Alter

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Business Processes
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Opening Case- Charles Schwab

• Considered the only retail operation to have
  successfully adapted its business to the Web
• Built on the idea of eliminating stockbrokers and
  providing only transaction processing services
• Started offering online trading early (using
  proprietary software), and was quick to move to
  Web trading

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Work Systems Snapshot Charles Schwab

• CUSTOMER
• Charles Schwab account holder who buys and sells
  stocks.

• PRODUCTS SERVICES
• Execution of buy and sell transactions
• Online stock data and stock analysis
• Monthly account reports

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Work Systems Snapshot Charles Schwab

• BUSINESS PROCESS
• Evaluate current status of account
• Decide what to buy or sell
• Enter the buy or sell order on-line
• Receive confirmation of completed trade
• Receive monthly reports and other brokerage
  information

• INFORMATION
• Market price and purchase price of stocks
• Analysts reports
• Buy or sell orders
• Account holders current portfolio of stocks,
  bonds, and other assets

• TECHNOLOGY
• Personal Computer
• Schwabs hardware and software for tracking
  portfolios and trades
• The Internet (Infrastructure)

• PARTICIPANTS
• Account Holder
• Financial professional (if desired)
• Schwab back office staff

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Introduction

• In order to develop information systems or
  understand them from a business professionals
  viewpoint, one needs to be able to describe and
  analyze business processes.
• We will emphasize the relationship between
  process architecture and process performance.
  Recall
• Improvements in a work system are usually related
  to the links between the architecture and the
  performance perspectives.
• Customer satisfaction is largely determined by
  product performance.
• Product performance is determined by a
  combination of product architecture and the
  internal work system performance.

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From work system architecture to customer
satisfaction
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Process Modeling

• Documenting a Business Process

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Process Modeling

• A business process that involves naming business
  processes and subdividing them into their basic
  elements
• Helps clarify the problem the information system
  attempts to solve
• Business Process Reengineering (BPR) the
  complete redesign of a business process using IT

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Fords New Payables System

• New Payables to reduce staff from 500 to 400.
• Mazdas A/P Staff had only 5 individuals.
• Differences in the Business Process Model
• Consider the degree of structure in Mazda model.
• Much of Fords A/P Staff time was spent on
  Exception Processing.
• New System requires only 125 persons.

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Fords New Payables System

• What changed in the new Ford system?
• Are the successes of the Ford and Mazda systems
  an indictment of management practices in other
  organizations?
• Work System Snapshot

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Ford Reengineers Its Payables Process

• Old process
• The receiving department accepted orders that did
  NOT match the purchasing order
• Lots of overhead to reconcile the inconsistencies
• New process
• ONLY shipments that match the purchase order are
  accepted
• The information is entered into a shared database

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• The business process was changed, by eliminating
  steps that did not add value
• The new information system was successful only
  because of the reorganized work flow

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Fords New Payables System
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Fords New Payables System
CUSTOMER Fords suppliers Fords manufacturing
and purchasing departments
PRODUCTS SERVICES Verification that the the
order was fulfilled correctly by the
supplier Payment to the supplier
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Fords New Payables System

• BUSINESS PROCESS
• Major Steps
• Order material
• Receive shipments
• Reconcile receipts with purchase orders
• Pay suppliers
• Rationale
• store purchase orders in a shared database
• accept shipments only if they match the purchase
  order
• pay on receipt, not invoice

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Fords New Payables System
PARTICIPANTS Purchasing department Receiving
department Accounts payable department
INFORMATION Purchase order Receipt confirmation
TECHNOLOGY Computer system supporting a shared
database
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Process Modeling Business Process Architecture

• Process Modeling - A method of documenting
  process architecture by identifying major
  processes and sub-dividing them into linked
  sub-processes.
• Data Flow Diagrams
• Flow charts
• Structured English

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Data Flow Diagrams (DFDs)

• Represent the flow of data between different
  processes within a system
• Simple intuitive, not focusing on details
• Describe what users do, rather than what
  computers do
• Limitations
• Focus only on flows of information
• Ignore flows of materials, decision points, etc.

