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BPR and Change Management: A Case Study of a Big Spanish Electricity Firm

Article  in  International Journal of Innovation Management · November 2011

DOI: 10.1142/S136391960400109X

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November 13, 2004 10:2 WSPC/150-IJIM 00109

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1 International Journal of Innovation Management

Vol. 8, No. 4 (December 2004) pp. 1–25
3 © Imperial College Press

BPR AND CHANGE MANAGEMENT: A CASE STUDY OF A

5 LARGE SPANISH ELECTRICITY COMPANY1

ENEKA ALBIZU∗,† , MIKEL OLAZARAN∗ and KATRIN SIMON∗∗

∗
7 University of the Basque Country, Spain
∗∗
Public University of Navarre, Spain
†
9 egpalgae@lg.ehu.es

Received 7 April 2004

11 Revised 12 July 2004
Accepted 16 July 2004

13 The aim of this study is to explain the key factors affecting the success of BPR in a large
European electricity company. First a review of the “business process re-engineering” (BPR)
15 concept and its relationship with organizational change and change management is carried
out. This is followed by the analysis of the idea of BPR adopted by the company, an
17 explanation of the main guidelines of the implementation carried out, and an interpretation
of the results that were obtained. The balance, both in economic and change management
19 terms, was highly positive, although organizational and cultural change, in a strong sense
of the term, remains a matter still to be resolved by the company.

21 Keywords: Re-engineering; BPR; change management.

Introduction
23 Although the genesis of the concept of business process re-engineering as a for-
malized set of ideas dates back to the early nineties (Davenport and Short, 1990;
25 Hammer, 1990; and later Hammer and Champy, 1993; Davenport, 1993) and, there-
fore, it has been more than a decade since this management program began to be
27 consciously applied, there is relatively little empirical research on re-engineering.2

1
This study was carried out within the PRECEPT project (Process Re-engineering in Europe: Choice,
People and Technology), TSER, EC. We would also like to thank the anonimous reviewers for their
very helpful suggestions regarding presentation and support of certain statements (specially, those
referred to results of the change process) and some bibliographic references.
2
Reference quotes are often found in works by several authors, consulting firms or companies that
supply IT, but detailed case studies are rare.

1
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2 E. Albizu, M. Olazaran & K. Simon

1 This is particularly true in the case of Europe, where the concept was not widely
taken up until the mid-nineties.3 Thus, it is in that period that implementations of
3 Business Process Re-engineering (BPR from henceforth) began to be carried out in
our geographical area.4
5 In 1994, in a benchmarking trip to the United States, the top management of
Iberdrola, a large Spanish multinational company from the electricity sector made
7 contact with several cases of re-engineering. It was known that, within a few years,
the Spanish electricity sector would be affected by structural changes, in line with
9 the policy of liberalizing certain sectors which the government had initiated.5 At that
moment, it was thought that BPR could be the tool for implementing the changes
11 needed in the company in order to ensure its subsistence in a uncertain and com-
petitive future.
13 This paper analyzes the implementation of BPR in this firm from the point of
view of change management. We would like to offer some elements for reflection
15 to BPR specialists, as well as offering guidelines to business managers. Thus, the
objectives of this article are, fundamentally, three: a) to describe the potential of
17 re-engineering as a tool for organizational change; b) to analyze the organizational
changes derived from the implementation of BPR in a large company; and c) to
19 discuss what we believe are the keys to the success of BPR, with a special emphasis
on organizational change.
21 In order to try to accomplish those objectives we use the case study method
because it allows the comprehension of the complex processes of decision-making,
23 implementation and change in organizations (Hammersley, 2004). Case study
methodology permits access to detailed, first-hand information across a wide range
25 of features of a case . This method permits to describe and explain a phenomenon or
process which has a particular interest. The information obtained in that way cannot
27 be obtained through quantitative surveys, but there is a loss in the generalizability
of results. Comparison and generalization from case studies has an inductive and
29 analytical character. In addition, case studies are the preferred strategy when “how”
or “why” questions are being posed, when the researcher has little control over

3
See the dates of the translations from English into those languages widely used in Europe (Spanish,
French, German, Italian, etc.) of the main studies on re-engineering in the USA. Moreover, it is also
in this period that the agents dealing with the formulation and transference of management concepts
(consulting firms, companies innovating their management styles, business associations, government
institutions, etc.) start to give re-engineering special attention in a generalized way.
4
The research project in which this study is based — PRECEPT — was launched with the
aim of thoroughly examining the uptake process as well as the socio-economic effects that re-
engineering has had in Europe. Information about this project can be found at this Internet address:
http://www.its.dtu.dk/faggr/tesoc/precept/default.htm.
5
In fact, in November 1997, the Electricity Sector Law came into force.
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BPR and Change Management 3

1 events, and when the focus is on a contemporary phenomenon within some real-life
context (Yin, 1989).
3 This case study is based in primary and secondary information collected about
Iberdrola. In-depth semi-structured interviews were carried out with 18 people
5 (functional managers, project managers, executives and consultants — external
and internal) who have been responsible at the highest level for the introduction and
7 implementation of BPR in Iberdrola. These interviews took place between April
and June, 2000, at different locations across Spain (Madrid, Bilbao, Valencia and
9 Zamora) with a duration of between 90 and 180 minutes each. In addition, we vis-
ited the company facilities to obtain on-site information about the magnitude of the
11 changes undertaken. Finally, the company provided us with a great deal of docu-
mentation where reference is made to specific aspects of the experience that we will
13 examine throughout this article.6

Re-engineering as a Program for Change

15 Although the conceptualization of BPR emerges simultaneously in the works of the
authors cited in the previous section, their proposals take different routes. Hammer
17 and Champy emphasized the results of BPR and called for the introduction of dras-
tic changes in business management, whereas Davenport touched upon the change
19 process and the need to consider the social aspects of organizational transforma-
tion. From our point of view, for re-engineering to be satisfactorily understood and
21 applied — at both economic and social levels — we must consider the contributions
offered by both standpoints.
23 According to the integral and concise definition proposed by Hammer and
Champy (1993, 32) BPR is understood as “the fundamental rethinking and radi-
25 cal redesign of business processes to achieve dramatic improvements in critical,
contemporary measures of performance, such as cost, quality, service, and speed”.
27 Therefore, from this point of view, re-engineering would involve the redesign, start-
ing from scratch, of the most significant processes in a company in order to achieve
29 a notable rise in the main indicators that make it possible to measure its efficiency
according to the satisfaction of the customers’ needs. The key element to achiev-
31 ing the proposed improvements in efficiency, according to these authors, is the
application of information technology (IT from henceforth) to the development of
33 the value-generating processes. Additionally, they suggest the criteria for the re-
building of the processes as well as the keys to the work re-organization derived
35 from the implementation of BPR.

