and organizational performance within the banking and
financial service settings. Therefore, non-experimental design or survey using the
quantitative method of administering the questionnaire is employed in this research.
4.2.2 Sampling design
The study uses the organization as the unit of analysis. The population of the study
is 1,023 financial organizations (consisting of 24 commercial banks, 901
microfinance bank and 98 primary mortgage finance). A total of one thousand and
twenty three (1, 023) banks and financial institutions are registered with the Central
Bank of Nigeria (CBN). The list of the Nigerian bank's population frames is in
appendix 9. Furthermore, the list can be accessed through the CBN Internet
website: http://www.cenbank.org/supervision/finstitutions.asp.
Given the population size of 1,023, the sample size is computed using the formula
suggested by Dillman (2000) and Weaver (2006). The formula for computing
sample size is as shown below:
(N)(p)(1 − p)
n= B
(N − 1)( )2 + (p)(1 − p)
C
Where, n = the computed sample size needed for the desired level of precision.
N = the population size.
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p = the proportion of population expected to choose. In this study before collecting
data, the proportion of respondents who answer “yes” or “no” is unknown, so the
proportion of 0.5 was used instead of 0.80 for a more homogenous sample
(Dillman, 2000). However, using 0.50 will lead to a greater sample size than using
0.80 (Weaver 2006); But,it always provides an adequate sample size for a smaller
or greater population (Biemer & Lyberg, 2003).
B=acceptable amount of sampling error or precision. It can be set at 0.1, 0.05, or
0.03, which are + 10, 5, or 3% of the true population value, respectively. In this
study, the acceptable amount of sampling error or precision is set at 0.05 or 5%.
C = Z statistic associated with the confidence level; 1.96 corresponds to the 95%
level.
Where, N = 1.023, p = 0.05, B = 0.05, C = 1.96
(1.023)(0.5)(1 − 0.5)
n= = 279.481
0.05 2
(1.023 − 1) ( ) + (0.5)(1 − 0.5)
1.96
Krejcie and Morgan (1970) greatly simplified size decision by providing the sample
size table that ensures a good decision model. The sample size for a given
population of 1,000 = 278 and sample size for 1,100 population = 285. Hence,
everything (assumption) being equal, we can deduce that, the sample size from a
given population of 1,023 would be = 279.61 approximately 280 (Krejcie &
Morgan, 1970)
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Based on the computation of sample size, this study needed 280 banks to complete
the survey using the questionnaire. It was also within the sample frame of +5%
margin error based on the formulae. The sample size of 280 is within Roscoe’s rule
of thumb for sample size; that is, larger than 30 and smaller than 500 are
appropriate for most research (Roscoe, 1975). In multivariate research, the sample
size should be ten (10) times the number of variables in the study (Hair, et al.,
2010).
4.2.3 Sampling techniques
Probability sampling techniques are used in this research instead of non-probability
sampling. The probability sampling gives each respondent an equal chance of being
selected as the sample object (Sekaran, 2003). Furthermore, a representative sample
in the probability sampling design guarantees the equal and independent
representation of data being chosen. The advantage of this sampling method is that
there is no bias of the researcher against the choice of another (Salkind,2003). It is
also regarded for its high generalizability (Cavana et al., 2001). Furthermore, the
aim of this study is to have samples drawn from various banking institutions. Thus,
stratified random sampling is appropriate to the study, as shown by Sekaran,
(2003); Biemer and Lyberg (2003). Stratified random sampling as its name implies,
involves a process of categorization, followed by selection of subjects from each
stratum using simple random sampling procedure. The subjects drawn from each
stratum are proportionate to the total number of elements in the respective strata.
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4.2.4 Proportionate stratified random sampling
The banks were categories into strata: 1) Commercial bank = 24 banks with 5,799
branches and minimum bank capitalization of N25billion about $200 million; 2)
Microfinance = 901 branches and minimum capitalization of N2 billion about
$15million; 3) Primary mortgage finance = 98 with 102 branches and minimum
capitalization of N5 billion about $40 million. The selection of the sample size of
each category of banks was made based on proportionate stratified random
sampling technique. 27.4% of the population elementsfrom each stratum were
selected. The breakdown of the stratified sample size and number of questionnaire
distributed to each category of the bank is as shown in Table 4.1.
Table 4.1
Proportionate stratified random sampling
Calculation. Questionnaire
Proportionate
Bank Population (27.4% of the distribution & new
Sample size
element) sample size
Commercial bank 24 24x.274 7 21
Primary Mortgage 98 98x.274 27 90
Microfinance 901 901x.274 246 449
Total 1023 1023x.274 280 560
Furthermore, a representative sample in the probability sampling design is
important for wider generalization purposes (Sekaran, 2003). In this study, simple
random sampling is used, which guarantees equal and independent representation
of the data chosen. The advantage of this sampling method is that there is no bias
that one person would be chosen over another and the choice of one person does
not bias the researcher against the choice of another (Salkind, 2003). It is also
regarded for its high generalizability (Cavana et al., 2001).
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However, the disadvantage to this method is that it is time consuming, expensive
and tedious (Cavana et al., 2001; Salkind, 2003). Furthermore, the objective of this
study is to have a sample drawn from various banks. Thus, simple random sampling
is appropriate to the study. Random numbers were generated using a Microsoft
excels program for application of the mathematical formula {= rand ( )}to enable us
select individual samples from the sample size of 560 banks. The details of random
numbers generated and selection of individual samples from the three categories of
banks is reported in appendix 9.
4.2.5 Estimating expected response rate
For thisstudy, a total of 560 questionnaires were distributed among the banksstated
inTable 4.1. The aim was to achieve at least 50% response rate of the respondents
whoare 280. The response rate was set in order to ensure that the non-response bias
and non-response rate did not affect the results. Moreover, this percentage was
established in accordance with a response rate of previous studies such as Sindhu
and Pookboonmee, (2008) and Phokhwang, (2008) that employs stratified random
sampling received response rate of 47 % and a response rate of 77.7%. Going by
the computation, this study is expected to sample 560 banks with an expected rate
of at least 50% for reliable and valid results.
4.3 Data collection strategy
In an attempt to get the completed questionnaire returned as quickly as possible, the
hand delivery and collection method was chosen; which is expected to give a high
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response rate. Hand delivery and collection are an efficient method in an
environment where a research culture is not sufficiently developed, such as Nigeria.
For instance, research has shown that the rate of return of mailed questionnaires is
between 3 per cent and 4 per cent (Asika, 1991).
The primary data was collected through the survey method, and the questionnaire is
adapted for such a purpose. The survey was conducted through self-administered
questionnaires. Although this method is expensive compared to a mail survey,
nevertheless, the researcher favours this method due to its advantages. The biggest
advantage is that the researcher can collect all the completed responses within a
short period of time. The second advantage is that the researcher can explain on the
spot the terms or parts of the questions that the respondents cannot understand.
Third, the researcher can motivate the respondents to take part in the survey and
give their honest opinions (Sekaran, 2003).
The survey method strategy was adopted to collect the data with regard to BPR
factors, IT capability and manager’s perception of the organization's performance.
Babbie (1990) highlighted the three (3) objectives linked with survey research: 1)
Description: It involves descriptive statement about population to identify the
characteristics and attributes of the respondent; 2) Explanation objectives to
enlighten the population through examining the relationship of the variable; and 3)
Exploratory objectives, which involve the search for a new study on a particular
area. This study’s objectives are descriptive and explanatory. It involves identifying
the characteristics and attributes of the respondents as well as providing an
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explanation through the examination of the relationships among the variables to the
study.
4.4 Measurement instruments and operationalization of variables
Questionnaires are considered one of the most appropriate data collection
instruments for survey research (Asika, 1999). Hence, a structured questionnaire,
which consists of closed-ended questions, was used. However, in order to ensure
the adaptation of the questionnaire was done properly, the researcher conducted
face validity before a pilot test of the instrument. The adapted questionnaire
measures the influence on the research independent variables: BPR factors –
change management; management commitment; IT infrastructure; less bureaucratic
structure; project management; customer focus; effective processes redesign, and
adequate financial resources, with a moderating factor of IT capability (IT
knowledge and IT operations) and dependent variable – organizational performance
(financial and non-financial). The six-point type rating scale was used in measuring
responses for the questions. A six-point rating scale assists the researcher to
compute means and standard deviation responses on variables as well as the
midpoint in the scale (Sekaran, 2003). Certain literature has found that a scale
between 5 to 7 points is more reliable and valid than shorter or longer scales
(Krosnick & Fabrigar, 1997). To prevent the respondents from answering a neutral
point for easy choice, the measurement of this study uses a six-point rating scale as
justified by Krosnick (1991), who argued that respondents demonstrate behaviour
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of either survey optimizing or satisfying. In addition, including a neutral point
could lead to a decrease in measurement quality.
However, Dawis (1987); Garland (1991); and Hughes (1969) suggested that the
decision lay largely on the preference of the researcher and that there can be no
single best method in scale construction; one may be better for one research
problem but not good for another. In this study, the use of a 6-point scale was
deemed appropriate because it was found to increase the reliability of the measure
and reduce social desirability bias among respondents, as respondents are
knowledgeable enough to understand the questions and issues being examined by
the research.
The questionnaire designed for this study consists of four (4) main sections
(Appendix1). Section A consists of questions regarding the degree of BPR factor's
implementation (independent variables) and consists of statements about the BPR
factors, adapted and modified mainly from the findings of Al-Mashari and Zairi,
(1999); Ahmad, Francis, and Zairi, (2007); Salimifard, et al. (2010). Section B
includes questions related to the degree of IT capability as the moderating factor
consists of statements about the IT capabilities (IT knowledge and IT operations)
that were associated with superior operational performance, adapted with
modification from previous studies (Tippins & Sohi, 2003). Section C of the
questionnaire was the dependent variable (Organizational performance). The
respondents were asked about the degree of perceived current organisational
performance over the past three years. The instrument to measure
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organisationalperformance was adapted and modified from the findings of Hammer
and Champy, (1993); Bontis, Chua, and Richardson, (2000); Terziovski,
Fitzpatrick, and O’Neil, (2003). Section D: Demographic data asked about the
personal and organization background of the respondents. The independent variable
consists of BPR factors; the moderating factor variable was IT capability, and the
organizational performance as the dependent variable. Specifically, the
measurement of each variable for the study is discussed as follows:
4.4.1 BPR factors
The BPR factors (Change management; management commitment; less
bureaucratic structure; project management; customer focus; effective process
redesigns, adequate resources and IT infrastructure) were adapted from the study
suggested by (Al-Mashari & Zairi, 1999; Ahmad et al., 2007; Salimifard et al.,
2010). The measurements of these dimensions were adapted from (Al-Mashari &
Zairi, 1999; Herzog et al., 2007; Cheng & Chiu, 2008). BPR factors variables were
assessed using a six-point rating scale of instrument with five factors containing 44
measurable items. The respondents are required to answer the questions of their
current organization potential BPR factors on a scale of 1=Strongly Disagree to
6=Strongly Agree. The specific dimensions of the BPR factors are discussed in the
following paragraph.
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4.4.1.1 Change management
The change management measure focuses on the degree of continually renewing an
organization’s direction, structure and capability to serve the ever-changing needs
of external and internal customers. Managers or leaders manage the potential
impact of change to make people accept it in order to implement change. Change
management includes all human and social related changes and the organization’s
cultural adjustment technique, employee’s motivation, empowerment, effective
communication, people’s involvement, training and education of employees,
needed by management to facilitate the insertion of newly designed processes and
structures into working practice and to deal effectively with resistance. This
