Nigerian Banking Sector Analysis Essay Example

led to significant improvements in their operations. Hammer, Champs, and Davenport presented notable works on BPR between 1990-1993. Hammer was recognized as one of the prominent management gurus of the 1990s, alongside Champs. They gathered information about successful organizations in various industries and collected consulting experiences to understand what strategies worked and why they were successful, as well as what strategies did not work and the reasons behind their failure.They discovered that most of the companies that had succeeded in changing their processes had used a similar set of tools and tactics. This set of procedures is called Business Reengineering. In organizations, the competitive field has been greatly reshaped in recent years. The globalization of markets, new customer requirements for product and service quality, and the rapid development of information technology (IT) all require new strategies, methodologies, and tools for successful enterprising in dynamic environments.

Majority of leading organizations have launched large-scale efforts to deliver greater customer value by redesigning their businesses, customizing their business processes, and using IT as an enabler for gaining competitive advantage. Total Quality is also a crucial aspect that all changes must be performed with respect to. As companies strive for competitive advantage, reduced costs, and increased profitability, more and more are embracing this trend.

Statement of the Problem: The steady globalization of financial markets necessitated market participants to make changes to their operational processes beyond local competition in order to achieve global competitiveness.According to Hosanna 2013, many banks in developing countries, including Nigeria, have improved customer service quality, speed, and reduced operating costs to enhance profitability performance. Innovative banking service and personalized banking portfolio management are developing as the markets consolidate

through mergers and acquisitions. The focus is no longer solely on cutting costs, but also on improving services to customers and making processes more efficient and customer friendly. The study aims to analyze business process reengineering (BPR) in the Nigerian banking sector, examining its factors that may influence bank performance, exploring its implementation level in Nigerian financial institutions, uncovering how it can help organizations effect innovative and strategic changes, and determining ways to communicate the necessity for change with employees. This study is significant given the dramatic changes experienced by businesses in recent times.The market forces of demand and supply, competition, globalization, and information technology are responsible for significant disruptions in business. This leads to changes in customers' needs, choices, awareness, and preferences. Therefore, organizations looking to enhance their operational performance can benefit from this study.

A review of related literature uncovers the conceptually clarifying sources that date back to 19905. These sources acknowledge the "fathers of BPR," individuals who previously promoted awareness of business process reengineering. Their contributions are crucial for a better understanding.

The origins of this process can be traced back to Frederick Winslow Taylor's book, scientific management, published in 1911. Taylor proposed that managers should systematically analyze activities and determine the most efficient way to execute them. This initiated an engineering tradition focused on measuring and analyzing activities to optimize their performance. Taylor emphasized the importance of careful analysis, measurement, and incremental improvement in specific activities. These approaches foster continuous improvement in job performance – known as the work simplification movement.Around the same period when Taylor was studying individual workers to enhance their performance, Henry Ford emerged in the field of

management processes by establishing his third car company, Ford Motor Company. Ford revolutionized the manufacturing process by completely rethinking it. He devised a car that was easy to manufacture and implemented a production line where each worker was assigned a specific task.

In this approach, a car was constructed by adding different components as the frame progressed along the production line. Ford's method brought about a significant transformation in manufacturing. It substantially reduced the cost of car production, increased production capacity, and enabled workers to earn enough to afford purchasing a car of their own. While Taylor's approach involved analyzing the worker and determining the most effective way to perform a function based on its necessity, Ford's approach started from scratch with a complete redesign of the entire process. It began with creating a product suitable for manufacturing on an assembly line.

As organizations expanded, additional personnel were onboarded and procedures were hastily modified. However, the organization of work still adhered to the original concept.According to Gush, Kettering, and Tent (1993), the localized, incremental approach implemented by organizations in today's business environment has resulted in excessively complicated processes that do not significantly contribute to overall effectiveness.

Due to changes in the global economy, market globalization, evolving customer requirements, and intensified competition, new approaches were necessary to effectively navigate environmental dynamics and facilitate flexible organizational change (Kohlrabies, 2009). The concept of reengineering originated from management theories developed in the early 19th century and was proposed by Frederick Taylor in the 1900s as a means to optimize all processes (Sturdy, 2010). However, it was Michael Hammer who first introduced the idea of reengineering in a Harvard Business Review article in

1990.

