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Volume 7 No 2 (2018) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2018.134 | http://emaj.pitt.edu
Business Process Reengineering and the Performance of Insurance Firms
in Nigeria
Benneth Uchenna Eze
Hallmark University, Nigeria | beneze7@gmail.com
Saidi Adedeji Adelekan
Mountain Top University, Nigeria | saadelekan@mtu.edu.ng
Emmanuel Kanayo Nwaba
Olabisi Onabanjo University, Nigeria | nwabakanayo@gmail.com
Volume 9 No 1 (2019) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2019.163 | http://emaj.pitt.edu |
Abstract
This study investigated the effect of business process reengineering on the performance of insurance firms in Nigeria, by
employing two components of business process reengineering. Survey research design was adopted, through the
administration of structured questionnaires on some selected staff of insurance companies at their head offices in Lagos,
Nigeria. The research instrument was validated through content validity index (CVI), while the reliability of the research
instrument was tested through test-retest method. The findings revealed that, the two components of business process
reengineering adopted for this study have individual positive significant effect on insurance firms’ performance and
adoption of new process. The F-statistics revealed that the two components of business process reengineering adopted for
this study have positive significant combined effect on insurance firms’ performance in Nigeria. The adjusted coefficient of
determination implied that, change in insurance firms’ performance is explained by the combined business process
reengineering components. It is therefore concluded that, business process reengineering components are important drivers
of insurance firms’ performance. It is recommended that, insurance firms should introduce new technology that will aid
insurance penetration, especially information communication technology (ICT). The deployment of ICT tends to make it
easier for existing and new customers to pick-up insurance policies through their smart phones or personal computers.
Furthermore, insurance firms should equally come up with reengineered processes. The process of serving their customers
should be enhanced.
Keywords: Business Process Reengineering, Insurance Firms, Performance, New Technology, New Process
New articles in this journal are licensed under a Creative Commons Attribution 3.0 United States License.
This journal is published by the University Library System of the University of Pittsburgh as part
of its D-Scribe Digital Publishing Program, and is cosponsored by the University of Pittsburgh Press.
Volume 9 No 1 (2019) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2019.163 | http://emaj.pitt.edu
Business Process Reengineering
and the Performance of
Insurance Firms in Nigeria
Benneth Uchenna Eze
Saidi Adedeji Adelekan
Emmanuel Kanayo Nwaba
In line with the research objectives, the following
hypotheses were formulated:
H01 :
Adoption of new technology does
significantly affect insurance firms’ performance.
not
H02 :
Adoption of new process does not significantly
affect insurance firms’ performance.
H03 :
Business process reengineering components do
not have significant effect on insurance firms’
performance.
I. Introduction
II. Literature Review
Organizational performance has become a
major determinant of firms’ corporate existence. As a
result, there are unavoidable pressures for organizations
to reengineer their business processes for greater
effectiveness and efficiency. The goal of business
process reengineering is to redesign and change the
existing business practices or process to achieve dramatic
improvement in organizational performance. In a highly
competitive globalized world, organizations enhance
competitive advantage through Business Process
Reengineering (BPR) by redesigning selected processes.
Sharma (2006) posited that, business process
reengineering implies transformed processes that
together form a component of a larger system aimed at
enabling organization to empower themselves with
contemporary technologically-based business solutions
and innovations.
According to Klun and Trkman (2018),
business processes are simply a set of activities that
transform a set of inputs into a set of outputs (goods or
services) for another person or process using people and
equipments. Business process entails a set of logically
related tasks performed to achieve a defined business
output or outcome. It involves a wide spectrum of
activities procurement, order fulfillment, product
development, customer service and sales (Okafor &
Okeke-Ezeanyanwu, 2018; Sharma, 2006). Thus,
business process reengineering becomes an offshoot of
business process. Hammer and Champy (1993) argued
that, the fundamental reconsideration and radical
redesign of organizational process in order to achieve
drastic improvement of current performance in cost,
service and speed enjoy a fair measure of consensus.