6
A first version of the report was sent to the company for reactions and comments. The final version
was produced within the Precept project and can be obtained from its website. See footnote 7.
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4 E. Albizu, M. Olazaran & K. Simon

1 Although Champy and Hammer point out that BPR must come hand in hand
with different elements of organizational change (organizational design, functional
3 definitions, managements style, labour relations, etc.) they understand that it is not
the aim of their work to justify how those variables should be managed. Davenport,
5 on the other hand, emphasizes the importance of change management. Thus, at the
start of his most widely known work (1993, 2) he suggests that “re-engineering is
7 only part of what is necessary in the radical change of processes; it refers specifi-
cally to the design of the new process. The term process innovation encompasses
9 the envisioning of new work strategies, the actual process design activity, and the
implementation of the change in all its complex technological, human, and orga-
11 nizational dimensions”. In the same way, he maintains that BPR requires a radical
cultural change, beyond the redesign of the flow of processes and the structure
13 around them, a type of change which is responsible for the long periods of time that
it takes to implement BPR.
15 On the other hand, those authors also differ in the conceptualization of the role
to be played by the factors that facilitate change. Hammer and Champy emphasize
17 the pre-eminence of technological factors, and especially IT, as agents of change.
However, Davenport points to the human and organizational factors as the main
19 facilitators of change in organizations, without detriment of the technological ones.
A number of well documented experiences of BPR show that re-engineering is not
21 an isolated change on the processes supported by introduction of IT. On the contrary,
it involves wide human and organizational issues.7
23 IT provides the processes that are radically innovated with operative solutions for
information management never imagined before, which places the re-designed pro-
25 cesses at a considerably different management stage. Thus, thanks to the application
of IT to process re-engineering, many activities are automated, detailed information
27 is offered for the monitoring of activities that add value, many of the tasks that are
carried out within the processes are normalized and standardized, physically distant
29 processes are coordinated, etc.
The people who offer their services to the company where the process is tak-
31 ing place are those who think and work so that the process output can satisfy the
needs of other people — the process’ end-users. Therefore, people must necessarily
33 constitute a key element of business management in BPR. Failing to adequately
manage human resources involves endangering the distinctive competences that
35 generate competitive advantages (Pfeffer, 1998; Hamel and Prahalad, 1994), as
well as neglecting customer service, since it is the customer, after all, that BPR
37 aims to satisfy efficiently.

7
See cases like JMBygg (Vakola and Rezgui, 2000) and Albizu et al. (2002).
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BPR and Change Management 5

1 Finally, it is essential to integrate the processes, the people and the systems
deployed for those processes to work satisfactorily within a new organization that
3 facilitates the most efficient combination of the available resources.
On this basis, we consider that for BPR to be developed successfully, it will be
5 necessary to take into account the role that this management tool plays in generating
organizational change. BPR, beyond the redesign of processes and the introduction
7 of information technology to support them, has the potential to become a powerful
tool for organizational change if properly managed.
9 Many authors in the BPR literature (Davenport, 1993; Harvey, 1995; Brus and
Roos, 1993; Mumford and Beckma, 1994; Hammer and Stanton, 1995; Towers,
11 1996; Sockalingam and Doswell, 1999) have pointed out that change management
is the main facilitating activity that must be developed to successfully implement
13 BPR. However, there are differences in how these authors conceptualize the critical
dimensions of change management. As a result of the analysis carried out on recent
15 studies, we propose a model of organizational change to be developed around BPR,
which synthesizes the main variables to be considered in its management.
17 The model is shown in Fig. 1, in which we represent the architecture of BPR-
based organizational change. The operative platform of the firm is made of pro-
19 cesses, people involved and IT-based systems. In order to change the operative
platform, related changes have to be carried out in the pillars which sustain the
21 organization, namely: leadership, structure, work organization, culture, and man-
agement of people. On top of that, the roof of the building is the strategy, which
23 influences and directs the disposition of the rest of elements.

• The strategy, or set of decisions made by the top management in order to favor
25 a company’s adaptation to its environment (Schendel and Hofer, 1972) plays an
essential role in the change process and, frequently, it has been considered that it

Fig. 1. Architecture of BPR and organizational change. Source: Authors’ elaboration.

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6 E. Albizu, M. Olazaran & K. Simon