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Figure 3.1 - Symbols used in data flow diagrams
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Creating Data Flow Diagrams

• The starting point for a DFD is a Context
  Diagram, which shows sources and destinations of
  the data being used and generated.
• Context diagram bounds the system summarizes
  the data flows
• The context diagram establishes the scope of the
  system.
• Next identify processes, and break them down into
  sub-processes to describe how work is done.
• Possible to look at a process at any level of
  detail
• The value of DFDs is in resolving disagreements
  about how work is currently done, or it should be
  done in the future.
• Example Ford Accounts Payable.

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Figure 3.2 - Context diagram for the Ford
purchasing system
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F 3.3 - Data flow diagram showing the main
processes in Fords original purchasing system
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F 3.4 - Data flow diagram dividing PCH 1 into
four subprocesses
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Example Data Flow Diagram Student Grading
Final Grades
REGISTRARs OFFICE
STUDENTS
Current Grade
Test Scores
Current Score
CALCULATEUNIVERSITYGRADES
CALCULATECLASSGRADES
TEACHER
Final Grades
Final Score
CLASS/GRADEFILE
STUDENTFILE
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Other Process Modeling Techniques

• DFDs are used extensively. However, other
  techniques can also be used to fill in some
  details not expressed by DFDs. DFDs do not
  express the sequence and timing of processes nor
  the detailed logic of processes.
• Flowcharting - represent the sequence and logic
  of procedures
• Structured English - pseudo-code - represent
  the precise logic of a procedure by writing it
  down.

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F 3.6 Flowcharts demonstrate conditions
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Please note

• Idealized business process the way the process
  is supposed to work
• Assumes that the participants follow the rules
• Workaround a divergence
• Necessary when the rules built into the system
  become an obstacle to getting the work done
• May indicate a poor design or that an external
  change has occurred

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Reality Check

• Can you identify a business process that was
  overly idealized and you had to develop a work
  around in order to accomplish a goal?

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Process Characteristics
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Architectural Characteristics of a Business
Process

• Eight Characteristics that often affect business
  process performance
• 1. Degree of Structure
• Range of Involvement
• Level of Integration
• Rhythm
• Complexity
• Degree of Reliance on Machines
• Prominence of Planning and Control
• Attention to Errors and Exceptions

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1 Degree of Structure

• The extent to which a task or business process
  can be scripted in advance, e.g.,
• Order of steps
• Required information
• Validation
• Relationships between inputs and outputs

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Structured Tasks

• Structured task possible to exactly specify how
  the task is to be performed and the evaluation
  criteria
• Ex. totaling invoices, ATMs, etc.
• information requirements known exactly
• methods of processing known precisely
• desired format of information known exactly
• decisions or steps within the process are clearly
  defined and repetitive.
• Criteria for making decisions clearly understood.
• Success in executing the task can be measured
  precisely

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Semi structured Tasks

• Semistructured task information requirements
  and procedures are generally known, but some
  aspects rely on human judgment
• Ex. medical diagnosis

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Unstructured Tasks

• Unstructured task cannot specify what
  information is to be used, how to use it, nor
  what the evaluation criteria should be
• so poorly understood that the information to be
  used, method of using the information, criteria
  for deciding when task is done can not be
  specified.
• Unstructured tasks are performed based on
  experience, intuition, trial and error, rules of
  thumb, and very qualitative measures.
• Ex. choosing a picture for the cover of a
  fashion magazine
• The desired degree of structure is sometimes a
  matter of controversy

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Figure 3.7 - Structuring loan authorization
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• Successful Information systems impose the amount
  of structure appropriate for the task being
  supported
• Too much structure stifles creativity
• Too little structure may lead to inefficiencies
  and errors

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• DEGREE TO WHICH STRUCTURE IS IMPOSED
• Highest Substitution of technology for people
• High Enforcement of rules or procedures
• Low Access to information or tools
• Problem if the level is too high
• People doing the work are prevented from their
  judgement.
• People doing the work feel like cogs in a machine
  because they have too little autonomy.
• Problem if the level is too low
• Easily foreseeable errors occur because
  well-understood rules are not applied
  consistently.
• Outputs are inconsistent.
• Review Table 3.2 p. 98.