dimension is measured by nine items. The list below briefly presents all the items
for the change management construct:
1. Employee’s motivation to hard work through an effective reward system to
encourage improvement of staff productivity.
2. The organization recognizes human involvement in implementation of a BPR.
3. The organisation trains and educates employees in the newly introduced
operational processes.
4. There is openness by the management for employees within the organisation
to accept changes for improvement.
5. The organisation has the effective communication system of updating
employees on reengineering implementation.
6. The employees have clearly understood the norms, values and organizational
culture.
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7. The organisation has a flexible structure that empowers core process owners
for effective service delivery.
8. The employee accepts positive changes easily for organisational goal
achievement.
9. The employee empowerment initiatives encourage improvement of staff
productivity in the organisation.
4.4.1.2 BPR project management
The project management measures the extent of the alignment of the BPR project
strategy with the corporate strategy, effective use of consultant, effective planning
and project management techniques as well as adequate identification of BPR value
and performance. This factor is measured by four items. The list of activities below
briefly presents the items of measurement for the BPR project management:
1. The organization has aligned the BPR strategy with corporate policy.
2. The organization BPR project is clear to all staff.
3. The organizations reengineering effort is towards the key business process.
4. The organization establishes the performance improvement goals for
process's key performance indicators (KPI).
4.4.1.3 Top management commitment
The management commitment measures the extent to which top managements are
committed to ensuring that employees contribute in achieving dramatic
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organizational improvement to the business process within the organization. This
dimension is measured by eight items. The list of activities below briefly presents
the items of the measurement for the degree of top management commitment:
1. The top management set strategic plans and activity for customer satisfaction
through the process reengineering projects.
2. The top management was committed to ensuring employee contribution
towards the organization achievement of the remarkable improvement
through the business process redesign.
3. The top management normally initiatesthe BPR in the organization.
4. The top management encourages changes to maintain a competitive
advantage in the organization.
5. The top management accepts consultant positive recommendations on
restructuring for implementation throughout the organization.
6. The top management considers the BPR as a method to improve operational
process performance for the organization.
7. The key personnel within the organization are capable of carrying out related
changes.
8. The top management considers the business process re-engineering (BPR)
approaches to improve competitiveness of the organization.
4.4.1.4 Customer focus
The customer focus measures the focus on the external orientation based on
customer research, competitive analysis, analysis of customer requirements on
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products/services, and firms that are able to meet customer demand to achieve a
competitive advantage over their competitors. This dimension is assessed by four
items. The list of activities below briefly presents the items of measurement for the
customer focus construct:
1. External orientation based on customer research, competitive analysis and
benchmarking.
2. Learning from customers and competitors
3. Measurement of customer's requirement and expectation
4. Define the process in terms of customer value
4.4.1.5 IT infrastructure
IT infrastructure: this dimension is measured by the organization’s extent of
expenditure on IT infrastructure, personnel, IS integration, maintenance, computers
and software. Effective reengineering of legacy information systems,the effective
use of software tools that contributes to the success of BPR project. This dimension
is assessed by five items. The list of activities below briefly presents the items of
measurement for the IT infrastructure construct:
1. The organization aligns I.T infrastructure and BPR strategy.
2. The organization builds an effective I.T infrastructure.
3. The organization has a sufficient budget for a purchase of an updated
hardware and software for operational processes.
4. The organization achieved proper integration of I.T.
5. The organization makes effective use of software tools.
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4.4.1.6 Effective process redesigns.
The effective process redesigns measure focuses on the degree of the appropriate
level of process knowledge, documentation of existing processes, selection of core
processes, identification of process gaps and evaluation of effectiveness of current
processes by making use of software tools to visualize and analyses them. This
dimension was assessed by five items. The list of activities below briefly presents
the items of measurement for the effective process redesign to construct:
1. The organization documentation process is clear to all employees.
2. The organization core processes were redesigned for efficient service
delivery.
3. The organization has periodically evaluated the process gaps of operational
processes.
4. The organization uses appropriate IT software for operational processes.
5. The organization processes were identified for appropriate redesign.
4.4.1.7 Adequate financial resources
The adequate financial resource's measure focuses on the availability of sufficient
financial resources or adequate capital base funding to the organization. The
recapitalization of the bank's share capital, adequate shareholder fund for the banks
to conduct their business effectively, strong capital base to provide a cushion
lending, level of customer deposits, savings, short-term and tenured fund. This
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dimension is assessed by six items. The list of activities below briefly presents the
items of measurement for the adequate financial resources construct:
1. The organization is financially sound to conduct its transactions.
2. The organization’s strong capital base provides a cushion for its risk assets.
3. The organization’s reserve is sufficient for growth.
4. The organization has a high volume of demand deposit as a cheap fund.
5. The organization’s volume of deposit is in a tenured fund.
6. The organization has attractive financing productsto its customers.
4.4.1.8 Less bureaucratic (flatter) structure
Less bureaucratic (flatter) structure: It measures the extent on the organization
structure that encourages creativity and innovativeness. The less bureaucratic and
more participative style of management to an organization is better and the more
likely to avoid failure of BPR implementation. Therefore, the need for a less
bureaucratic and more participative organization is obvious (Ahmad et al., 2007).
McAdam (2003) suggested that organizations could implement less bureaucracy to
avoid failure of BPR implementation. This dimension is assessed by five items. The
list of activities below briefly presents the items of measurement for a less
bureaucratic structure (flatter structure) construct:
1. The organization's structure encourages creativity for a new way of adding
value to customers.
2. The organization structure is less bureaucratic for innovation of customer
service.
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3. The organization’s structure is flexible for enhancement of performance.
4. The organization employees actively participate to meet customer demands.
5. The flattened organization structure offers equal involvement of employee’s
representation in the decision-making processes.
4.4.2 IT capability
The measurement of this dimension was adapted from Tippins and Sohi (2003). IT
capability variables are assessed using a six-point rating scale of instrument with
two dimensions containing 12 measurable items. The respondents are required to
assess their organization on the perceived performance of IT capabilities on a scale
of 1=Strongly Disagree to 6=Strongly Agree. The specific dimensions of the IT
Capabilities are discussed in the following section.
4.4.2.1 IT knowledge
IT knowledge is referred as the extent to which organisation acquires a body of
technical knowledge about infrastructure or objects such as the computer-based
system. Technical knowledge could be expressed as contextually based know how.
In this study, IT knowledge was measured by six items. The list of the activities
below briefly presents the items of measurement through the use of IT knowledge
constructs:
1. The organization operation's staffs are knowledgeable on I.T operations.
2. The organization staffs of I.T department are qualified for the job.
3. The organization I.T networking engineers are professionally qualified.
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4. The organization has an excellent of computer expertise as consultants.
5. The organization I.T staffs are proactive in e-banking innovation.
6. The organization I.T staffs attend training courses regularly.
4.4.2.2 IT operations
For this study IT, Operations are the extent of activities within the organization that
utilizes IT to manage market and customer information required to meet goals.
These activities are underpinned by skills that encapsulate the knowledge within the
firm. When IT operations are able to monitor and manage IT resources and
services from a real-time business outcome perspective, it can align IT operations
with business priorities. As a result, IT operations can streamline business
processes and optimize resources to help manage costs, increase efficiency to
manage productivity and increase revenue, and help ensure service availability to
enhance customer satisfaction, rather than simply focus on technology. This
dimension is measured by six items. The list of the activities below briefly presents
the items of measurement through the use of IT operation's constructs:
1. The organization operations are linked to branches through WAN.
2. The organization technology based links via LAN is efficient 24/7.
3. The organization computer link system down time is minimal.
4. The organization has computerized all its banking operational service.
5. The organization I.T policy is in line with regulatory guidelines.
6. The organization I.T operations monitor customer activities.
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4.4.3 Organizational performance
Organizational performance measures the extent of the managers’ perception on the
organizational performance (increase/decrease) measured by subjective and
objective indicators (financial and non-financial). The non-financial (subjective)
indicators range from customer services, effective operations and service delivery,
while the financial (objective) indicators included the financial growth and ratios.
The performance measurement was adopted from various sources. The respondents
were required to rate their organization over the last three years indicating the
extent of perceived performance based on a scale: 1=Decreased Significantly (DS);
2=Decreased (D); 3=Slightly Decreased (SLD); 4=Slightly Increased (SLI);
5=Increased (I) and 6 = Increased Significantly (IS). This dimension was
measured by 10 items based on the perception of managers on the performance
within the organization as explained in the subsequent sections.
4.4.3.1 Non-financial performance measures
The non-financial performance indicators used in this study are:
1. The level of our customer satisfaction with our services
2. The reactivation of inactive account records
3. The customer service delivery in our branches
4. The customer relationship management in our branches
5. The brand name of our organization in the business environment
6. The transaction cycle time measure through SLAs in our branches
7. The operating cost of doing business in branches
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8. The zero error of operational processes
9. The market share in retail, consumer corporate banking services
10. The market share in public sector business
4.4.3.2 Financial performance measures
The financial performance indicators used for this study are:
1. The number of our performing loan
2. The yearly profit before tax performance
3. The number of non-performing loans
4. The organization deposit liability growth
5. The number of recovered bad loan
6. The fee-based income on transaction services
7. The volume of current and saving account customers
8. The volumes of a tenured fund/fixed deposit.
9. The financial performance targets achievement by branches.
10. The level of operating cost
The measurements of financial and non-financial performance in this study were
the perceived subjective measures of financial and non-financial performance
within the organization. Financial performance indicators were: profitability,
success rate of new service (product) introduction, after-tax ROI, sales growth, and
after-tax return on assets (Sun, 2000; Bontis, 1998; Bontis, Chua & Richardson,
2000; Khong & Richardson, 2003). The non-financial performance indicators used
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for this study include: customer satisfaction (Khong & Richardson, 2003), cost and
cycle time reduction, quality service and process speed (Hammer and Champy,
1993; Market research), and customer relationship (Bontis, 1998; Bontis, Chua &
Richardson, 2000; Khong & Richardson, 2003). Table 4.2 summarizes the
measurement instrument's dimensions of the independent, moderating and
dependent variables.
Table 4.2
Summary of Measurement Instrument Variables, Sources, and Number of Items
No. of
Construct Dimensions Definition Sources
item
BPR factor Change This study defines change management Al-Mashari and 9
Management asthe extent of all human, social related Zairi (1999);
changes and cultural adjustment technique Ahmad, Francis
needed by management to facilitate the and Zairi (2007);
introduction of newly designed processes Cheng and Chiu
and structures of the systems, working and (2008);
to deal effectively with resistance. Terziovski,
Fitzpatrick and
O’Neil (2003)
BPR Project This study defines project management as Same as above 4