1 is strategy itself that triggers the change (Grouard and Meston, 1995; Altinkemer,
Chaturvedi and Kondareddy, 1998). In fact, recent literature on BPR (Kettinger
3 and Teng, 1998; Wu, 2002) points out that the key criterion when selecting the
processes to which BPR should be applied is whether those processes are aligned
5 with the company’s strategy. From this strategic perspective, BPR should be
considered a management tool to be applied when implementing strategy. Strate-
7 gic level changes are required when a company has to react to new competitive
situations, or when taking the initiative to reposition the competitive edge of
9 the firm. Correspondingly, the drivers of business changes are various (Kallio
et al., 2002). They include external changes (i.e., technological, political-legal,
11 unforeseen changes in the evolution of markets, increasing customer/supplier
requeriments) and internal changes (inefficiency, high costs or low quality, lack
13 of personnel involvement in the tasks, etc.).
• Within change management, leadership plays a crucial role as a facilitating factor
15 for success when implementing BPR (Hammer and Stanton, 1995; Cooper and
Markus, 1995; Simpson et al., 1999).8 Moreover, transformational leadership is
17 best suited for those situations where the existing order has to be altered through
a collective and institutionalized learning process (Vera and Crossan, 2004) such
19 as that involved in BPR implementation. The function of leadership basically
lies in: offering the organization a clear vision of the future; communicating this
21 vision; widely involving those collaborating in BPR; and showing commitment
to the efforts that the implementation of BPR demands by serving as an exam-
23 ple (Hammer and Stanton, 1995). In addition to this, leadership based on a firm
conviction and commitment to change, as well as on ample authority, plays an
25 important role in overcoming the resistance that might oppose change. In this
sense, a recent empirical study that analyzes the existing relationship between
27 leadership and business results shows that those leaders who manage BPR suc-
cessfully are able to harmonize the people’s needs with the needs created in the
29 activity that is the object of re-engineering (Sutcliffe, 1999).
• The redesign of processes generates changes in the organizational structure.
31 Thus, moving from hierarchical functional structures towards structures with
fewer levels based on business processes oriented to satisfying the customers’
33 needs is one of the distinctive features of BPR — albeit not an exclusive one.
It is frequently argued that organizations structured around business functions are
35 charactized by a narrow perspective and lack of flexibility to deal with the changes

8
Even though it is generally assumed that deployment of leadership throughout the organization
facilitates change, we refer here to leadership by top management, i.e. strategic leadership (Hambrick
and Pettigrew, 2001).
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BPR and Change Management 7

1 that take place in an increasingly turbulent and ever-changing environment. One

solution to this problem involves organizing the activities according to the business
3 processes cutting across the existing functional barriers.9
An organization based on processes, as opposed to a functional organization,
5 groups tasks on the basis of the main processes developed by the company. When a
company is reorganized by switching from functional to process-based structures,
7 traditional job descriptions (defined by the performance of specific tasks, highly
specialized, and demanding very specific skills) are replaced by positions requiring
9 multi-skilled staff. These job contents are not task-centered, as was usual, but based
on a goal or mission of a wider range. The holder of the position is responsible, at
11 least partially, for various activities and tasks that are required to reach the desired
goal. Therefore, the workers in a given process have to add to the wider-ranging job
13 contents (a horizontal redefinition of work) the responsibility for making decisions
within their management area (a new vertical division of work).
15 BPR makes it possible to bring together the advantages of both centralization
and decentralization. On the one hand, the organization benefits from the big-scale
17 economies generated by centralization — fundamentally derived from the imple-
mentation of IT — while, on the other hand, it is made possible for different units,
19 very often physically distant from each other, to work autonomously.10
• Another key aspect of change is work organization. Increased participation of
21 the workers in the decisions of the company is at the basis of the transition from
functional, hierarchical structures towards structures based on processes, more
23 flexible and oriented to the satisfaction of the customers’ needs. Thus, the creation
and development of participative management systems generated by BPR is one
25 way to achieve lower levels of bureaucracy, hierarchy and delays (Bright, 1999).
On the other hand, implementing more participative systems of work organization
27 involves the need to change the management style and the role of the people who
have responsibility for other people under them. This change, which has to take
29 place along the whole chain of command, requires special attention in the case of
middle management. Experience has shown that, in many cases, they find it difficult
31 to adjust to a process-oriented organization as opposed to the previous situation
where their activity was department-oriented, since BPR demands a management
33 style oriented more towards training, promoting and involving, and less towards
supervising and controlling. In this context, assuming delegation dynamics usually
35 generates problems (Hammer and Champy, 1993).

9
Hammer and Champy (1993, 73 and ff.) illustrate this idea with cases from different companies.
10
David Lyon (1994, Ch. 7) described the emergence of a new type of control in organizations which
combines both centralization and decentralization.
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8 E. Albizu, M. Olazaran & K. Simon

1 • BPR generates changes in the culture of an organization; in other words, in the

values, beliefs and behavioral patterns of its members. Changing these is one of
3 the main challenges in any serious attempt at business transformation (Zucchi and
Edwards, 1999). Beyond the importance of an existing culture in an organization
5 as a facilitating or restricting factor for change, BPR induces transformation in
the dominant values of an organization such as: focus on the customer versus
7 focus on the task; focus on the process versus focus on hierarchy; collective
performance versus individual performance; etc.
9 • As we shall see later, there is an increasing number of scientific studies that
underline the close relationship existing between BPR and people manage-
11 ment, an aspect often underestimated that has been responsible for the failure
of many projects. New work processes and “hard” IT infrastructures need to to
13 be underpinned by “softer” investments in human resources (Pettigrew et al.,
2000). Kennedy (1994) discusses certain elements of change management from
15 the point of view of the people arguing that this is “the most difficult change”
(p. 64), and explaining the risks that BPR involves when it introduces changes
17 that force the staff to modify their working practices. Cooper and Markus (1995)
emphasize among the causes of the failure of BPR the inadequate treatment and
19 handling of the human aspects of change, while Love and Gunasekaran (1998)
focus on the importance of organization and the adequate management of human
21 resources among the main requirements for a successful BPR. Sockalingam and
Doswell (1999) point out that the management of conflict among people is a key
23 issue in BPR implentation. Zucchi and Edwards (1999 and 2000) have studied
the management model of the Human Resources Function that derives from the
25 implementation of BPR, while Purwadi, Tanaka and Masaharu (1999) go as far
as demonstrating that the management of human resources that underlies BPR
27 is convergent with the Japanese style of human resource management. In sum,
recent studies suggest that the human resource management (HRM) function has
29 become central in the implementation of new forms of work organization such
as BPR.
31 The analysis of those studies shows that there are certain areas within the HRM
function whose management is intimately associated to the successful implemen-
33 tation of BPR, such as the following:
(a) Labour relations play a key role, beyond that attributed by formal labour leg-
35 islation (the rights to information and participation in collective bargain agree-
ments). In fact, several studies (Riordan and Winsten, 1996; Reshef and Lam,
37 1999) show that securing the workers’ representatives’ understanding of the
need for change and their subsequent cooperation in the implementation of BPR
39 constitutes a fundamental element for its success. As a matter of fact, there are
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BPR and Change Management 9