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2 Range of Involvement

• Refers to the organizational span of people
  associated with the business process
• Too narrow decisions are made from a local
  viewpoint, often missing enterprise-wide
  opportunities
• Too wide business processes slow down

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• RANGE OF INVOLVEMENT
• too many participants or too few
• the organizational span of people involved in a
  process.
• RANGE OF INVOLVEMENT
• Problem if the level is too high
• Work is slowed down because too many people get
  involved before steps are completed.
• Problem if the level is too low
• Work is performed based on narrow or personal
  considerations considerations, resulting in
  decisions that may not be the best for the
  overall organization.
• The Role of Information Systems
• Information systems can be designed to broaden or
  constrict the range of involvement.
• Executive Information Systems
• Case Manager Approach
• TQM Reduce involvement and empower workers
• Note separation of duties from an internal audit
  perspective.

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3 Level of Integration

• Often a confusing term
• The right level of integration is not obvious
• Too little disorganized unproductive
• Too much complex hard to control
• INTEGRATION mutual responsiveness
  collaboration between distinct activities or
  processes
• Related to the speed with which one responds to
  events in the other

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3 Level of Integration

• Integration is the mutual responsiveness and
  collaboration between distinct activities or
  processes.
• In general, the extent of integration between two
  processes or activities is related to the speed
  with which one responds to the other.
• The speed depends on the immediacy of
  communication and the degree to which the process
  responds to the information communicated.
• e.g. level of integration between NJIT Registrar
  and Rutgers-Newark Registrar
• Five Levels of Integration
• common culture
• common standards
• information sharing
• coordination
• collaboration

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Five levels of integration

• Common culture
• Shared understandings beliefs
• Common standards
• Using consistent terminology procedures
• Information sharing
• Independent business processes can share each
  others data
• Coordination
• Separate but interdependent processes respond to
  each others needs and limitations
• Collaboration
• Strong interdependence the unique identity of
  each process begins to disappear

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Five levels of integration between business
processes
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Five levels of integration between business
processes - continued
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Five levels of integration between business
processes - continued
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Level of Integration

• LEVEL OF INTEGRATION
• Problem if the level is too high
• Steps in the process are too intertwined.
• Participants in different business processes get
  in each others way.
• To change one step it is necessary to analyze too
  many other steps or processes.
• Problem if the level is too low
• Steps in the processes are too independent.
• The process needs greater integration to produce
  results.

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4 Rhythm

• The frequency and predictability with which a
  process occurs
• Periodic
• Event-driven
• Haphazard
• E-business makes it possible to support more
  responsive business rhythms

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5 Managing Complexity

• Complexity how many types of elements the
  system contains the number and nature of their
  interaction
• Complex systems are difficult to develop and
  understand
• Difficult to anticipate the consequences of
  changes

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• How to handle complexity?
• Eliminate low value variables
• Different versions of processes and information
  that exist simply because of historical accident
• Recognize variations explicitly and treat them
  differently, instead of using a fundamentally
  similar process

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Complexity

• Systems that are too simple dont handle the
  complexity of the problem systems that are too
  complex are hard to understand, maintain, and
  fix.
• Complexity can be measured by the number of
  elements it contains, and the number and nature
  of their interactions
• Reduce Complexity by reducing low value
  variations, reducing the number of interacting
  components, and simplify the nature of
  interactions.
• COMPLEXITY
• Problem if the level is too high
• Participants, managers, and programmers have
  difficulty understanding how the system operates
  or what will happen if it is changed.
• Problem if the level is too low
• The system cannot handle the different cases that
  it should be able to handle.

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6 Degree of Reliance on Machines

• Tasks assigned to computers are
• Totally structured
• Can be described completely
• Require speed, accuracy, endurance
• Tasks assigned to people require
• Common sense
• Intelligence
• Judgment
• Creativity

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Degree of Reliance on Machines

• Not everything can be automated!
• DEGREE OF RELIANCE ON MACHINES
• Problem if the level is too high
• People become disengaged from their work.
• Peoples skills may decrease.
• Mistakes occur because people overestimate what
  the computers are programmed to handle.
• Problem if the level is too low
• Productivity and consistency decrease as bored
  people perform repetitive work that computers
  could do more efficiently.

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7 Prominence of Planning and Control

• Participants in a business process need to know
  what to do, when to do it, and how to make sure
  it was done right.
• Planning - decide what work to do and what
  outputs to produce when.
• Executing - process of doing the work
• Controlling - use information about past work
  performance to assure goals are attained and
  plans carried out.