management the extent of alignment of strategy with
corporate strategy, effective use of
consultant, effective planning and project
management techniques and adequate
identification of project values and bank
performance measurement.
Top This study defines management Same as above 8

management commitment as the extent of top
commitment management commitment to ensure that
employees contribute towards the
successful achievement and remarkable
improvement in the organizational
performance of the bank.
Customer This study defines customer focus as the Same as above

focus extent of research conducted on customer 4
related to their requirements, value,
satisfaction, competitive analysis and
benchmarking for improvement of
performance of organization.
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No. of
item
IT This study defines IT infrastructure as Same as above 5
Infrastructure the extent of the organization’s
expenditure incurred on IT
infrastructure, IT personnel training, IT
consulting, IS maintenance, computers
and software, effective alignment of IT
infrastructure and building an effective
IT infrastructure, proper IS integration,
effective reengineering of legacy IS,
increasing IT function as competency,
and effective use of software tools.
Process This study defines the process redesign Same as above 5
redesigns as the extent of the organization to
create or redesign processes that have a
direct impact on customer value and
cost on the operational system of a
bank.
Same as above
Adequate This study defines adequate financial 6
Financial resources as the extent of monetary
resources resources available to meet the
budgetary allocation for successful
implementation of projects for
improvement of the performance of a
bank.
Less This study defines a flatter structure as Same as above 5

Bureaucratic the extent of organizational structure
Structure that encourages creativity and
(Flatter innovativeness. The less bureaucratic
Structure) and more participative organization the
better, which would avoid failure of
BPR implementation.
IT This study defines IT capability Tippins and

Capability attributes as the extent to which Sohi (2003)
cumulatively the IT knowledge, IT
operations and IT objects' dimensions
of IT competency represent co-
specialized resources that provide an
indication of the organization’s ability
to understand and utilise IT tools and
processes that are needed to manage
market and customer information.
IT knowledge IT knowledge is referred as the extent Tippins and 6

to which a firm possesses a body of Sohi (2003)
technical knowledge about objects such
as computer-based systems.
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No. of
item
IT operations IT operations refer to the extent to Tippins and 6
which a firm utilises IT to manage Sohi (2003)
market and customer information.
IT objects IT objects refer to computer-based Tippins and

hardware, software and support Sohi (2003)
personnel.
Organisation This study defines organizational Sun (2000); 20