This approach, known as business process re-engineering (BPR), focused on examining how information technology influenced business processes. Hammer and Champs, the pioneers of BPR, argued that reengineering had broader implications beyond just processes. It encompassed all aspects of an organization and aimed for significant transformation (Bindle, 2008). In 1991, Hammer emphasized the importance of fundamental organizational change and coined the term "Business Process Reengineering" for the first time.

The concept of business process reengineering (BPR), as defined by Hammer (1993), involves a fundamental rethinking and radical redesign of business processes. Its goal is to achieve significant improvements in measures of performance such as cost, quality, service, and speed. BPR focuses on redesigning work processes to enhance productivity and competitiveness. The need for a new approach to organization restructuring arises from the recognition that many existing business practices are based on outdated assumptions.

These existing processes were originally designed as sequential manual procedures and later automated with the advancement of technology. However, this automation did not change the strong focus on efficiency and control optimization. It also failed to address external factors such as customer demands. BPR aims to improve efficiency and effectiveness within and across organizations.

The key to BPR is for organizations to examine their business processes from a fresh perspective and determine how they conduct business. BPR has gained significant attention in the field of change management in recent years.

A key driver for reengineering has been the advancement and implementation of sophisticated information systems and networks (Ryan, Stephen and Lee 2009). Business Process Reengineering incorporates theories and concepts from three main areas: organization theory, marketing, and informatics. Organization theory encompasses human resource management,

organizational strategies, and customer focus for competitive advantage and industry value systems. Informatics involves utilizing appropriate information systems to support process-based organizations. Adding value for customers is a crucial factor in Business Process Redesigning, which was originally developed by Porter in his book "Competitive Advantage" (Simon 1994). According to Porter, a firm is composed of activities that are conducted to design, produce, market, deliver, and support its product. These activities can be represented using a value chain structure, which demonstrates the linear flow from supplier(s) through the business to customer(s).The organization must engage in primary activities that add direct value to the product or service and effectively link these activities to impact overall performance. The secondary activities support the primary ones and ensure organizational and managerial control, coordination, corporate culture, and image. Information and communication technology has contributed to the success of business process reengineering strategies. Business processes are logically related tasks performed to achieve a defined business outcome. These processes are designed to add value for customers and should not include unnecessary activities. They have goals, specific inputs and outputs, use resources, involve a sequence of activities, may affect multiple organizational units, and create customer value. (Meyer et al., as cited in Mouth, Whitman, & Charge, 1999; cited by Malay, Slovakian & Wetland, 2013).Business Process Reengineering (BPR) is the analysis and redesign of workflow within and between enterprises, aiming for a total transformation of a business. It involves reshaping all business processes, technologies, management systems, organizational structure, and values to achieve significant improvements in performance. BPR evaluates and amends strategy, process, technology, organization, and culture, including the elimination of outdated organizational goals. The use

of information technology is crucial for gaining a competitive advantage and supporting business activities in a dynamic environment. Authors like Cobra, Harrington, David, College, and Keen emphasize the importance of modern information technology as the main driver of the global economy. A country's economic competitiveness and well-being are increasingly dependent on its ability to innovate and participate in the IT industry.The information revolution has facilitated the emergence of a new trade system on electronic networks, where goods can be exchanged without the need for money. This has led to the creation of virtual markets in the form of electronic business, replacing traditional brick-and-mortar shops. Similarly, electronic banking systems have also adopted this approach. The impact of IT on the economy has been accelerated by advancements in satellite communication, smaller memory chips, and software programming. As a result, it has had a significant influence on organizational structures and human resource management. Middle management levels have been reduced, and intellectual capital has become a vital resource. Both industrialized and developing countries are implementing policies and programs to expedite the development and diffusion of IT. IT is increasingly recognized as a crucial technology, seen as generic, strategic, critical, core, enabling, and pervasive. In Nigeria, IT has shown potential to enhance competitiveness in businesses, modernize infrastructure and services, combat information poverty, and decrease transaction costs. It is utilized in various sectors such as macro-economic planning, public administration, education, healthcare, manufacturing, finance and banking, commerce, and transportation.The journey into the information age aims to improve the quality of human life, promote a competitive society, and enhance the economy through transparent governing systems, infrastructure, and skilled human resources. Many BPR theorists

and practitioners believe that IT is essential for reengineering efforts, although a minority argues that it is not necessary. Nevertheless, IT plays a significant role in most BPR projects.

