1. Organizational Decision-Making and Process Management (BPM)
BSAD 141
Dave Novak
BDIS: Chapter 2

2. Topics Covered Decision-making and types of decisions
Decision-making and the organizational pyramid
Metrics
CSFs and KPIs
Efficiency versus effectiveness
Terminology associated with BPM
Changes at different decision-making levels
Scope of decision

3. Decision-Making Essentials Organizational Pyramid
Decision-making and problem-solving occur at each level in an organization

4. Decision-Making Essentials
Operational decision making
Operational Decision Making -
Employee Type: lower management, analysts, staff
Focus: Internal, functional
Time Frame: Short term, day-to-day operations
Decision Types: Structured, recurring, repetitive
MIS Type: Information
Metrics: Key performance indicators focus on efficiency
Examples:
How many employees are out sick?
How many products need to be made today?
What are next week’s production requirements?
How much inventory is in the warehouse?
How many problems occurred when running payroll?
Which employees are on vacation?
What are some examples of types of systems or activities at this level?
Payroll
Training & development
Accounts payable & receivable
Employee record keeping
Scheduling
Order processing
Order tracking
OPERATIONAL

5. Decision-Making Essentials
Tactical / Managerial decision making
Managerial Decision Making
Employee Type: Middle mgmt., managers, directors
Focus: Internal, cross-functional
Time Frame: Short term, daily, monthly, yearly
Decision Types: Semistructured, adhoc, reporting
MIS Type: Business Intelligence
Metrics: KPIs focusing on efficiency, and CSFs focusing on effectiveness
Examples:
Who are our best customers by region, by sales representatives, by product?
What are the sales forecasts for next month? How do they compare to actual sales for last year?
What was the difference between expected sales and actual sales for each month?
What was the impact of last month’s marketing campaign on sales?
What types of ad hoc or unplanned reports might the company require next month?
What are some examples of types of systems or activities at this level?
Sales management
Pricing & profitability
Contract analysis
Production costs
Sales analysis by region
Inventory
Audits
MANAGERIAL

6. Decision-Making Essentials
Strategic decision making –
STRATEGIC
Strategic Decision Making
Employee Type: Senior management, presidents
Focus: external, industry, cross company
Time Frame: Long term, yearly, multi-year
Decision Types: Unstructured, nonrecurring, one time
MIS Type: Knowledge
Metrics: CSFs focusing on effectiveness
Examples:
How will changes in employment levels over the next three years impact the company?
What industry trends are worth analyzing?
What new products and new markets does the company need to create competitive advantages?
How will a recession over the next years impact business?
What measures will the company need to prepare for due to new tax laws?
What are some examples of types of systems or activities at this level?
Sales trend forecasting
Budget forecasting
Profit planning
5-year forecast planning

7. Decision-Making Essentials Types of Decisions
Structured
Unstructured

8. Decision-Making Essentials Information Requirements
Source: Gelinas, Sutton, and Fedorowicz, 2004

9. Why Does This Matter?
The decision-makers at different managerial levels are responsible for making very different types of decisions – some decisions are much more structured than others
Each decision-making level requires very different types of information
MIS are more useful with respect to some decisions

10. Supporting Decision-Making with MIS
Type of Decision
Decision support system (DSS) – models information to support managers and business professionals during the decision-making process
Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization
Decision-Making Level from Organizational Pyramid

11. Operational Support Systems
Transaction processing system (TPS) – Basic business system that serves the operational level and assists in making structured decisions
Online transaction processing (OLTP) - Capturing of transaction and event information using technology to process, store, and update
Source document – The original transaction record
Transactional Information – encompasses all of the information contained within a single business process or unit of work, and its primary purpose is to support the performing of daily operational or structured decisions.
Transaction processing system (TPS) - basic business system that serves the operational level and assists in making structured decisions.
Online transaction processing (OLTP) – capturing of transaction and event information using technology to process, store, and update.
Source Documents – Using systems thinking, the inputs for a TPS or the original transaction record.
Analysts typically use TPS to perform their daily tasks
What types of TPS are used at your college?
Payroll system (Tracking hourly employees)
Accounts Payable system
Accounts Receivable system
Course registration system
Human resources systems (tracking vacation, sick days)

12. Operational Support Systems
Systems Thinking View of a TPS
Create, read, update, and delete (CRUD) are the common processes associated with a TPS
Common inputs are source documents and outputs are reports