In Nigeria, the changing dynamics of insurance
market has forced players at all levels to reengineer their
business process. The insurance operations and functions
were redesigned to meet emerging challenges of
contemporary insurance activities. Scholars (Okafor &
Okeke-Ezeanyanwu, 2018; Kabiru, Mohamed &
Norlena, 2012; Kemal, Yasin, & Zafer, 2011) established
that, business process reengineering is positively related
to firm performance. However, studies examining the
effect of business process reengineering on insurance
firms’ performance are sparse. In addressing this research
gap, this study examines the effect of business process
reengineering (measured by adoption of new technology
and adoption of new process) on insurance firms’
performance.
Business process reengineering (BPR) is a
means by which an organization can achieve radical
change in performance, by application of a variety of
tools and techniques that focus on the business as a set of
related customer-related core business processes.
According to Jacob (2014), BRP is a solution that is an
informed and participative process resulting in new ways
of doing business that position a firm for success, both in
the short and the long term. Hammer (1990) posits that,
BRP is the fundamental rethinking and radical redesign
of business processes to achieve dramatic improvement
in important contemporary measures of performance
such as cost, service quality and speed. Tor and Wendi
(1996) are of the opinion that business process
reengineering was founded on the premise
that significant corporate performance improvement
requires continuous improvement, breaking away from
the outdated rules and fundamental assumptions that
underlie operations. BPR has gained a considerable
attention in the world of change management during the
past years. Today, more and more organizations are
embracing the BPR trend (Okafor & OkekeEzeanyanwu, 2018; Kabiru, Mohamed & Norlena, 2012;
Klun & Trkman, 2018). BPR portrays the adoption of
new technology and processes in business operations.
Challenges in business environment and
competitiveness have called for immediate redesign of
business processes to achieve dramatic improvement in
cost of business operations, service quality, revenue and
profitability. This involves removing outdated processes
and using modern information technology to manage
business organizations. Hammer and Stanton (2013)
opine that, dynamic business environment has called for
innovation which is regarded as crucial to the
sustainment of competitive advantage. Changing
processes and creating new ones is essential for adapting
to technological change and competitive pressures. The
essence of new technology adoption is to ensure
efficiency and effectiveness in operations management
within an organization to maximize value and
profitability through competitive performance (Okafor &
Okeke-Ezeanyanwu, 2018).
The reengineering process deals with replacing
the manual processes with automation and eliminating
unnecessary bureaucracy as well as providing right
information at the right time to the right
people, eliminating
unnecessary work,
reducing
Benneth Uchenna Eze, Saidi Adedeji Adelekan, Emmanuel Kanayo Nwaba
Emerging Markets Journal | P a g e |45
Volume 9 No 1 (2019) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2019.163 | http://emaj.pitt.edu
unnecessary control, empowering every employee and
getting it right the first time. Moreover, automation of
key processes can improve the performance of business
activities and productivity, increase profitability and
enable the enterprise-wide monitoring and coordination.
Automated process in certain key areas of production
process will lead to reduction in cost of production and
achievement of better quality products as well as
enhanced revenue (Okafor & Okeke-Ezeanyanwu,
2018).
Simon (1994) identified value adding as a
concept of BPR. The concept of value adding, which was
originally developed by Porter (1984) postulates that
every firm is a collection of activities that are performed
to design, produce, market, deliver and support its
product. All these activities can be represented using a
value chain. Value chains can be understood in the
context of the business unit. In the classical value chain,
an organization’s activities form a linear flow from the
supplier(s) to the customer(s). The value chain includes
firstly the “primary activities”, that is, the activities the
company has to perform in order to justify its right to
exist. These activities are adding direct customer value to
the product or service and the effective link of these
activities has a major impact on the overall performance
of the organization. The “secondary activities” are
supporting the former, in order to ensure organizational
and managerial control, coordination among primary
activities, as well as for developing and maintaining a
corporate culture within the organization, and a corporate
image towards the environment. Their value-adding
effect is indirect and can only be realizable through the
results of primary activities. Simon (1994) also equally
examined the application of BPR on organizational
structures, processes and tasks, as well as their location
of individuals and changes of work descriptions,
positions and titles. The challenge of organizational
analysis, design and change has been a concern for
almost any theorist within the area of organization in its
narrow, as well as wider sense.