1 research studies showing that the staff’s participation in the design of BPR
is a facilitating element for its implementation (Tikkanen and Pölönen, 1996;
3 Marjanovic, 2000).
(b) Information and communication — honest and open — play a relevant part in
5 raising the workers’ awareness and in getting rid of certain barriers within the
BPR implementation process (Marjanovic, 2000).
7 (c) The management of the flows of people in the migration from one type of orga-
nization (function-based) towards a new one (process-based) demands a huge
9 effort since the change process must not prevent the companies from maintain-
ing their operation levels, due to demand pressure, during the transformation.
11 This step is closely related to staff training, both concerning the content of
the new jobs as well as other relevant aspects of the change process (e.g.,
13 using IT applications, teamwork, company values, techniques for continuous
improvement, etc.).
15 (d) Finally, the implementation of BPR is related to the revision of retribution sys-
tems. Increased work responsibilities and wider job contents, higher staff qual-
17 ifications, a new focus on the customer and the introduction of collective work
are elements to be considered when designing BPR-related retribution systems.
19 In sum, implementation of change programmes such as BPR, if it is going to
go beyond mere IT implementation, requires the alignment of the key strategic,
21 structural and cultural elements of the organization. It also requires active manage-
ment of the change process in order to animate and lead participation of the main
23 organizational actors.

BPR in Iberdrola
25 Providing a context for BPR in Iberdrola
Iberdrola, S.A. was born in 1991 as a result of a merger between Iberduero, S.A. with
27 Hidroelectrica Española, S.A., two companies with a long tradition in the Spanish
electricity sector, although at present Iberdrola has a presence in other sectors such
29 as: gas, water, telecommunications, engineering, property and information systems.
The merger resulted in the creation of one of the two leading Spanish companies
31 and also of one of the largest in Europe in its sector. Following the merger, it had
nearly 16,000 employees in Spain; approximately 50 percent coming from each of
33 the companies.
The merger in 1991 created the need to unify all the areas of activity of the
35 new company (organizational structure, information technology platforms, operat-
ing systems, working conditions, culture, etc.). The company dealt with the first
37 challenge of formally consolidating the merger, at least in legal and organizational
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10 E. Albizu, M. Olazaran & K. Simon

1 terms. It was then necessary to introduce a strategic direction to management in

order to guide the transformation which had begun to be managed. Thus, in 1994
3 a strategic re-think process began in which a series of changes were identified that
were presumably going to directly affect Iberdrola’s activity. Among these we can
5 cite the following:

(a) It was known that within a few years the electricity sector would be liberalized,11
7 which would imply deep changes in the way it worked, changing from being a
regulated oligopoly to a freer and more competitive market.
9 (b) The growing market globalization involved both the need to be competitive at
an European level and to position itself in developing markets, especially those
11 where there was a degree of cultural identity (i.e., Latin America).
(c) The development of environmental legislation and of growing social awareness
13 were increasingly impeding several electricity generation systems which the
company was using at the time.
15 (d) There was increasingly more demand from clients and institutions for quality
of service, consumer information, a complete range of services, flexibility to
17 meet end-users’ needs, etc. This greater demand was obviously going to create
the need for an improved and rationalized service to all these groups.

19 Therefore, this is a company which, historically having had a captive market,

has basically focused on producing energy for this market at prices fixed by the
21 regulating mechanism (the state). It has employed its staff as quasi-civil servants
and has produced sufficient profits for its shareholders. There was a need to guar-
23 antee long term competitiveness within a competitive environment that was new to
the company. Iberdrola also needed to face challenges such as international growth;
25 diversifying its activities; modernizing its systems; in short, transforming the com-
pany. Thus arose the need to be more efficient, to improve productivity, reduce costs
27 and reorientate the company culture towards values like satisfying customer needs
and efficiency.
29 In the context of the need for comprehensive change described above, in a trip to
the United States the company’s Top Management made contact with several cases
31 of BPR which could be used for benchmarking. At that moment it was thought
that BPR could be a tool for implementing the desired change in the company
33 and for facing the main challenges posed: cost reduction, increased productivity,
rationalization of the company, improvement in service levels and a change of
35 mindset among the staff.

11
In fact, in November 1997 the new Spanish Electricity Sector Law came into force.
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BPR and Change Management 11

1 Implementation of BPR in Iberdrola

We can distinguigh the following main phases in the implementation of BPR in
3 Iberdrola: start-up, model conception, launch, development and consolidation.

Phase I (1994) Starting up

5 The plan for the implementation of BPR arose from the initiative of the High Man-
agement Team which was formed following the merger of Iberduero and Hidro-
7 electrica. The new Managing Director was convinced that within the near future the
liberalization of the electricity market was going to take place. Even before being
9 appointed to the position, he ordered several reports to be carried out that would
allow him to determine possible future management scenarios. In the same way,
11 and as mentioned before, a process of strategic reflection took place in order to
determine the position that the company should take in the following years.
13 A fundamental idea developed in this phase and which underlines the develop-
ment of all the project is that of “general change” (Overall Transformation Project,
15 OTP). It seemed clear that BPR, being at the base of the change which optimizes
operations, needed to be faced alongside other major changes taking place. A high
17 manager of the company put it in this form:
“In an environment of liberalization the company has to change radically. There’s
19 no room for taking it step by step. A profound qualitative change is required and,
within this, one of the relevant aspects is going to be re-engineering, which alongside
21 other initiatives is going to subsequently converge in the Overall Transformation
Plan”. (Interview with Planning Department Director)
23 At the end of 1994, once an initial estimate of the project’s potential outcomes
had been calculated — jobs that could be cut12 and the consequent cost savings —
25 a decision was taken to make a start despite the great difficulties it would entail
(the regulations regarding the working conditions of the employees from the two
27 companies were still not unified and multimillionaire investments needed to be
made). An organizational unit was created that would deal with the development of
29 the project and an initial budget was assigned.