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Planning, Execution, and Control- Figure 3.10
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Comparison of Planning, Execution, and Control

• PLANNING
• Time focus Future
• Important issues related to information
• Having reliable methods of projecting into the
  future by combining models, assumptions, and data
  about the past and present
• EXECUTION
• Time focus Present
• Important issues related to information
• Providing information that tells people what to
  do now to meet the plan and adjust for any
  problems that have occurred recently
• Using current information to identify problems or
  errors in current work
• Collecting information without getting in the way
  of doing the work
• CONTROL
• Time focus Past
• Important issues related to information
• Having reliable methods of using data about the
  past to develop or adjust plans, and to motivate
  employees
• Provide information current enough that it can be
  used to guide current actions

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Attention to Planning, Execution, and Control

• ATTENTION TO PLANNING, EXECUTION, AND CONTROL
• Problem if the level is too high
• Too much effort goes into planning and
  controlling within the process, and not enough
  goes into execution.
• Problem if the level is too low
• Insufficient effort in planning and control
  leaves the business process inconsistent and
  unresponsive to customer requirements

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8 Attention to Errors Exceptions

• The process architecture should specify how the
  process should respond when errors, exceptions,
  or malfunctions occur
• Tradeoff
• Wasting resources by being unsystematic vs.
  diverting resources from the main system goals
  through excessive formalization of exception
  handling

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Treatment of Exceptions, Errors, and Malfunctions
Exceptions The system does not handle special
cases properly. Operational failures The system
fails to operate as intended. Bugs The system
does not correctly reflect the ideas of the
system designers. Design errors The system does
what the designers intended, but they failed to
consider certain factors. Capacity shortfall The
system cannot meet current output
requirements. Displacement of problems The
system creates problems that must be absorbed and
fixed somewhere else. Computer crime The system
is used for theft, sabotage, or other illegal
purposes often based on fraudulent data inputs.
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Treatment of Exceptions, Errors, and Malfunctions

• The danger in designing systems is not planning
  for the unexpected.
• A mistake should be as easy to correct as it was
  to commit in the first place!
• TREATMENT OF EXCEPTIONS, ERRORS, AND MALFUNCTIONS
• Problem if the level is too high
• The process focuses on exceptions and becomes
  inefficient and inconsistent.
• Problem if the level is too low
• The process fails altogether or handles
  exceptions incorrectly, resulting in low
  productivity or poor quality and responsiveness
  perceived by customers.

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Evaluating Business Process Performance

• Seven Main Performance Variables

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Process Performance Variables

• Activity rate
• Output rate
• Consistency
• Productivity
• Cycle Time
• Downtime
• Security

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Evaluating Business Process Performance

• PROCESS PERFORMANCE VARIABLES
• Rate of output - the amount of output it
  actually produces in a time period
• consider capacity and scalability
• How can I handle special needs?
• Consistency
• A Basic TQM tenet unwarranted variation
  destroys quality.
• Carefully specify how something should be
  performed and monitor the process to ensure it is
  performed consistently.

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Activity Rate and Output Rate

• Output rate the amount of outputs produced
  per unit of time
• Activity rate the number of interim work steps
  performed per unit of time
• The distinction is important mainly for systems
  that take long to complete and/or are complex
• The activity rate is a good predictor of the
  output rate

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• You should consider capacity and scalability
  How can you handle special needs?
• Capacity the theoretical limit for the output
  rate
• The challenge to determine the ideal capacity and
  output rate
• Scalability the ability to increase or decrease
  the capacity without major disruption or
  excessive costs

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Consistency

• Consistency applying the same techniques in the
  same order to obtain the same results
• Basic TQM Rule unwarranted variability destroys
  quality
• Information systems may force organizations to do
  things consistently
• Emphasizing consistency often makes it difficult
  to be flexible
• Flexibility the ease with which the process can
  be modified to
• Meet customer needs
• Adapt to external changes

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Control chart for monitoring consistency of a
business process

• Carefully specify how something should be
  performed and monitor
• the process to ensure it is performed
  consistently