Performance performance as the level of bank Bontis (1998);
performance (increase/decrease) in Khong &
terms of both financial and non- Richardson
financial performance indicators. (2003); Bontis,
Chua &
Organisational performance refers to Richardson,
the organisational effectiveness and (2000); Hammer
represents the results of the & Champy,
organization’s activities or focuses on (1993).
the achievement of objectives
(Hammer & Champy, 1993; Henri,
2004).
Total items 78
4.5 Preliminary investigation on BPR implementation in Nigerian banks
Prior to commencement of the research (main study) on the BPR factors and
organizational performance of Nigerian banks, a preliminary investigation was
conducted to ascertain the level of BPR implementation. The result indicated that
various operational processes were reengineered by Nigerian banks in the post
consolidation period. The operationalization of BPR factors by change
management, process innovation and use of IT as well as IT capability
operationalized by IT partnership, IT external link, IT business strategy integration,
IT management, and IT infrastructure were also found to be reliable and valid
measurement (Ringim, Razalli & Hasnan, 2011).
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4.6 Validity test of instrument measures
Exploratory factor analysis (EFA) is generally used to discover the factor structure
of a measure and to examine its internal reliability. EFA is often recommended
when researchers have no hypotheses about the nature of the underlying factor
structure of their measure. Exploratory factor analysis has three basic decision
points: (1) decide the number of factors, (2) choosing an extraction method, (3)
choosing a rotation method. Exploratory factor analysis (EFA) was used instead of
CFA because the extensive studies conducted on BPR literature is based primarily
on qualitative case study and there is a lack of rigorous wide ranging empirical
research covering all aspects of BPR (Herzog et al., 2007). Furthermore, EFA and
CFA are similar in the sense that
1. Exploratory factor analysis (EFA) and confirmatory factor analysis (CFA) are
two statistical approaches used to examine the internal reliability of a measure.
2. Both are used to investigate the theoretical constructs, or factors, that might be
represented by a set of items.
3. Either can assume the factors are uncorrelated, or orthogonal.
4. Both are used to assess the quality of individual items.
5. Both can be used for exploratory or confirmatory purposes
A pilot study was conducted prior to the main research study. The objective was to
get feedback and use it in adjusting and improving data collection, the
questionnaire and the techniques used in analyzing data. The pilot study was
performed to achieve the following specific purposes:
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1. To enable the researcher to establish contact with organizations before
the real data collection process of the main study
2. To determine the validity and reliability of the constructs
3. To foresee any challenges that may arise during the main study data
collection.
A pre-test of the questionnaire was conducted in order to enable testing of the
alternative wordings and question sequences to determine which format best suits
the respondents. The purpose of the pre-test was to alert the researcher to potential
problems that may be caused by the questionnaire. Thus, pre-tests were conducted
to answer questions on the questionnaire, such as the following: 1) Can the
questionnaire format be followed by the researcher/interviewers? 2) Does the
questionnaire flow naturally? 3) Can respondents answer the question easily? 4)
Which alternative form of question's works best? Pre-testing also provides the
means to test the sampling procedure, whether efficient or not. Therefore, the
benefit of conducting a pre-test of the questionnaire is to improve the validity and
reliability of the instrument measures. Zikmund (2000) highlighted that the aim of
conducting validity is to ensure that the instrument measure what it is supposed or
intended to measure.
Discriminant validity can be defined as the degree to which a construct can
beestablished as truly being the difference from other constructs in the model
(Byrne,2010). A detailed review of the extant literatures as shown that there are
twomain methods through which researchers can statistically measure
thediscriminant validity of their data set, i.e. AVE (as suggested by Fornell
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andLarcker, 1981) and comparing chi-square of a model through its nested
model(Hair et al., 2006).
To assess discriminant validity of the data set, this study madeused of the average
variance extracted (AVE) procedures as described byFornell and Larcker (1981). In
that study, they suggested that the squaredmultiple correlations between any two or
more constructs as calculated for eachitem that measures it should be less than the
calculated average varianceextracted (AVE) that is measuring the item (John and
Reve, 1982).
4.7 Reliability test analysis of construct
There are various types of reliability test; the most common method used in many
study is internal consistency reliability (Litwin, 1995). The Cronbach’s coefficient
alpha test was conducted to measure the internal consistency reliability. A pilot
study was conducted with banks to test the reliability of the instruments. A total of
100 respondents participated in the pilot study, and the result from the study is
summarized inTable 4.3.
The result from the pilot study indicates that Cronbach’s alpha of the variable's
ranges from 0.609 to 0.890. The generally agreed lower limit for Cronbach’s alpha
may decrease to 0.60 in exploratory research (Hair, et al., 2010). Since the results
on the reliability were more than 0.60, none of the items were dropped from this
pilot study. The reliability results have shown that the dimensions of BPR, as listed
in Table 4.3are appropriate for use in further research. Further reliability analysis
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was performed after factor analysis in the actual study based on larger sample size
(refer to chapter 5).
Table 4.3
Summary of the pilot test reliability analysis of constructs
Constructs Number of items Cronbach’s Alpha
Change Management 9 .744
BPR Project Management 4 .609
Top Management Commitment 8 .828
Customer Focus 4 .751
IT Infrastructure 5 .830
Process Redesign 5 .740
Financial Resources 6 .725
Less Bureaucratic Structure 5 .748
IT Capability 12 .824
Organisation Performance 20 .890
4.8 Data analysis method
Preliminary analysis of data checks for normality and outliers was performed
before reliability analysis. The data was analyzed using Statistical Package for the
Social Science (SPSS) software. Six methods of data analysis were used for the
main study using the SPSS software. These analyses included:
1. Cleaning and screening of data
2. Descriptive statistics
3. Factor and Reliability analysis
4. Pearson Correlation analysis
5. Multiple regression analysis
6. Hierarchical regression analysis
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4.8.1 Cleaning and screening the data
The data screening set was conducted through an examination of basic descriptive
statistics and frequency distributions. Values that were found to be out of range or
improperly coded were detected. A frequency test was run for every variable to
identify any missing responses.
4.8.2 Descriptive analysis
Prior to carrying out any statistical analyses, such as correlation, it is important to
ensure that any assumptions make for a test are not violated. Testing of assumptions
usually involves getting descriptive statistics on the variables. These descriptive
statistics include the mean, standard deviation, range of scores, skewness and
kurtosis (Pallant, 2001).
4.8.3 Goodness of measure
As this research uses instruments that were already tested by other researchers,
principal component analysis was performed for determining the set of common
underlying dimensions, known as a factor of the construct (Hair et al., 2010).
Furthermore, the use of factor analysis is also to check whether each constructs
cluster together thus, reducing a vast number of variables to a meaningful,
interpretable and manageable set of factors (Cavana, Dalahaye & Sekaran 2001).
The sample size that is needed to perform factor analysis for this study is
acceptable. The required sample size qualified to conduct factor analysis should be
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100 or larger, or to have at least five times as many observations as possible for the
variables (Hair et al., 2010; Coakes & Steed, 2003). Since the computed sample,
size is 560, and the study samples met the requirement, the researcher decided to
perform factor analysis.
4.8.4 Principal component analysis (PCA)
Factor analysis was used to identify the latent structure (dimensions) of a set of
variables. It reduces attribute space from a larger number of variables to a smaller
number of factors. For factor analysis purposes, the items on the questionnaire were
grouped into components consisting of items to represent all antecedent variables to
the study. Factor analysis was based on the principal component method with
varimax rotation for all components.
4.8.5 Correlation analysis
The analysis was conducted to determine the link between the variables under
study. It identified the power and direction of the linear relationship between two
variables. The analysis results reveal the variables that correlate with the dependent
variable as well as the presence of multicollinearity before using multiple
regression analysis.
4.8.6 Multiple regression analysis
This method analyses the link between several independent (predictor) variables
with a single dependent (criterion) variable. Multiple regression analysis was
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conducted for this study to verify the relationship between the independent
variables (BPR factors) and the dependent variable (organizational performance),
and, at the same time, to identify the contributory variables.
4.8.7 Hierarchical regression analysis
This analysis was conducted to test the interaction effect of the moderating
variables on the relationship between the independent and dependent variables.
Hierarchical regression or moderator regression analysis was considered to be an
appropriate technique in identifying the moderating variables (Baron & Kenny,
1986; Frazier, Barron, & Tix, 2004). The summary of the data analysis against each
objective of the study is shown inTable 4.4.
Table 4.4
Summary of data analysis against each research objective
No. Research Objectives Data Analysis
1 To examine the relationship between Multiple regression analysis
BPR factors, IT capability in banking and was conducted to determine the
organizational performance of Nigerian relationship between BPR
banks. factors, IT capability with a
single organization
Multivariate relationship between BPR
performance variable (financial
factors and organization performance as
and non-financial).
well as between IT capability and
organisational performance would Simultaneously, regression
provide answers to researchobjectives- analysis identified the BPR
1& 2. Before conducting the multiple factors and IT capability
regression analysis, a correlation analysis variable that best predicts
was conducted to determine the direction organization performance in
and power within the relationship terms of financial and non-
between the independent variable and the financial performance).
dependent variable.
2 To examine the level of IT capability that Hierarchical regression
moderates the relationship between BPR analysis
factors and the organizational
performance of Nigerian banks. This
would provide answers to research
objective – 3.
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4.9 Chapter Summary
This chapter discussed the research methodology and rationale behind the research
design. It outlined the sampling design, methods and strategy of data collection.
The chapter also discussed on the measurement instrument used for this study and
validity and reliability of the instrument measures. Finally, this chapter described
the methods of data analysis used for this study. The analysis and findings of the
study are presented in the next chapter.
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CHAPTER 5 DATA PRESENTATION AND ANALYSIS
CHAPTER 5
DATA PRESENTATION AND ANALYSIS
5.1 Introduction
The main objective of this chapter is to provide the results of the research, which
include data presentation, analysis and discussion of the outcomes of the study. The
chapter presents the research findings of the study based on the data collected from
respondent banks. The data were analysed in the following sections: first, response
rate; description of the study profile of the respondents and study variables;
goodness of measures through validity, reliability analysis of measures being used,
and analyses hypothesis testing; general descriptive statistics of the respondents and
main variables involved in the study; Second, reports on the assumptions in
multiple regression analysis; Third, reports on the multivariate and multiple
regression analysis results between BPR factors and organizational performance;
and the hierarchal regressions results regarding the moderating effect of IT
capability attributes to the relationship between BPR factors and organisational
performance.
5.2 Response rate
The data for this study was collected from senior management, executives,
managers and heads of department that represent the respective banks in Nigeria. In
this study, attempts were made to increase the response rate by reminding the
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respondents through telephone calls, SMS and self-visit (Sekaran, 2003). As a
result of these efforts, 460 questionnaires were returned out of the 560
questionnaires distributed by hand delivery to the respondent banks (commercial,
microfinance and mortgage) in Nigeria. This makes a response rate of 82.14%
based on the definition of response rate (Jobber, 1989). Out of these 460 responses
collected, 417 questionnaires were useable for further analysis making a valid
response rate of 74.0 per cent. A response rate of 30 per cent is acceptable for
surveys (Sekaran, 2003; Hair et al., 2010). Similarly, Pallant (2001) suggested that
for regression type of analysis to be conducted, the sample size could fall between
five and ten times, the number of independent variables. Given the number of
variables in this study, which are eight (8), it suggests that a sample size of 80
respondents. Hence, 417 useable responses (74 per cent) satisfied the required
sample size requirement for conducting the multiple regression analysis. Table 5.1
shows the distribution of the required sample and the total number of responses by
each category of the bank.
Table 5.1
Response Rate of the Questionnaires
Response Commercial Microfinance Mortgage Freq/Rate
No. of distributed questionnaires 21 449 90 560
Returned questionnaires 21 349 90 460
Returned and usable questionnaires. 18 312 87 417
Returned and excluded questionnaires. 3 37 3 43
Questionnaires not returned 0 100 0 100
Response rate 100% 77.72% 100% 82.14%
Usable response rate 86% 69% 97% 74%
The data collection period took about three months. The follow up messages were
made through text messages, phone calls and e-mails during the period. The data
was keyed into SPSS (version 16.0) for further analysis. Forty-three (43)
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questionnaires were excluded in the process of screening and cleaning the data.
Errors were checked by analysing the mean, standard deviation, minimum and
maximum scores for all 417 cases on all variables.
5.3 Respondent and organizational background
The statistical frequency distribution of key variables in the questionnaires was
objectively classified and presented in logical categories to reflect the originality of
the study. Subsequently, the desired analytical tables were extracted for the proper
data analysis and hypothesis testing. The presentation of the original data sets in the
form of frequency tables, as well as the analytical tables, is in the appendix 2.
The majority of the respondents in the organization were male (68%). In terms of
job title of the respondents, 35% were holding the responsibility of the head of
department, 30% senior manager, and 20% Deputy General Manager/Assistant
General Manager. Hence, these represent the majority of the targeted respondents
for the study. Others include top management (ED/GM), which represents 16%.
The respondents represented their organizations that were categorized into three
different types of the bank – Commercial bank 4.3% of population sample
(representing 75% of registered commercial banks with the Central Bank of
Nigeria); Microfinance bank represents 74.8% of 417 useable response
(representing 35% of registered Microfinance banks with the Central Bank of
Nigeria; Primary mortgage banks, representing 21% of 417 useable response, which
accounted for 88.75% of the registered primary mortgage banks to the apex bank.
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As for the number of employees in these organizations, 60% of employees were
outsourced personnel’s to banks. Out of 417, responses received from the banks,
75% of them fall under a category of organization (Microfinance bank and Primary
Mortgage bank) without ATM machines, POS, etc. Only 14% of banks have a
network of 99 branches with ATM Machines, 5.0% of the participating banks have
a network of 300 to 499 branches with ATM machines, and 4% of banks involved
in the survey have a network of 100 to 299 branches that have ATM machines
installed onsite. As for the location of branches, 47% of the respondents indicated
that most of their bank branches are located in the commercial and state capital,
21% were sited in-state capitals and a few in cities, and 13% were located in urban
and rural areas with a few branches in cities.
In terms of BPR implementation, the Nigerian banks have implemented BPR
initiative in their operational processes. Specifically, we found that 57% of the
banks have implemented electronic banking services, such as operational
transactions of cash/cheques received and payment through ATM, POS, mobile,
telephone, card's transaction, loan processing, credit transactions and others; 67%
of the banks have restructured and improved their operational processes; 61% of the
banks reengineered their credit risk operational processes of loan appraisal and
administration, as well as the rendition of periodic returns to the regulatory
authority using IT software for credit risk reporting; 51% of the banks confirmed to
have redesigned their domestic and international operational processes.
Concerning the objective of adopting BPR initiatives by the organization, 25% of
the banks indicated that their organization’s objective was to enhance their
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profitability performance by increasing revenue; 23% of the banks indicated that
their motive was to improve the quality of customer service of the organization;
21% of the banks implemented BPR in order to be proactive for future challenges
while 12% expressed their goals to reduce operating cost and be reactive to
competitive pressure from foreign banks. Another 13% of the banks implemented
BPR as a reactive approach as a quick fix, while 20% of the respondents indicated
their objectives as proactive for challenges in the business environment. The overall
objective of BPR implementation by Nigerian banks was to improve profitability
through cost containment strategy, and improve customer service delivery by
providing an effective and efficient service with error free operational processes.
Therefore, the reengineering processes in banks involved redesigning of core
processes and restructuring of the domestic and foreign operational processes that
involved some kind of innovation and value added service to the various processes,
such as cheque clearing and settlement, interbank transfers, remittances for
payment of bills, fund transferred both local and international payment through
MoneyGram, Western Union Money transfer, Wire transfer through SWIFT and
opening of letters of credit.
5.4 Goodness of measures: factor analysis of the research instrument
The instrument used in this study was evaluated for its content, criterion,
convergent and discriminant validity. Convergent validity refers to the degree to
which the scale correlates positively or in the same direction with other measures of
the same construct. Discriminant validity refers to the degree to which the
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measurement scale does not correlate with or is distinct from other measures
(Malhotra, 1999). Content validity refers to the extent to which the instrument
covers the meaning included in the concepts (Babbie, 1990). The present study
assesses the content validity subjectively by using the extensive literature review
and practitioners in the banking industry (Chow& Lui, 2001). In addition, the PCA
method is used to help the investigator represent a large number of relationships
among interval-level variables in a simpler way. The method allows the computer
to determine which, of a fairly large set of items, "hang together" as a group, or are
answered most similar by the participants.
PCA was carried out for the items of the variables of this research work. The
central idea of principal component's analysis is to reduce the dimensionality of a
data set in which there are a large number of interrelated variables, while retaining
as much as possible of the variation present in the data set. This reduction is
achieved by transforming to a new set of variables, the principal components,
which are uncorrelated, and, which are ordered so that the first few retain most of
the variation present in all the original variables.
Computation of the principal components reduces to the solution of an eigenvalue
problem for a positive semi-definite symmetric matrix. The sample size guideline
by Coakes and Steed, (2003); Hair et al., (2010) indicates that a minimum of five
subjects per variable is needed for factor analysis. In this study, with eight
variables, a sample size of 417 is higher than the minimum requirement of the
desired cases for factor analysis. A sample size of more than 350 requires a factor
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loading of 0.30 to assess statistical significance (Hair et al., 2010). Hence, the
minimum requirement for factor analysis was fulfilled.
Other criteria for factor analysis suggested by Hair et al. (2010) employed by this
study are as follows:
1. Sample size should be 150 plus and should be a ratio of five cases for each of
the variables.
2. Bartlett’s test of Sphericity (test of presence of correlation among variables)
need to be significant at p<0.05 or smaller.
3. Kaiser-Meyer-Olkin (KMO)/Overall Measure of Sampling Adequacy (MSA)
should be at least 0.50 or above. These values are presented as part of the
output from the factor analysis.
4. Commonalitiesgive information on how much of the variance in each item is
explained. Low values (e.g., less than 0.50) could be deleted as it indicates that
the item does not fit well with other items in the component. Removing items
with low commonalities values tend to increase the total variance explained.
5. Items for loading and cross loading of 0.50 or greater on one factor and 0.30 or
lower on the other factor have been set to assess the significance for this study;
the items load less than 0.50 is deleted (Igbaria, Livaria, & Maragahh,1995).
6. To determine how many components (factors) to extract, there is a need to
consider information provided by the output. First, using Kaiser’s criterion, this
is based on components that have an eigenvalue of more than one. To
determine how many components meet this criterion, we looked at the total
variance explained the table.
163