Phase II (1995) Model conception and implementation planning

31 This phase began with a diagnosis of the situation carried out in collaboration
with two consulting firms that the company had been working with. This diagnosis
33 had several different consequences. Firstly, a conscientious study of the company’s

12
The number of jobs cut was initially estimated at around 1,300.
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12 E. Albizu, M. Olazaran & K. Simon

Fig. 2. Megaprocesses map. Source: Iberdrola.

1 processes begun leading to an Iberdrola Process Map being established (see Fig. 2).
The aim of the process map was to relate the diagnosis to the identified processes.
3 Secondly, high management became conscious of the opportunities for imple-
menting BPR in Iberdrola. They subsequently began to work on planning activities,
5 establishing some primary objectives and defining the first steps to be taken to carry
out the BPR idea. On completing this stage, a reduction of approximately 3,000
7 people (from 14,000 to 11,000) was already being considered as well as about a
25–30 percent reduction in costs through the implementation of nearly 20 BPR
9 projects.
Once the processes with the greatest potential for improvement had been iden-
11 tified, they were placed in order of importance in order to establish priorities for
action. The principal criteria used in placing them in order was their alignment with
13 the strategic elements (adding value, customer service, business growth, cost and
investment efficiency, re-structuring of workforce),13 being the last two especially
15 relevant. In addition to the impact on the strategic elements, the following questions
were also taken into account when deciding which projects to start first: potential
17 improvement of process and exemplar character of projects as best practices to be
generalized in the organisation.

13
In 1994 the first Strategic Plan of Iberdrola was launched, where the following key elements for the
management of the company were established: mission/vision; corporate values; strategic objectives
(which belonged to five strategic areas: value addition, client attention, business growth, cost and
investment efficiency, human resource development); and strategies. Since then each of the businesses
has its own operating objectives in the five strategic areas.
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BPR and Change Management 13

1 Phase III (1995 and 1996) Launch

At the start of this phase, efforts were concentrated mainly on developing a method-
3 ology. With the collaboration of the consultants,14 the group set up for BPR devel-
opment adapted the consultant’s methodology to the case of Iberdrola.
5 In this phase, work concentrated in two issues: development of methodology for
process improvement and system adaptation.
7 It is at this stage that the first 8 BPR projects were begun, as well as some projects
not related with processes but which were considered critical for their impact on
9 the strategic objectives previously defined. In order for the projects to go ahead,
teams were appointed with the responsibility for implementing the BPR projects.
11 Prior to beginning work, the methodology they were to apply was communicated
to them. In the same way, performance indicators were established for the different
13 BPR projects, characterised by being intimately related to the redesigned processes.
They reflected the objectives set up for each project and were taken on board by the
15 organization as the benchmark of their success.
In this phase, an information system about the progress of the different projects
17 was set up in which the following items were set out in a roadmap: objectives,
degree of progress of the project, performance indicator levels, costs, staff, etc.
19 With this tool, all the projects undertaken could be monitored by knowledge of their
development and efficiency.
21 At the end of 1996 a collective bargaining agreement was signed that would reg-
ulate working conditions until the year 2000. More specifically, it would regulate the
23 aspects concerning retirement, early retirement, and particular working situations.
This regulation made it possible to carry out the staff adjustment foreseen in the first
25 estimates made by the company. At the same time, it created the right conditions
for the adjustment to take place in a climate of social peace. As stated by one of the
27 persons responsible for the Transformation Project:

“The agreement with the unions was very important because it

29 eliminated the understandable fears which a re-engineering plan
could create. As a consequence of the agreement, workers who were

14
During the strategic reflection phase Iberdrola worked with different consultancy companies. Sub-
sequently, both in the design of the Overall Transformation Plan and in the phases of development
and transfer of BPR methodology, an option was made in favour of Ernst and Young. At the operative
level, the methodology offers some elements for the analysis, redesign, evaluation and improvement
of processes. At the executive level, the methodology gives High Management a management and
evaluation tool for the human, organizational, technological and economic components of process
change. The methodology developed at Iberdrola follows the stages proposed within the CONDOR
BPR project (Vakola and Rezgui, 2000).
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14 E. Albizu, M. Olazaran & K. Simon

1 57, 58 or 59 could retire under very good conditions, and we could

implement the BPR projects, the Overall Transformation Plan and,
3 in general, the technological improvements which made possible
to work with more quality and fewer personnel”. (Interview to
5 responsible for Transformation Project.)
In this phase, they began to design the internal communication and ad hoc
7 training activities in order to create an atmosphere conducive to the implementation
of the BPR projects that were launched.

9 Phase IV (1997) Development

Once the first steps of the launch phase were evaluated, the Process Map and activ-
11 ities were revised and 9 new BPR projects were launched.
The finalist information model for management control to be established in
13 Iberdrola, in line with the strategic objectives, was based on activities. In this
way, the budgeting function could be carried out based on the activities deployed
15 in the processes defined in the Process Map. In 1997, as an initial and transi-
tory step, a budget based on the re-engineering projects was drawn up for the
17 following financial year. Thus, all the accounting in the company — be it cor-
porate wide or profit centre related — could be seen from the point of view of
19 the processes as well as in the traditional way — balance sheet and profit and
loss account.
21 It is in this phase as well that a balance score card was established in which
the key variables and performance indicators of the different processes appeared.
23 In fact Iberdrola applied the underlying logic of the Kaplan and Norton (1996)
model, under the assumption that the redefinition of central processes according to
25 a strategic vision would help improve the value proposal which is handled to clients,
as well as increase stakeholders’ expectative of returns. Subsequently, a system of
27 work by objectives in function of these variables and indicators was linked to a
variable remuneration system.

29 Phase V (1998) Consolidation

In this phase the implementation of the first BPR projects was finished off and the
31 last ones were launched. For the business processes in which BPR implementation
was complete, continuous improvement mechanisms were established.
33 Based on the experience acquired in the previous year (in which the budget was
based on processes) the budget for financial year 1998 was drawn up, referring to the
activities to be deployed in the various processes defined in the Iberdrola Processes
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BPR and Change Management 15

1 Map. Later on, this tool — until this point parallel to the corporate accounting
system — was fully integrated into this system bringing with it valuable information
3 for analyzing the consumption of resources in each process. Thus, in this transitory
period it was useful for all those people responsible for using accounts to familiarize
5 themselves with a new way of recording financial data.
From 1998 actions begun that were intended to give an impulse to the implemen-
7 tation of a new management system. These would contribute to a nascent cultural
change along the lines set out in the strategy. Basically, these actions were deployed
9 among the company management.

