cis 465 - business processes 1 business processes
TRANSCRIPT
CIS 465 - Business Processes 1
BusinessProcesses
CIS 465 - Business Processes 2
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
PARTICIPANTS
•Account Holder
•Financial professional (if desired)
•Schwab back office staff
INFORMATION
•Market price and purchase price of stocks•Analyst’s reports•Buy or sell orders•Account holder’s current portfolio of stocks, bonds, and other assets
TECHNOLOGY
•Personal Computer•Schwab’s hardware and software for tracking portfolios and trades•The Internet (Infrastructure)
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
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Introduction
• In order to develop information systems or understand them from a business professional’s 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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Ford’s New Payables System
• New Payables to reduce staff from 500 to 400.• Mazda’s A/P Staff had only 5 individuals.• Differences in the Business Process Model
– Consider the degree of structure in Mazda model.
• Much of Ford’s A/P Staff time was spent on Exception Processing.
• New System requires only 125 persons.
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Ford’s 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 eliminating steps that did not add valuesteps that did not add value
• The new information system was successful only because of the reorganized work flow
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Ford’s New Payables System
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Ford’s New Payables System
PRODUCTS & SERVICES
Verification that the the order was fulfilled correctly by the supplier
Payment to the supplier
CUSTOMER
Ford’s suppliers
Ford’s manufacturing and purchasing departments
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Ford’s 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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Ford’s 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 dowhat 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 diagramContext 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 DFD’s 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 Ford’s 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
STUDENTS REGISTRAR’sOFFICE
TEACHER
CLASS/GRADEFILE
STUDENTFILE
CALCULATECLASS
GRADES
CALCULATEUNIVERSITY
GRADES
Final Grades
Test Scores Current Grade
Current Score
Final Score
Final Grades
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Other Process Modeling Techniques
• DFD’s are used extensively. However, other techniques can also be used to fill in some details not expressed by DFD’s. DFD’s 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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• 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
Please note…
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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 Structure2. Range of Involvement3. Level of Integration4. Rhythm5. Complexity6. Degree of Reliance on Machines7. Prominence of Planning and Control8. 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 taskStructured 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 taskSemistructured 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 taskUnstructured 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 taskamount 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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• Common culture• Shared understandings & beliefs
Common standards• Using consistent terminology & procedures
Information sharing• Independent business processes can share each other’s data
– Coordination• Separate but interdependent processes respond to each other’s
needs and limitations
– Collaboration• Strong interdependence; the unique identity of each process
begins to disappear
Five levels of integration
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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 other’s 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 don’t 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.•People’s 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
• ConsistencyConsistency = 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• FlexibilityFlexibility = 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 timeCycle 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
• BottleneckBottleneck = 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 inventoryProblem if the level is too low:•Inefficient resource usage and imbalanced work in process
RATE OF OUTPUTProblem if the level is too high: •Lower productivity and consistency due to increasing rates of errors and reworkProblem 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
PRODUCTIVITYProblem if the level is too high:•Too much emphasis on cost per unit and too little emphasis on quality of the outputProblem if the level is too low: •Output unnecessarily expensive to produce
CONSISTENCYProblem if the level is too high:•Inflexibility, making it difficult to produce what the customer wantsProblem 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 TIMEProblem if the level is too high:•Lack of responsiveness to customer •Excess costs and waste due to delaysProblem 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
FLEXIBILITYProblem if the level is too high:•Too much variability in the output, reducing quality perceived by the customerProblem if the level is too low: •Inflexibility, making it difficult to produce what the customer wants or to modify the process over time
SECURITYProblem if the level is too high: •Excess attention to security gets in the way of doing workProblem 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
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• Activities that are part of business processes include:– Processing data– Communicating *– Making decisions *– Thinking/creating– Taking physical action
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ACTIVITY RATE AND OUTPUT RATEImprove communication: Make sure communication does not cause delays in performing work stepsCommunicate more information or more types to more peopleImprove decision making: Make sure information for decision making is readily availableMake more decisions using better, more complete information
CONSISTENCYImprove communication: Make sure different people receive the same communication Improve decision making: Make sure repetitive decisions are made in the same way
PRODUCTIVITYImprove 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.
Improving Communication and Decision Making Performance within Business Processes
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Improving Communication and Decision Making Performance within Business Processes
CYCLE TIMEImprove communication: Eliminate undesirable delays in communicationImprove decision making: Eliminate unnecessary delays in decision making
DOWNTIMEImprove 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.
SECURITYImprove communication: Make sure communications go only to the intended recipientsImprove 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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CommunicationCommunication
• Communication is an interpersonal process of sending and receiving symbols with messages attached to them.
General Model of a Communication SystemGeneral Model of a Communication System
Source Transmitterencoder Channel
ReceiverDecoder Destination
Noiseand
Distortion
Feedback
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Basic Communication ConceptsBasic Communication Concepts
• Social Context• Personal, Impersonal, and Anonymous
Communication• Time, Place, and Direction of Communication
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Social ContextSocial 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
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Personal, Impersonal, and Anonymous Communication
Personal, Impersonal, and Anonymous Communication
• Personal - the relationship between sender and receiver matters. It affects form and content.
• Impersonal - The sender and receiver’s relationship does not matter. Both serve as agents of the organization.
• Anonymous - The sender’s identity is hidden from the recipient.
• IT can make communication more personal AND more impersonal.
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Time, Place, and Direction of CommunicationTime, 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.
Common Communications Classified By Time and Place
Common Communications Classified By Time and Place
SAMEPLACE
DIFFERENTPLACE
SAME TIME DIFFERENT TIME
Presentation SystemsCopyboardsPC ProjectorsFacilitation ServicesPolling SystemsGroup Decision Rooms
Transaction databasesWorld Wide WebShared FilesElectronic MailVoice MailShift Work Communications
Typical TelephoneVideo Telephone Video ConferencingLive Radio TV Broadcast
EDITransaction databasesElectronic MailComputer ConferencingVoice MailFaxPre-recorded Radio/TV
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What are some approaches for Information Systems to
improve communications?
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Approaches for Improving CommunicationApproaches 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
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Permit Communications That Could not Take Place Otherwise
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Making Face to Face Communication More Effective
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.
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Eliminate Unnecessary Person to Person CommunicationEliminate 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
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Making Communication SystematicMaking 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.
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Combine and Extend Electronic Communication Functions
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.
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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?
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Basic Decision-Making Concepts
• Steps in a decision process– Problem findingProblem finding
• All too often resources are spent finding good solutions to the wrong problem!
– Problem solvingProblem solving• Decision processes typically iterate between the
various phases
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Four-phase Decision Making Process Figure 3.15
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• 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 rationalitybounded rationality
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– (To Be Discussed Later)– Poor framing– Recency effects– Primacy effects– Poor probability estimation– Overconfidence– Escalation phenomena– Association bias– Groupthink
Common flaws in decision making
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• 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