7. The naming of the factor is based on the item with higher loading. The
discussion on the results of factor analysis for the dependent, moderator and
independent and variable are as follows:
5.4.1 Dependent variable – organization performance (OP)
Table 5.2 shows the outcome of the factor analysis for the dependent variable
(organization performance). At inception, the dependent variable was measured by
20 items in two dimensions, which was subjected to principal component's analysis
(PCA) using SPSS Version 16. Prior to performing PCA, the suitability of data for
factor analysis was assessed. The factor loading of the items ranged from 0.770 to
0.984 with 10 items being removed for various reasons, such as having low MSA
value, low communalities value, loading less than 0.50, and cross-loading. The ten
(10) deleted items from the initial 20 items measurement of organization
performance construct (1, 2, 6, 10, 11, 12, 14, 16, 17 and 19) were those items that
indicated failure to fit well with other items in their components. Removing these
items increased the total variance explained. Inspection of the correlation matrix
revealed the presence of many coefficients of 0.3 and above.
The KMO measure of sampling adequacy of 0.885 exceeded the benchmark value
of 0.60, showing that the sample size was adequate for factor analysis to be
conducted. That is, the ratio of the sample size to the number of items is sufficient
for factorability. However, the Bartlett's test of Sphericity is statistically significant,
supporting the factorability of the correlation matrix, as the p-value is 0.000. This
implies the adequacy of applying the factor analysis. Principal component's analysis
164

