Class 6 Organization in Process View MIS 2000 Information Systems for Management Updated Jan. 2014

Outline Organization and process Concept of Process Business (Organizational) Process Management in process view Operational & strategic processes Process Design Process Performance Process optimization IS, Process Design & Performance Summary Organization in Process View PRoc & Roll 2 of 19

Management Process Sales & Delivery Process Marketing Process Production Process Organization Most apparently, organization* is a collection of people with particular expertise, which delivers a certain product (good or service). From process perspective taken in this course, organization is a set of business processes that altogether deliver a certain product. Processes contain data – some managed via IS, some manually. Organization in Process View Research & Development Process Accounting Process IS Development & Maintenance Process Supply Process Organization HR Process 3 of 19

General Concept of Process Process is a set of activities connected from a start to an end point. Process is similar to procedure, but usually larger in scope and it contains procedures. An example of process with typical components: Organization in Process View Pick a class Do readings Think + Make notes Learned enough? No Have a drink + Be happy! Yes Activity Decision activity (point) Flow Start End 4 of 19

Business or Organizational Process Definition: Business process is a set of activities connected from a start to an end point, which deliver a product of a measurable value to a customer (internal or external*). Organization in Process View ACCOUNTIONG PROCESS IN ANY ORG. (tracking expenses & income, account mgt.) PRODUCTION PROCESS IN BANK (borrowing, lending, investing) HR PROCESS IN ANY ORG. (professional development, pay, wellness) Client Employee Management Services for clients Services for employees Financial reports PRODUCTION PROCESS IN FACTORY (scheduling, assembly, quality control) StartEndCustomer Buyer ValueProduct Good for market Utility/Price, Timing, Quality Utility, Cost, Speed, Quality Timing, Quality Accuracy, Depth, Timing 5 of 19

Management in Process View Business process location can be: Business process location can be: In organization (e.g., HR dept.— employee ) In organization (e.g., HR dept.— employee ) Between organization and market (e.g., marketing message to customer) Between organization and market (e.g., marketing message to customer) Between organizations (e.g., interactions between buyers and sellers in supply chain). Between organizations (e.g., interactions between buyers and sellers in supply chain). From the BP perspective, management is focused on managing processes to (a) meet process performance standards goals, and From the BP perspective, management is focused on managing processes to (a) meet process performance standards goals, and (b) to raise these standards.* (b) to raise these standards.* Process performance determines organizational performance.** Process performance determines organizational performance.** Role of IS: Role of IS: (a) Proper support of IS is needed for a process to perform as planned. (a) Proper support of IS is needed for a process to perform as planned. (b) IS are an instrument for the process improvement. (b) IS are an instrument for the process improvement. Information Systems (IS) Process Design & Performance Organizational Performance 6 of 19

Operational processes make most of organizational functioning. That’s what employees do as their regular, everyday work. Strategic processes happen in some intervals (e.g., strategic planning, introducing new product). Some strategic processes are not readily visible (e.g., change of product philosophy).* Operational and Strategic Processes Organization in Process View OperationsStrategies Daily “grind”, short time horizonOccasional activities, long time horizon Routines (patterns, with little or no variation) More variability Context of jobs, tasks, procedures, processes Significant advances, big changes in business and organizing IS are embedded in operations, provide necessary support IS support is partial (e.g., decision making as part of planning; engineering systems) See Note** 7 of 19

Design of Business Process Design aspects: How does a process look like? Design aspects: How does a process look like? CCCFIS: Composition, Coordination, Complexity, Flexibility, and IS. CCCFIS: Composition, Coordination, Complexity, Flexibility, and IS. 1. Composition: What components do make a process? 1. Composition: What components do make a process? Start Start Flow (Control) Flow (Control) Activity (data-based, physical) Activity (data-based, physical) Decision (special activity) Decision (special activity) Loop Loop End End Activity and Decision Activity and Decision are often called Step are often called Step ** Open Order Fill Order Deliver overnight Rush order? Deliver regularly Send Invoice Send Payment Reminder Payment received on due tae? Close Order yes no Process diagram for Customer Order Fulfillment (simple form) 8 of 19