13. Managerial Support Systems
Decision support system (DSS) – Computer-based model(s) to support managers and business professionals during the decision- making process
Includes a combination of data and analytical tools
Decision support system (DSS) – Models information to support managers and business professionals during the decision-making process
Analysts typically use TPS to perform their daily tasks – Ask your students what types of TPS are used at your college?
Payroll system (Tracking hourly employees)
Accounts Payable system
Accounts Receivable system
Course registration system
Human resources systems (tracking vacation, sick days)

14. Managerial Support Systems
Interaction Between a TPS and DSS
The TPS supplies transaction-based data to the DSS
The DSS summarizes and aggregates the information from the many different TPS systems, which assists managers in making informed decisions. Burlington Northern and Santa Fe Railroad (BNSF) regularly tests its railroad tracks
Each year hundreds of train derailments result from defective tracks
Using a DSS to schedule train track replacements helped BNSF decrease its rail-caused derailments by 33 percent

15. Metrics: Measuring Success / Performance
Critical success factors (CSFs) – The crucial steps companies make to perform to achieve their goals and objectives and implement strategies
Create high-quality products
Retain competitive advantages
Reduce product costs
Increase customer satisfaction
Hire and retain the best professionals

16. Critical Success Factors (CSFs)
CSFs are larger picture performance measures that directly relate to a specific goal
When you look at the individual CSF examples, you should note that they don’t refer to specific quantifiable measurements but provide specific focus areas for achieving the goal

17. Metrics: Measuring Success / Performance
Key performance indicators (KPIs) – The quantifiable metrics a company uses to evaluate progress toward critical success factors
Turnover rates of employees
Number of product returns
Number of new customers
Average customer spending

18. Key Performance Indicators (KPIs)
Much like objectives are tied to goals, multiple KPIs can be tied to a specific CPI
When you look at the individual KPI examples, you should note that they CAN be explicitly measured

19. Metrics: Measuring Success / Performance
External KPI
Market share – The portion of the market that a firm captures (external)
Internal KPI
Return on investment (ROI) – Indicates the earning power of a project
Measuring market share and especially ROI, are getting harder and harder to track when you add to the equation social media and online marketing. There are debates on both sides of how to measure these effectively, but truly only time will tell the actual impact of all these new technologies have on the business environment.

20. Efficiency Versus Effectiveness Measures
MIS Efficiency metrics
The extent to which a firm is using its resources in an optimal way – getting the most from its resources
Measure the performance of MIS itself, such as throughput, transaction speed, and system availability
Efficiency MIS Metrics
Focuses on the extent to which a firm is using its resources in an optimal way.
Doing things right – getting the most from each resource (Peter Drucker)

21. Efficiency Versus Effectiveness Measures
MIS Effectiveness metrics
How well a firm is achieving its goals and objectives
Measures the impact MIS has on business processes and activities, including customer satisfaction and customer conversation rates
Effectiveness MIS Metrics
Focuses on how well a firm is achieving its goals and objectives
Doing the right things – setting the right goals and objectives and ensuring they are accomplished

22. System availability – the number of hours a system is available
EFFICIENCY
-VS-
EFFECTIVENESS
Throughput – the amount of information that can travel through a system
Usability – the ease with which people perform transactions or find Info
Transaction speed – the amount of time a system takes to perform a transaction
Customer satisfaction – measured by satisfaction surveys, how many retained, and increase in revenue per customer
System availability – the number of hours a system is available
Conversion rates – how many ‘touches’ it takes to convert a first time user to become a customer and purchase the product
Information accuracy – How often a system generates the correct results when doing the same transaction many times
Financial – ROI, cost-benefit analysis, break-even analysis
Response time – how long it takes to respond to user interactions.

23. Relationships Between Measures
Benchmark –
Benchmarking –
You can’t Improve what you don’t measure!!
Benchmarks help assess how an MIS project performs over time
If a system held a benchmark for response time of 15 seconds, the manager would want to ensure response times did not deviate from this point – including increases or decreases.