revealed the presence of three components with eigenvalue exceeding 1. The three
components extracted were named 1) operation cost reduction (L10), 2) customer
service relationship management (K4), and 3) business operation's efficiency (zero
error operations process–K8). The percentages of the variance were 50.70%,
19.94%, and 11.26%, respectively.
Table 5.2
Results of the Factor Analysis for Organization Performance
Component
Items
1 2 3
L10 Operating Cost .984
L8 Interest cost of tenured fund .981
K7 Branches operations cost .981
L5 Number of recovered bad loans .978
L3 Number of non-performing loans .977
K4 Customer relationship management in branches .794
K5 Organization brand name/Goodwill .785
K3 Customer service delivery in branches .770
K8 Zero error operational processes .840
K9 Market share in retail, consumer and corporate banking .812
services
Eigenvalue 5.070 1.994 1.126
Percentage of variance (81.90%) 50.69 19.940 11.262
81.90%
KMO .885
Bartlett’s Test of Sphericity 5520.00
Significance .000
The three component solution explained a total of 81.90% of the variance. To aid in
the interpretation of these three components, varimax rotation was performed. The
first component was defined by five items relating to operating cost. This included
interest payment (cost) on tenured fund, branches operational cost, cost of
recovering bad loans, and provisional cost of having numbered of bad loans in the
organization. The higher loadings influence the name of the factor (Hair et al.,
2010). The higher loadings were level of operating cost, interest cost of tenured
165

fund and branch's operating cost. Operating cost and interest cost are part of the
cost of doing business in an organization (Ogubunka, 2010). Hence, this factor was
named as operation cost reduction.
The second component was defined by three items, namely, customer relationship
management, brand name, and customer service delivery. These items were related
to customer service relationship management (Bontis, 1998; Bontis, Chua, &
Richardson, 2000; Kotler, 2003; Khong & Richardson, 2003). Hence, the name
Customer service management was used.
Finally, the third component was represented by two items – zero error of
operational process, and market share in retail, consumer and corporate banking
services. Business operation's efficiency (Zero error process) is a category of
efficient service delivery/speed (Hammer & Champy, 1993). Hence, the factor was
named business operations efficiency performance. Please refer to appendix - 3 for
SPSS output regarding this result of factor analysis from the table, the KMO
measure of sampling adequacy of .885.It implies that the sample size was
adequately meritorious for factor analysis to be conducted.
5.4.2 Moderating Variable: IT capability (IT Cap)
Table 5.3 shows the results of factor analysis for IT capability. At the beginning,
the moderating variable was measured by 12 items in two dimensions, which were
subjected to PCA using SPSS. Prior to the process of performing PCA, the
suitability of data for factor analysis was assessed. The factor loading of the item
166

ranges from .650to .794. Two items being removed due to various reasons, such as
having low MSA value, low communality value, loading less than .50, and cross-
loading. The deleted items from the initial (1 and 2) are those items that indicated a
sign of non-fit with other items in their components. Removing the non-fit items
that had low communality values increased the total variance explained in this
study. Inspection of the correlation matrix revealed the presence of many
coefficients of .3 and above. The KMO measure of sampling adequacy of .863
exceeded the benchmark value of .60; this implies that the sample size was
adequate for factor analysis to be conducted. Furthermore, the ratio of the sample
size to the number of items was sufficient for factorability. However, the Bartlett's
test of Sphericity was statistically significant, supporting the factorability of the
correlation matrix, as the p-value was .000. This indicated the adequacy of applying
the factor analysis. Principal component's analysis revealed the presence of three
components with eigenvalue exceeding 1. The three components extracted were
named 1) IT knowledge (IT Cap3), 2) IT Operations (IT Cap8), and 3) IT policy
(IT cap11). The percentages of the variance were 39.81%, 11.64%, and 10.55%,
respectively.
FromTable 5.3, the KMO measure of sampling adequacy of .863 implied that the
sample size was adequately meritorious for factor analysis to be conducted. The
three-component solution explained a total of 61.99% of the variance. To aid in the
interpretation of these three components, varimax rotation was performed.
167

Table 5.3
Results of the Factor Analysis for IT Capability
Component
Items
1 2 3
I3 IT staff and network engineers with professional .754
qualification.
I5 Proactive IT staff in e-banking innovation .731
I4 Excellent expertise consultant in computing .730
I6 Regular training of IT staff .700
J2 Technology based link via local area network LAN 24/7 .794
J2 Link to branches through wide area network WAN .735
J3 Minimal down time for connection links to computers .714
J5 Organization IT policy in line with regulatory guidelines .154 .759
J6 Comprehensive procedures, of operational transactions and -.064 .749
requirements
J4 Computerization of operational services .384 .650
Eigenvalue 3.981 1.164 1.055
Percentage of variance (61.99%) 39.810 11.637 10.552
KMO .863
Significance .000
The first component was defined by four items relating to IT knowledge. These
included professional qualification, IT staff proactiveness in e-banking innovation,
and qualified trained expertise/consultant in computing and regular training courses
for IT staff. The higher loadings influence the name of the factor (Hair et al., 2010).
The higher loadings were professional qualification of IT engineers, proactive
innovation in e-banking by IT staff and qualified expertise/consultant. Professional
qualification, expertise consultants and regular training of IT staff can be viewed as
skill knowledge in IT computing (Tippins & Sohi, 2003). Hence, this factor was
named as IT knowledge.
The second component was defined by three items, namely, the technology-based
links via local area network and wide area network online real time (LAN and
WAN 24/7), link to branches through WAN, and minimal computer system down
time. These items were relating to IT operations (Tippins & Sohi, 2003). Hence, the
original name was retained.
168

Finally, the third component was represented by three items – organization IT
policy in line with regulator's guidelines, monitoring of customer’s transaction by
IT operations, and computerization of banking operations. These activities were
related to the function of IT objects. It is a tool; technical object refers to artefacts
that assist in the acquisition, processing, storage, dissemination, and use of
information (Martin, 1988). Hence, the third factor was named IT objects (Tippins
& Sohi, 2003). IT objects represent computer-based hardware, software and support
personnel to ensure compliance with regulatory guidelines, monitor customer
activities by making use of software and hardware installed in the computer system.
Please refer to appendix- 3 for SPSS output regarding the results of factor analysis.
5.4.3 Independent variables: BPR factors
The independent variables of this study are the BPR factors, which include 1)
Change Management – measured as the uni-dimension, 2) BPR Project
Management – uni-dimensional, 3) Top Management Commitment – one
dimension, 4) Customer Focus – one dimension, 5) IT Infrastructure – one
dimension, 6) Process Redesign – one dimension, 7) Financial Resources – one
dimension, and 8) Less bureaucratic structure – one dimension. Initially, the total
items measuring the BPR factors were 56 items. These items and dimensions were
analysed using factor analysis to check for their validity. Using the criteria for
conducting factor analysis discussed in section 5.1, the analysis extracted nine (9)
components. In the process of getting these nine components, 27 items and one
169

construct (Less bureaucratic structure) had to be deleted for various reasons, such
as low communality value, loading less than 0.50, and cross loading. Removing
items with low communality values increased the total variance explained.
Inspection of the correlation matrix revealed the presence of many coefficients of
.30 and above. The KMO value was .750, exceeding the recommended value of .6
(Kaiser, 1970, 1974) and the Bartlett’s test of Sphericity (Bartlett, 1954) reached
statistical significance, supporting the factorability of the correlation matrix. Table
5.4 presents the results of factor analysis for the independent variables of the study,
while the Appendix 3 shows the SPSS output for the analysis. The number of final
factors together with the number of items used to measure the particular variable is
as follows. Note that almost all the original names were retained.
1. IT investment (E3) – fouritems
2. BPR Strategy Alignment (B1) – four items
3. Customer Focus (D4) – three items
4. Management commitment (C7) – three items
5. Communication (A8) – three items
6. Training and education (A3) – three items
7. Volume of financial activities (G5) – four items
8. Reward system (A4) – two items
9. Strong capital base (G2) -2 items
170

Table 5.4
Results of the Factor Analysis for Business Process Re-engineering Factors (BPR)
Components
Item
1 2 3 4 5 6 7 8 9
E3 Sufficient budget to purchase
updated software and .773
hardware.
E4 To achieve proper integration
.755
of IT
F2 Redesign core processes for
.722
efficient service delivery
E2 Build an effective IT
.551
infrastructure
B1 Alignment of BPR strategy
.754
with corporate policy
B4 Establish performance
improvement goal for process
.740
key performance indicator
(KPI)
B3 Organization re-engineering
effort towards key business .718
process
B2 Organization BR project clear
.710
to all staff
D4 Customer feedback was used
.740
to redesigned processes
D3 Ability to meet customer
demand or new products and .735
services
D3 Ability to meet customer
demand or new products and .735
services
D1 BPR project result from
.734
analysis of customers
D2 The organization objective is
to find a new way of adding .728
value to customers.
C7 Personnel commitment to
.792
handle related change
C6 BPR as operational
performance improvement
.772
method considered by
management
C5 Top management accepted .676
consultant positive
recommendation on re-
engineering for
implementation
A8 Employees accept positive
.749
changes easily
A2 Recognition of human .719
involvement in
implementation of BPR
171