Kemal, Yasin, & Zafer (2011) studied the
effects of BPR on productivity and performance by
conducting firm level analysis. The objective of the study
was to empirically examine the effect of BPR on
firm productivity and performance. Data was used
spanning between 1987-2008. The findings showed that,
return-on-assets drop significantly during the project
initiation year. Moreover, it was found out that,
performance and productivity measures improve in a
decreasing manner after project initiation, suggesting that
BPR positively affects firms’ performance.
Islam & Mohamed Bin (2011) conducted a
study on the impact of organizational innovation on firm
performance drawing evidence from Malaysian-Based
ICT firms. The study investigated the effect of
organizational innovation on firms’ performance. Data
for the study were collected through an electronic survey
conducted on 115 small and medium enterprises
operating in the ICT industry in Malaysia. The findings
from the study revealed that, organizational performance
has a significant effect on firms’ performance.
Kabiru, Mohamed & Norlena (2012) studied
the critical success factors for business process
management for small and medium banks in Nigeria,
conducting a questionnaire on banks. The finding from
the study showed that, there is a significant relationship
among information technology investment, personnel
commitment, volume financial activities and overall
organizational performance. Mura, Nilgun & Fulya
(2013) conducted a study on the relationship between
innovation and firm performance by using evidence from
Turkish Automotive Supplier Industry. The purpose of
the study was to examine the relationship between
innovation and firm performance. The authors employed
survey research design, through the administration of
structured questionnaire on top level managers from 113
firms operating in the automotive supplier industries in
Turkey in 2011. The study used regression analysis with
the aid of SPSS. The findings from the study revealed
that, technological innovation such as product and
process innovation have positive and significant impact
on firms’ performance.
Okafor
&
Okeke-Ezeanyanwu
(2018)
investigated the effect of business process reengineering
on organizational performance of rice production firms in
South-East Nigeria, using the survey research design.
Authors employed multiple regression analysis and
found that, the adoption of new technology and processes
have positive significant effect on the performance of
rice producing firms in South-East, while presence of
process owners at production interfaces have negative
significant effect. Based on the findings, the study
concluded that, if rice production firms in South East
Nigeria want to improve performance, attention should
be given to the business process reengineering technique.
III. Methodology
The survey research design was employed for
this study. The exact employees of insurance companies
in Nigeria (population of the study) could not be
ascertained; as such the exact population of the study
could not be determined. However, Kothari and Garg
(2014) posit that, if the population of a study is not
available, the researcher should employ a population of
20,000. This is because, most sample determination
formula designers assign a relatively similar sample size
for a population in the range of 20 thousands to 50
million. The study employed Raosoft sample estimation
technique at the 95% confidence level in arriving at a
sample size of 377 from the population of 20,000
employees of insurance companies. A 30% non-response
rate was assumed, which gives an aggregate sample size
of 490. Purposive sampling method was used to select a
sample of 490 staff of some insurance companies
(Mutual Benefit Assurance PLC, AIICO Insurance PLC
and Standard Alliance Insurance PLC). The study
employed a close ended questionnaire to obtain data.
Well-structured questionnaire on a seven-point Likert
scale ranging from 1 (minimum) to 7 (maximum) was
administered on some selected employees of Insurance
firms in Nigeria.
The instrument (questionnaire) was validated
using content validity index (CVI), through the
evaluation of four independent evaluators (two
academics and two top executives of insurance firms),
that evaluated the instrument on a two-scale (relevant and
not relevant).
Business Process Reengineering and the Performance of Insurance Firms in Nigeria
Page |46| Emerging Markets Journal
Volume 9 No 1 (2019) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2019.163 | http://emaj.pitt.edu
The CVI formula: n/N was used.
Where;
n= number of questions rated as relevant
N= total number of questions
A CVI of 0.786 was obtained, which indicated that the
instrument is valid.