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• How to achieve FLEXIBILITY WITHIN A FRAMEWORK OF
  CONSISTENCY
• Avoid restrictions that can be left to the
  judgment of the process participants
• Delay as long as possible converting information
  to physical results that are hard to change
• Use technical tools and methods that are
  themselves flexible

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Productivity

• Productivity the amount of output produced vs.
  the resources consumed
• Waste any activity that uses resources without
  adding value
• Reduces productivity
• Built into the way many processes operate
• Ford example
• IT does not always lead to increased productivity

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Cycle Time

• Cycle time the length of time between the start
  of a process and its completion
• Processing time for each step
• Waiting times between steps
• Dependencies between steps
• Bottleneck an essential step where a capacity
  shortage induces consistent delays

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Figure 3.13Identifying the causes of long cycle
times
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Downtime

• Downtime the amount of time the process is out
  of operation
• Unexpected failures
• Planned maintenance
• Especially important consideration for
  e-business

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Security

• Security the likelihood that the process is not
  vulnerable to unauthorized uses, sabotage, or
  criminal activity
• Depends on procedures that insure accuracy and
  prevent unauthorized access

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Finding the Right Level for Each Process
Performance Variable

• ACTIVITY RATE
• Problem if the level is too high
• Wasted effort and buildup of unneeded inventory
• Problem if the level is too low
• Inefficient resource usage and imbalanced work in
  process
• RATE OF OUTPUT
• Problem if the level is too high
• Lower productivity and consistency due to
  increasing rates of errors and rework
• Problem if the level is too low
• Lower productivity due to the cost of unused
  capacity

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Finding the Right Level for Each Process
Performance Variable

• PRODUCTIVITY
• Problem if the level is too high
• Too much emphasis on cost per unit and too little
  emphasis on quality of the output
• Problem if the level is too low
• Output unnecessarily expensive to produce
• CONSISTENCY
• Problem if the level is too high
• Inflexibility, making it difficult to produce
  what the customer wants
• Problem if the level is too low
• Too much variability in the output, reducing
  quality perceived by the customer

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Finding the Right Level for Each Process
Performance Variable

• CYCLE TIME
• Problem if the level is too high
• Lack of responsiveness to customer
• Excess costs and waste due to delays
• Problem if the level is too low
• Product produced too soon is damaged or
  compromised before the customer needs it Delivery
  before the customer is ready
• FLEXIBILITY
• Problem if the level is too high
• Too much variability in the output, reducing
  quality perceived by the customer
• Problem if the level is too low
• Inflexibility, making it difficult to produce
  what the customer wants or to modify the process
  over time
• SECURITY
• Problem if the level is too high
• Excess attention to security gets in the way of
  doing work
• Problem if the level is too low
• Insufficient attention to security permits
  security breaches

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Process Performance Variables and Related Roles
of Information systems

• Review Table 3.5 p. 111.

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Introduction to Communication and Decision Making
78

• Activities that are part of business processes
  include
• Processing data
• Communicating
• Making decisions
• Thinking/creating
• Taking physical action

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Improving Communication and Decision Making
Performance within Business Processes
ACTIVITY RATE AND OUTPUT RATE Improve
communication Make sure communication does not
cause delays in performing work steps Communicate
more information or more types to more
people Improve decision making Make sure
information for decision making is readily
available Make more decisions using better, more
complete information CONSISTENCY Improve
communication Make sure different people receive
the same communication Improve decision making
Make sure repetitive decisions are made in the
same way PRODUCTIVITY Improve communication
Achieve more communication with less effort.
Permit efficient communication in many different
forms. Improve decision making Make better
decisions with less effort. Maintain decision
quality across a wider range of situations.
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Improving Communication and Decision Making
Performance within Business Processes
CYCLE TIME Improve communication Eliminate
undesirable delays in communication Improve
decision making Eliminate unnecessary delays in
decision making DOWNTIME Improve communication
Provide backup channels to continue communication
even if the regular channel is not available.
Improve decision making Automate certain
decisions to minimize the impacts of process
downtime. SECURITY Improve communication Make
sure communications go only to the intended
recipients Improve decision making Make sure
decisions are controlled only by those authorized
to make the decisions
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Basic Concepts of Communication
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Communication

• Communication is an interpersonal process of
  sending and receiving symbols with messages
  attached to them.