Components
Item
1 2 3 4 5 6 7 8 9
A5 Effective
communication system
to update employees on .705
reengineering
implementation
A3 Training and education
of newly introduced .767
operational processes
A9 Employee
empowerment
.728
initiatives to encourage
productivity
A7 Flexible structure that
empowers process
.638
owners for effective
service delivery
G5 Volume of deposit in
.761
tenured fund
G4 High volume of demand
.713
deposits as cheap fund
F5 Processes identified for
.633
redesigning
F4 Make use of appropriate
technology for .544
operational process
A4 Openness by
management for
.974
employees to accept
changes
A1 Effective reward system
to facilitate BPR .972
implementation
G2 The organization strong .783
capital base
G1 Financially sound to
conduct business .736
profitable transaction
Eigenvalue 4.677 3.311 2.400 1.786 1.732 1.317 1.238 1.118 1.057
Percentage of variance
16.127 .416 8.274 6.158 5.974 4.540 4.270 3.854 3.645
(64.259%)
KMO .750
Significance .000
172

As shown in Table 5.4. Principal Components analysis revealed the presence of
nine (9) components with eigenvalue exceeding 1, explaining 16.127%; 11.416%;
8.274%; 6.158%; 5.974%; 4.540%; 4.270%; 3.854% and 3.645% of the variance,
respectively. An inspection of the scree plot revealed a clear break after the ninth
component. Using Catell’s (1966) scree test, it was decided to retain nine (9)
components for further investigation. To aid in the interpretation of these nine (9)
components, Varimax rotation was performed. The rotated solution revealed the
presence of a simple structure (Thurstone, 1947), with both components showing a
number of strong loadings and all variables loading substantially on components.
The nine factor solution explained a total of 64.259% of the variance, with
component 1 contributing 16.127%; component 2 contributing 11.416%;
component 3 contributing 8.274%; component 4 contributing 6.158%; component 5
contributing 5.974%; component 6 contributing 4.540%; component 7 contributing
4.270%; component 8 contributing 3.854%; and component 9 contributing 3.645%
respectively.
The first factor was defined by four items and reflected the organization’s
investment in IT to achieve proper IT integration, build effective IT infrastructure
and redesign core process for efficient service delivery. Thus, this factor was named
IT investment. The second factor was dominated by items relating to organization
strategic initiative project that aligned with corporate policy. Therefore, this factor
was named BPR strategy alignment driven of reengineering project (Zairi &
Sinclair, 1995). The third factor was dominated by items relating to customer focus,
which are oriented towards finding new ways of adding value to customers (Scherr,
1993). Thus, this factor was named customer focus. The fourth factor consisted of
173

items pertaining to personnel capability and commitment to handle related changes
recommended by consultant and consider process re-engineering as the method to
improve process performance in the organization, thus, this factor was named
management commitment. The fifth factor consists of items related to
communication for an employee to accept positive changes by involving them in
implementation of business process re-engineering. Therefore, the factor was
named effective communication. The sixth factor was dominated by training and
education of employees in newly introduced core processes for effective service
delivery. Thus, this factor was named training and education. The seventh factor
consists of items related to organization volume of financial activities and making
use of appropriate software technology to redesign processes, thus, this factor was
named volume of financial activities to customer. The eighth factor consists of
items related to the effective reward system that encourage employees to accept
changes for improvement. Therefore, this factor was named reward system. The
ninth factor consists of items related to organization adequate capital base to
provide a cushion for risk asset and conduct profitable transaction. Therefore, this
factor was named strong capital base. Please refer to appendix – 3 for SPSS output
regarding this result of factor analysis. From the table, the KMO measure of
sampling adequacy of .750 implies that the sample size is adequately meritorious
for factor analysis to be conducted.
174

5.4.4 Common method variance (CMV) test
As a precaution, the study has adopted measures, such as hiding the information of
the participants, randomizing the order of items, devising the items in a reverse
order and organizing the wording of the items, to prevent the occurrence of
common method variance. Besides, the study also adopts Harman’s single factor
analysis to conduct posterior examination of common method variance (Podsakoff
& Organ, 1986). Traditionally, researchers using this technique load all the items in
their study into an exploratory factor analysis (Aulakh & Gencturk, 2000) and
examine the un-rotated factor solution to determine the number of factors that are
necessary to account for the variance in the variables. The basic assumption of this
technique is that if a substantial amount of common method variance is present,
either (a) a single factor will emerge from the factor analysis or (b) one general
factor will account for the majority of the covariance between the measures. The
use of a single-factor test may provide an indication of whether asingle-factor
accountfor all the covariance between the items, this procedure does nothing to
statistically control for common method variance effects.
In this study, un-rotated factor analysis with forty nine items results in fifteen
factors those together accounts for 68.7% of the total variance, of which factor one
accounts for 17.56%. Common method bias is not likely in the context of this study
since a single factor does not emerge in this analysis and no single-factor account
for the majority of covariance between the variables. Therefore, based on the
multiple factors emerged from the factor analysis using the Harman one factor test
175

was an indication that the measures are free of common method variance. Hence,
common method variance is not a major problem for this study.
5.5 Measuring the reliability of the research instrument
The reliability of any research questionnaire is best measured by the Cronbach’s
alpha statistic. It is designed as a measure of internal consistency of a research
instrument. Reliability measures the extent to which results are consistent with time
and acts as the best representation of the population under study (Joppe, 2000).
Cronbach’s alpha is a consistency test of whether all items within the instrument
measure the same thing. It is simply a measure of reliability of the questionnaire
items. It is measured on the same scale as the Pearson’s product-moment
correlation coefficient and typically varies between 0 and 1. Although a negative
value is possible, such a value indicates a scale in which some items measure the
opposite of what other items measure. The closer the alpha is to 1.00, the greater
the internal consistency of items in the research instrument. At a more conceptual
level, the coefficient of Cronbach’s alpha may be considered as the coefficient
between a sincere response and all other sincere responses of the same item that are
drawn randomly from the same population of interest.
After factor analysis, the nine constructs that emerged, containing twenty nine (29)
items in the questionnaire, will evaluate and assess the effect of BPR factor on the
organizational performance of Nigerian banks: moderating factor of IT capability.
Cronbach’s alpha is the approximate average correlation between all pairs of items.
The formula that determines Cronbach’s alpha is fairly simple and makes use of the
176

number of variables or question items in the instrument (k) and the average
correlation between pairs of items (r):
kr
∝=
1 + (k − 1)r
The reliability test for each dimension emerged after factor analysis was conducted.
Table 5.5 shows the results of the reliability test. Flynn, Schroeder, and Sakakibara
(1994) argued that a Cronbach’s alpha of 0.6 and above was considered an effective
reliability for judging a scale. The generally agreed lower limit for Cronbach’s
alpha may decrease to 0.60 in exploratory research (Hair et al., 2010). A research
instrument can be considered to be reliable if the result of the study can be
replicable under a similar methodology with stability of measurement over time
(Golafshani, 2003). Therefore, the Cronbach’s alpha of the instruments is shown in
Table 5.5. The SPSS output for this analysis is shown in the Appendix - 4.
Table 5.5
Summary of Reliability Analysis of Major Variables
No of items
Variables No. of items Cronbach’s Alpha
deleted
Dependent Variables
Organizational Performance 10 0 0.87
Operations cost reduction 5 0 0.99
Customer Service Management 3 0 0.71
Business operations efficiency 2 0 0.60
Moderating Variables
IT Capability 10 0 0.83
Independent Variables
BPR Factors 29 0 0.80
IT Investment 4 0 0.75
BPR Strategy alignment 4 0 0.73
Customer Focus 4 0 0.74
Management Commitment 3 0 0.71
Change Management 8 0 0.77
Financial Resources 6 0 0.71
177