Design of Business Process: Composition 1. Composition: What components do make a process? 1. Composition: What components do make a process? Ask: Ask: Are the steps defined accurately (note: names)? Are the steps defined accurately (note: names)? Activities are actions (get, fill, send, close, Activities are actions (get, fill, send, close, deliver). deliver). Activities apply to data (order, invoice) and objects (delivery items). Activities apply to data (order, invoice) and objects (delivery items). Do the flows make sense? Do the flows make sense? Are all steps included (note: decisions)? Are all steps included (note: decisions)? Composition errors marked red. Composition errors marked red. Organization in Process View Get Order Fill Order Deliver overnight Rush order? Deliver regularly Send Invoice Close Order yesno Fulfill Customer Order Process 9 of 19 CCCFIS 

Business Process Design: Coordination 2. Coordination: The functional fit of process activities and decisions (steps). 2. Coordination: The functional fit of process activities and decisions (steps). Ask: Ask: Do all the parts equally contribute to the Do all the parts equally contribute to the end result? end result? What are dependencies between activities in time (below) and quality of deliverables? What are dependencies between activities in time (below) and quality of deliverables? There are: There are: Sequential coordination (A finishes - B starts) Sequential coordination (A finishes - B starts) Parallel coordination (A & B in same time; saves process time).* Parallel coordination (A & B in same time; saves process time).* 10 of 19 Open Order Fill Order Deliver overnight Rush order? Deliver regularly Send Invoice Send Payment Reminder Payment received on due tae? Close Order yes no Check Old Orders Reduces coordination Fulfill Customer Order Process CCCFIS 

Business Process Design: Complexity 3. Complexity: The number of process parts and connections between them. 3. Complexity: The number of process parts and connections between them. Ask: Ask: Measure of Complexity: No. of Steps/No. of Steps in Benchmark Process (step=activity and decision) Measure of Complexity: No. of Steps/No. of Steps in Benchmark Process (step=activity and decision) Number of loops and their nesting (loop within loop) Number of loops and their nesting (loop within loop) Depth of process (how many sub-processes) Depth of process (how many sub-processes) IS can absorb some complexity (some sub-processes could be automated). * IS can absorb some complexity (some sub-processes could be automated). * Organization in Process View Open Order Fill Order Deliver overnight Rush order? Deliver regularly Send Invoice Send Payment Reminder Payment received on due tae? Close Order yes no Fulfill Customer Order Process 11 of 19 CCCFIS 

Business Process Design: Flexibility 4. Flexibility: The extent of variation in a process. Ask: Are there alternative steps? How many versions of process are there? Fulfill Customer Order Process analyzed in previous slides is a routine process (operation) with low variability coming just from the way delivery can be done. So, Variability=2; there are two versions of the process determined by two different delivery steps. Strategic (Make Long-Term Plan, Develop New Product) Routine operations (e.g., Process Customer Order, Register Course) lowhigh variation 12 of 19 CCCFIS 

Business Process Design: IS 5. IS as part of process design (“footprint”): IS is part business process? 5. IS as part of process design (“footprint”): IS is part business process? Some important aspects: Some important aspects: The portion of process IS covers (system’s “footprint”) The portion of process IS covers (system’s “footprint”) What IT are used (computers, networks, mobile devices) What IT are used (computers, networks, mobile devices) Characteristics of user interface screens Characteristics of user interface screens Characteristics of databases (local, distributed, centralized or not) Characteristics of databases (local, distributed, centralized or not) Organization in Process View13 of 19 CCCFIS  Organizational Performance Organizational Performance Process Design (IS part) Process Design (IS part) Process Performance Information System (functions, characteristics) Information System (functions, characteristics)

