Class 6 Organization in Process View

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

2. 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 PRoc & Roll Organization in Process View

3. 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 Management Process Supply Process Production Process Marketing Process Sales & Delivery Process Research & Development Process HR Process Accounting Process IS Development & Maintenance Process Organization in Process View

4. 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: Start STUDENTS’ Study Process Think + Make notes Pick a class Do readings Decision activity (point) No Activity Yes Learned enough? Have a drink + Be happy! Flow End Organization in Process View

5. 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*). Start End Product Customer Value PRODUCTION PROCESS IN FACTORY (scheduling, assembly, quality control) Good for market Buyer Utility/Price, Timing, Quality PRODUCTION PROCESS IN BANK (borrowing, lending, investing) Services for clients Client Utility, Cost, Speed, Quality HR PROCESS IN ANY ORG. (professional development, pay, wellness) Services for employees Employee Timing, Quality ACCOUNTIONG PROCESS IN ANY ORG. (tracking expenses & income, account mgt.) Financial reports Management Accuracy, Depth, Timing Organization in Process View

6. Management in Process View • Business process location can be: • In organization (e.g., HR dept.— employee ) • Between organization and market (e.g., marketing message to customer) • 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 • (b) to raise these standards.* • Process performance determines organizational performance.** • Role of IS: • (a) Proper support of IS is needed for a process to perform as planned. • (b) IS are an instrument for the process improvement. Process Design & Performance Organizational Performance Information Systems (IS)

7. Operational and Strategic Processes • 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).* See Note** Organization in Process View

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

9. C C C F IS P Design of Business Process: Composition • 1. Composition: What components do make a process? • Ask: • Are the steps defined accurately (note: names)? Activities are actions (get, fill, send, close, deliver). • Activities apply to data(order, invoice) and objects (delivery items). • Do the flows make sense? • Are all steps included (note: decisions)? • Composition errors marked red. Get Order Fill Order Rush order? yes no Deliver overnight Deliver regularly Send Invoice Close Order Fulfill Customer Order Process Organization in Process View

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

11. C C C F IS Business Process Design: Complexity P Open Order • 3. Complexity: The number of process parts and connections between them. • Ask: • 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) • Depth of process (how many sub-processes) • IS can absorb some complexity (some sub-processes could be automated). * Fill Order Rush order? yes no Deliver overnight Deliver regularly Send Invoice Payment received on due tae? no yes Send Payment Reminder Close Order Fulfill Customer Order Process Organization in Process View

12. C C C F IS Business Process Design: Flexibility P • 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. variation high low Strategic (Make Long-Term Plan, Develop New Product) Routine operations (e.g., Process Customer Order, Register Course) 12 of 19

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

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

15. Process Performance Measurement • Process performance can be assessed by this metrics: • CVTCIS: Customer Value, Time, Cost, and IS Performance. • 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. • 1. Customer Value – Characteristics of the process product that matter to • the customer (external or internal); see slide 5. CONS-UMER Inventory Manager Manuf. Manager Inventory Manager Delivery Manager 15 of 19

16. CV T C IS P P 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 19

17. CV T C IS IS Performance P • 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) • Another important characteristic is the IS reliability (small down time, recovering capability, security od data)* Organizational Performance Process Performance Process Design Information System Performance

18. Relationships between Process Performance Organizational Performance Process Performance Organizational Performance Process Design Information Systems • 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

19. Summary 1/2 • 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. • 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. Organization in Process View

20. 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 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). • Process design and performance influence organizational performance. Organization in Process View