From Table 5.5, the Cronbach’s alpha ranges from 0.60 to 0.99 for the variables in
the questionnaire used for the study implied that the instrument was reliable. Hence,
the instrument had excellent reliability as far as internal consistency is concerned,
that is, the instrument can give consistent results on the effect of the BPR factors on
the organizational performance of Nigerian banks.
5.6 Construct Reliability and Validity
In this section, an attempt is made to explain the reliability and validity of the
constructs involved in the study. However, construct reliability must be assessed
before examining its validity (Hair et al., 2010). To this end, the reliability of all the
items was examined through the Cronbach’s Alpha, factor loadings and the index
of composite reliability (see Table 5.6). Although, there is a lot of debate
concerning the best method to estimate reliability, coefficient alpha remains the
commonly used method even though it may underestimate reliability (Hair et al.,
2010). The different methods of assessing reliability produced similar results. The
values of Cronbach’s alpha and composite reliability are shown in Table 5.6.
Fornell and Larcker, (1981) argued that composite reliability is more robust than
Cronbach’s alpha. From the table, it is obvious that each of the indexes of construct
reliability (composite reliability) is greater than the threshold of .7 (Fornell &
Larcker, 1981). The composite reliability values range between .7307 and .9803.
This result means that the constructs have internal consistency, and that all the
measures consistently represent the same latent construct.
178

Although, composite reliability is stronger than the Cronbach’s alpha, in this study,
the latter was also assessed in order to complement the former. Flynn, Schroeder,
and Sakakibara (1994) argued that a Cronbach’s alpha of .6 and above was
considered an effective reliability for judging a scale. The generally agreed lower
limit for Cronbach’s alpha may decrease to .60 in exploratory research (Hair et al.,
2010). Again, fromTable 5.6 presents factor loadings for all the items ranging from
.544 to .984, confirming that the indicators are strongly related to their various
constructs.Hence, it indicatesgood construct validity (Hair et al., 2010).
(∑𝑛𝑖=1 𝐿𝑖 )2
𝐶𝑅 =
(∑𝑛𝑖=1 𝐿𝑖 )2 + (∑𝑛𝑖=1 𝑒𝑖 )
Where:CR = composite reliability; Li = standardized factor loading; ei = error

variance
Table 5.6
Constructs Validity and Reliability
Average
Factor Factor Composite Cronbach’s
Constructs Items Variance
Loadings LoadingsSquared Reliability Alpha
Extracted
Biz OPS K8 .840 .705 .682 .811 .603
Efficiency K9 .812 .659
Customer K4 .794 .630 .613 .826 .705
Service K5 .785 .616
K3 .770 593
Ops Cost L10 .984 .968 .961 .992 .993
Reduction L8 .981 .962
K7 .981 .962
L5 .978 .956
L3 .977 .955
Performance K8 .840 .706 .875 .924 .870
K9 .812 .659
K4 .794 .630
K5 .785 .616
K3 .770 .593
L10 .984 .968
L8 .981 .962
K7 .981 .962
L5 .978 .956
L3 .977 .955
179

Factor Average
Factor Composite Cronbach’s
Constructs Items Loadings Variance
Loadings Reliability Alpha
Squared Extracted
.796
IT Invest
E3 .773 .598 .501 .751
E4 .755 .570
F2 .722 .521
E2 .551 .303
BPR Strategy B1 .754 .569 .534 .821 .730
B4 .740 .548
B3 .718 .516
B2 .710 .504
Customer D4 .740 .548 .539 .824 .738
Focus D3 .735 .540
D1 .734 .539
D2 .728 .530
Mgt C7 .792 .627 .560 .792 .712
Commitment C6 .772 .596
C5 .676 .456
Communication A8 .749 .561 .525 .768 .715
A2 .719 .517
A5 .705 .497
Training & A3 .767 .588 .508 .755 .706
Educ. A9 .728 .530
A7 .638 .407
Volume of G5 .761 .579 .546 .760 .683
financial G4 .713 .508
activities. F5 .633 .401
F4 .544 .496
Rewards A4 .974 .948 .947 .973 .976
A1 .972 .945
Strong Capital G2 .783 .613 .577 .732 .600
base G1 .736 .542
Change Mgt. A1 .972 .944 .638 .939 .771
A2 .719 .517
A3 .767 .588
A4 .974 .948
A5 .705 .497
A7 .638 .407
A8 .749 .561
A9 .728 .530
Financial GI .736 .542 .590 .850 .706
Resources G2 .783 .613
G4 .713 .508
G5 .761 .579
F4 .544 .296
F5 .633 .401
180

Factor Average
Factor Composite Cronbach’s
Constructs Items Loadings Variance
Loadings Reliability Alpha
Squared Extracted
IT Capability I3 .754 .984 .851 .892 .830
I5 .731 .981
I4 .730 .981
I6 .700 .978
J8 .794 .977
J7 .735 .794
J9 .714 .785
J11 .759 .770
J12 .749 .840
J10 .650 .423
IT Knowledge I3 .754 .569 .531 .819 .780
I5 .731 .534
I4 .730 .533
I6 .700 .490
IT OPS J8 .794 .630 .560 .792 .731
J7 .735 .540
J9 .714 .510
IT Objects J11 .759 .576 .520 .764 .631
J12 .749 .561
J10 .650 .422
5.6.1 Convergent Validity
In an attempt to establish construct validity, convergent validity was examined
using Average Variance Extracted (AVE) as recommended by Hair et al. (2010).
The AVE shows how indicators of construct converged and how they share
common variance. In other words, the indicators should converge and share a high
proportion of variance on a common point, the latent construct. AVE is computed
as the mean of variance extracted for the items loading on a construct. This
computation can be done using the formula below with the standardized loadings:
∑𝑛𝑖=1 𝐿𝑖 2
𝐴𝑉𝐸 =
𝑛
Where: AVE =average variance extracted; Li = standardized factor loading; i =

number of items
181

5.6.2 Discriminant Validity
Discriminant validity assesses the extent to which a construct is truly different from
other constructs (Hair et al., 2010). Consequently, a high level of discriminant
validity suggests that a latent construct is unique and captures some phenomena that
other constructs do not. Although, there are several ways to compute discriminant
validity, a more rigorous method is to compare the AVE values for any two
constructs and with the square of the correlation estimate between these two
constructs. The AVE should be greater than the square correlation estimate (Hair et
al., 2010). Another way of doing this test is to compare the square-root of AVE for
a given construct with the absolute correlations of that construct and all other
constructs (Tang, Luo, & Xiao, 2011). For either, however, the AVE must be
greater than the construct correlation in order to establish discriminant validity
(Fornell & Larcker, 1981). Table 5.7 clearly indicates all the square roots of AVE
ranging between 0.731 and 0.981 are greater than the values of the constructs in the
corresponding matrices. This indicates that each constructs shares more variance
with its items than with other constructs, and supports discriminant validity.
5.6.3 Face Validity
Face validity, according to Sekaran and Bougie (2010), provides an indication that
the items that are intended to measure a construct seem to have measured it. With
regards to the measurement scale of this study, six experts - Senior lecturers,
Associate Professor and Professor in UUM - were consulted, and their observations
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EFFECT OF THE BUSINESS PROCESS RE-ENGINEERING FACTORS AND

Thesis · October 2012

Kabiru Jinjiri Ringim

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KABIRU JINJIRI RINGIM

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Dean of Othman Yeop Abdullah Graduate School of Business

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Keywords: Business process reengineering factors, Information technology

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Katakunci: Faktor-faktor perekayasaan proses perniagaan, Keupayaan teknologi

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I am greatly indebted to so many wonderful people for their contributions and

A special dedication to my wife, Binta Bala and lovely children Ayman

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CHAPTER 2 LITERATURE REVIEW 19

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CHAPTER 3 CONCEPTUAL FRAMEWORK 115

CHAPTER 4 METHODOLOGY 125

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CHAPTER 6 DISCUSSION AND CONCLUSION 229

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Table 1.1 Definition of Major Variables 13

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Figure 2.1 Model Framework of Khong & Richardson (2003) 72

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1.1 Background of the study

The progressive globalization of financial markets requires market participants to

make changes to their operational processes beyond local to global

performance(Randle, 1995). Innovative banking services and personalized portfolio

management are evolving as the market consolidates due to mergers and

acquisitions of up-to-date strategy. As a result, the focus is no longer on cutting

costs alone, but rather on simultaneously improving services to customers. In other

friendly as well. Central Bank of Nigeria (CBN) initiated business process

reengineering (BPR) project tagged EAGLES (Efficiency, Accountability, Goal

orientations, Leadership, Effectiveness and Staff motivation). The objective is to

the regulatory framework; enhanced customer protection as well as internal

transformation of the bank (CBN, 2009).

On the internal transformation aspect, the CBN in partnership with

PricewaterhouseCoopers conducted a comprehensive assessment of the bank's core

and non-core operations that required fundamental restructuring. The identified

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management & benchmarking, information technology (IT), customer satisfaction,

human resources and administration and communication effectiveness at all

particularly those in manufacturing. One of these approaches is known as BPR.

that is clearer and easier to achieve a radical improvement on quality, speed,

industry is to enhance processes and customer service performance through the

management approach of cost reduction, improving quality, speed, and customer

service for profit maximization. Therefore, management scholars argue that

organizations can become proactive in operation by adopting the BPR to achieve a

remarkable improvement in organizational performance (Davenport & Short, 1990;

business changes (Ranganathan & Dhaliwal, 2001). It was introduced by Hammer,