Results of BPR in Iberdrola

11 The results of BPR in Iberdrola affect different aspects, both quantitative and qual-
itative among which the following can be cited: (a) reduction of staff; (b) improve-
13 ment in efficiency and quality; (c) creation of a new organizational structure; (d) the
redesign of job descriptions and the appearance of considerable training needs;
15 and (e) the introduction of new practices concerning human resource management
(HRM from henceforth).
17 (a) Reduction of staff has been one of the most visible effects of BPR in Iberdrola.
In fact, the staff has decreased by approximately 25 percent in five years, from
19 13,581 people at the end of 1994 to 10,106 at the end of 1999. The actual
results of staff reduction have markedly surpassed the initial estimates made
21 by the company (1,300 employees). Even though there was a significant staff
reduction, this neither caused convulsions nor created particularly significant
23 conflicts in the organization. The keys to this are explained in the following
section.
25 (b) Efficiency was considered to be the cornerstone of the Overall Transformation
Plan (OTP from henceforth) from the start. In addition to the cost reduction
27 resulting from staff cuts, efficiency also resulted from the improved produc-
tivity of the employees. The improved productivity of the employees is the
29 result of four principal sources: a) people working in re-designed posts and
being qualified to do them, thus optimizing the development of their functions;
31 b) automating several tasks which feature in different processes; c) improve-
ments resulting from workers’ participation in continuous improvement groups.
33 These have made possible continued improvement of the indicators established
to measure the efficiency of each process; and d) the “learning by example
35 effect”, or put another way, when certain processes have been re-engineered,
a good proportion of the staff occupied in other areas of the company have
chosen to improve their efficiency in the light of possible restructuring which
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16 E. Albizu, M. Olazaran & K. Simon

Table 1. Some results of BPR.

Efficiency Indicators Initial Final Evolution

(Project) Value Value

Installation jobs not within deadline (NSP) 40% 0% 100%

Reports not within deadline (NSP) 22% 15% 31,8%
Customer satisfaction index (NSP) 6.81% 7.1% 10,42%
Cost of accounting entries (AP) 74,47(euros) 44,38 (euros) 40,40%
Time taken to record financial data (AP) 22 days 7 days 68,1%
Automated invoicing (AP) 0% 80% 80%
Invoice deadlines (AP) 35 days 4 days 88,57%
Remote controlled Power (META) 0 Mw 7670 Mw 92%
Shifts worked (META) 56 12 78,57%

Source: Elaboration from data provided by Iberdrola.

1 could negatively affect them. As the Director of HRM in the electric generation
business put it:
3 “. . . Under the new organization of hydraulic stations task require-
ments are very different to those required before BPR. Low qualifi-
5 cation jobs have been eliminated, and the remaining personnel has
higher technical training requirements than before. Many manual
7 tasks were eliminated, and the new tasks have a high technological
content . . .” (Interview)
9 Implementation of BPR in Iberdrola resulted in very important improvements
in most process indicators. Below are shown some performance indicators used in
11 the three main re-designed processes of Iberdrola in terms of number of employees
involved, affected investment, and impact on clients.15 Evolution of those indicators
13 shows results which are in line with those promised by “classic” BPR literature.
Another consequence of the increase in efficiency following BPR projects was
15 the reduction of subcontracted tasks, which, in many cases, came to be carried
out by surplus staff resulting from the re-engineered processes. These staff was
17 normally either waiting to be permanently assigned to a new job or had their work
time partially freed up.
19 (c) Re-engineering has involved the need for a new organizational structure. Thus,
the corporate structure resulting from the implementation of the OTP is one
21 based on macroprocesses, which eventually derived in a division into distinct

15
New Supplies Process Re-engineering Project (NSP); Administation Processes Re-engineering
Project. (AP); and Hydroelectric Generation Processes Re-engineering Project (META).
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1 business units and which is characterized by notably reducing the existing levels
as well as diluting the functional organizational model previous to the imple-
3 mentation of the Project.
(d) BPR implementation has created considerable training needs resulting from the
5 re-design of jobs, creating some very significant training costs16 in addition
to the need to develop existing training structures in the organization and to
7 partially sub-contract some of the training in order to deal with the projects.
Also, the scope of the training content was naturally wide given that, in general
9 terms, there was a need for specialist workers to become more multi-skilled
and thus be able to occupy jobs with more varied tasks. In addition to this,
11 the training entailed a significant organizational effort given that work had to
continue at the same time. Massive training has meant that new opportunities
13 for re-qualifying and consequently improving professional status and salary
have appeared.
15 (e) Practices in the area of HRM have developed a great deal with this project. There
is an impression that even though there was a significant HRM team before the
17 OTP began, they only really managed labour relations and personnel adminis-
tration, or to put it another way, the labour law aspects of the HRM function. To
19 a certain extent, this situation was understandable given that as a result of the
merger, the working conditions of the workers from both companies needed to
21 be harmonized, a process that did not come to an end until the end of the nineties.
However, a project with a social impact of such caliber required adequately re-
23 dimensioning the management of human resources. For that reason, including
one person from HRM in each BPR project was considered in order to: support
25 the necessary change management in each project; favour better solutions for
surplus personnel, based on knowledge of labour standards and the collective
27 agreement in place; manage jobs; inform the workers’ representatives; and act
as a link with other organizations in Iberdrola separate from the project.