The reliability of the instrument was tested using
test-retest method. A pilot study was conducted, whereby
the instrument was administered twice to twenty
employees of Mansard Insurance in Lagos State, Nigeria
within an interval of fourteen days. The result of first
pilot study was correlated with that of the second, which
gave a value of 0.809, 0.702 and 0.749 for adoption of
new technology, new process and performance
respectively. This implied that, the instrument is
consistent. The data were analyzed using multiple
regression analysis with the aid of STATA version 14 at
the 5% level of significance.
Model Specification
PERF= f(ANT & ANP)
PERF= β0+β1(ANT) +β2(ANP) +µi
Where;
PERF= Performance
ANT= Adoption of New Technology
ANP= Adoption of New Process
β 0 is the constant term
β1, β2, β3 are the coefficient estimators
β1, β2, β3, > 0
Where
is error term
A Priori Expectation
Based on the study by Okafor and OkekeEzeanyanwu (2018), the two components of business
process reengineering (adoption of new technology and
new process) are expected to exhibit positive relationship
with insurance firms performance. Hence, there will be a
direct relationship between adoption of new technology
and new process as well as insurance firms’ performance.
The research instrument (questionnaire) was
administered on 490 staff members of three insurance
companies in Lagos, Nigeria (Mutual Benefit Assurance
PLC, AIICO Insurance PLC and Standard Alliance
Insurance PLC). However, only 381 copies of the
questionnaire were returned and found useable, which
gave a response rate of 77.7%. Regression analysis was
employed in analyzing the data with the aid of STATA
version14.
IV. Findings and Discussion
variables (through the t-statistics). The model addresses
the main objective of the study, which is to examine the
effect of business process reengineering on the
performance of insurance firms in Nigeria.
Table 1: Result Summary (Dependent Variable Performance)
Variable(s)
t
P-Value
Coefficient
Adoption of 0.959*
7.892
0.000
New
Technology
Adoption of 0.874*
New Process
F-Statistics = 38.981 (0.0000)
N.B:*: Significant at 5 percent
level
5.098
0.000
R-Square
=0.838
Adj R-Square= 0.786
Source: Authors’ computation from Field Survey (2019)
and STATA 14.
Concerning the summary of results on Table 1,
it was revealed that business process reengineering
components (adoption of new technology and new
process) have a positive significant combined effect on
the performance of insurance firms’ in Nigeria (Fstatistics= 38.981 < 0.05). The adjusted coefficient of determination (adjusted R2) suggested that, 78.6% variation in insurance firms’ performance is accounted for by the combined business process reengineering components. The t-statistics revealed that, both adoption of new technology and new process have a positive significant individual effect on insurance firms’ performance in Nigeria. The findings from the study revealed that, the two components of business process reengineering adopted for this study have an individual positive significant effect on insurance firms’ performance with coefficients and probability values of: Adoption of new technology (0.959, P-Value<0.05) and adoption of new process (0.874, P-Value<0.05). This is consistent with the study by Okafor and Okeke-Ezeanyanwu (2018), which found that the adoptions of new technology and new processes have positive significant effect on the performance of rice producing firms in South-East, Nigeria. The F-statistics revealed that, the two components of business process reengineering (Adoption of new technology and new process) adopted for this study have a positive significant combined effect on insurance firms’ performance in Nigeria (F-statistics= 38.981 < 0.05). The coefficient of determination (R2) provided a value of 0.838. But since there are more than one independent variable (multiple regression), it will therefore be appropriate to use the adjusted coefficient of determination (adjusted R2) value, which is: Adj RSquare= 0.786. This implies that, 78.6% change in insurance firms’ performance is explained by the combined business process reengineering components (Adoption of new technology and new process). This sub-section aggregates the indicators of business process reengineering (adoption of new technology and new process). It estimate the combined effect of these variables on insurance firms’ performance as well as ascertaining the individual effect of the Benneth Uchenna Eze, Saidi Adedeji Adelekan, Emmanuel Kanayo Nwaba Emerging Markets Journal | P a g e |47 Volume 9 No 1 (2019) | ISSN 2158-8708 (online) | DOI 10.5195/emaj.2019.163 | http://emaj.pitt.edu V. Conclusion and Recommendation The study investigated the effect of ... Purchase answer to see full attachment