Process Optimization How to optimize (improve) a process: How to optimize (improve) a process: Composition: Correct and complete Composition: Correct and complete Coordination: Enhance, think parallel coordination Coordination: Enhance, think parallel coordination Complexity: Simplify Complexity: Simplify Flexibility: Apply appropriate variation Flexibility: Apply appropriate variation IS* (process optimizer): IS helps in of optimizing of the aspects above. (See also class 9) IS* (process optimizer): IS helps in of optimizing of the aspects above. (See also class 9) Organization in Process View14 of 19 Organizational Performance Organizational Performance Process Design (3CF) Process Design (3CF) Process Performance Information System

Process Performance Measurement Process performance can be assessed by this metrics: Process performance can be assessed by this metrics: CVTCIS: Customer Value, Time, Cost, and IS Performance. CVTCIS: Customer Value, Time, Cost, and IS Performance. Filtering criterion: Does a process serve useful organizational purpose? Filtering criterion: Does a process serve useful organizational purpose? There are odd processes surviving from the past. They may perform well but have no real purpose. There are odd processes surviving from the past. They may perform well but have no real purpose. 1. Customer Value – Characteristics of the process product that matter to the customer (external or internal); see slide 5. the customer (external or internal); see slide 5. CONS- UMER Inventory Manager Manuf. Manager Delivery Manager Inventory Manager 15 of 19

Process Metrics: Time & Cost 2. Time: What is the total time between the start and end point of a process? sum up execution time of all the steps for parallel steps, take the time of the longest step 3. Cost: What is the amount of expenditures in monetary figures? sum up costs for labor, materials, IS, other technologies, overhead 16 of 19CVTCIS  

IS Performance 4. IS performance influences process performance (performance booster): Non-functional characteristics* of IS that reflect on process time and cost. 4. IS performance influences process performance (performance booster): Non-functional characteristics* of IS that reflect on process time and cost. The most important IS characteristics is IS speed, which depends on many factors (speed of data processing, transfer, and retrieval; size of main memory) The most important IS characteristics is IS speed, which depends on many factors (speed of data processing, transfer, and retrieval; size of main memory) Another important characteristic is the IS reliability (small down time, recovering capability, security od data)* Another important characteristic is the IS reliability (small down time, recovering capability, security od data)* 17 of 19CVTCIS  Organizational Performance Organizational Performance Process Design Process Performance Information System Performance Information System Performance

Relationships between Process Performance Organizational Performance The better a business process performs, the better the organizational performance. For example a faster and less costly process, improves the income to cost ratio (or decreases costs while usually enlarging the income). * 18 of 19 Organizational Performance Organizational Performance Process Design Process Performance Information Systems

Summary 1/2 Organization is a whole consisting of business processes that altogether deliver a certain product (good or service). Organization is a whole consisting of business processes that altogether deliver a certain product (good or service). Business process is a set of activities connected from a start to an end point, which deliver a product of a measurable value to a customer (internal or external). BP can be inside and outside of organizations. BP works with data and physical objects. Business process is a set of activities connected from a start to an end point, which deliver a product of a measurable value to a customer (internal or external). BP can be inside and outside of organizations. BP works with data and physical objects. The goal of managing organizations from the process perspective is to improve process performance and design, which leads to higher organizational performance. The goal of managing organizations from the process perspective is to improve process performance and design, which leads to higher organizational performance. There are operational and strategic processes. There are operational and strategic processes. Organization in Process View19 of 19

Summary 2/2 Process design refers to process composition, coordination, complexity, flexibility, and IS (CCCFIS). Process design can be optimized with help of IS. Process design refers to process composition, coordination, complexity, flexibility, and IS (CCCFIS). Process design can be optimized with help of IS. Process performance can be measured in terms of customer value, time, cost, and IS performance (CVTCIS). Process performance can be measured in terms of customer value, time, cost, and IS performance (CVTCIS). IS is (a) part of organizational design (IS footprint), (b) helps optimize process design (optimizer role), and influences directly process performance (performance booster). IS is (a) part of organizational design (IS footprint), (b) helps optimize process design (optimizer role), and influences directly process performance (performance booster). Process design and performance influence organizational performance. Process design and performance influence organizational performance. Organization in Process View20 of 19