Yates (1989), as cited in Simon (1994), observed that the time between IT implementation and organizational change can vary greatly. Furthermore, the resulting change is often incremental. Therefore, IT is just one of many factors that enable change, and if used improperly, it can hinder progress. Disregarding information logical constraints or using the wrong technological platforms can negatively impact system functionality.

Global competition has led to change in organizations. To survive in today's competitive economy, organizations are seeking to rationalize, innovate, and adapt to changing environments through BPR efforts.Regardless of the chosen process reengineering program and modeling techniques, BPR initiatives involve taking risks. Effective risk management, prediction, and estimation can help minimize failures in BPR efforts. Sadist and Amanda (2008) conducted a study on the Impact Assessment of Business Process Reengineering on Organizational Performance in First Bank Nigeria. They used the case study method and analyzed the data through simple percentage and regression analysis. The results showed that BPR, service quality, and Innovative & strategic hang are directly related to the success of the organization. Business reengineering process is only successful when it is directly related to the needs and objectives of the business. The impact of business reengineering process on Nigerian organizations is significant given the country's economic situation, as it helps meet domestic and industry needs and pursue better performance. Business reengineering process has helped achieve the organization's overall objectives.The study concludes that Business Process Reengineering (BPR) has become a valuable tool for corporate organizations seeking

to improve their current performance and achieve a cost leadership strategy in their industry. It recommends that organizations should reengineer their business processes in order to achieve breakthrough performance and long-term strategic goals. Raspberry (2011) conducted a case study on the impact of BPR on the performance of First Bank Nigeria PL (FUN) using paired data samples from 1986 to 2008. The study aimed to evaluate the effect of reengineering operational processes on the bank's performance. It tested the hypothesis that business reengineering does not significantly impact FUN's operational performance, measuring it through indicators such as Roth, profitability, and financial intermediation. The bank's growth was measured using measures such as annual changes in gross earnings, total assets, and total deposits amassed.

Profitability was evaluated using profit margin, return on assets, and return on equity. The level of financial intermediation by the bank was determined through the loans and advances to total deposit ratio. The findings from the tests conducted indicate that the bank did not improve during the pre or post re-engineering period. It can be concluded that the re-engineering project had a positive impact on the bank's profitability. However, there was no significant improvement in financial intermediation by the bank.

To summarize, the analysis of the data revealed that the re-engineering project significantly enhanced the profitability performance of the bank, but did not contribute to its growth or the extent of financial intermediation. A study conducted by Ringing, Racial ; Hosanna (2011) focused on the effect of business process reengineering factors on the organizational performance of Nigerian banks, with information technology capability as the moderating factor. The survey method was utilized, and a pilot

test was conducted to achieve the objectives.

The instrument's content and face validity and reliability were assessed by a panel of experts from both academic and practical backgrounds. The data collected from various departments within the commercial bank were analyzed using SPAS software. The results demonstrate that the dimensions of business process reengineering are reliable and valid. Additionally, it was observed that BPR implementation was incorporated into multiple operational processes in banks.

The study had two main objectives, which were to identify the dimensions of BPR in Nigerian banks and to explore the level of BPR implementation in these banks. It was revealed that these dimensions include change management, process redesign/innovation, use of information technology (IT), and IT capability. The study also found that Nigerian banks have been implementing BPR in various operational processes, such as credit risk, domestic and international banking, branches, and e-banking. The researchers recommended using these findings for further research on BPR in Nigerian banks. In a similar study conducted in Pakistan by Habit (2013), the critical success and failure factors of BPR were examined.