29 Key Factors in the Implementation of BPR in Iberdrola

We consider that BPR in Iberdrola has been successful from an economic standpoint
31 (evolution of performance indicators and of the costs of the processes undertaken).
The improvements have been, for the most part, very important, and they were the

16
For instance, the META project (Improvement in Exploitation, Remote Control and Automatization),
aimed at the automatization and remote controlling of hydroelectric power stations, with a total cost
of nearly 120 million euros, had to sustain training costs representing 9.7 percent of the total cost of
the project, since the whole staff had to be trained, which required 147,000 hours of training.
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Table 2. Results of Iberdrola — Returns per share.

2003 2002 2001 2000 1999

1,18 • 1,07 • 1• 0,95 • 0,81 •

Source: www.iberdrola.com.

1 result of the key aspects outlined below. The change undertaken during the 1994–
2000 also contributed to the increase of positive economic returns for the company’s
3 stockholders. Table 2 shows the evolution of return per share in recent years (an
increase can be seen from 1999 to 2003)
5 A distinction should be made between structural keys, related to the com-
pany’s specific characteristics, and ad-hoc keys, related to the change management
7 carried out.
However, it should be pointed out that, in our opinion, the company has missed a
9 unique opportunity to establish a new business model where both process transfor-
mation and organizational transformation — in a wide sense of the term-would have
11 taken place hand in hand. In our view this was due to a conservative approach to
decision-making and management style, a reactive management of human resources
13 and a weak approach to cultural change.

Structural factors
15 (a) Iberdrola was a company in a stable profit situation and thus, not weighed
down by the burden of financial results. The stable situation of the market at a
17 national level (an oligopoly in a highly controlled market) softened the impact of
the change project and allowed for improved competitiveness when facing the
19 changes taking place in the company’s environment in the medium/long term.
(b) High average age of the staff (around 50 years old) which has boosted the
21 considerable impact of the pre-retirement and early retirement processes. These
processes, in turn, have been helped by some advantageous financial conditions
23 agreed with the company.

Ad-hoc factors
25 From the beginning of the project, it was clear that BPR could only be approached
within a context of deeper, wider-reaching organisational change, that is to say, by
27 closely linking it to other management areas.

(a) Establishing a corporate strategy. As a consequence of the process of strate-

gic rethinking started in 1994, the following elements were established on
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BPR and Change Management 19

1 which the management of the company would be based: the mission/vision,

corporate values, strategic objectives and competitive and functional strategies.
3 The launch of the Strategic Plan between 1994 and 1995 was important for the
company given that, in the face of its traditional modus operandi, it introduced
5 notable strategic varieties. On the one hand, the growth factor appeared, which
would put the company in the firing line of competition in a context of growing
7 market liberalization and internationalization. On the other hand, the ideas of
customer service and creating value for them through offering different services
9 ran up against the classic idea of servicing the power needs of a fixed number of
subscribers. From an internal perspective, the objectives of efficiency and prof-
11 itability were introduced. These objectives also meant an important change,
given that in a regulated market a certain amount of profit was assured. The
13 twin obsession for efficiency and profitability thus came about in anticipation
of the management conditions under which the company would operate at some
15 point in the future. Finally, the explicit preoccupation with developing human
resources arose for the first time.
17 (b) Creating an organizational unit to specifically deal with the development and
leadership of the project. From the beginning of the project, it was thought
19 necessary to create an organizational unit that would act as a store for all the
know-how the various consultants were transmitting. At the same time, the
21 methodology would be adapted to each one of the different BPR projects that
the company was going to tackle and the unit would plan, organize, collaborate
23 in the implementation, periodically evaluate and inform Top Management of
the progress of the OTP. In fact, this unit has taken charge of the project lead-
25 ership, by delegation from General Management and with its explicit support.
In practice, the work carried out by this unit has proved vital for the success of
27 the implementation of BPR in twenty simultaneous projects divided into three
phases, with a high impact on the company’s activity and affecting processes
29 of a varied nature.
(c) Establishing a Management Model to make sure that there was coherence in
31 all the actions taken by the company in line with the OTP. This required the
improvement of the corporate planning processes, establishing a system for
33 harmonization and evaluation of objectives based on the definition of indicators
and decentralizing the budgeting system and the financial results accounts,
35 starting from the basic business processes.
(d) Aligning the organizational structure with the strategic vision. More specifi-
37 cally, the company has been reorganized into business units (which are basically
“macro-processes”); it has carried out adjustments relating to the organization
39 and the jobs based on the BPR projects; and it has aligned the responsibility for
the management of processes with the organizational model.
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1 (e) Implementation of the technological support that makes the company manage-
ment possible. The company has developed the actions necessary for imple-
3 menting a technological platform that made the success of the OTP possible.
This plan incorporated different actions towards the development of a platform
5 that offers the information required by the Management systems, fulfilling at
the same time the technological requirements of the BPR projects.
7 (f) A thorough management of labour relations. From the outset of the project, the
workers’ representatives were kept up to date, and later the basis were nego-
9 tiated that would allow its implementation (1996–2000 collective agreement).
We must consider that 70 percent of Iberdrola’s staff is unionized and that, for
11 different historical reasons, the role of the unions in the company management
has been relatively important, a fact that must be taken into consideration before
13 setting up any project which will have an impact on human resources. There-
fore, clarifying the objectives and procedures of any project to the workers’
15 representatives has been a key element in the implementation of BPR.
(g) The long implementation period of the BPR project, given that it begun to
17 develop in 1994 and basically culminated in the year 2000. This period of time
(no less than 6 years) has allowed for a non-traumatic matching of staff needs
19 in accordance with the organizational objectives and the availability of staff.
(h) Collaboration of the executives in communicating and implementing the project.
21 One of the bases for this collaboration has been internal communication. Thanks
to the communication effort, mainly on the part of the executives, the personnel
23 has understood the need to carry out the re-engineering. This has particularly
been the case when the technological changes presented the opportunity to
25 perform the tasks more efficiently. Moreover, overcoming the endless orga-
nizational and people management problems that have occurred during the
27 implementation phase of BPR has basically been a success attributable to them.
(i) Corporate actions on human resources and culture. A transformation of such
29 dimensions requires establishing actions designed to change the behaviour, pro-
files and, in general terms, the management of human resources. In this sense,
31 however, it should be pointed out that the management of human resources
carried out in Iberdrola has been basically reactive. Aspects such as those con-
33 cerning labour law, the treatment of personnel flows, information, training and
remuneration, all essential for BPR to be operatively materialized, have been
35 successfully dealt with throughout the change process.