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General Model of a Communication System
Feedback
Receiver Decoder
Transmitter encoder
Source
Destination
Channel
Noise and Distortion
84
Basic Communication Concepts

• Social Context
• Personal, Impersonal, and Anonymous Communication
• Time, Place, and Direction of Communication

85
Social Context

• The situation and relationships within which
  communication takes place.
• Social presence (perceives as a personal
  interaction)
• Organizational position
• Relationships
• Cultural Norms
• Age
• Gender
• The topic being discussed
• Nonverbal communication
• Media Richness Theory

86
Personal, Impersonal, and Anonymous Communication

• Personal - the relationship between sender and
  receiver matters. It affects form and content.
• Impersonal - The sender and receivers
  relationship does not matter. Both serve as
  agents of the organization.
• Anonymous - The senders identity is hidden from
  the recipient.
• IT can make communication more personal AND more
  impersonal.

87
Time, Place, and Direction of Communication

• Synchronous - The sender and Receiver are
  available simultaneously
• Asynchronous - The sender and receiver are not
  available simultaneously.
• Place Involves Physical Presence
• Direction One-way vs. Two Way communication.

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Common Communications Classified By Time and
Place
Presentation Systems Copyboards PC
Projectors Facilitation Services Polling
Systems Group Decision Rooms
Transaction databases World Wide Web Shared
Files Electronic Mail Voice Mail Shift Work
Communications
SAME PLACE
EDI Transaction databases Electronic
Mail Computer Conferencing Voice
Mail Fax Pre-recorded Radio/TV
DIFFERENT PLACE
Typical Telephone Video Telephone Video
Conferencing Live Radio TV Broadcast
SAME TIME
DIFFERENT TIME
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What are some approaches for Information Systems
to improve communications?
90
Approaches for Improving Communication

1. Permit communication that could not take place
   otherwise.
2. Make communication situations more effective.
3. Eliminate Unnecessary Person to Person
   Communication
4. Make Communications more systematic
5. Combine and Extend Electronic Communications

91
Permit Communications That Could not Take Place
Otherwise
92
Making Face to Face Communication More Effective

• Presentation Technologies
• Blackboard
• Prepared Paper Handouts
• Overhead projector or slide projector with color
  transparencies
• Electronic Blackboard
• Computer LCD Display panels
• Computer for What-If Scenarios
• Computer-controlled Multi-media
• Computer controlled multi-media with interactive
  control.

93
Eliminate Unnecessary Person to Person
Communication

• Substitute on-line Access to data
• Example Supplier/Customer Relationships as
  discussed in Inter-organizational Information
  systems
• ATM access
• Automated Telephone Attendants
• Danger of becoming too impersonal

94
Making Communication Systematic

• Contrast communication between people vs.
  communication between machines.
• The business Memo Header
• To
• From
• Date
• Re
• Having structure reduces the effort required to
  figure out what the communication means.
• Even with communication between groups of people,
  repetitive aspects of communication are
  systematized.

95
Combine and Extend Electronic Communication
Functions

• Early communication technologies have been
  combined and extended to create more powerful
  communication technologies.
• Example Telegraph, Telephone, Radio Broadcast
• Consider how more modern technologies are being
  combined.
• More convergence of computing and communications
  technologies.

96
Question How have the different degrees of
social presence in communication, or how have
time, place, and direction of communication
affected a situation in which you have been
involved?
97
Basic Decision-Making Concepts

• Steps in a decision process
• Problem finding
• All too often resources are spent finding good
  solutions to the wrong problem!
• Problem solving
• Decision processes typically iterate between the
  various phases

98
Four-phase Decision Making Process Figure 3.15
99

• Rationality vs. satisficing
• Rationality a common model for explaining how
  people should make decisions
• Rational people are expected to attempt to
  maximize their welfare
• Satisficing how people actually behave when
  making a decision
• Looking for a satisfactory alternative, rather
  than the optimal one bounded rationality

100
Common flaws in decision making

• (To Be Discussed Later)
• Poor framing
• Recency effects
• Primacy effects
• Poor probability estimation
• Overconfidence
• Escalation phenomena
• Association bias
• Groupthink

101

• Automating decisions
• Have important advantages when
• A great deal of information must be processed or
• Small delays affect the outcome
• Only acceptable when every aspect of the decision
  is fully understood