24. Business Processes

25. Business Process Management
BPM – a systematic approach for creating, documenting, evaluating and improving all business processes throughout the organization

26. Business Process Management
Offers a holistic management approach that focuses on aligning the organizations business processes with its goals and objectives
Think about how processes might be improved to create better performance within the primary and secondary activities and improve the flow of information and material within the organization’s value chain

27. Business Process Management
Evaluating current processes and designing better, “more effective” processes
Provide more value to the customer
Reduce “costs”
Increase “benefits”
Requires an established data collection and benchmarking process

28. Business Processes and Systems
Short video from Chase about the importance of process and systems

29. There is A LOT of similar terminology…
These 3 terms all fall under the umbrella of Business Process Management (BPM) / Business Process Improvement but mean different things
Continual improvement process
Total quality management
Six Sigma

30. Continual Improvement Process (CIP)
CIP – specifically refers to incremental improvement based on small changes rather than on completely reengineering processes
Is CIP just another term for (or another way to view) the automation component of Business Process Improvement?
Source:

31. Total Quality Management (TQM)
TQM – captures the idea that the quality of products, services, and processes is the responsibility of everyone in the organization (all people and processes involved in the creation, dissemination, and use of the products and services offered)
This concept is not new, but stresses that upper- level management alone is not responsible for “quality management”
Source:

32. Six Sigma
Six Sigma – a business management strategy attributed to Motorola that seeks to improve quality by eliminating errors associated with variations in manufacturing and business processes
Is Six Sigma just another term for (or another way to view) product / service consistency?
Is it simply detailed documentation and strict adherence to engineering and management practices?
Source:

33. BP Changes with MIS Magnitude of Change and Potential Benefits
A true BPR effort does more for a company than simply improve it by performing a process better, faster, and cheaper
Progressive Insurance’s BPR effort redefined best practices for its entire industry
The figure displays the different types of change an organization can achieve, along with the magnitude of change and the potential business benefit
What is an example of each type of change on the change spectrum?
Automate – answering phones with computers, auto grading an essay or Excel project
Streamline – remove duplicate jobs in the process, use a different tool to perform the same task
Reengineering – taking an airplane instead of a bike, horse, or car, taking BPR to the level where you redefine an entire industry – such as Progressive Insurance
Managerial Decision-Making Level

34. Changes at Each Decision-Making Level
Automation is an operational level change
Streamlining is a tactical level change
Business process reengineering (BPR) is a strategic level change

35. Changes at Each Decision-Making Level
Automation –automate specific tasks or activities in an existing process
Streamlining – simplify, refine, eliminate (an incremental change) in an existing process
BPR – dramatically or completely change how things are done
Could involve completely eliminating old processes and adopting new ones

36. Business Process Management
Viewing and evaluating BPs in isolation or in functional area / departmental silos may not be that useful and has limited benefits
Changing a process without considering how that process integrates with other processes in the value chain can:
Address symptoms of a problem rather than the problem itself
Impact other processes in unexpected ways
Lead to interorganzational conflict

37. Not Necessarily Simple…
Are people / systems that are taking the orders communicating with operations people / systems, and with people / systems delivering the orders?
Functional area “silos” present a huge problem

38. Not Necessarily Simple…
FedEx conflicting KPI example from book
Sales team sets 2 KPI
Increase # of orders
Increase sales $
Operations team sets 2 KPI
Reduce cycle time
Reduce lead time

39. Not Necessarily Simple…
There are some potentially HUGE issues associated with BPM
What does automation imply for some lower-skilled workers?
Can the organization find the skilled workers it needs to manage, maintain, and operate new systems / technologies?

40. Not Necessarily Simple…
People are generally resistant to, and suspicious of, change – especially big changes
As an organization implements larger changes such as streamlining and BPR (that can have substantial impacts on employees and how things are currently done) there tends to be more push back

41. Business Process Management
As organizations change processes further up the organizational pyramid (higher management levels), the organizational-wide impact of these changes grows larger
Systems View -

42. The scope of the processes versus the “decision-making” or management level
How about the scope of the process?
Who (inside / outside the organization) is involved in managing the process?
What if a single organization doesn’t fully control the process?

43. The scope of the processes
Functional processes – BPs that are very limited in scope and occur within a single department

44. The scope of the processes
Cross-functional processes – BPs that are wider in scope and may involve several or many business units within a single organization

45. The scope of the processes
Inter-organizational processes – BPs that are very wide in scope and involve multiple organizations

46. Lecture Summary Decision-making and types of decisions
Decision-making and the organizational pyramid
Metrics
CSFs and KPIs
Efficiency versus effectiveness
Terminology associated with BPM
Changes at different decision-making levels
Scope of decision