It is only after 1998 that specific initiatives, especially aimed at the company’s
37 executives, were designed towards the evaluation, development and boosting of
human resources; the diagnosis and guidance of the climate of change, as well as
39 towards a change in values and management styles. In this context, we consider
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BPR and Change Management 21

1 that there are negative aspects worth pointing out: the power structures remained
unchanged; BPR has been carried out operating in the same management style as
3 before; BPR has not substantially improved the employees’ participation in the
company’s decision-making; communication at corporate level is poor, and the
5 criteria for personnel promotion remain arbitrary and non-systematized.
Therefore, it could be argued that Iberdrola has successfully dealt with the prob-
7 lems that arose from adapting the staff affected by BPR to the new processes, but has
missed the opportunity to start a change that would transform the company towards
9 a business model that harmonizes the staff’s commitment and efficiency.

Conclusions
11 BPR was conceived in Iberdrola as a project of radical organizational change (a
radical redesign of processes, as described by Hammer and Champy) which acquired
13 a more adaptative and transformational sense (as described by Davenport) in the
implementation stage.
15 BPR would not have been efficiently implemented if it had not been integrated in
a wider and more ambitious plan. Thus, BPR was the part of the attempted change
17 programme which affected the company’s operations: its key processes. This change
in the processes would not have led to the desired results if it had not been aligned
19 with the strategy of the company and joined to the changes in the management
system, the organization, the technology and the labour relations system. In the
21 same way, the unit for internal change appointed by Top Management has had a
remarkable animating and leading role.
23 In practice, as opposed to the orthodox definition of BPR as a tool for radical
change in a short period of time, Iberdrola dedicated nearly 6 years (1994–1999)
25 from the conception to the implementation of the main part of BPR. The average
time taken by each particular BPR project was nearly 2.5 years, but the implantation
27 of the concept of BPR (a set of projects and organizational transformations) in the
company took 6 years.
29 This fact had two important consequences. Firstly, given the long period in which
BPR took place, adjustments due to the surplus staff resulting from the re-engineered
31 processes were dealt with in a non traumatic way. The continuous reduction in
personnel during those years was favoured by the relatively high average age of
33 the staff and by the negotiation of some good conditions for the people who had
to leave the company through retirement and early retirement. Secondly, given the
35 complexity of the project, the company saw the need to create an organizational unit
that would nurture the development and perfection of an adequate methodology and
37 work in the leadership, planning, co-ordination, implementation and evaluation of
the various BPR projects undertaken.
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1 The results of BPR surpassed initial expectations. The cost savings accrued were,
in the projects analyzed, greater than 30 percent, with the forecasted staff cuts sur-
3 passed practically from the start of the project. Similarly, BPR led to the renovation
of practically all the information systems used previously and to a significant mod-
5 ernization of company equipment. There is no doubt that the services — internal and
external — offered through the re-engineered processes improved notably and that
7 staff productivity clearly increased. The relationship that the company had with its
suppliers, intermediaries and clients also changed. They are now more committed
9 to the company. Subcontracting decreased; and some of these tasks were taken on
by some of the surplus staff resulting from the re-engineered processes. All those
11 factors contributed to improve the general results of the company, which in the last
five years has produced increasing returns per share in the stock market.
13 We consider that the success of BPR was also based on the commitment of the
command chain to the projects, without which they would not have been completed.
15 Those efforts made in training and in communication with the staff affected by BPR
warrant special mention. The time dedicated to these concepts was detracted from
17 work time and this made daily organization and operation of the processes more
difficult. However, it proved vital. In general terms, the surplus staff retired satisfied
19 with the conditions offered by the company and the workers who continued in the
company are better qualified and identify more with the company, having in many
21 cases improved their professional category and added to their skills.
On the more negative side, the management and development of human resources
23 was a consequence of BPR in Iberdrola. In our judgement, the HRM area played
an instrumental role. Even if the OTP conceptually contemplated a change in the
25 culture and in the management of people, during the first years of the change
process HRM efforts concentrated on managing labour relations and on person-
27 nel administration. Later on attention was devoted at managing and developing
the management staff. Thus, experience suggests that there is one HRM policy
29 for some — the re-engineered employees — and a different one for others —
the employees with management positions. The company’s culture has slightly
31 evolved towards the reference values established during the strategic reflection,
but cultural change in Iberdrola has only just began and has undoubtedly become
33 the most difficult change and one of the biggest challenges still to be dealt with
by the company.

35 Recommendations
In the context of diffusion and commercialization of new management concepts,
37 insufficient attention is often paid to the processes of active adaptation of those
concepts to the particular reality of organizations. However, in our view, active
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BPR and Change Management 23

1 adaptation has a critical importance in the transfer and implementation of new

management systems and tools such as BPR.
3 Implementation of a management tool such as BPR is a collective process of
learning and creation of new knowledge (which is slow, interactive, gradual). Exter-
5 nal sources of knowledge (literature, consultants, technical specialists) are impor-
tant, but the main change factors and processes are internal to the firm. Those
7 processes are social, involving actors from different functions and hierarchical lev-
els, who take part in the dynamics of knowledge conversion (tacit-explicit, explicit-
9 tacit, Nonaka and Takeuchi, 1995). Leadership and change management are of great
importance for those processes.
11 The strength of BPR comes from the combined implementation of both technical
(IT) and organizational (process-based organization) elements within a strategic
13 framework. In order to get the best results out of BPR it is highly recommendable
that the change project be aligned with other dimensions such as culture, structure,
15 work organization and management of people.

Acknowledgements
17 Apart from the persons and organizations mentioned in footnote 1, we are indebted
to all the people in Iberdrola who contributed to carry out this research. Specially,
19 we want to acknowledge the co-operation of Javier Camarero-Olasolo and Javier
Garcia-Laza for their help and encouragement, and for co-ordinating and facilitating
21 our work in the company.

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